AGRI Committee Meeting

Notices of Meeting include information about the subject matter to be examined by the committee and date, time and place of the meeting, as well as a list of any witnesses scheduled to appear. The Evidence is the edited and revised transcript of what is said before a committee. The Minutes of Proceedings are the official record of the business conducted by the committee at a sitting.

For an advanced search, use Publication Search tool.

If you have any questions or comments regarding the accessibility of this publication, please contact us at accessible@parl.gc.ca.

Previous day publication Next day publication

37th PARLIAMENT, 1st SESSION

Standing Committee on Agriculture and Agri-Food

EVIDENCE

CONTENTS

Thursday, June 6, 2002

0910

The Chair (Mr. Charles Hubbard (Miramichi, Lib.))

Mr. Ken Ritter (Chair of the Board of Directors, Canadian Wheat Board)

0915

0920

The Chair

Mr. Hilstrom

0925

Mr. Ken Ritter

The Chair

Mr. Howard Hilstrom

The Chair

Mr. Howard Hilstrom

Mr. Ken Ritter

The Chair

Mr. Howard Hilstrom

The Chair

Mr. Howard Hilstrom

The Chair

Mr. Howard Hilstrom

0930

The Chair

Mr. Howard Hilstrom

The Chair

Mr. Ken Ritter

Mr. Howard Hilstrom

Mr. Ken Ritter

0935

The Chair

Mr. Bob Speller (Haldimand—Norfolk—Brant, Lib.)

Mr. Garry Breitkreuz (Yorkton--Melville, Canadian Alliance)

Mr. Bob Speller

Mr. Ken Ritter

Mr. Bob Speller

Mr. Ken Ritter

Mr. Bob Speller

Mr. Ken Ritter

Mr. Bob Speller

Mr. John Clair (Director, Canadian Wheat Board)

Mr. Bob Speller

Mr. Ken Ritter

0940

The Chair

Mr. Dick Proctor (Palliser, NDP)

The Chair

Mr. Dick Proctor

The Chair

Mr. Dick Proctor

Mr. Ken Ritter

Mr. Jim Thompson (Senior Marketing Manager, Canadian Wheat Board)

Mr. Dick Proctor

Mr. Jim Thompson

Mr. Dick Proctor

0945

Mr. Ken Ritter

Mr. Dick Proctor

Mr. Ken Ritter

The Chair

Mr. Calder

Mr. Ken Ritter

Mr. Calder

0950

Mr. Ken Ritter

Mr. Murray Calder

Mr. Rick Borotsik (Brandon—Souris, PC)

Mr. Ken Ritter

Mr. Rick Borotsik

Mr. Ken Ritter

Mr. Rick Borotsik

Mr. Ken Ritter

Mr. Rick Borotsik

0955

Mr. Ken Ritter

Mr. Rick Borotsik

Mr. Ken Ritter

Mr. Rick Borotsik

Mr. Ken Ritter

Mr. Rick Borotsik

Mr. Ken Ritter

Mr. Rick Borotsik

Mr. Ken Ritter

Mr. Rick Borotsik

Mr. Ken Ritter

Mr. Rick Borotsik

Mr. Ken Ritter

Mr. Rick Borotsik

Mr. Ken Ritter

Mr. Rick Borotsik

Mr. Ken Ritter

Mr. Rick Borotsik

Mr. Ken Ritter

The Chair

Mrs. Rose-Marie Ur (Lambton—Kent—Middlesex, Lib.)

Mr. Jim Thompson

Mrs. Rose-Marie Ur

Mr. Jim Thompson

Mrs. Rose-Marie Ur

Mr. Jim Thompson

Mrs. Rose-Marie Ur

Mr. Jim Thompson

Mrs. Rose-Marie Ur

Mr. Jim Thompson

Mrs. Rose-Marie Ur

Mr. Jim Thompson

1000

Mrs. Rose-Marie Ur

Mr. Jim Thompson

Mrs. Rose-Marie Ur

Mr. Jim Thompson

Mrs. Rose-Marie Ur

Mr. Wilfred Harder (Director, Canadian Wheat Board)

Mrs. Rose-Marie Ur

Mr. Wilfred Harder

Mrs. Rose-Marie Ur

The Chair

Mr. Ken Ritter

The Chair

Mr. David Anderson (Cypress Hills--Grasslands, Canadian Alliance)

Mr. Ken Ritter

Mr. David Anderson

Mr. Ken Ritter

Mr. Jim Thompson

Mr. David Anderson

Mr. John Clair

Mr. David Anderson

1005

Mr. John Clair

Mr. David Anderson

Mr. John Clair

Mr. David Anderson

Mr. John Clair

Mr. David Anderson

Mr. Ken Ritter

The Chair

Mr. Dick Proctor

Mr. Ken Ritter

Mr. Dick Proctor

Mr. Rod Flaman (Director, Canadian Wheat Board)

1010

Mr. Dick Proctor

Mr. Rod Flaman

Mr. Dick Proctor

Mr. Rod Flaman

Mr. Dick Proctor

Mr. Rod Flaman

Mr. Dick Proctor

Mr. John Clair

The Chair

Mr. Ken Ritter

1015

The Chair

Mr. Rick Borotsik

Mr. Ken Ritter

Mr. Jim Thompson

Mr. Rick Borotsik

Mr. Jim Thompson

Mr. Rick Borotsik

Mr. Ken Ritter

Mr. Wilfred Harder

Mr. Rick Borotsik

Mr. John Clair

1020

Mr. Rick Borotsik

The Chair

Mr. David Anderson

Mr. Jim Thompson

Mr. David Anderson

1025

The Chair

Mr. Wilfred Harder

The Chair

Mr. Bob Speller

Mr. Wilfred Harder

The Chair

Mr. Wilfred Harder

Mr. Bob Speller

Mr. Ken Ritter

The Chair

Mr. Ken Ritter

The Chair

CANADA

Standing Committee on Agriculture and Agri-Food

NUMBER 073

1st SESSION

37th PARLIAMENT

EVIDENCE

Thursday, June 6, 2002

[Recorded by Electronic Apparatus]

¿ (0910)

[English]

The Chair (Mr. Charles Hubbard (Miramichi, Lib.)): Pursuant to Standing Order 108(2), we're meeting today for a briefing session with the Canadian Wheat Board. We'd like to welcome members of the board.

Ken, I understand that as chairperson of the board you will be the main presenter.

I would like to point out that we have about an hour and 20 minutes now, because at 10:30 we have to adjourn this portion of our meeting to look at other business of the committee.

We'd like to welcome you. You have about ten minutes to make your presentation. You've been here before and you know how the system works. Welcome. Maybe you could introduce the other members of your board before we begin.

Mr. Ken Ritter (Chair of the Board of Directors, Canadian Wheat Board): Yes, thank you, Mr. Chairman. Thank you for allowing us to present before you. On behalf of the board, I wish to thank you for this opportunity to meet with the Standing Committee on Agriculture and Agri-Food.

With me today are my fellow directors: Wilf Harder, from Lowe Farm, Manitoba; Rod Flaman, from Edenwold, Saskatchewan; and John Clair, from Radisson, Saskatchewan. Also with me is Jim Thompson, who is the senior marketing manager for North America. He'll be able to answer and provide necessary information, particularly around processing and those key issues facing the western grain industry.

The CWB, Mr. Chairman, is now in its fourth year of the new corporate structure. As you know, we have ten elected directors and this fall we're again having four districts facing election. We also have five appointed directors.

Since the CWB Act was revised, a board of directors was put in charge of the strategic direction of the corporation. And we've worked very hard to define the core strengths and set a path for our future. The key themes are ownership, advocacy, and growth.

Ownership reflects the nature of the fact that the company accrues all benefits to farmers. The CWB operates to maximize farmers' returns. Any benefits that we accrue flow directly to farmers, and company decisions are made to try to increase those benefits.

The second theme is advocacy. The CWB is part of the farmers' business success. As an organization run for the purpose of maximizing returns to prairie farmers, advocacy on matters that affect the success of prairie wheat and barley growers is part of the CWB's responsibilities.

Third is growth, which means pursuing those endeavours that increase farmers' returns. Growth means growing the business in a manner consistent with the single desk, the CWB's key asset.

Ownership and openness: In order to provide farmers with an independent examination of the CWB's marketing and accounting principles, and in accordance with our act, the board of directors of the CWB welcomed the Office of the Auditor General to examine our financial accounting and reporting systems, and to assess the efficiency, effectiveness, and economy of the management systems and practices within the CWB. The special audit is now concluded, and the bottom line of this audit is probably best captured by Sheila Fraser, the Auditor General, who stated: “In our opinion, the financial accounting and reporting systems of the Corporation were managed economically and efficiently.”

As a board, we see the audit results as a confirmation that the CWB is an effective marketing organization. Its strengths include very good market intelligence, market information, well-developed annual sales strategies and plans, competent and tough negotiators, and good relations with customers.

The Auditor General also identified deficiencies in areas of governance, strategic planning, performance measurement, reporting, and information technology.

Based on this report and feedback we received from producers, our board is working hard to identify the concerns and to address strategies and details to ensure that we comply fully with what is regarded as good business practices throughout our organization.

The environment: A scan of the external environment in which the CWB operates clearly demonstrates a dramatic move toward grain industry consolidation and fewer choices for individual farmers on both the input and marketing sides of their operation. As we all know, there's rationalization in grain handling in the transportation system. The costs farmers face, whether it's seed, fertilizer, or chemicals, are all climbing. As well, elevators are fewer, and farther apart, with numbers falling from something like 1,600 in 1991 to 500 today. We also have to ensure that we have efficient grain companies and railways, because our farmers face long distances and costs to move their grain.

The second concern and irritant we have is the trade harassment issue. The CWB has been investigated nine times since 1990, with farmers paying for the legal costs. The result of each and every investigation has vindicated Canada and the CWB as a fair trader acting consistently within Canada's international obligations.

We see the signing of the new U.S. Farm Bill south of the border as the U.S. government's guarantee of the annual emergency payments that have been paid out over the last four years. At the end of the day, this money insulates American farmers from decisions related to market signals. We feel that as Canadian farmers we need to have some support so that we can compete against this legislation.

Around the agricultural policy framework there are some important long-term initiatives. However, I'm going to address a few of the things that are not in the agricultural policy framework.

Government policies must not allow the licensing of genetically modified wheat and barley prior to its acceptance in the marketplace.

Governments must also ensure a competitive, responsive, and reliable grain-handling and transportation system with an effective monitoring process. In the transportation area, the blueprint document currently being drafted by Transport Canada will draw on the results of the Canadian Transport Act review. As indicated earlier, rail freight is the single largest cost for grain producers. In this regard, the blueprint document and any changes to the transportation legislation must address the need for effective competition in Canada's rail sector and must reflect government's commitment to create a competitive, low-cost grain transportation system. Achieving these objectives will greatly assist in keeping Canadian farmers competitive in the international grain markets.

Another issue that could affect the competitiveness of Canadian farmers is the government's disposal of its hopper car fleet. In keeping with the government's commitment to create a competitive system, it is very important that the disposal of the cars not result in increased rates for farmers or the removal of these cars from the western grain movement. Selling these cars is likely to increase farmers' rates, because regardless of who purchases the cars there will be new costs in the transportation system that will eventually be borne by farmers.

Current legislation provides for revenue cap increases to reflect any additional costs or ownership costs incurred by the railways. So whether the railways incur additional lease costs or ownership costs like depreciation and interest, they will pass these costs on to farmers through higher rates.

In value-added processing, within the CWB mandate we have established a marketing system for domestic processors that is transparent, is predictable, offers assurance of supply, and treats all producers and processors fairly in a manner that emulates the open U.S. market system.

To do this, the CWB uses a market-based pricing system to ensure the Canadian flour milling industry is competitive in servicing the Canadian market. The CWB has a market-based formula that prices all North American customers--eastern Canada, western Canada, and the U.S.--competitively in relation to one another. Under this system, wheat and barley exports have increased, milling wheat capacity has increased, and flour exports are up tenfold over the last decade.

Still, however, the CWB comes under attack for impeding value-added processing on the prairies because it will not provide pricing incentives for farmer-owned processing facilities. I'm not speaking alone on this issue; the CWB has surveyed farmers on the issue. Eighty-five percent of farmers surveyed indicated it was important for the CWB to facilitate value-added processing, but 81% were not willing to receive lower returns to increase value added processing on the prairies. These statistics indicate that farmers do not want the CWB to encourage value-added processing by offering special pricing discounts to value-added processing ventures.

In addition, the Canadian Millers Association, which is one of the very largest customers of the CWB, has stated that as long as the producers continue to receive a benefit from the single desk system, and as long as the CWB maintains complete control over the marketing of wheat in western Canada, the milling industry is comfortable working with the single desk. However, if there is a dual marketing system, the Canadian Millers Association have a great difficulty in seeing how they can operate under it.

¿ (0915)

Ladies and gentlemen of the standing committee, I'll leave you with one thought from my presentation today. It is this. Our job is to maximize returns for farmers using the single desk. It's not to lower those returns through special exemptions, which will only serve to erode premiums that are obtained around the world.

Thank you, Mr. Chairman. We look forward to your questions.

¿ (0920)

The Chair: Thank you, Mr. Ritter.

Howard, are you going to lead off?

Mr. Howard Hilstrom (Selkirk—Interlake, Canadian Alliance): Yes, I'm going to lead off here.

Welcome, gentlemen.

I think you should recognize that our farmers operate under Canada's free enterprise economic system, and the system you're talking about clearly is not in the best interest of all farmers.

CAP and other farm organizations have stated quite clearly that you guys should not be participating in lobby efforts on farm issues other than concerning your wheat and barley, but obviously you stray across that line.

The Canadian Wheat Board also should not be participating in political activities in order to prop up this failed monopoly economic model that you want to continue with. Using Canadian Wheat Board funds to attend political fund-raising events was explained by Jim Pietryk, one of your employees, by saying political donations are an entry fee for the purpose of doing business. That smacks of the political sleaze and moral corruption that we see in government from time to time and that is predominant in the House today.

The Canadian Wheat Board has sunk into this area, and I don't know why. The CA's written policy is to make the Canadian Wheat Board a voluntary participation organization. The comments of your directors going around to district meetings that you hold--and you can run them any way you want, because they're your meetings--are less than complimentary towards the Canadian Alliance.

During the summer of 2001, six members of the Canadian Wheat Board staff and board of directors attended a golf tournament organized by the Canadian Alliance Selkirk--Interlake Riding Association. The cost for attending was $225: three golfers at $50 each, which included a dinner and the golf fees, and three people attended the barbecue at $25 a person, for a grand total of $225. The CA volunteers in Selkirk were even talking about the fact that maybe the Wheat Board could do a sponsorship towards the tournament. When that was brought to my attention when I attended the next meeting, I said no; that is ethically wrong, in my mind. As a result, there was no sponsorship done.

Mr. Murray Calder (Dufferin--Peel--Wellington--Grey, Lib.): I have a point of order, Mr. Chair.

The Chair: Okay. Mr. Calder.

Mr. Murray Calder: We're here today to listen to the Canadian Wheat Board, and quite frankly I haven't heard a question out of the honourable member over there yet. I would like him to get to his question, please.

Mr. Howard Hilstrom: We are talking about the organization and its impact on farmers, with tens of thousands of farmers who do not want to be part of the Wheat Board. I'm just about finished and am coming to my question. Have you ruled that this is finished with?

The Chair: We're going to hear you out.

Mr. Howard Hilstrom: It has come to my attention this week that attending this golf tournament constituted political activity that violated the Canadian Wheat Board's internal code of ethical conduct.

I cannot accept pool account money that the farmers of the designated region specifically directed through their elected board members should not be used for political activities. And we know, of course, what was on your website. The result is the ethical stand I took last summer and the ethical stand I take now that I know what the true facts are.

You, Mr. Harder, in particular I recall being at that tournament. You used Canadian Wheat Board money to do it, because that was the cheque I am told we received. It was a Wheat Board cheque that as an ethical member of Parliament I cannot accept. I am delivering to you, Mr. Ken Ritter, today a cheque for $225 and a letter, and I expect it to go back into the Canadian Wheat Board pool account.

My question is, would you explain the ethical code of conduct the Canadian Wheat Board has been following and intends to follow in the future?

¿ (0925)

Your political master, the Honourable Ralph Goodale, has indicated in the House that he intends to look into your activities and determine whether or not you're breaking rules that this government feels are important.

Mr. Ken Ritter: Mr. Chairman, if I might--

The Chair: I wonder if I could see that cheque, Mr. Hilstrom. Could I see that cheque? Do you have the cheque with you?

Mr. Howard Hilstrom: We are all working on behalf of farmers. There are tens of thousands of farmers who do not want to be part of the Canadian Wheat Board. You know that, because in the last election many people voted for directors who said they were going to have a voluntary Wheat Board. They did not vote for the one who was going to perpetuate the monopoly.

So you can answer that question, too. Do you intend to keep these farmers in the monopoly, even though they don't want to be there? What gives you the moral right to do that? I'd like to know what that is, question two. So start answering.

This is a forced monopoly on Canadian farmers, and we are not going to put up with them using farmers' money for the purposes of advancing their political interests.

I note that they also put $4,000 into the Liberal Party, which I believe probably should be sent back also, but that's up to the Liberal Party.

The Chair: Howard, I'm having some trouble with this. It seems like a personal cheque from Howard or Faye Hilstrom. There's no account number on it.

A voice: Is it signed?

Mr. Howard Hilstrom: That's because this is a public document that I'm putting out, and I don't want my personal cheque number out there.

The fact of the matter is as I'm a member of Parliament for Selkirk--Interlake I'm responsible for that constituency while I'm sitting in the House here, and as a member responsible for that constituency, I'm going to run a clean constituency and there's going to be no political sleaze or corruption there.

The Wheat Board is trying to politicize the Wheat Board to the point that it is going down to the depths of political interference itself in trying to influence the Liberal government to retain the monopoly. That, Mr. Chairman, is very relevant to the operations of the Wheat Board.

Mr. Ken Ritter: Mr. Chairman, may I--

The Chair: Can I make a point here with this? It seems where the difficulty is --

Mr. Howard Hilstrom: I have a question to ask.

The Chair: --is that you introduced something to the meeting that--

Mr. Howard Hilstrom: I would like my question answered.

A voice: We don't know what the question is, Howard.

Mr. Howard Hilstrom: The question is precisely, Mr. Chairman, about the ethical conduct of the Canadian Wheat Board. I want an answer to that. Did you or did you not break the rules that were posted on your website? I want to see some answers.

The Chair: Howard, I want to look at this cheque that you introduced here first. It appears that--

Mr. Howard Hilstrom: I didn't introduce that cheque. What I did was deliver the cheque to the Canadian Wheat Board to be returned to the Canadian farmers. That is not a cheque that is going through the committee. That has nothing to do with the committee, other than I'm doing it publicly, because in the Winnipeg Free Press the Canadian Wheat Board specifically went to Paul Simon and reported that the Canadian Alliance, along with the Liberals, had received money from the Wheat Board. If the Wheat Board wants to get into political games, they should consider themselves probably to be the real amateurs that they are in the area of politics. They should stick to selling wheat and barley for farmers. Your job is selling wheat and barley, it's not playing politics.

A voice: Or golf.

The Chair: Mr. Hilstrom, the cheque now is into the blues, the cheque from Howard or Faye Hilstrom.

Mr. Howard Hilstrom: That's right.

The Chair: Are there other members who want to make donations to the Wheat Board?

Mr. Howard Hilstrom: That is not a donation. Do not misuse my words. That is a return of money that these Wheat Board members--Butch Harder and others--took from the Wheat Board that they had no right to, because it was ethically against their own code of conduct to do it. And even if it wasn't against the code of conduct, it would be against the ethics of using hard-earned money that Wheat Board members should have received back as farmers and didn't.

The average net income of a grain-and-oilseed farmer in Saskatchewan this coming year is going to be about $13,000 to $15,000. You guys sit there with your $90,000 expenses for the year--Ken, if that figure is wrong, tell me that $90,000 isn't right--you sit there doing that, and those farmers.... You know very well there are many farmers who are on the verge of losing their farms.

These are the issues that need to be dealt with. We don't need to be here listening to you say how much you think that the Wheat Board is doing a great value added.

Are you ready to let them answer the questions, Mr. Chairman?

I would point out that I am the member of Parliament, and that when I ran in the last election, absolutely every dollar that was earned or was raised I am responsible for. It wasn't anybody else. It was the member of Parliament's responsibility. My association received money that I used in that election, including that $225.

¿ (0930)

The Chair: You used this money in the election?

Mr. Howard Hilstrom: Well, it went into the association.

The Chair: I never heard.... I'm sorry, but....

Mr. Ritter.

Mr. Ken Ritter: Mr. Chairman, I'd like to answer some of the questions that I think--

Mr. Howard Hilstrom: The first question is the ethics question.

Mr. Ken Ritter: I think have a right, Mr. Chairman, to respond to the concerns expressed by Mr. Hilstrom.

The first point I'd like to make is that CWB members, around their donation policy, act on two primary principles. We have been accused of being an arm of the government or a crown corporation. Well, we're neither of those. We made the decision based on the fact that we're going to act like a normal corporation, and we're impartial to any political party.

The issue of whether or not we should be involved in being advocates on behalf of farmers.... We have also heard from farmers very clearly. We were elected by those very same farmers, and they have told us clearly that they want us to advocate on their behalf. They face declining incomes, as has been stated. They have great concerns about the U.S. Farm Bill. We feel proud that we are part and parcel of the whole western movement. That includes all farm groups that have identified the trade injury of $1.3 billion, and we pushed hard to ensure that these moneys will flow to farmers. So that is how we made our decision.

The second point that was mentioned was that the Canadian Wheat Board directors are not complementary to the Canadian Alliance in their district meetings. I feel strongly that in every meeting I go to, I should make it very clear that the parliamentary elections are sacrosanct. They elect the person the electorate wants to elect for the Parliament of Canada. However, at the same time, we're elected directors from the CWB, and farmers have a right to elect us.

The third item that was referred to was the golf tournament. I don't want to go into this issue a great deal. I'm as surprised as everyone here. I would think that a year later, it would be a very unusual event to return a cheque.

Fourth was our code of conduct on the website. It has been clearly stated that it was an oversight. The old code of conduct, which was in effect prior to May 2001, had not been removed and the new code of conduct that we passed in May 2001 had not been placed on the website. In fact, it has now been placed on that website.

Insofar as our ethical code of conduct, we are of the view that we have not breached that code of conduct as an organization. We had a very clear, full airing and discussion and decision around this issue. We felt it was in the best interests of farmers, that it was money well spent. Like I said, it's impartial. Our policies are impartial; they apply to all political parties. We made the decision that it was important that producers be represented at this event, and we acted accordingly.

I believe the last question is something about the intention to keep the money, and I believe that was directed to you, sir. I think that pretty much covers all the issues raised by Mr. Hilstrom.

¿ (0935)

The Chair: Thank you, Mr. Ritter.

Bob, do you have anything?

Mr. Bob Speller (Haldimand—Norfolk—Brant, Lib.): I want to be more clear about this cheque. I don't understand the process. What happened? Did the Wheat Board go to a political event in...? Was that the only riding?

Mr. Garry Breitkreuz (Yorkton--Melville, Canadian Alliance): I thought you didn't want to make an issue of that.

Mr. Bob Speller: No, I'm interested now that we've spent the first 20 minutes of the meeting talking about some cheque.

An hon. member: I have a golf tournament....

Mr. Bob Speller: Could you explain this to me?

Mr. Ken Ritter: Mr. Chairman, we also attended the Stockwell Day dinner last October, I believe it was.

Mr. Bob Speller: Oh, so there have been more. Why is that? Could you explain why it is that you do that?

Mr. Ken Ritter: Quite simply, as I stated before, we feel very strongly that we are a normal corporation, and a normal corporation attends these kinds of events. We are impartial to whatever political party holds them.

Mr. Bob Speller: So in other words, you would--

Mr. Ken Ritter: We feel it's in our--

Mr. Bob Speller: Whoever it is, whatever political party.

Mr. Ken Ritter: Absolutely.

Mr. Bob Speller: Getting on to another subject, I'm wondering where you see the future of grain farming in western Canada. There are lots of different challenges, particularly with the American Farm Bill and the impact that will have. I'm wondering if we can maybe get down to some serious talking while you're here. Where do you see our future opportunities in farming?

Mr. John Clair (Director, Canadian Wheat Board): Thank you for the question. I'll take a first go at trying to answer it.

I'm one of the fortunate or unfortunate individuals who has two children trying to farm with me. I'll give you a little bit of an idea of what they're going through right now. One of them has farmed with me for five years, the other for seven. They have no understanding of what a profitable, normal business return is. We're in a critical situation, and we have been for a minimum of five years.

The past five years are the worst five years I've had in my 28 years of farming. If you're asking about the future, I'm very concerned about the American farm bill and what it's going to do to my returns. I see my neighbours and I see my own operation expanding to cover more and more acres to try to draw a living out of farming. My daughter is farming with me, and the only way they're surviving is with her husband's off-farm job. My son replaces me on the farm, so in a sense he has another job as well. There is no return to get them rolling.

I have nothing but very serious concern, and yet I'm viewing it through eyes that are 55 years old. I don't want to take the heart that I had, and that I see in my children, away from them, because they believe farming is a fantastic way of life. In all my time farming, I farmed because I wanted to, not because I had to or anybody made me. But when I look down the road, I don't see a pretty sight. I don't see a normal return.

Most of us, as we go through life, look to our children and hope they do better than we do. That's a normal parent. When I look at what my parents had and what I now have and the life I've had on the farm for 27-plus years, I've had a better life than they did. I don't think that's going to happen for my children. I hope I'm wrong, but I'm very concerned about where agriculture is, and I don't mean just grain farming. I see my neighbours in a really devastated position with their cattle this year. I'm told from what I believe are pretty certain sources that we're going to see a downturn in the hog industry.

This is western Canada. We're in desperate trouble. It's not just one segment of the sector now; it's the whole thing. There are very few bright spots.

Mr. Bob Speller: Anybody else, particularly with regard to the direct impact of the U.S. Farm Bill?

Mr. Ken Ritter: I'll just speak very briefly to it, Mr. Chair.

When you look at the values set out in the U.S. Farm Bill and ask the fundamental question of whether those are the values that western Canadian grain producers need as well, the answer, quite frankly, is yes. The bottom line is that we need that kind of a return to continue to operate profitable businesses. However, we, like the Government of Canada, I'm sure, and all the parties, are concerned about the fact that the American Farm Bill totally distorts the market structure of grains and oilseeds because it insulates and isolates American farmers from the rigours of the marketplace. They no longer have to be concerned about what prices might be like on their particular products at any time of the year. They can simply rely fully on the target prices and the guaranteed prices they receive through the American government.

This also is skewed in favour of certain crops over others, particularly corn and wheat, as I understand it. Accordingly, its impact on Canada will be even greater than it might be on some of the other trading partners, particularly in the oilseed sector.

¿ (0940)

The Chair: Thanks, Bob.

Dick.

Mr. Dick Proctor (Palliser, NDP): Thanks, Mr. Chair.

Gentlemen, good morning.

As you know, the agriculture committee was across the country late the winter and early spring. We're just working our way through a series of recommendations that we haven't quite finalized. One of them we're still grappling with relates to the Canadian Wheat Board. It deals with the question of pricing. At the moment, the wording reads: “The committee recommends that the Board of Directors of the Wheat Board authorize on a trial basis--”

The Chair: Dick, I'm sorry to interrupt, but that is not public information yet.

Mr. Dick Proctor: So we can't deal with this?

The Chair: I don't think. It would be....

You can paraphrase it, if you want.

Mr. Dick Proctor: Okay.

So the question is whether the board would be willing, for a limited period of time, to look at the processing of Canadian grains in an open-market system.

Mr. Ken Ritter: As background information, Mr. Chairman, perhaps it would be useful for our manager of North American Operations, Mr. Jim Thompson, to give a bit of background around this issue. Then we'll answer the question.

Mr. Jim Thompson (Senior Marketing Manager, Canadian Wheat Board): The Canadian milling industry has stated very clearly that they can operate in either an open or a single-desk market. They have said the predictability, the transparency, and the ability to hedge and manage risk are key to a healthy value-added processing sector. A dual market, which is neither of these, is not an environment in which they can operate.

As an example, Ontario has gone to an exemption system in which a certain volume is exempt. The Canadian National Millers Association has written to their government and the commission empowering the Ontario Wheat Board. They have asked for complete removal of the agency powers, simply because they are having difficulty operating in the unstable environment created by a so-called dual market, or the trial exemption they have.

Mr. Dick Proctor: So is it the view of the board that, even on a trial basis, this is fraught with danger and difficulty?

Mr. Jim Thompson: For the value-added processing sector, yes. It offers no benefits to them whatsoever. It only provides increased risk for them and their particular businesses.

Mr. Dick Proctor: Thank you.

Mr. Ritter, in your opening remarks you referred to getting the hopper cars to something like the prairie Farmer Rail Car Coalition, or have the Canadian government continue to own them, because anything else will just drive up the cost of transportation. I agree that this is a large component of farmers' input costs.

Have you looked at the Farmer Rail Car Coalition proposal, and do you have any thoughts on it?

¿ (0945)

Mr. Ken Ritter: We have a broad understanding of the Rail Car Coalitions's proposal.

What I do know, Mr. Chairman, is that there is a special section in the Canadian Transportation Act that, in the event the railways buy the cars, they can charge back the cost of the cars to farmers through an increase in the revenue cap. Accordingly, it's a no-brainer that this is obviously a cost that will flow back to producers. Quite frankly, in these difficult times they cannot afford this cost.

So any solution turning these cars over to producers dedicated specifically to the movement of western Canadian grains--board and non-board--is certainly our preferred position.

Mr. Dick Proctor: Just to jump back to the earlier question, you keyed in on page five of your report that “Our job is to maximize returns for farmers using single desk. It's not to lower those returns through special exemptions...”. Is it the board's contention or position that this trial-market basis would lower the exemptions, or would take away from prices that you're able to achieve?

Mr. Ken Ritter: Well, it certainly is. As I understand it, Mr. Chairman, the fact that we would have a domestic dual market would have the net effect of taking away what's a premium market from the pool accounts, with the resulting loss of that premium to all producers in western Canada.

We've examined this issue. We've examined it many times and looked through the numbers and not gone on political philosophy, simply did the analysis to determine what the net effect is to producers, and have come up with the conclusion that an open domestic market would lower prices domestically to prairie farmers, let alone have the potential of causing a trade rift with the U.S., and accordingly lower the export of processed products from Canada into the U.S.

The Chair: Thank you, Dick.

Murray, do you have a question?

Mr. Murray Calder: Yes. I want to pick up where Dick left off on the producer cars, the hopper cars.

Right now as a rural caucus and northern and western caucus we're currently lobbying to see whether we can't get the cars transferred to the farmer coalition. The best-case scenario would be for one dollar. That is what I'm looking at, because we've already paid for these cars once.

What I'd like to know is how the producer car situation in Eston, Saskatchewan, is working right now where the farmers are in fact able to get away from having to pay elevation fees. I would like to know about that system and how the Wheat Board is involved in that. That's my first question.

Mr. Ken Ritter: Sir, in answer to your question, I'm quite familiar with the experiment. We see it as a competitive alternative to the traditional handling system. The second point to be made about the facility is it's ultra-modern. If you have had the opportunity to view it, it's an ultra-modern system that has a new vision of how to get grain from the farm to the port. We have been supportive of it, as I said, because we feel it is a competitive alternative to the system we have in place right now. What I understand is on a per tonne basis it has significantly lowered costs to producers.

The difficulty with the Eston experiment over the last year is they had an extremely poor crop in that particular region, so a full-scale assessment has yet to be made of the net benefits to the producers in that area.

All I can say is I have seen articles in the newspapers that have indicated they're going to build a second one, or are in the process of raising money to that effect. We see that producer car loading facility as a direct way for producers to counter the consolidation of the grain-handling industry.

Mr. Murray Calder: In other words, with that type of situation, maybe Sask Pools has made a mistake with their super condos and the deals they have cut with the railways. Are there any problems with this type of example with mixing and blending and quality control?

My next question on top of that is the railways are the ones that have the engines. If we can get the cars to the farmers, that's one thing, but they still have the engines. I'd like your comments on common running rights.

¿ (0950)

Mr. Ken Ritter: The first thing about the producer car loading facilities, as I know them, is that they are a series of hopper-bottomed bins linked by conveyor. So in many ways you can segregate a producer's grain far, far better in them than you can in the traditional handling system that has developed. When you look at the facility and see its potential, you simply have to answer the question by stating that it has a very good chance.

My other understanding of quality control is that farmers' grain is all tested. It is tested at port by the Canadian Grain Commission. There's also a testing process at the loading facility. So all grains are subject to quality control.

We certainly feel confident that our system can accommodate a producer car loading facility.

In your second question, you asked about common running rights and the railways' ability to provide engines. We are of the view that railways have a common-carrier obligation. They're also largely a monopoly in different regions of the country. Accordingly, it makes sense that any carrier who wishes to get into the business should have an opportunity to do so under a reverse onus clause, which would ensure that the railway wanting to provide the service would have to go before the Canadian Transportation Agency. The carrier would have to prove that it has a certificate of insurance, that it has the operational capabilities, and that it pays a fair rent for the use of the track of the host railway. Then it's up to the host railway. The onus is then on them to prove why the carrier shouldn't receive the running right.

Accordingly, we've intervened in the Ferroequus application before the CTA.

Mr. Murray Calder: Thank you, Mr. Chair.

Mr. Rick Borotsik (Brandon—Souris, PC): Thank you, Mr. Chair.

I see a bit of a sweet irony for Mr. Ritter. You have just supported the producer cars. You'd said that it's always good to have another opportunity for competition with the railroads themselves, and you've talked about the railroads having a monopoly. You support that competition, but you don't support the competition with respect to the Canadian Wheat Board on more than just a single-desk seller. I find it rather ironic that you would support competition in one area, but try to dissuade any type of competition in your own operation.

Do you have just a 25-word comment on this? I do have some other really important questions.

Mr. Ken Ritter: Yes.

I don't think there's any discrepancy there at all. We see the “we” as all farmers. The CWB is not an entity exclusive of all the producers. So we, as producers, want to ensure that everybody who provides service to us does it in the most competitive, cost-efficient way possible.

Mr. Rick Borotsik: But it is a monopoly.

Mr. Ken Ritter: Absolutely. But “we” are all the farmers, and we want to assure them that we sell for the highest price--

Mr. Rick Borotsik: But just as a group, it is a monopoly. Correct?

Mr. Ken Ritter: Yes, it is a single desk--

Mr. Rick Borotsik: By the way, I really appreciated the lobbying of the Canadian Wheat Board. Other comments made today, with the cheque, are rather irrelevant.

You have five members on your board who are Liberal appointees. You had said earlier, Mr. Ritter, that you support the $1.3 billion trade injury program that is being proposed. I would ask two questions on this. Have you lobbied the government with respect to a payment on that trade injury? And that's only in regard to trade injury?

I have two other things I'd like you to lobby the government on. One is PFRA. I know it's not a direct responsibility of yours, but certainly indirectly it's important to your producers. The second thing would be a probability of drought.... The trade injury is one aspect. Drought damage is totally another aspect. We've been told consistently that the crop insurance program will not suffice to cover some of the costs of the potential drought. Have you talked to government about drought protection or drought programming? And have you ever talked to them about an increase in actual capital program spending in PFRA?

¿ (0955)

Mr. Ken Ritter: Mr. Chairman, we continually advocate on behalf of farmers. I'll just give you some examples of the times we have written letters and expressed concerns to government about economic incidents affecting farmers. One is around the agricultural policy framework. We've clearly put our views forward on it. We've clearly put our views forward on grain transportation and how it functions--

Mr. Rick Borotsik: I understand that, and I don't have a lot of time, but clearly those two things, PFRA and the drought--

Mr. Ken Ritter: We have not gone into the specifics around the PFRA program.

Mr. Rick Borotsik: Would you?

Mr. Ken Ritter: We will certainly take it under advisement and consideration.

Mr. Rick Borotsik: Okay. I have a thick pile of letters and faxes from people who now have some difficulties with water in our areas. If you could do that I'd appreciate it.

My last question is on the U.S. Farm Bill. When I asked the question, the minister and his department hadn't analysed what the impact will be to Canadian producers. Now we know that the U.S. Farm Bill will certainly impact your operations because of the yields on barley and wheat.

Have your departments and your people done any analysis as to how the American Farm Bill will affect us over the next ten years? It's a ten-year farm bill. Have you done any analysis at all?

Mr. Ken Ritter: Mr. Chairman, we're just at the initial stages of looking into that issue. We've had a report of what the U.S. Farm Bill is. My understanding of our market analysis group is we do a ten-year projection at all times, look at world markets and the effects we see coming from the European policies and the U.S. Farm Bill.

Mr. Rick Borotsik: Will we be affected by country of origin labelling?

Mr. Ken Ritter: We will be partially affected by that, Mr. Chairman, yes. Well, not partially--we will be affected.

Mr. Rick Borotsik: Fine. How is the impact--

Mr. Ken Ritter: But we are now, because there's an end-user certificate required for Canadian Wheat Board grains anyway. My understanding is there won't be a huge change around that.

Mr. Rick Borotsik: When will this analysis be available?

Mr. Ken Ritter: Well, I would hope it would be available in time for, first of all, the strategic planning day we're having as early as next week.

Mr. Rick Borotsik: Is that on the U.S. Farm Bill?

Mr. Ken Ritter: I'm not sure if it'll be available by then. It certainly will be available for our main strategic planning session next January.

Mr. Rick Borotsik: Would you share that, obviously not only with the committee but also with...?

Mr. Ken Ritter: I can certainly bring it to the attention of our board of directors. If they feel it should be shared, they will. Our usual practice is to share documents that impact farmers with everyone.

Mr. Rick Borotsik: Can you just briefly tell me what the deficiencies are in governance that the Auditor General pointed out? She said there were deficiencies in governance. Can you tell us what they are?

Mr. Ken Ritter: Yes. The Auditor General indicated that we should have performance targets, we should have a strategic plan backed up by a long-term plan, and we should provide a better governance structure around the IT provisions at the board. I can truthfully and sincerely tell you that we have addressed all the issues the Auditor General has mentioned, as recently as our last board meeting on May 30 and May 31.

Mr. Rick Borotsik: Did she talk about the make-up of the board at all?

Mr. Ken Ritter: The Auditor General did not talk about the board make-up.

The Chair: Thanks, Rick.

Mr. Rick Borotsik: Thank you.

The Chair: Rose-Marie, it's your turn.

Sorry, Wilfred, but the time is done.

Mrs. Rose-Marie Ur (Lambton—Kent—Middlesex, Lib.): I have just a couple of quick questions. Just for information, do producers in Ontario still have to apply to the Canadian Wheat Board for export licences?

Mr. Jim Thompson: If they are exporting their grain out of Canada they have to apply to the Canadian Wheat Board for an export licence.

Mrs. Rose-Marie Ur: In Quebec, is it just granted that they don't have to do this?

Mr. Jim Thompson: No. Quebec, the Atlantic provinces, any regions outside the designated area require an export licence to export grain from Canada.

Mrs. Rose-Marie Ur: So why don't producers in Quebec have to apply?

Mr. Jim Thompson: They do have to. A producer in Quebec would have to apply, yes.

Mrs. Rose-Marie Ur: I was given information here that the CWB has decided it would no longer require producers in Quebec to obtain an export licence. So that's not true, then?

Mr. Jim Thompson: That's not correct, no. They do require an export licence to export wheat and barley, and the products thereof, from Canada.

Mrs. Rose-Marie Ur: The question went on to ask that if Quebec doesn't have to have an export licence, why does Saskatchewan have to have it? Why do Saskatchewan producers not have that option unless they have the buyback?

Mr. Jim Thompson: No, it doesn't say that. Under the act, export licences are required for the export of wheat and barley and products thereof from all regions of Canada.

Mrs. Rose-Marie Ur: Right.

A little while ago you changed the term “buyback” to “producer direct sale”. Why was that done? What was gained by changing that?

Mr. Jim Thompson: That was changed, I think, back in the mid-1990s, and I think it was to better reflect what was actually occurring with the sale. It was being done by the producer directly in contact with an end user. I don't know where the term “buyback” came from originally, but “producer direct sale” was felt to better reflect what was actually occurring.

À (1000)

Mrs. Rose-Marie Ur: Right.

Another question brought forth and brought to my attention was does the legislation allow the Canadian Wheat Board to grant licences without a buyback, or not?

Mr. Jim Thompson: Yes, it does. I'm not a lawyer and I don't know the interpretation of the act, but I believe it says that if it does not affect orderly marketing of the Canadian Wheat Board, the board can, at its discretion, grant licences around that.

Mrs. Rose-Marie Ur: How much involvement does the Canadian Wheat Board have with organic farming?

Mr. Jim Thompson: We have an organic marketing manager who is directly involved with the organic community on marketing, assistance programs, and things like that.

Mrs. Rose-Marie Ur: Is that Mr. Harder?

A voice: No.

Mrs. Rose-Marie Ur: Are you involved with organic farming? Do you have anything to do with organic farming?

Mr. Wilfred Harder (Director, Canadian Wheat Board): I was on a committee that was, but I'm not an organic farmer.

Mrs. Rose-Marie Ur: But you've done some work on organic farming, looking into.... I thought you mentioned that yesterday.

Mr. Wilfred Harder: Yes.

Mrs. Rose-Marie Ur: Thank you, Mr. Chair.

The Chair: Thank you.

Mr. Ken Ritter: If I might just answer that also, the CWB is working on a common licensing policy for all of Canada, and the results of that will be dealt with at the board in the very near future.

The Chair: Thank you, Ken.

David.

Mr. David Anderson (Cypress Hills--Grasslands, Canadian Alliance): Have you developed that because people have been treated differently across Canada? Is that why you're trying to put something new into...?

Mr. Ken Ritter: As Mr. Thompson explained, right now everyone is subject to the Canadian Wheat Board Act. However, we want to be very clear as to the results and effects of the export licence. Accordingly, we're looking at how the policy has been working. We are going to ensure it will not only be a common policy, but everybody will be aware of the policy and there will be enforcement around it. That's certainly what we're looking at.

Mr. David Anderson: You presently give no-cost licences to producers in certain areas as well, right?

Mr. Ken Ritter: That's in Jim's area.

Mr. Jim Thompson: A Quebec producer who certified his product was grown in the province of Quebec would be granted an export licence, without having to pay any fee into the pool account.

Mr. David Anderson: Thank you.

I guess I want to come back to this advocacy thing. I understand that from some of your meetings this spring some directors were saying they wanted you to become more of a political organization, lobby a lot more politically, and get involved politically. Seeing this morning the fallout of what's going to happen, I imagine if you continue to do that.... But your mandate is to market grain in an orderly fashion.

This morning we've heard that you're advocating on things like the U.S. Farm Bill, you're against GMOs, and you've tried to prevent fusarium-resistant wheat from coming into the market. You've stepped into the transportation and hopper car issues. Now you're saying you would consider getting involved with the PFRA issues. How much have you budgeted this year for political activity and political advocacy?

Mr. John Clair: First, I don't have a budget figure right off the top of my head. But when I talk to the farmers in my district, or for that matter when I'm anywhere out in the country, I do not get the message that I should not carry their message forward to government. That is not what my people are telling me. They're telling me to speak on their behalf about things that concern them and impact their farms

Mr. David Anderson: First of all, they have a Wheat Board minister to do that. They also have farm organizations and MPs.

When I talk to people about these issues, they're on different sides of it. I hear farmers on both sides of the issue on GMOs, transportation, fusarium-resistant wheat, and hopper cars--there are definitely people on both sides of that issue. You have taken consistent stands on those that some of my constituents are at odds with. They're paying the bill. This is very similar to people having union dues collected and having to support a particular political party, whether they want to or not. You're consistently taking political positions that are not supported by all farmers, but they have to pay the bill, and I have a problem with that.

Your mandate is to market our grain. I understand that the marketing has consistently gone down and will probably continue to go down, so you're becoming a smaller player all the time in that market. But if you're going to move out of that and into advocacy, you need to be honest and let the farmers choose whether they want to be part of that advocacy or not.

À (1005)

Mr. John Clair: First I want to say that I am elected. I represent producers in my district and have a responsibility to all producers, just like you do as part of government; there's no difference.

Mr. David Anderson: It's not the same.

Mr. John Clair: Not all producers support me, I understand that. Not all people in the country support you, sir, or any other party for that matter.

Mr. David Anderson: You're not elected to take political positions, you're elected to market grains.

Mr. John Clair: I have a responsibility to my farmers to represent them in things that impact them. That's what they're telling me to do, and I am doing the best job I can in representing them.

For instance, take the hopper cars: how many farmers want their freight rates to go up? I would suggest not very many do.

Mr. David Anderson: Okay, I'll ask you on that issue then, how do you propose to pay the massive maintenance bills that are going to come in on those hopper cars very shortly, and who is going to pay for the replacement of that fleet, which needs to take place over the next few years? You want farmers to have them for one dollar. Who's going to pay? There are going to be some incredible costs involved with owning those hopper cars and keeping that fleet moving. Who do you suggest should pay the bill on that?

Mr. Ken Ritter: Mr. Chairman, the difficulty with that question is that farmers are paying for the maintenance right now. Our understanding is that in the revenue cap there's some $4,000 per car charged annually for their maintenance. We have expressed concern about that number; we feel strongly it should be about half the amount.

The second point around the hopper car fleet is that in the sale we put forward our views that there should be a certificate of fitness and quality established by credible engineers and engineering firms around the value of those cars and their fitness for any future buyer.

I think these are normal, reasonable, prudent positions to take on an issue that directly impacts on producers.

The Chair: Thank you, David.

Dick.

Mr. Dick Proctor: Yes, thanks, Mr. Chair. I have a couple of questions.

I noticed you had a brief to the foreign affairs and international trade committee a month ago today--the Wheat Board, that is--in which you indicated that for Canada to be effective we require better dispute settlement mechanisms under NAFTA, in particular, rules that would prevent or reduce petty trade actions.

I wonder, Mr. Ritter, whether you could elaborate on what the thinking of the board is with respect to NAFTA and the constant harassment, for lack of a better word, that seems to flow from the Americans toward the Wheat Board and other areas of Canadian agriculture.

Mr. Ken Ritter: It arises from all the trade actions that we see levelled against us on a continual basis.

We're of the view that these rules should be tightened up. Three strikes and you're out should be the kind of rule that governs this area. We always seem to get caught in the American electoral process as somebody to beat up on and have their domestic politics affected. As a matter of fact, right now there are eleven plains state senators who are running for election, and I dare say the U.S. Farm Bill and the challenges against the Canadian Wheat Board have some direct relationship to that political process.

All we're saying is that we would look to our government to establish some good solid rules around the trade challenges with our NAFTA partners so that when an organization like us acts commercially and is commercial, it's an end to the matter and there isn't an opportunity to constantly affect the returns to farmers.

Mr. Dick Proctor: Thanks.

You've told us again today, Mr. Ritter, about the concern the board has with the looming GM wheat issue and the need to demonstrate that there are markets there for it. We've heard that before, but I'm just wondering, what does the Wheat Board perceive to be the timetable on this issue?

Mr. Rod Flaman (Director, Canadian Wheat Board): I think the timetable is very short. I think Roundup Ready wheat, according to the existing system, could be registered in 2003 for commercial plantings in 2004. Right now the Wheat Board doesn't have a role in the legislative process that impacts on that registration. It's in the hands of Agriculture Canada and the Government of Canada to intervene.

Our position is that we don't have the means to segregate these grains, we don't have tolerance levels to satisfy our customers' requirements, and this is going to have a huge impact on marketing of wheat by Canadian producers. It's a situation that affects strictly Canadian producers. This is not a situation that is developing in our competitor countries, Argentina, Australia, and so on.

We strongly encourage the government to look at the situation and to take into account the marketability of our grain and the negative impact on the producers.

À (1010)

Mr. Dick Proctor: You didn't mention the United States in terms of competitor countries. What is your understanding of the situation there with regard to their genetically modified wheat?

Mr. Rod Flaman: They have a very small area that is going to be capable of growing these varieties of grain. It's not specifically being introduced into the U.S. at this point in time.

But we really have a fairly transparent border. There's going to be contamination regardless of whether this Roundup Ready wheat or these genetically modified products are introduced in Canada or the U.S.

Mr. Dick Proctor: Do you have any sense from either the minister responsible for the board or the Minister of Agriculture about what the Government of Canada's position is going to be on this issue, in terms of licensing or agreeing to...?

Mr. Rod Flaman: Well, I guess what I've seen is that our process, currently, is pretty much exclusively a science-based process. We don't have a problem with being science-based. But from our perspective, as the marketer of the grain, we have great concerns about customer acceptance. Somehow, this needs to be taken into account for the protection of our producers.

Mr. Dick Proctor: But you're not seeing any sense so far that is being taken into account?

Mr. Rod Flaman: I've seen no firm commitment.

Mr. Dick Proctor: Just one short question. We're hearing reports about lack of federal assistance for the Canadian International Grains Institute. You work closely to that in the board. What's the situation there?

Mr. John Clair: I can maybe touch on it.

Over the years the Wheat Board and government have partnered at the Canadian International Grains Institute. As it expanded to cover more grains--as more grains became more important across western Canada--they went outside for funding. But it's my understanding that government funding has been, at best, stable. Like a lot of organizations, they are looking for more help. Like most places, their costs are going up with inflation.

The Chair: Thank you, Dick.

Just before we move on, I have a couple of points. First, Australia right now is giving us quite a push with grain sales around the world. Second, we look at Iran and the Americans' changing relationship with Iran, where one of our major markets is. And third, apparently the EU is unloading its bins with further export subsidies. Ken, could you comment on any of these items?

Mr. Ken Ritter: I can comment a bit on the reality of marketing in an international marketplace, which is charged with politics and whatever.

As we all know, the economic circumstances in a major competitor, Argentina, are such that it's very unpredictable. Their currency is in great flux right now. So we're never quite sure whether they're going to undercut the market by huge sums or in fact abide by market signals.

Second, we see that the American Farm Bill is certainly going to have an impact on production--likely to Canada's detriment.

Third, Australia has a geographical advantage over the Canadian grain-growing area. Much of their grain is grown very close to port. Their livestock industry has been in some decline over recent years, so large acreages have been broken up and planted with wheat. Now we see them intervening in the durum wheat market. If my recollection is correct, they're the largest malt barley exporter now in the world.

You're right, Mr. Chairman. The intervention stocks that I saw recently being accumulated in the European Union are certainly going to be burdensome. We're hoping that they are going to be placed on the world marketplace at values that are competitive, and maintain the pricing structures that we see. However there's no guarantee of that.

So the international marketplace is a precarious place. It is charged with politics. Other countries have some locational advantages. But as representatives of Canadian producers, we still feel very strongly that western Canada's grain industry is a strategic industry for this country. It has provided great export revenue for Canada, and we feel certain it will do so in the future as well. That's why we join so strongly with all our fellow groups of farmers in talking to government, so that we can have adequate returns to continue to participate in this particular industry.

À (1015)

The Chair: Thank you.

Rick.

Mr. Rick Borotsik: Thank you, Mr. Chairman.

That was basically was what I was going to say.

Ken, you just said that we have excellent export revenue for Canada, but your job one, as identified in this document, is to operate to maximize farmer returns. It's not necessarily to have export revenue for Canada but to generate maximum farmer returns.

That being said, we know that there's competition out there, and we know that there are a lot of people trying to eat our lunch. What is it you as the Canadian Wheat Board are doing that is new to develop new markets and to get the premium prices we have for our grains? What are you doing? I don't see anything dramatic. I see an organization that sits back on its laurels and says okay, here.... What kinds of new markets are you developing, and how are you developing them?

Mr. Ken Ritter: Maybe Jim could get an initial cut at that, because that is an area he is associated with.

Mr. Jim Thompson: We have a full market development area that is looking at developing new products all the time for particular markets and specific uses. One of the exciting new products coming down the line that is in development now is a hard white wheat that will serve noodle markets and white bread markets. In fact, it has some potential in whole-wheat markets in Canada and the U.S. We have a new, extra-strength durum that will provide better pasta colour and strength in markets such as the Italian market. There are products like that being developed on an ongoing basis to try to penetrate new markets and serve new opportunities.

Mr. Rick Borotsik: If some of those were GM products, would you still go forward with them?

Mr. Jim Thompson: You'd have to ask the director.

Mr. Rick Borotsik: You're looking at new markets. If some varieties were GM products, would you continue to do that? Would you just turn a blind eye?

Mr. Ken Ritter: Wilf would like to answer that.

Mr. Wilfred Harder: Right now 70% of our customers say they don't want a GM product. That's one.

You asked what we've been doing, and you brought up the International Grains Institute. It would perhaps be useful for the MPs to tour that from time to time. We are a major funder for that, and so is the federal government--or was. We have a noodle-making plant there. We just set up a malting barley technical centre, where customers can come down and find out what malts will fit their particular program, the same thing as with the noodle industry.

We're doing that kind of development on an ongoing basis. The International Grains Institute is probably one of the best-kept secrets we have.

Mr. Rick Borotsik: I've seen it, Mr. Harder, and it is an excellent thing.

There are two aspects to business. One is the sales and the marketing, which we've heard a bit about, and the other one is the actual efficiencies of the organization itself.

We recognize that there will probably be less volume this year because of the drought in western Canada, and we will probably see that there will be fewer sales. Have you looked at any cost efficiencies in your operation? Are you looking at reducing the cost, with staffing perhaps? We see this all around us right now with restructuring in a lot of corporations. Are you looking at that area, perhaps efficiencies and restructuring in your operation and in staffing?

Mr. John Clair: I'd like to speak to that, and I'd like to use the example we went through last year.

Last year was not a large crop year for us. When we were meeting, I believe, in October, we as a board said to staff, take a serious look at where we're at; if projections are correct--and we're getting very close to the end of the year--I believe our budget is 11% under what it was expected to be as an administration budget for the current year we're working in.

Now, we're concerned about the drought right now, on June 6, but the crop is not written off, so we have no idea.... I've only written off one crop in the first week of June in my life.

But to answer your question, we will look at it seriously as we know what's developing out there for our crop. Generally speaking, it's October when we really see the final numbers and know where we're at.

À (1020)

Mr. Rick Borotsik: Your fiscal year end is when?

Mr. John Clair: July.

The Chair: Thank you, John.

David, do you have another question?

Mr. David Anderson: John, I was wondering if you could provide the budget figures I asked for earlier to the committee at the earliest convenience, with the amount you committed to political advocacy and political involvement. Could you get those to us?

I have a question. We understood you were coming here to talk about value added, and we haven't really gotten to that very much. I've been looking through some of your stats, some of your releases, and that sort of thing, and you talk about milling capacity, which is really the only value added with grain we have in western Canada right now. You consistently talk about and try to take credit for the fact that milling capacity is up, according to your figures.

We went back to some figures just to check that out. StatsCan says that in 1987 we had 10,000 metric tonnes per day of milling capacity, and by 1997 we had 9,300 metric tonnes per day. You say we now have 9,800 metric tonnes per day, which means that at the most it's gone up 5% since 1997.

In some of your other material you say that the U.S. trade agreement has been responsible for any growth that's taken place in that. But as we checked, we saw that the greater part of the milling is done by large U.S. firms. We've talked over the last couple of years to smaller milling companies, and they tell me that you're actually the biggest impediment to them expanding their business, not a help to them.

I'm just wondering if you can tell me, how are producers benefiting from that value added we're supposedly doing in western Canada, especially when the ones who are trying to do it, the smaller guys, are saying that you're keeping them back and that you are the problem, not the solution?

Mr. Jim Thompson: I don't know the numbers for 1987 off the top of my head. I would have to go back and look at them. I don't think that number is correct.

However, there were significant closings of flour mills in Canada in the late 1980s as we moved out of the regulated $7-a-bushel wheat environment into the open market or so-called NAFTA environment. We saw a significant number of mills close between 1985 and 1991.

If you look, you'll see that the numbers stabilized in the early nineties and there's then been an annual growth coming out of 1993, 1994, until today of about 2% or 3%. So the industry has done very well under the NAFTA environment. If you look at flour and product exports to the U.S., they've been growing each year and continue this trend toward very healthy growth.

In terms of returns to producers, the single desk extracts the full market premium for that value for producers, as Ken had mentioned in his text. That money goes into the pool count and is returned to producers.

In terms of small mills versus large mills, I would suggest--I'd have to go back and look--the most significant expansion in recent years has been with the smaller mills. The new mills that have been built have been smaller independent mills, such as Prairie Flour Mills in Elie. The most recent expansions that come to my mind over the last year were done by Ellison Milling in Lethbridge. Farm-Gro Organics in Regina is a new mill. Dover Flour Mills in Cambridge recently expanded by 5,000 hundredweights. New Life Mills in Hanover expanded by 1,000. And those are all smaller or mid-sized milling companies, rather than the multinationals you referred to.

The multinationals have had some expansions as well, but in fact the percentage of the capacity ADM has had since the early nineties when it came into Canada has shrunk from about 50% to about 44% today. Robin Hood as well was about 20% in the early nineties; it's down to about 17% today.

Mr. David Anderson: Actually, I think probably the biggest help you've been to value-added producing is the fact that people have gone into other, non-board, crops. We have farmers who consistently tell us that the board has helped them to diversify and to value-add, but it hasn't been in wheat.

I have people who would love to put flour mills in and begin to do that process. I have some of your other literature that basically says these people are not capable of deciding whether businesses can be run or not. They shouldn't even be allowed the chance to do that.

On the prairies, we need to begin to value-add to the product we grow the most of, which is wheat, and you are preventing this. You're not allowing the small communities to do this. I'm watching them die. And until we can do something with our grain in our local communities, we're not going to be able to do anything with that. I know you have an initiative with new generation co-ops, but people need to be able to do what they need to do in their communities with the product they're growing. They're dying.

Grain prices are going down, as well. The United Nations has said they're going to continue going down. If we don't do something and allow farmers to begin to do something in their communities with this, in many ways the Wheat Board is going to be responsible for the demise of rural western Canada.

We have to be able to start doing this. It's not good enough to leave it up to ADM and Robin Hood; we have to be able to start doing it in our small communities.

À (1025)

The Chair: Thank you, David.

Mr. Wilfred Harder: That's absolutely...some of those comments--

The Chair: Sorry, he's made a statement and his time is up.

Are there other quick comments?

Mr. Bob Speller: I'll give them time to allow them to respond.

Mr. Wilfred Harder: That's absolutely ridiculous. Farmers are not prevented from milling their own grain if they wish to. Frankly, the system we have enables an up-and-starting producer to compete at an equal level with the multinational because everybody gets the same acquisition price. Normally, in other businesses, the big companies get the big deals. Here everybody is treated fairly. So they can do that.

Somehow the Wheat Board is to blame for all this. How about on the non-board crops? I don't see mom-and-pop oat milling companies starting up. There's an oat crushing plant at Sainte-Agathe that's been standing empty for five years.

The Chair: It's come down. Come and visit.

Mr. Wilfred Harder: So I think it's really not a runner, this whole notion that we're all going to set up flour mills in our backyards.

They have a tremendous advantage under the Wheat Board system. In fact, that's what the American millers like about us. One thing they get with the Wheat Board system is consistency of supply, and that's a big, big factor. So it's absolutely ridiculous to think the Wheat Board is somehow an impediment to setting up these mills.

Mr. Bob Speller: Also, you're saying here that the idea of dual marketing is a misleading concept. Ken, what do you mean by that?

Mr. Ken Ritter: First of all, there's no such thing, really, as a dual market. You're either a single-desk seller or it's an open market system. You cannot have the disciplines and the premium prices that are achieved by being a single-desk seller operating in the same backyard as an open market system. What quickly happens is that the premium prices that the single desk can achieve are eroded by competitor prices.

I'll use an example. If my colleague Rod Flaman, myself, and John Clair were able to identify a particular market that brought a higher price--let's say it's across the border in the U.S. at a particular elevator--what would we do as producers? We'd all rush down there and compete with each other and destroy that price. That's the only logical outcome when you have a product that is in constant oversupply, particularly in North America and often generally around the world. So the best way to achieve these premiums from the high-value customer is to ensure that the single-desk concept is kept.

If a dual market is there, what simply happens is that the premium is lost and so is the price premium, and the two groups cannot function together.

The Chair: With that, Ken, we'd like to thank you and your board for coming to meet with us today, and good luck with your work here in Ottawa.

As you can see, we have differences of opinion within the House and even around our own table.

Mr. Ken Ritter: Thank you, Mr. Chairman.

The Chair: Thank you.

We'll just clean up this report, and then we can go. We'll suspend for a few minutes and then finalize the report.

[Editor's Note: Proceedings continue in camera]