Thank you, Mr. Chairman and members of the Standing Committee on Agriculture and Agri-Food. It's an honour for me to appear before you today as president and chief executive officer of the Canadian Wheat Board.
You'll notice that my accent isn't quite the same as yours, but I'm told that across Canada there are varying accents, so mine might eventually fit somewhere in the spectrum.
I've come to Winnipeg, which is a long way from Australia, where I was last employed as CEO of Queensland Sugar Ltd. It's also a few degrees cooler in Winnipeg, I have to say.
I'm very pleased to have this opportunity to visit the beautiful city of Ottawa to meet all of you and to spend some time talking about the grain industry in western Canada. I look forward to a thoughtful and stimulating exchange.
I would like to tell you a bit about myself and what I hope to bring to the position entrusted to me by CWB's board of directors. I was born and raised in Australia and have been fortunate to work in a wide array of agriculture-based industries—from cotton, to grain, to sugar. I have worked at the CEO level for about 20 years, and I come to the CWB with what I think is a great deal of corporate and commercial experience in agri-business.
Some have attempted to read a great deal into the fact that I was involved in the deregulation of Australia's sugar industry. However, as I have pointed out on a number of occasions, Queensland Sugar Ltd. still maintains a 95% share of today's Australian market. In the context of the Australian sugar industry, it was a decision that made sense. But I wish to make it clear to all members of the standing committee that I have not come on a deregulation agenda. Rather, I have come determined to work with the CWB's board of directors in providing the most value possible to the farmers of western Canada, whatever that might be.
It is not my first time working in Canada. From 1987 to 1991 I was employed by Elders Grain in their Canadian offices and by AgPro Grain, a subsidiary of the former Saskatchewan Wheat Pool. Much has changed in the intervening years. The Crow rate has gone, and the wheat pools and UGG have disappeared, along with a thousand prairie elevators and miles of rail branch lines.
On the other hand, much has remained the same, and western grain producers still face the same challenges they did 20 years ago. Because of their location, the majority of producers are captive to grain-handling and transportation systems with relatively high costs. And in spite of today's high grain prices, farmers are still caught in the price-cost squeeze caused by the dramatic increases in fuel, fertilizer, and equipment prices. They face intense competition in the marketplace from a host of rival grain exporters, some of whom are much closer to the major buyers than we are in western Canada.
Happily, a number of strengths have endured as well. Western Canadian wheat remains the gold standard by which all others are measured. Its reputation for consistency, reliability, and quality is recognized throughout the world.
You could say the same about the Canadian Wheat Board. Some of the issues it faces have changed little over 20 years, but the CWB itself has changed in a fundamental way. There is no doubt from what I have now seen and heard first-hand that the CWB of today is very different from the institution I remember from 20 years ago. Most important, it is now overseen by and answers to a board of directors, the majority of whom are elected by grain producers. This change, made almost ten years ago, is very significant. It put control of the organization in the hands of the people who are most directly affected by its operations and who ultimately pay its bills.
Led by farmer representatives, the board has introduced sweeping changes in response to producers' needs. This has been an evolutionary process based on a solid business strategy and vision of the future. Most notably, it has included the creation of many payment and pricing options designed to give farmers choices far beyond price pooling. More changes have been added each year, with another new slate of pricing and delivery options set to be rolled out over the next few weeks. This process has been carried out carefully to ensure that the core value and strength of the CWB remains in keeping with its primary mission—to maximize farmer returns.
I'm accountable to the board of directors for providing real and tangible value to the farmers of western Canada. I take this commitment very seriously and I see it as my top deliverable.
If prairie grain producers can be clearly shown how their marketing agent adds value to their bottom lines, I think many of the other issues that have continued to swirl around the CWB will slowly lift and dissipate.
I thank you for your time and attention and I look forward to your questions and comments.
Thank you, Chairman.
I believe, Mr. White, the chair is suggesting what we may ask and what we may not.
In any event, welcome to the committee and welcome to Canada. We do wish you well in your job.
We'll see whether the chair allows this or not, but the reason you were originally requested to appear was because of the concern in the country and by committee members and certainly by myself about the great suspicion around your appointment. I think you've alleviated that in your remarks and in your performance to date at the board, to be honest with you. But there was great suspicion around your appointment that you may be appointed to achieve the Prime Minister's objective, which is to undermine the Canadian Wheat Board. There's a lot of evidence to lead us to that point, the relentless attack on the board.
We've seen directives to the Canadian Wheat Board from the minister's office directing the board to do certain things that we've never seen from previous ministers. We've seen gag orders on the elected board members—and that's one of the questions I will be raising to you—gag orders that were originally placed on the board under threat of two years in jail and huge fines.
I would like to know if those gag orders are still on the board--in other words, that they can't defend themselves and can't promote the board in terms of its policies and really challenge the government. We've seen manipulated elections by one minister, and it seems the other one may follow suit.
The key is that we've seen the firing—
I shouldn't comment on a lot of the things you've referred to, other than to say that it might be worth my going through the process that came to my appointment.
I was contacted by a search firm that asked me to send my CV to them. I heard back from them that they wanted to talk to me further. The search firm talked to me. Then there was an interview by video conference, since I was in Australia, by a committee of directors of the CWB and some other representatives from government who were on a joint search committee. Finally, the board of the Canadian Wheat Board asked me to meet with them. I met with them in Calgary. It was just the board of directors.
Following that, the chairman of the Canadian Wheat Board indicated to me that they wanted to appoint me. We negotiated a contract between me and the Canadian Wheat Board. There was then obviously the requirement for me to be appointed by the government. So the minister held a very short teleconference with me. He didn't indicate to me any direction and really wanted to talk to me about my credentials before he appointed me. From an outsider's point of view, I regarded that as a fairly proper process.
Coming to the point of your question, I work for the Canadian Wheat Board. I work for the directors of the Canadian Wheat Board. That's where I have my contract, and I take my direction from them.
Having said that, of course, we work in an environment where there is an act of Parliament associated with us, and the minister and the government do have the ability to do some things associated with that. I suppose I take it that if I act properly and commercially in all circumstances, then I won't really have any great trouble.
I was the chief executive officer and managing director of Queensland Sugar Limited from 2000 to March 30 of this year, 2008—about eight years. When I started at Queensland Sugar, it was a new company set up by an agreement with the industry.
In the sugar industry in Australia, there are sugar cane farmers and sugar millers, and there's an interplay between them associated with the returns for sales of sugar. The government at that stage had an act of Parliament that meant there was a single desk in place for all the sales of raw sugar in Queensland. It was an acquisition act.
The company was just moving from being a government-owned corporation, the Queensland Sugar Corporation, to being a public company, Queensland Sugar Limited. This was a company that was owned by guarantee by the growers and millers of Queensland. When we say “by guarantee”, we mean it was a construct of a company, an ownership structure that was not for profit and didn't have shareholders as we know them in the public shareholder sense, but it certainly reported on an annual basis to a group of members who were farmers and sugar millers.
The act of Parliament continued, and it had a review date associated with it. There was in fact an early review of the single-desk arrangement by agreement among all the parties: the sugar millers, the government, and the sugar cane farmers. After five years, that review took place. It was decided that there could be a deregulation.
It was state government legislation; the Government of Queensland was the government. Their view was that they wanted to basically get away from the sort of regulation that had been associated with the sugar industry, and they were prepared to move away from it if the industry agreed on that movement.
After a process of negotiation between the government and the sugar cane farmers and sugar millers, it was agreed that they would move. However, there was one particular arrangement that just about everybody agreed on. This was that because the customer base, particularly the export customer base, was a relatively few large sugar refineries, predominantly in Asia, which had significant market power in terms of where they purchased their raw sugar or their ingredient from—I suppose a bit like a large flour mill—it was still sensible to continue to sell the product through a single sales channel and logistical channel; otherwise, there would be multiple sellers from Queensland trying to sell to what is a relatively small customer base.
It didn't make sense to them in principle that this would be a good idea, so there was an agreement that if 85% of the potential export product could be signed up to continue to be marketed with Queensland Sugar Limited on a commercial basis, the government would be prepared to take legislation away.
My role in this was really to advise the group that was contemplating this about the consequences and the implications associated with the move they were planning, and then to negotiate commercial contracts with the sugar milling companies to take the product they produced to the export market. We achieved 95% of the total tonnage going into those contracts. That was in about 2005.
As I left Queensland, we were having a further discussion, about the future of the company more than about the single-desk arrangement. There are some proposals being put forward now, particularly about the board of directors of Queensland Sugar Limited, which was a company that had four growers, four millers, and four independents including myself on the board—a board of twelve. They are now contemplating a much smaller board, of independent directors only and the managing director.
Mr. White, it's my first opportunity to meet you. I guess some of the members around the table met you previously, but this is my first opportunity.
I have been around this table for a long time, and have met various CEOs of the Wheat Board over my 15 years in attendance here. I look at your résumé and where you've come from, and you indicate in your résumé that you worked in Canada for a number of years some years ago. So you had some knowledge of the Wheat Board's purpose, the reason for it being there, and how it has served Canadian agriculture, particularly our wheat farmers and barley growers, over the last many years. You came here with some sort of background knowledge about the Wheat Board.
In coming here, obviously, you knew that some issues were going to face you. You came, I suppose, with some degree of trepidation, knowing that you were going to probably face some difficulties in some areas. Now that you have been in your job for six weeks and have heard some of the things mentioned this morning, which obviously were not new to you--you were expecting it, I'm sure--do you feel positive about the future of the Wheat Board? Because in the world, we have become known as the best marketers of the best product. Later this morning we're going to be talking about KVD. If we lose some of that identification and the ability to sell and guarantee that kind of quality, something goes with it, and that's our image.
If we lost the Wheat Board, could grain companies themselves do what the Wheat Board is doing today in terms of handling the large contracts? We have countries buying huge volumes of wheat. There's the financing of that and holding credit lines for those kinds of things. The Wheat Board changed its mandate about ten years ago. We now have farmer involvement. I would have to think that single-desk selling is still the best option. We have it in various other sectors in my province of Ontario--in the hog industry, in the white bean industry. We know it works. I was there when it wasn't done, and it didn't work very well.
How do you see yourself going forward with the challenges we've talked about this morning? And how do you work your way through this maze? What arguments can you come back with to assure us that the Wheat Board, going forward, unless there's government intervention or farmers decide to change course...? How do you see the Wheat Board functioning in the future?
There's a lot in the question you've asked.
First, I came here understanding a reasonable amount about the issues here, but you can never understand those issues fully until you're on the ground and working through them. So I'm still in the process of working through those, to some extent.
As I said previously, I think the idea of single selling, of the single sales channel, is a good one, but you just can't assume that's the model for everything. It does depend on the market you're in, the customer base, and the arrangements you have. There's no question that the Canadian Wheat Board and the sale of Canadian grain, particularly internationally, has been aided by the ability to keep the product together and keep the consistent quality and the high level of that consistency together. In my view, there's no doubt that's been a very good arrangement, particularly in those products where the customer is very interested in quality, and that would be in some particular areas, wheat, malt, barley, etc.
I work for the board of directors of the Canadian Wheat Board, and as the president of the Canadian Wheat Board I'll be looking to chart the best future I can for the organization. As an organization we need to look at what the long-term plans for the organization are and we need to be able to contemplate what they might be. To some extent, there's no question that is a negotiation with government, because it controls the act and it controls the future of the Canadian Wheat Board in that sense.
It's not an easy task, and some people have asked me why I took it on. All I can say is that while it seemed to me a difficult task, and I'm finding out how difficult that is as I go through this, I felt it was one that my background and my experience in running single-desk organizations, in being involved in deregulation to some extent--but the learning is from that, not the model that's associated with that, necessarily--might be useful for me in terms of helping the Canadian Wheat Board and the government, and the industry in a sense, work through these issues, as we have to do.
We give farmers the choice of choosing the price, depending on what the daily market price is that they want to hedge, and it's entirely up to them whether they think that's a good price or not.
We have seen a very large run-up in the wheat market, for instance, in the course of the last 12 months or so. Obviously, when the prices were starting to rise, coming off what has been for many years a very low base, both in Canada and in North America there are a lot of farmers who thought these were prices they should start pricing at.
We're talking about farmers choosing prices themselves, on an individual basis, and then we're talking about a pooling system that actually prices throughout the year. So in a sense, we're probably not talking about apples and apples here. We're probably talking about apples and oranges, in a way. It's the same issue as what might be the price over the border on any particular day and what the pool pays, because they're not really the same concept.
The pool prices throughout the year. The pool had the opportunity of pricing throughout the year and therefore captured a segment of the higher prices. Some producers priced at a lower number and some producers priced at a higher number. Those who priced at numbers lower than the advance rate of the pool—all producers actually receive the advance rate—basically are going to have to refund some money because they did actually price lower than.... That's their individual choice. They have their own risk management to worry about.
What we are doing with those pricing options is giving them the choice about prices they might like or dislike. That's the choice they make, and sometimes they'll do better than others and sometimes they'll do worse than others. This year the pool has done better than some farmers, but on the other hand, because it's an average price through the season, it might do as well as those farmers who might have chosen to price at much higher prices, and some obviously did.
It's a pleasure to be back before the committee. I think I made an offer the last time I was here that we'd be pleased to return and that if there were particular issues that needed to be discussed I would also bring experts. I've done that this morning.
I'm pleased to have with me my colleague Jim Stuart, who is the director of industry services. He is also a member of the industry working group on KVD. As you mentioned, Mr. Chair, Randy Dennis is the chief grain inspector for Canada. He also sat on the industry working group.
I have a short statement, which I will read. I'm not sure whether my colleague has a statement as well. We'd be happy to take any questions following the statement.
We're pleased to appear before the Standing Committee on Agriculture and Agri-Food to discuss the issue of kernel visual distinguishability, commonly known as KVD.
Before we answer questions, we would like to provide some background on how we arrived at this juncture. KVD has been used in western Canada as a rapid and cost-effective tool for segregating wheat within the handling system. The visual appearance of the kernel is indicative of intrinsic processing quality. However, it should be noted that it is only in use in western Canada, nowhere else in the world. In recent years KVD has come under pressure. Producers and end-users have expressed growing dissatisfaction with the range of wheat varieties available to them. All segments of the grain handling industry realize it is time to acknowledge the limits of KVD and implement alternative systems to allow for segregation of visually indistinguishable varieties.
To address these growing issues, the Canadian Grain Commission indicated its intent to do two things: first of all, establish a new general purpose wheat class—the Canada western general purpose class—with no KVD requirements; and secondly, to remove KVD as a registration requirement, beginning with the six minor wheat classes.
In December 2006 this committee tabled a government response to a review of the Canada Grain Act and the Canadian Grain Commission. This response recommended the removal of KVD from all classes of western Canadian wheat. The Minister of Agriculture and Agrifood's announcement, on February 11, 2008, extended the removal of KVD to all classes of wheat, including Canada western red spring and Canada western amber durum, to August 2008.
This decision sent a signal to seed breeders to facilitate the development and registration of new varieties. It also will give farmers more choice in what they grow and market. Farmers will have access to new markets, biofuels, feed, and specialty options. Also, it encourages the industry to act quickly to put alternative systems in place to ensure continued buyer confidence in grain quality. The government has made the decision to eliminate KVD, and grain sector participants are now implementing the necessary changes to shift from a visual to a non-visual system.
All players in the wheat system know they need to adopt new procedures. Substantial progress is being made, and I will note four examples.
First, the Canadian Food Inspection Agency policies, procedures, and regulations are being aligned to facilitate KVD removal. In February of 2008 the CFIA wrote to the recommending committee for wheat, rye, and triticale instructing that KVD requirements be removed from the guidelines used to recommend a variety for registration. As a result, new varieties will still be evaluated to determine which class they belong to, but they will no longer be excluded from Prairie Grain Development Committee trials based on KVD. In addition, changes are being proposed to the seeds regulations to remove KVD from wheat import requirements.
Secondly, since July 2007 an industry committee on the removal of KVD has been developing the key elements needed in a post-KVD environment. This committee is building upon successful protocols devised by a previous working group focused on ineligible varieties. The current committee is composed of producer representatives from all prairie provinces, we in the CGC, the Canadian Wheat Board, the Western Grain Elevator Association, the Inland Terminal Association, as well as Agriculture and Agrifood Canada. The committee meets approximately every three weeks and maintains ongoing contact with other industry participants to ensure a coordinated effort.
At this point, the committee has determined that a combination of an industry system of declarations, grain company quality management systems and protocols, and monitoring and sampling protocols will be relied upon to ensure the quality of Canadian wheat.
Through this committee, the Canadian Wheat Board and grain handlers have reached an agreement on a handling and liability protocol for the 2008-09 crop year. As part of this agreed-upon protocol and the overall wheat quality management system, a declaration system has been finalized for the 2009-09 crop year. Producers will be required to sign a declaration form annually at each facility where they deliver. This declaration form states that the grain being delivered is eligible for delivery into the class of wheat for which payment is being requested. In addition to producer declarations, grain companies will be required to declare to the CGC wheat deliveries to terminal elevator position and to vessels.
Enhanced regulatory authority associated with declarations is also being considered to facilitate enforcement and compliance. Although regulatory provisions will assist the grain sector in a post-KVD environment, they are not immediately necessary.
As for the CGC's part in the quality management system, we will continue to conduct internal testing and monitor railcar and vessel shipments for the presence of ineligible wheat varieties. The CGC will continue to issue certification and report to grain handlers and exporters instances of shipment non-conformance.
The CGC has launched an extensive public communication campaign to explain the new declaration system and the changes. All members of the industry committee on the removal of KVD have agreed to the content of this campaign and are committed to working together to continue supporting Canada's brand reputation in domestic and international grain markets.
Campaign coverage includes both print and radio media sources spanning the western provinces, including the Peace River area of British Columbia. Information packages have also been distributed to grain handlers, producer groups, and provincial governments.
Rapid affordable varietal identification technology--commonly called VID--is part of the replacement strategy for KVD, and its development remains a priority. Several research projects are under way.
The Agricultural and Agrifood Canada cereal research centre is developing an innovative lab-based VID test. CRC is currently seeking proposals from private industry to pilot this technology to evaluate its potential for use in a commercial lab environment. NeoVentures, a private company, is in the process of developing a VID test for use in the elevator driveway. NeoVentures is projecting full-market entry by 2010.
Both the Canadian Wheat Board and the federal government have committed extensive funding to both of these projects. On top of that, the Canadian Grain Commission is working on VID technology development in single-kernel DNA systems to replace protein and electrophoresis testing, and on DNA analysis of composition of ground wheat samples for variety. Both of these are lab-based tests.
It's important to emphasize that the required steps are in motion to facilitate the removal of KVD for 2008. Significant effort is being expended by all sector participants to make this transition as smooth as possible and uphold the Canadian wheat quality assurance system. In addition, there will not be a flood of new, indistinguishable varieties into the system right away. In fact, at the recent February Prairie Grain Development Committee meetings, six general-purpose wheat lines were supported for registration. None of these lines indicate a KVD conflict with Canadian western red spring or Canadian western amber durum, and only two have actually been registered by the CFIA.
Other components of Canada's variety registration process will remain the same. The key quality, disease, and agronomic requirements for a variety of registration into the various wheat classes will not change. Removing KVD does not change the requirement for varieties to be registered prior to commercial production, and producers must still seed registered varieties if they want to deliver a milling grade of wheat.
In closing, the CGC and fellow members of the industry committee on the removal of KVD are committed to working together to make sure protocols and processes are developed for implementation beyond 2009. Ensuring the quality of wheat that domestic and international customers have come to rely on will remain a key competitive advantage for Canada.
I hope this information addresses some of your concerns.
Thank you, Mr. Chair, for the opportunity to make a statement.
Thank you, Mr. Chairman.
The Canadian Wheat Board has marketed the wheat, durum, and barley produced by western Canadian farmers on the basis of a branding strategy with customers that established their products as the gold standard for quality, consistency, and reliability for many years. KVD is a visual quality-control system that was the basis of the ability to attest to this quality for wheat and durum. In the new environment, we cannot afford to let this quality slip or jeopardize the loyalty and confidence that customers have in the grain they buy from western Canada. We are therefore working on this issue on two fronts.
As Mr. Hermanson has said, we're working with farmers and industry, including the Canadian Grain Commission, to develop a set of protocols based on what we're already doing with ineligible varieties, to ensure the supply chain delivers the quality our customers require. The board of directors of the Canadian Wheat Board has made significant investments in the development of two tests, both laboratory-based, that will have the capacity to screen for varieties on the driveway of an elevator to back up these protocols. This technology has been a long time coming, but we think we're close.
The CWB has been the leader in trying to get variety identification technology in place as soon as possible, but it is not available yet. In this regard, industry and the CWB would have preferred that the federal government stick to the original implementation date of August 1, 2010, for the elimination of KVD requirements in the major classes of wheat. It would also considerably facilitate the transition to a non-KVD environment if the federal government partnered with farmers of western Canada in investing in the commercial testing of the technologies that have been developed to identify varieties of wheat.
Welcome, folks, and former colleague of the House of Commons, Elwin.
There's no question that Canada is seen as probably the most reliable supplier of quality grains around the world, and to a great extent it's due to how careful we are in terms of the export of grains.
Mr. White, in your presentation I think you did mention the fact that the industry, and mostly all the industry, didn't want to move on changing KVD until August 1, 2010. There are good reasons for that. However, it's another case of how this government tends to operate. They shoot first and ask questions later. Now we're into August 1, 2008, which could in fact jeopardize the system somewhat.
I have two questions.
First, Mr. Hermanson, you outlined on page six the progress towards technology. So my question is simple. The government has led us to believe, basically, that there is already technology in place, that this can be handled on August 1, 2008. Just to be clear, I don't think there's a danger as yet, because those new products are not on stream, but it would have been far better, I think, because 2010 would have met the timeframe for those new varieties to come on stream without the international community looking at us with somewhat suspicious eyes. Are you saying that the technology is not in place, that it's only under development effective August 1 and absolutely not in place to give us the security that we really require?
The second question relates to page four of Mr. Hermanson's presentation:
At this point, the Committee has determined that a combination of an industry system of declarations, grain company quality management systems and protocols, and monitoring and sampling protocols will be relied upon to ensure the quality of Canadian wheat.
That leads me to believe that the technology is not there, certainly. But secondly, in my area, we know the difficulties you can run into when you ship a product to a foreign country and the quality is questioned. I've seen people lose millions of dollars, even though the quality was there, but for political or other reasons that quality was jeopardized.
So who is going to be liable if some producer, for whatever reason, ships a product that doesn't meet the quality, that goes into the hold of a ship and a portion of that grain is lost? Who is going to be liable for that amount of grain that doesn't meet that quality? What security is there in that declaration? Who will be held responsible for that quality? Will it be the minister who brought in the system; will it be the individual producer; or will it again fall back and be an attack on either the Canadian Grain Commission or the Canadian Wheat Board?
First of all, on the varietal identification technology, there is technology in place right now that can distinguish varieties. However, it's not low-cost technology. It's not elevator-driveway technology. The challenge for the industry is to provide that affordable technology that can be located at the initial delivery points.
That's not there yet. There are some promising signs that it could be there. Whether it will be next year or the year after, or whether it's many years off, we can't predict that.
That said, we are currently monitoring for ineligible varieties. We have been fairly successful in doing that without the low-cost technology and have maintained integrity in our system. As you quite frankly pointed out, we have high quality and a good reputation for that high quality in Canada.
Secondly, the answer for the declaration system is similar, in that we know the declaration system has been effective in the past for, again, ineligible varieties, and there have been ineligible varieties in Canada. It has not put our reputation in jeopardy to this point. I think that's why the industry and all the partners who work together on the committee determined that the declaration system would be the immediate tool used to ensure the integrity of our grain quality in Canada.
On liability, Mr. White may want to comment, but the liability for the upcoming 2008-09 crop year I believe will be assumed by the board, as it has been for ineligible varieties. The committee is going to continue to work to determine how that will be handled into the future.
Thank you. I'm happy to respond.
First of all, I don't believe you'll ever come to the point where you have eliminated 100% of the risk. We've not done that with ineligible varieties, but we have managed that risk so it has not impeded Canada's reputation for producing reliable product, and so the buyer is getting what they expect when their commodity or their grain is unloaded.
Perhaps I'll ask Mr. Stuart to talk a bit about the history, but I can tell you that this has been an evolution in Canada. My understanding is that KVD has been limited only to the Canadian scene and was removed for red wheats in Ontario. I'm not sure about Quebec. I'm not sure if it ever was there. Perhaps Mr. Stuart knows. But it was eliminated for red wheats in Ontario, I think back in the 1980s, and last year it was removed for white wheat in Ontario. The western region is the last region to undergo the change, and I think there's been industry-wide agreement that it needs to happen.
The discussion, as you have quite rightly pointed out, is over the timetable, which has been accelerated. That decision is not within the ability of the Canadian Grain Commission to make, but we are determined to make sure that we maintain Canada's grain quality assurance. We've worked with our colleagues at the Canadian Wheat Board, the elevator associations, and producers, using models that have worked in the past to ensure that integrity will be there in the future.
Jim, can you add anything to that?
I want to go along the lines of questioning and comments that have already been pursued this morning.
We have such a high level of confidence by the purchasers of Canadian wheat and other products, but particularly of Canadian wheat. This is what we're talking about this morning, the KVD. If we abandon something prematurely, even though there is probably good reason to do that--and I understand that--is that not sending a message to our buyers and the marketplace that somehow we're rushing something a bit?
Coming from the farm community as I do, and being very close to the dairy industry, I know that in the dairy industry there's a lot of trust placed in producers. We're talking about certificates, signing documents, and verifying. People can make mistakes; people can wilfully make mistakes, and it's when they're wilfully done....
We have the largest inland elevators in Canada in a community very close to my home. Farmers will place the wet beans in such a way that they can't be sampled and tested, so that the test that shows, and the test for which they're paid, shows a higher or a drier quality. Similarly, we're going to do the same thing.
In the dairy industry, if we in error milk a cow that shouldn't have her milk going to the milk tank, and that milk goes into the huge tank that comes and picks up our milk at the gate, there is liability. Here we're shifting all the liability back to the Wheat Board, when in fact the decision, as I see it, to some degree has been made by the Grain Commission.
I'm not sure that I quite understand if there were to be such a thing. The final test of the sampling, as I understand it, takes place at port. If you have a shipload of grain going someplace and there is a deficiency found in that grain, it doesn't mean just one farmer is affected; it affects a whole lot of farmers, and it affects the Wheat Board with a huge liability.
I have real difficulty in accepting that we're moving forward on something when we can't give full assurances. There is nothing foolproof, but to do that in that way of thinking somehow doesn't quite resonate in my way of thinking.
I want you to comment on that--and think about the liability, because sooner or later somebody is going to look for an opportunity. Let's not put ourselves into a vulnerable position.
Sure, I'll take the first stab at it.
There is always moral hazard. As I mentioned, you'll never eliminate 100% of the risk, whether it's in the dairy sector, the grain sector, or the social services sector, I suppose, although I'm not an expert to comment on that.
There has been growing pressure among many in the agriculture sectors--including dairy, by the way--calling for the removal of KVD because they want access to higher-yielding feed wheats that may not be visually distinguishable from milling wheats. That's the conundrum that the industry is in. Of course biofuel is another sector that has been calling for the elimination of KVD, and farm organizations have joined in on that call.
All I can add is what I've stated before, unless Mr. Dennis wants to respond: the decision has been made. We didn't make the decision; this is not a Canadian Grain Commission decision, but a decision made by the Government of Canada.
Our challenge, working with our industry partners, is to use the systems that work to maintain the integrity of our grain handling system and make sure that customers receive the product they have requested. We know the tools that we've used for other hazards--ineligible varieties--and we know they've worked, so we're modelling what we're doing in this case on previous success stories.
Did you want to add anything to that, Randy?
One comment in general is that you're alluding to the spiking of a sample: a truck being delivered and a producer or someone who's handling the grain purposely adulterating it or putting it in the truck so that it would miss a delivery point or a collection point from the sampling system. That opportunity has been there forever and a day. The potential for that to occur is there.
Based on what this committee has done and the driving force behind that, I would strongly suggest that we want to be able to continue to deliver our certificate final, which is a certificate I sign off on for quality at the end of the day. We don't want to have to wait until the vessel completes loading and have the sample come back to the CGC and be tested in the Grain Research Laboratory. On that basis, every individual and organization involved in this working group committee is pulling for that to be delivered again at the time of vessels sailing, because of the commerce involved.
The sampling systems are in place at the terminal elevators, the transfer elevators, and CGC is on site at primary locations. We collect samples of those—railcars going to a terminal position, railcars to Mexico, to the east coast—and we are doing testing on those, as well. We do a random testing, a monitoring program. We don't advise the industry the percentage of cars we are testing. We do it surreptitiously. We don't want to tell people how much we are testing. It keeps everyone on their toes. The companies are also doing this, and everyone knows that. That's one of the tools we will use.
With new varieties coming forward, we have a couple of years in which we are quite confident we will still be able to distinguish visually.
I would very much appreciate that.
The controversy has been going on lately about world food shortages, and we need to feed the world.
One frustration for western Canadian farmers that I've heard over the years is that we cannot get the newer varieties. Mr. Steckle talked about farmers marketing, and they market wet beans, I guess it was.
The farmers I know are very proud of what they grow. There are some tough years with wet grain, but I know farmers who buy dryers and dry their grain and develop it and take it to market.
With the declaration, I don't know why our farmers couldn't deliver like eastern Canadian farmers. You've said yourselves that you haven't found much discrepancy in the declaration, when a farmer signs a declaration.
I really have a problem with the opposition saying that farmers might do something to this declaration, deliver something they're not supposed to. It's a question.
How long has this declaration been on the website? Is every farmer going to receive one at their home address, or do you have to go to the terminal or wherever you're delivering to get one of these declarations? Can you talk about that, please?
Again, I'll let Mr. Dennis speak to those specifics. I would say from my observations—and I have been following this quite closely since I joined the Grain Commission in January—I am reinforced in my belief that the stakeholders in the agriculture sector and particularly the grain industry recognize that everyone has to work for the good of the industry if it's to be successful, starting with producers, including grain companies, including the Canadian Wheat Board, including the Canadian Grain Commission. We all recognize that if we do our job well and we maintain Canada's reputation, we all win.
Obviously, 99.9% of producers would take no risk whatsoever or would take no actions that would bring risk to the grain quality assurance system in Canada. I think that speaks to our success over the past. These risks are not new. These risks have been with us for decades, and the industry players, including producers, have risen to meet that challenge and Canada has benefited. All of Canada has benefited.
My sense from the report of the industry working group, which Mr. Dennis sits on and the Wheat Board has representation on, where producers are represented and the grain companies are represented, is that this is the attitude they have taken with regard to dealing with KVD.
Specifically with regard to the availability of the declaration, where producers can pick those declarations up, I'll let Mr. Dennis respond.