Thank you very much, Mr. Chairman.
Good morning. Thank you for the opportunity to provide input on the Canadian grain and oilseed supply chain.
Our grains and oilseeds sector is an important contributor to the Canadian economy in terms of jobs, exports, and a safe and reliable food supply for Canadian and global citizens.
Innovation is important along all sectors in the supply chain. Whether it is a plant breeder delivering a higher-yielding, more disease-resistant variety, a farmer adopting new technology, such as zero tillage or GPS guidance, or a processor who develops a new product or a lower-cost method of production for their current products, all of these contribute to gains within the supply chain.
Research has been an important component in achieving gains in the supply chain. Whether it was Charlie Saunders with Marquis wheat, Keith Downey with canola, or Al Slinkard with lentils, all of these gains have been important to the prairies and to the Canadian economy.
More important than just the gains is how the gains are distributed among the participants in the supply chain. Recent innovations are to be commended, with gains with GM and hybrid canola resulting in yield improvement, better weed control, and more canola acreage planted each year.
However, the control of the seed and the chemicals that link these traits to canola is in the hands of a few companies, which results in much higher seed costs as the companies seek to maximize profits. Years ago, canola was 30¢ to 40¢ a pound. Now it's $7 to $10 per pound.
The policy environment has created major profit centres for these firms. Yes, profits are needed to fund research, but these firms spend only a small portion of the revenue they gain each year in returning it to research. This can endanger the future of the Canadian supply chain. Large gains accrue when public research is done, yet despite these large gains, research in the public sphere is being cut back. Basic agronomic research has been cut across the prairies, and private companies typically do not invest in public research, as it just brings along free riders and they do not achieve benefits.
Another concern with less public research in the plant-breeding area is the sharing of genetic material. Adding one gene to the existing pool of good genetic material created these specialty canolas. In the long term, the ability to share or unwillingness to share may inhibit the rate of development. One cannot imagine that this could happen in something like the machinery market. If someone added a rake-up pickup to a combine and then said they owned the entire patent rights for the combine, we would be shocked.
Specific rights had evolved in the machinery industry, but not so with genetic innovation. With decades or centuries of historical plant breeding, the gains were captured when a new gene was added. This area, in my view, needs revisiting, as the innovations are largely resulting in returns to the companies rather than necessarily the farm community.
Another input along the supply chain is farmland itself. Settlers were attracted to the Canadian prairies when the Government of Canada offered free homesteads. How many of our forefathers would have come if the signs had said “Land for Rent” rather than “Land for Sale”? Indeed, land ownership by a farmer who farms it has been a relatively strongly held tradition of many farmers on the Canadian prairies. Recently, however, other investors have taken a strong interest in the ownership of farmland. High commodity prices, low interest rates, a disappointing stock market, and global financial uncertainty have been factors.
There's another factor that I consider extremely important: the current rules that allow investors to use RRSPs in purchasing farmland. Indeed, Agcapita seeks investors who will place money into an RRSP to purchase farmland. As a farmer, I am only allowed to purchase farmland with after-tax income. This creates an uneven playing field. If I am in a 50% tax bracket, federal and provincial taxes combined, then it costs me twice as much to buy land.
Farmland is important for farmers, as it has been a key source of security with their lenders.
The history with absentee landlords and tenants has not always been pretty. These policies may have evolved with RRSP eligibility from the lobby efforts of investors rather than as a specific policy for agriculture. I think it should be assessed closely from your perspective of interest in the agricultural and rural communities.
It is important that all links in the supply chain be able to achieve profits and to operate efficiently. The farm enterprise has been where the instabilities of world and local weather, trade disruptions, currency swings, pest and disease outbreaks have generated income problems and sometimes farm failures.
Indeed, the boom and bust of Canadian prairie agriculture is in the memory of many of the senior citizens who are still farming. Governments have recognized the cost of disruptions and adjustments and have sought policies to cushion the blow on families and communities. Historically, programs largely from the federal government were LIFT, western grain stabilization, crop insurance, the special Canada grains program, ADA, CFIP, CAIS, and more recently AgriStability and the other Agri programs. These have arisen from the recognition of the inherent instability within the export sector.
The recent reductions, however, in support of AgriStability may leave the sector with minimal support. The reference margin's decline to 70% and only covering eligible costs means that it does not cover total variable costs for a farmer, as all costs are not included. This puts the support level below what economists call the shutdown point. Our current program mix will not handle a major downturn in the farm economy.
Crop insurance is one of the programs that does share risks with producers and is an important component in our Canadian supply chain. Premiums adjust, as do coverage levels, based on historical individual performance.
However, the practices of some producers of growing canola on canola, or, as some say, canola snow canola, may be increasing the risks not only for themselves but for their neighbours and the industry. If the agronomics indicate that canola produced on the same field will yield say 15% less, then perhaps coverage levels should be adjusted on those individual bases. Undesirable agronomic practices can implicitly be encouraged if programs do not make the appropriate adjustments. Costs accrue to all participants in the canola system if no adjustments are made.
Another concern of the farm community is the competitiveness of other entities along the supply chain. We are seeing increased concentration of input suppliers and output handlers. Fertilizer companies are large and important players. The U.S. recently sued our potash firms in Canada for price fixing, and a settlement was paid. It was done out of court. Our nitrogen fertilizer, which is a major input, is very high, and the cost of natural gas, the major input, is very low. It appears the price of fertilizer follows the price of corn, wheat, and canola, and the farmer's ability to pay rather than cost. This is exactly what you would predict with few firms that exercise their market power.
Monitoring farm input prices is one mechanism that could foster improved competition. Another mechanism is to strengthen competition policy in Canada as competitive markets improve the welfare of the society.
Sometimes similar criticisms are offered for fuel, chemical, and other suppliers where farmers allege that market power is being used and excess profits are being achieved.
The recent termination of the Canadian Wheat Board single desk may create a need for regulation for the sharing of terminal space at port, as has happened in Australia.
Published prices and export sales reports may also be needed. Canada has gone from one of the most regulated grain export environments to one of the least monitored. What happens if we don't monitor them is we can have almost a great grain robbery, similar to what the U.S. experienced relative to the U.S.S.R.
I could talk a little bit more about rail, profit centres, the importance of futures markets, and the ability to hedge because risk is high. Right now, only the ICE canola futures have sufficient volume for trade to be an effective risk-handling mechanism. I could also talk about the importance of the grain commission as an efficient dispute settlement mechanism, and a number of other issues.
What I would say is there needs to be public research into positive outcomes for the entire sector. I would say any chain is as strong as its weakest link. Legislative changes over the last number of decades have often moved the profit centres to people or enterprises on both sides of the farm. Therefore, it has made the farm the weakest link in the chain. I think the farm component is extremely important and it needs your full attention.
Thank you very much.
I'd like to start by thanking the committee for the opportunity to be here this morning. I know that Ken is a farmer as well, so a lot of the things I'm going to speak about, Ken has already touched on. But I think that's a good thing.
Our farm is located in southwestern Saskatchewan, not far from Swift Current. My grandparents homesteaded here just over 100 years ago. Right now my partner, Terry Toews, and I currently own and operate the farm.
Until the mid-eighties it was a mixed cattle and grain farm, and since that time we've been strictly in grain production. I've been working on or co-managing the farm for 41 consecutive years. During that time I've seen many ups and downs in the farm economy, and I’ve had the time to think about how federal farm policy has affected our farm and how it has affected our neighbours across the country.
In terms of successful value chains from the farmer point of view, I’d like to bring forward three topics for the consideration of the committee: risk management, market power, and vertical integration. Risk management and market power are key considerations if there is to be long-term value at the farmer link of the value chain. Vertical integration is a term currently being used by the Minister of Agriculture in relation to the plight of Canadian hog farmers.
Risk management includes plans like AgriStability, AgriInvest, the PFRA, plant research and seed development, the community pasture program, the agroforestry program, crop insurance, the single-desk selling of hogs and grain, supply management, and regulated rail freight rates.
In almost all of the risk management areas, the government is moving to weaken or altogether end these programs. For instance, without any consultation, the government recently enacted changes to the AgriStability program that will seriously weaken our farm. In the event of a complete crop failure, our AgriStability coverage used to amount to about three times our allowable expenses under the program. In other words, our AgriStability coverage would probably have paid for about two years' worth of our farming expenses. From what I can find out so far, in the future we'll be covered for less than one year’s worth of farming expenses. This will have a serious negative impact on our farm, and I'm awaiting an analysis from Meyers Norris Penny as to whether or not we should even participate in AgriStability going forward, as we have paid a lot of attention to the cost structure on our farm; we've been trying to be efficient and keep our expenses as low as possible.
Let’s talk about plant research for a moment. Farm production relies on climate, and our climate is changing and becoming much more volatile and erratic. And now, at the very time that atmospheric CO2 levels are much higher than at any time over the past 800,000 years—and that's nine complete ice ages—the government is seriously weakening public plant research and giving private companies much more control over our seed and production systems. More restrictive plant breeders' rights, like UPOV 91 and other seed control systems are counterproductive and weaken the farmer link of the value chain.
Let’s turn to market power. A hundred years ago farmers needed to maximize their returns from the marketplace. There were no risk management programs like crop insurance or AgriStability. If farmers could not get enough money from the marketplace, they literally starved and were forced off the land.
These farmers quickly understood that they needed to build institutions like the Canadian Grain Commission, the Wheat Board, single-desk selling of hogs, and supply management—farmer-friendly institutions that could exert market power and increase returns to farmers from the marketplace. Institutions like these both limited risk and exerted market power at the same time.
Lastly, the committee should dedicate substantial time to the statement made by the Minister of Agriculture that vertical integration is the answer to the hog farmers’ problems. The minister is saying that the solution is for hog processors and/or retailers to own the whole production chain, including the actual raising of the hogs. With this statement the minister marginalizes the contributions of individual farmers over the years. When you think about that more deeply, you realize the minister is blaming the victims, in fact, the hog farmers themselves. The minister is saying that hog farmers are the problem, not the solution, and we should just remove them from the chain. If this position is not reconsidered, there is nothing to stop this mentality from spreading to all sectors of agricultural production.
Compared to post-single-desk selling of hogs, hog production that included single-desk selling was a very stable enterprise. It was the processors that convinced governments to destroy single-desk selling of hogs, which in turn greatly increased the risk and decreased the market power of hog farmers, which has now led the minister to say that industry-centred vertical integration is the answer. As odd as it may seem on the surface, I'm going to agree with the minister that vertical integration can be the answer for better values down on the farm. But that can only happen when the elements of the vertical integration are controlled by the farmers or are mandated to put the farmers' interests first.
This brings us back to supply management, the single-desk selling of hogs, the Canadian Grain Commission, the Canadian Wheat Board, the public research system, and regulated rail freight rates. All of these institutions were, in one way or the other, elements of farmer-centred vertical integration. All of these institutions gave the farmers more market power and risk management, and they integrated the farm production system in a way that was directly beneficial to the farmers.
The Canadian Grain Commission and the Canadian Wheat Board were textbook examples of how to integrate plant breeding, production by farmers, grain trade mechanics, and consumers. Fragmenting the system, taking control and information out of the hands of farmers and farmer-friendly institutions, will weaken the farmer link of the value chain. In the worst case scenario it will lead other political leaders to say that industry-led vertical integration is the answer.
That's where I'm going to stop on the written remarks.
Thank you very much.
First I want to thank the committee for inviting me to talk about the grains and oilseeds supply chain and how it affects farmers.
My name is Ian Robson. I farm 900 acres in Deleau, Manitoba. I grow oilseeds and grains, and I run some cattle. I am a medium-sized farmer who believes strongly in government policies that support a sustainable and biodiverse farming sector.
As I read through the previous transcripts from the committee sessions, there was little mention of farmers except in passing. When we are mentioned, it is because we are beneficiaries of money, efficiencies, markets. The question for me is, what will those benefits cost my neighbours and me?
Farmers talk about the land. We mean its wholeness, the air, water, insects, birds and other animals that share a particular location, the plants, microbes, soil, and topography. A first nations person would speak of the earth and an environmentalist the environment. The land is whole to us, a living whole. We farmers are part of that living wholeness, and so are the communities we live and work in.
The current model of industrial agriculture is something akin to bottom trawling. This fishing system rakes bare the bottom of the ocean and destroys the habitats for countless fish, corals, and invertebrates. A similar thing happens when a 60-foot air seeder or 120-foot sprayer roars through miles of open fields. The land looks all the same. It is treated largely the same. It is a resource that, with a GPS system guiding precision application of fertilizer and chemical treatments, will yield the highest return.
There is surprisingly little reference to farmers' quality of life in the submissions that I read. The assumption seems to be that if your farm makes money, your life will be of the highest quality. For some, perhaps it will be. For many of us, though, the price we pay for making that money is our neighbours, our communities, access to health care, diversity both in the biosphere and in our neighbourhoods. We spend hours driving somewhere for something in a landscape increasingly bare of people. It's not my idea of quality of life.
I'd like to read a quote from the 1969 report of the Federal Task Force on Agriculture entitled “Canadian Agriculture in the Seventies”, which advised that it was:
...desirable to end farming by the individual farmer and to shift to capitalist farming.... In sketching out this kind of model for agriculture circa 1990, we are of course rejecting the ‘Public utility’ or socialized concept of agriculture.
The task force also emphasized the realignment of the Canadian agricultural economy to that of our primary trading partner, the United States.
We seem to be well on the way in that direction. Canada's economy continues to align with that of the U.S., and we are moving to harmonize regulation environments. Free trade has increased exports and farmers are producing more. We have signed numerous free trade agreements, and more are coming, although negotiated in total secrecy without broad-based public consultation. Our supply chain is efficient and provides economic benefit. Everyone wins, except we farmers don't, not really. Let me offer some proof.
Figure 1...I have submitted this paper for your perusal later. It shows farm income, debt, imports, and exports from 1970 to 2011. Exports have risen from $5 billion in 1970 to just short of $70 billion in 2011. However, realized net farm income has been and remains stagnant since 1970, never rising above $5 billion. On the other hand, farm debt has increased by 1,400%, from $5 billion in 1970 to $66 billion in 2011.
Between 1970 and 2011, $65 billion was generated by export. Where did that money go? It went into the pockets of seed and chemical companies, machinery companies, investors. Those gains were generated on the backs of farmers, and our backs are breaking.
For more proof of corporate profit-taking, look at the seed costs per acre. The costs of commercial seed per acre among four crops—wheat, barley, conventional canola, and GM canola—are almost equal until about 2000, when the price of canola seed began to rise faster than the price of wheat and barley seed. Conventional and herbicide-tolerant genetically modified canola seed prices rose pretty much in tandem until 2007, when the cost for that herbicide-tolerant canola seed took off and rose quickly.
Canadian farmers' total cost of purchased seed has risen from about 2.5% of expenses in 1970 to a high of just over 4.6% in 2011.
We've landed here because government policies have converged on a single vision of how economies should be organized. Legislative and regulatory environments increasingly favour economic activities conducted on a global scale. National sovereignty is trumped by corporate interests looking for and getting rights to sue government for activities that reduce their profitability.
There are fewer corporations in the supply chain: Bayer, Syngenta, PepsiCo, Nestlé, Glencore, Monsanto, DuPont, etc. The list goes on but is shorter each year as consolidations continue. Corporate concentration and big business may favour competitiveness, but in the process, true competition is greatly reduced.
Omnibus budget bills contain the seeds of destruction, de-funding, reorganizing, and changing mandates. Farmer-friendly agencies like the former CWB and the Canadian Grain Commission are being systematically dismantled after being developed decades ago to give farmers some parity with and protection from large exploitive grain companies.
The Canadian Wheat Board, a single-desk seller of wheat and barley, collected and returned to farmers every cent, less cost, that could be captured along the supply chain.
We see grain prices vary significantly among elevators now. Grain that is bought low at the elevator sells high at port. That benefit used to accrue to farmers, but now it goes to the grain companies. In a “back to the future” scenario, the situation has regressed.
A vision of Canadian farmers and food systems that balances the interests of farmers and corporations would give rise to much different policies, regulations, and legislation, a few of which I will offer. Nothing I say will be new to you; it's all been said before. But I will continue to advocate for a more fairly balanced food and farm supply chain because I believe that in the end Canadians will continue to care for and about each other.
First, be transparent about international trade and industry-regulated agreements throughout negotiation. Seek broad-based public discussion of opportunities and challenges afforded by each agreement.
Two, do not allow international agreements, trade or otherwise, to trump the rights of a democratically elected government to protect the interests of its citizens. Corporations should not be allowed to sue national governments acting in the best interests of their citizens.
Three, legislation, regulations, and policy directions must effectively balance the rights of players with vastly different resources and power. The Canadian Grain Commission and the former Canadian Wheat Board are excellent examples of how this might work.
Four, the public interest, whether in health, wheat, rivers, or oil, must be protected. Invest in fundamental research to protect the public interest. To ensure that present and future public interests are protected from harm, citizens and their governments, not corporations, must control genetic engineering.
Five, investigate and quantify potential effects of policies, regulations, and legislation, whether social, economic, or environmental. The balance should always tip in favour of citizens' needs rather than corporate needs.
Six, regulate genetically modified technologies so that organic and non-GMO production systems are not threatened by potential GM contamination. Neither co-existence nor tolerance of low-level presence should be permitted.
Seven, productive resources—for example, land, seed, and machinery—should be owned and controlled by the primary producer. Land grabbing, whether by foreign or domestic corporations, should be prevented. UPOV 91 should be avoided, as it will give global corporations rights that even governments do not have.
Eight, enact processes to ensure that farmers receive a fair share of the consumer food dollar.
Nine, implement legislation, regulation, and policies to support the development and operation of local food systems.
My Canada protects the rights and benefits that have come to define Canada. Give us the policies and the funding to enable healthy people and healthy communities.
Thank you for the opportunity to speak with you. I would be very happy to answer any questions you might have.
That's right. They have to adjust as times change—exactly—just as any other organization has to adjust as times change. Is that correct?
Prof. Kenneth A. Rosaasen: Yes.
Mr. Randy Hoback: Both Mr. Wells and Mr. Robson are very strong single desk supporters. I understand that. That's something that's inbred in them and it's something they strongly believe. I respect that, and I really respect their passion. But I disagree with it because the market conditions right now are showing something totally different from what they're saying.
I'll use the example, the testimony we had earlier, of talking to...sorry, it escapes me. Basically the movement of grain this fall has been 40% higher, and more efficient, since the removal of single desk. When you look at the price of grain off the combine...I have testimony from numerous farmers who have never had such high prices paid in cash, off the combine, in their pocket, in the bank account, all within two or three days. That was never there before.
So you have to look at that and ask where was the supposed market power. The reality is the board was not big enough or efficient enough to extract market power. It could threaten, but it could never extract. The reality is that the market now is reacting to a variety of things. It's sending signals based on where and when the grain should be delivered; the market is driving that, which is what the market does. This is no different from canola.
I know Mr. Robson says he finds it confusing, but you know what? I don't find options confusing. Options are what the farmer needs to make the best decisions for managing his operation. My operation would be different from Brian's operation and different from Blake's. That's something the single desk could never do.
One thing I do find interesting is that the single desk now, the new CWB, is handling canola. I understand that's moving very well. Colleagues at the CWB said the first example of moving canola through the Canadian Wheat Board, which was supposedly not possible to do, went very well.
I'm not a plant breeder. I guess I would say that the rules you have around research and who's going to benefit might change the direction of what you look for. For example, if you're working for a chemical company and they say “Fight wild oats”, what do you want? You want to be able to spray it when it's this big to this big: you want a wider window. You want it mixable. You want it “rainfast” right away.
If you turned it over to a public researcher, they might look at a totally different direction—i.e., what could I do biologically to make it grow so that once you do that it's not hard to control? It's the dormancy that you have to break.
So the whole field of what you look for can change in public versus private research. In private research you must get dollars, because we expect a return on investment.
There are these big returns to public investment. All the research documentation about it, by Julian Alston and other people who study it, says that there are big benefits, yet governments choose to cut back.
In terms of organic, I haven't tried to take a look at it, but let's recognize places like China, where they do things quite intensively. For years they didn't even have any chemicals, and they managed to feed a lot of people in a relatively sustainable manner.
Does our farm rely on chemicals? Absolutely, because right now those are the recipes you use. Do other people, like Stewart Wells and others, learn how to get around it and produce effectively? Absolutely. I don't think it's an either/or situation.
I think you should recognize what consumers want. Some want organic products. Some want non-GMO products.
When I was talking with some of the people in the GM industry, I said, you know, if you look at history, it's always been the hog producer or the cattle producer with the poorest quality who never wanted the grading system so that their product was identified.
So with GM and not labelling, based on history, they're on the wrong side of history. They have the quality that consumers like least.
I think this issue will be coming back in the Canadian economy.
It behooves me to ask the chair to do some work. It's not my nature to ask him to take on stuff, but, Chair, what I'd ask you to do is go back to the beginning of this session in the fall and pull the witness list to this committee, and let's see which organizations and who belongs to whom....
I've been at this committee since last September and beyond, and I'll guarantee to this committee that the vast majority of witnesses belong to organizations that would be more favourable to the government's position. Now, they are entitled to have more. There are more of them. They are the majority. But I would tend to think you are going to find that indeed they may be greater.
If what the government is suggesting is that we, as the opposition, no longer should call witnesses from certain organizations—because they are either affiliated with them or not, or may have been in the past—let them put the organizations on the table. We'll put on the table the ones we won't want to talk to either. Then we can figure out who eventually we do want to talk to.
Either we do actually want to have an open session that talks to all kinds of folks who we don't agree with on any particular thing or we don't. And I'll make this abundantly clear as the lead from the official opposition: there is no attempt from our perspective to put witnesses on the list and try to hide their affiliation. If I wanted to do that, we wouldn't have asked Mr. Wells or Mr. Robson, with Mr. Storseth, Mr. Richards, Mr. Payne, Mr. Lemieux—and Mr. Hoback, who was here—and the chair, who actually know them all personally. We would have asked Mr. Smith and Mrs. Smith, who maybe you didn't know, if we were trying to hide their affiliations.
Clearly we didn't try to hide anybody. The inference that somehow we are doing something along those lines is patently false.
The other side has its time, as you have said, Mr. Chair. The members are entitled to use it as they find appropriate in whatever way they do. I guess I would look at the committee and say I don't challenge their witnesses as to which organizations...but again, that's my choice. The other side has its choice too.