[Recorded by Electronic Apparatus]
Wednesday, June 14, 1995
.1538 
[English]
The Chairman: Colleagues, today we're considering Bill C-92. As colleagues know, that bill hasn't come out of the House yet. But we thought, given that we had a time slot here, it would give us an opportunity to hear from the Manitoba Pool. We have the opportunity today of having Ken Edie, first vice-president - welcome, Mr. Edie - and director David Sefton - welcome.
I understand you have a short statement and then would be willing to answer some questions.
Mr. Ken Edie (First Vice-President, Manitoba Pool Elevators): Thank you very much, Mr. Chairman. Before I start I would like to apologize to our French-speaking members for not having a copy in French. We usually do, but with the short timeframe the notice gave, we got this completed only at 4:30 p.m. We will make French copies available.
Certainly we are very appreciative of the opportunity to speak to you on this issue. I will go through the points here, and Mr. Sefton and I will be happy to enter into any discussion.
Manitoba Pool Elevators and Saskatchewan Wheat Pool, the largest farmer-owned cooperatives on the eastern prairies, make this presentation on behalf of over 40,000 member-owners located between Moose Jaw, Saskatchewan, and the Manitoba-Ontario border.
Eastern prairie farmers will be seriously affected by legislation that would change the Canadian Wheat Board pooling system on August 1, 1995, one year ahead of the schedule announced on February 27, 1995.
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This action will magnify the impacts of other major budget decisions scheduled for implementation on August 1, 1995. Most notably, the Western Grain Transportation Act will be terminated, ending the federal grain transportation subsidy known as the Crow Benefit and several provisions established in recognition of grain producers and shippers captive to Canada's two railways.
Together, these changes will substantially increase the cost to eastern prairie producers of transporting their product to tide water, which in turn will reduce the farm-gate price on Canadian Wheat Board shipments of wheat and barley.
Manitoba Pool Elevators and Saskatchewan Wheat Pool accept that the Canadian Wheat Board pooling system must be changed to more accurately reflect market conditions and costs and that western prairie farmers should not have to share the cost of shipping eastern prairie grain down the St. Lawrence Seaway from Thunder Bay. However, eastern prairie farmers will be severely affected by the proposed pooling changes and therefore must receive fair and adequate compensation.
While an increase in initial or final payments from the Canadian Wheat Board will offset a portion of the higher freight deductions, the combined negative impact of a change in eastern pooling points and the elimination of the Crow benefit will place a significant financial burden on producers in Manitoba and eastern Saskatchewan.
I won't read the next paragraph because it does get into a lot of percentages. If someone wants to get into it in any depth, I would be happy to do that, but note that the sidebar at the side puts out the concept and the problem as we see it.
Wheat producers at Winnipeg and Sintaluta will see their freight deductions increase by a total of 148% and 137% respectively following the introduction of pooling changes and full freight rates. Clearly, eastern prairie farmers face a significant financial adjustment following the change in pooling points. This adjustment will be more difficult given the federal government's decision to announce the pooling change after 1995-96 decisions have been made.
The change in Canadian Wheat Board pooling points is evidence of the diminishing role of cross-subsidization in federal government policies and programs. In the interest of consistent policy application and attaining a more equitable and efficient grain transportation system, the federal government should re-examine its recent motion to amend the Budget Implementation Act to finance existing short-line railways through an increase in the maximum freight rate scale. Ironically, this amendment would require all prairie producers to cross-subsidize the operation of two short-line railways.
The federal budget provides for a $300 million adjustment fund, which over a six-year period will assist prairie farmers in adjusting to transportation reform. Farmers negatively impacted by Canadian Wheat Board pooling changes are to receive compensation from this front.
Despite ongoing dialogue and correspondence with the Minister of Agriculture and Agri-Food, Manitoba Pool Elevators and Saskatchewan Wheat Pool remain concerned about the adequacy of transition assistance being planned for eastern prairie producers affected by the pooling change.
The adjustment period being proposed extends two years beyond the 1995-96 crop year. This is insufficient, given that producers had no opportunity to plan for the implementation of a pooling change in the coming crop year. The amount of compensation is still unknown; therefore, its adequacy cannot be determined. Although estimates of $100 million have been suggested, the pools have yet to receive confirmation of the proposed compensation level or an indication of how such funding would be allocated.
Based on actual and estimated deliveries of board grains since 1992-93, the pooling change is expected to cost eastern prairie producers an additional $50 million in freight deductions in 1995-96 alone.
The catchment areas for each of the export points identified in the Canadian Wheat Board pooling proposal will not be calculated until July 1995. This means the freight deductions proposed for each pool account and delivery point are still subject to change. It is imperative that, where appropriate, freight deductions under the new pooling system fairly reflect the locational advantage of eastern prairie delivery points to competitive export markets.
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Contrary to assurances from Agriculture and Agri-Food Canada, the Manitoba Crop Insurance Corporation has advised that the GRIP will not take into account the negative impact on market returns of a change in pooling points. This position increases the importance of adequately compensating Manitoba producers for the negative impacts of a change in pooling points. Eastern prairie farmers are entitled to and urgently require information on the freight deductions they can expect under the new pooling system and the level, allocation, and duration of assistance they will receive to ease their transition to this system.
Manitoba Pool Elevators and Saskatchewan Wheat Pool support the implementation of an equitable method of allocating freight costs among prairie producers of wheat and barley. However, it is imperative that the federal government recognize the dramatic increase in transportation costs and significant adjustment facing eastern prairie producers as a result of the proposed change in Canadian Wheat Board pooling points. This recognition must take the form of adequate financial compensation over a reasonable adjustment period and open and timely communication of decisions and information concerning the provision of transition assistance and the operation of the new pooling system.
Thank you very much, Mr. Chairman.
The Chairman: Thank you very much.
Mr. Chrétien.
[Translation]
Mr. Chrétien (Frontenac): Mr. Vice-President, welcome to Ottawa. I'm happy to hear the position of two groups with a total of some 40,000 members. You know that Bill C-92 that we are now studying has a dual purpose. First, it aims at changing the mission of the port of Thunder Bay and at transfering the mission it now has to one or several ports on the St. Lawrence. Various names are sometimes mentioned such as Baie Comeau, Montreal, Three-Rivers, Quebec City, but it will be a port on the St. Lawrence.
However, regarding transportation costs from Thunder Bay, one of those famous transshipment ports, we are faced with a dilemma. Who is going to pay the transportation costs? Your association is entirely in agreement with the fact that the Prairie grain producers should not have to cover such expenses. Bill C-92 provides that 100 million dollars will be made available to farmers over the next three years so as to enable them to adjust to the new situation.
The Department of Agriculture has provided us with various charts. The Winnipeg area is probably the hardest hit. In 1995, freight cost might be as high as $37.20 per metric ton. This is a heavy blow.
It is the intention of the Bloc Québécois - let us know what you think of this to move an amendment that would extend those payments over 5 years instead of three to enable farmers to adjust more easily. As a member of the opposition, I certainly won't have to defend the government's position.
I voted against Bill C-76 but it has been passed and we now have to live with it, just as we have to live with Bill C-68 which was passed yesterday. I didn't have the guts to go to the House to vote against it, I stayed in my office. However, when I answered a question put to me on a talk-show in a radio station in my riding, at noon today, I told my constituents that they should obey the law. That's another side of democracy: one has to abide by the law.
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Democray also means that, as a first step, the WGTA has to be eliminated. Direct subsidies for grain transportation are abolished. A 300 million dollar adjustment fund has been set up. Initially, I didn't think that any part of that 300 million dollars could be used to establish a new grain transportation financing and compensation system. Maybe that's not such a bad thing. At first, I thought that it was meant to be used for the improvement of roads, of railway sections or yet for the constructing of primary elevators, but it now seems that this will take up only one third of the funds.
Together with my colleague from Lotbinière, Jean Landry, I shall propose that this be extended over a five year period and that the amount of 100 million dollars might be raised to 120 million dollars. Obviously, if we allocate too much for that, there won't be enough money for other things since the total amount of the fund is only 300 million dollars.
[English]
The Chairman: Thank you, Mr. Chrétien. Mr. Chrétien, you seem to have covered a number of pieces of legislation in your question, a few of which don't actually deal with Bill C-92. But if the witnesses wish to comment on that, I'll allow them to comment.
Mr. Edie: Thank you, Mr. Chairman.
I had a little trouble getting my interpretation device working.
The first question I heard was, who will pay the freight from, for instance, Winnipeg to Montreal or Baie Comeau? That is the very essence of what has been proposed. It will be paid by the user; that is, the actual area that ships grain from the eastern prairies to the St. Lawrence point, whatever is chosen. As we stated, we do not disagree with that as being an intermediate-term objective. This is something that does not fit the rule of fairness for the averaging of prices and pooling of costs, and we agree to that.
Going from that to your comments about having a five-year timeframe, I think we would be very happy with anything that would lengthen the time to make the adjustment; that would be very helpful. We would be quite supportive of it. It has been one of our concerns - both the amount of compensation and the length of time it will be in place.
[Translation]
Mr. Chrétien: With your permission, I would like to add something. I mentioned five years but the amounts involved would have to decrease gradually. You might have 40 million dollars the first year which would then decrease to 30, 20, 10 and 5 million dollars. In the last year, the amount would be minimal so that people would hardly be aware of the changes.
[English]
Mr. Edie: Mr. Chairman, it would be very helpful to have that approach. The suggestion has been that the $100 million could be paid in one of two ways - one-third in each of three years, or 40%, 30%, 30%. We feel that is not adequate. So I think we have some commonality in our approach.
Mrs. Cowling (Dauphin - Swan River): I would like to thank the three representatives from Manitoba Pool Elevators and Saskatchewan for appearing before this committee.
Just for clarification and to have on record, Jean-Guy Chrétien had mentioned some things I believe are incorrect with respect to the bill. There's nothing in the bill that provides money for compensation. Bill C-92 changes the Canadian Wheat Board pooling from Scott, Saskatchewan, to Sintaluta, Saskatchewan. However, by passing Bill C-92, there will be dramatic changes for Manitoba. We've discussed that at some length at the subcommittee on transportation. These will be changes that will cause the farmers in my riding, in Swan River, and I believe in the riding of Bernie Collins, which is in eastern Saskatchewan, in Estevan, to pick up the highest cost of moving grain out of this country.
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I'm wondering if you could expand on what you believe the compensation should be for those farmers and farmers in Manitoba and eastern Saskatchewan, to cover the high costs they'll have to pick up because they're in land-locked areas of the country.
Mr. Edie: As I said, the proposal suggested, which has not been totally decided on, was that it would be $100 million spread over three years. That of course averages $33.333 million per year. The Canadian Wheat Board and Agriculture Canada, in their estimates going back to 1992-93 - and this is just above the middle of page 3 in the brief - came up with $50 million in additional deductions in 1995-96 alone. It depends somewhat on the volume being moved. So we feel this would be a minimum and the three-year period is short. In a conference call with the minister we suggested it be a four-year period. But I think the number has been put together by credible sources; therefore, it's something we feel confident about.
Mrs. Cowling: Will there be any impact on Manitoba producers and eastern Saskatchewan producers from some of the legislative changes we've made with respect to short lines? Will there be additional costs? Could you expand on that?
Mr. Edie: Just so people understand what is being discussed here, when the Western Grain Transportation Act was put in place, provisions were made for two short lines: the Central Western in Alberta, and the Southern Rails Co-op in southern Saskatchewan. The short lines were funded above and beyond the rate scale the rest of the grain moved on. They got both the rate scale and additional funding. It has never been made public what that level of funding was, and it was what we called an off-the-top-of-the-Crow benefit. That meant other producers had to pick up more of the share.
That was funded under section 50 of the NTA, I believe. Since there will be no Crow benefit after August 1, there is no source of additional funding for those short lines. An amendment was made under the Adjustment Act that an additional, on-average, $10 a tonne would be put on the rate scale for every other producer in western Canada to pay, to help fund the shortfall in their funding. We feel it is ironic that at a time when the government is moving toward doing away with pooling and averaging of costs - which is really what the seaway costs are - it is setting up another class where there will be a pooling and averaging of costs to keep those short lines viable.
Mr. David Sefton (Director, Saskatchewan Wheat Pool): I guess that's what we object to as well. You start changing the whole system to a market-driven, market-oriented type of system and eastern Saskatchewan and Manitoba producers are going to have to pay the full cost of water transportation down the St. Lawrence, yet one sector of the grain producers in the transportation system will continue to get a cross-subsidization. It just seem ironic to set up two different classes. Why set up two different types of freight-rate structures within the province or within western Canada?
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Mr. Benoit (Vegreville): I'd like to get some clarification from Mrs. Cowling. She referred to Bill C-92 and said there was an indication that the split point for freight would change from Scott, Saskatchewan, to another point. I have looked at this legislation and haven't seen that in there. I'm wondering if I have a different version. That's not in the bill, is it?
Mrs. Cowling: No.
Mr. Edie: Just for clarification on that point, there's nothing in the bill, because what is being suggested is Vancouver and the St. Lawrence River. But what happens is the break point on what the Wheat Board will do becomes Sintaluta, which will have the highest cost of freight to salt water. It's just a fact of geography; it's not a legislative or regulatory fiat, it's just the way it is.
Now Scott, Saskatchewan, is a reference point with the largest freight rate through Thunder Bay to Vancouver. The movement to Montreal moves that east, and it just happens to be Sintaluta.
Mr. Benoit: I understand that Scott is the centre point now and that will change, but I hadn't seen it in the bill. I thought maybe some more definite material had been put in the bill. There isn't much that is definite in the bill really, in that regard.
You've touched on this by indicating that the portion of freight costs the farmer bears will increase substantially in Manitoba and eastern Saskatchewan. What would the largest increase be to farmers in terms of the portion of the freight costs they'll have to pay?
Mr. Edie: On the top of page 2 the example used is Winnipeg; costs there will increase by 287%. There are three or four points east of Winnipeg where it will be slightly higher, but we use Winnipeg because people know where that is and it's pretty much on the eastern edge. We use Moose Jaw because people know where Moose Jaw is. It could have been Scott, Saskatchewan.
Mr. Benoit: We've have your presentations taken away because we had no French translation. So we don't have them in front of us.
Mr. Edie: I'm sorry.
Mr. Benoit: How many dollars more will these farmers be paying under this change than they are paying right now?
Mr. Edie: At Winnipeg, the freight deduction to date is $9.11 per tonne. That will go to $16.78 per tonne on August 1 because of the loss of the Crow benefit. Then with the change in pooling points, it increases to a total of $22.59, for a total increase of $13.48 or 148%. Those are the numbers at Winnipeg.
At Calgary, of course, they will lose the Crow benefit, but there will be a higher return from the pool accounts of the Wheat Board, so at Calgary there will be a 25% increase in the freight bill. Those are the numbers on either end and of course they feather out into the middle from one end to the other.
Mr. Benoit: So the area with the highest cost borne by farmers will be about the same as it is in the highest cost area under the present system, but the point has changed considerably. About $14 a tonne would be the highest portion paid right now from Scott.
Mr. Edie: The highest freight rate today before the loss of the Crow benefit is over $18 a tonne. The average producer's share is in the neighbourhood of $18 a tonne. Any of these points you can take and 48% of the total freight bill has been the producer-shipper share. So you literally double it and take a little more.
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Mr. Benoit: So right now it's $18 a tonne at the highest point. After the changes it'll be -
Mr. Edie: It will be $35.
Mr. Benoit: But the portion that's paid by farmers in the highest-cost area now will be -
Mr. Edie: It will be $35 a tonne.
Mr. Sefton: That varies by crop as well, because of where the market for the crop is. That's why the barley in Winnipeg becomes significantly higher: because the barley or feed market is to the west, as compared with cereal wheat, durum. All the different wheat grains shipped have east and west markets. That's why Sintaluta becomes a higher shipping cost than Winnipeg in the case of wheat.
Mr. Benoit: I understand that. Then the freight cost in the Winnipeg area and in Scott, Saskatchewan, won't really be all that different after the changes are all in place. They'll be pretty close to the same.
Mr. Sefton: Significantly higher in eastern Saskatchewan and Scott, because you have the $20 St. Lawrence cost added to the rail cost that now is being paid from Scott to Vancouver. So you will have upwards of $10 to $15 above the change in rail transportation.
Mr. Edie: The highest freight cost to salt water will be in eastern Manitoba.
Mr. Benoit: And for Scott it'll be somewhere around $29, close to $30, with the change.
Mr. Edie: In that neighbourhood.
Mr. Benoit: So $35 versus close to $30.
Mr. Edie: Except their pool return will show a higher return, because they don't have the deduction taken off for the St. Lawrence transportation. So although their rail transportation may not be that much different, there's the addition of the St. Lawrence transportation being charged to the eastern Saskatchewan and Manitoba producers. That will in fact be a benefit to western Saskatchewan and Alberta.
Mr. Benoit: But that is taken into account in the amounts we're talking about.
How are farmers in Manitoba? They're getting hit the highest in the increase. How are they going to deal with the change?
Mr. Edie: We're not sure. That of course is the whole point of our presentation: to make sure there is some way of mitigating this in the short timeframe that's being suggested.
Mr. Benoit: But there supposedly will be the $100 million - that isn't in the bill, of course - compensation over three years. Overall, how do you expect Manitoba farmers will deal with the change? You must have talked about it.
Mr. Edie: They will try to pick a low-volume, high-value crop. The danger in that is that low volume in mass per acre, which could be canola or flax for instance, or lentils... the thing there is there's not an unlimited market for these crops. If too many people go into them, you could have a severe change in the value of them.
There's another issue here which you just touched on, and I would like to expand on it a little. There is quite a drawing of grain into the United States, and we all know about the things that happened there: we ended with a cap, which is to disappear on September 12, 1995. The reduction or the removal of the Crow benefit to farmers will make, all other things being equal, the U.S. market more attractive than it is now, if nothing else changes, because there will be a higher freight cost. If it's attractive now, the reduction in farm-gate will cause the U.S. market to look more attractive.
Mr. Benoit: Do you expect you're going to get a call from farmers for some changes to the Wheat Board regulations so they'll have direct access to those markets without having to -
Mr. Edie: What we're suggesting - and the Wheat Board has taken some steps in this direction - is that there has to be a recognition of the draw areas. I'll use an example. If Minneapolis is the destination of wheat, the truck freight rate from the southern point of Manitoba would be something under $30 a tonne. For that grain to get to Vancouver will be about $47 or $48 a tonne, and about the same to get to Montreal. So those people are going to want to be able to capture that particular price premium.
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Without getting into all the other problems in that, if they see they do not capture that and are paying these other prices and the averaging of seaway costs have been taken away, they're going to be very persistent in wanting that addressed through some form of the initial payment. The Wheat Board has had some discussions. We've seen some of their ideas on how they might address that. In fact, we'll be meeting with them this Friday to try to make sure it's adequate to address those farmers' concerns.
Mr. Benoit: I have neighbours who right now ship non-board grains into the United States; and I'm from Mannville, which is a fair distance from the border. These neighbours would like to ship board grains without having to go through the board, as well. I know, because I've been told, that they're concerned the advantage will be recognized for those in southern Manitoba, but the people in my area still won't be allowed to -
Mr. Edie: I think a lot of work needs to be done because what you say is a fact and yet among the people along that southern area, which also includes Saskatchewan and Alberta, there's grain that's attracted into the United States. If that isn't put together in a way the farmers view as equitable and fair, then there are going to be a lot of additional pressures, which you've referred to, coming along. We understand that.
Mr. Sefton: In reference to the point you're making that farmers in your area will be looking at that U.S. market as well -
Mr. Benoit: They have been already.
Mr. Sefton: They have been already, granted. I think what needs to be recognized in this whole discussion is that if the market area is Minneapolis or somewhere on that side of the continent, eastern Saskatchewan and Manitoba will be in a far better position, as far as distance is concerned, to meet that market and in all likelihood will have that market filled at a lower transportation cost than the cost from your area.
That, as Mr. Edie indicates, needs to be recognized in the whole area of how the pooling price and the initial prices are presented to recognize the market destination of those products. Because if it isn't, then you are correct, there will again be all kinds of imbalances that will cause the types of things you're talking about.
The same is true in the area of livestock. You asked what the farmers will do. If you look at livestock production on the eastern side of the prairies - Vancouver becomes the base price because it's the feed market outlet - Alberta will have a $20 premium to eastern Saskatchewan and Manitoba in their feed costs. In other words, it'll cost Alberta $20 a tonne more for their feed grain. Where will that shift to over time? Those kinds of things will happen.
It's the same thing in the crushing industry because Vancouver is the price outlet, or price discovery point.
Mr. Benoit: Not for long, it has been changed.
Mr. Sefton: It doesn't matter. The market moves in that direction. There again will be a price premium, or higher cost of canola meal as a protein supplement on the western side of the prairies as opposed to the eastern side of the prairies. There's going to be tremendous pressure for a livestock industry to develop, not because of what the destination of the livestock products is going to be, but because of the cost of production being far lower on the eastern side of the prairies.
That's why we ask for some transition time to make those adjustments so it doesn't have to happen overnight, so that the economic realities of what is happening, the $15 and $20 a tonne price disparity between the two sides of the prairies, has some time to work itself out in a civilized manner, if you like, as opposed to a strict all-of-a-sudden economic reality.
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Mr. Edie is correct as well, the higher priced products will be the ones that will tend to be grown. We have seen that already with the vast increase of flax and canola acres in the past, as opposed to barley, except on the eastern side of the prairies and Manitoba where we got so much rain that we ended up with barley anyway this year.
[Translation]
Mr. Chrétien: Mr. Benoit has asked most of my other questions. We probably have the same concerns.
According to the figures provided by the department, we export an average of 30 million metric tons of grains, so that seven million of them transit through Thunder Bay or the Lower St. Lawrence and 23 million through other ports such as Vancouver.
As you told Mr. Benoit earlier, if grain producers turn to higher price products, there will be a diversification into live stock production that would necessarily translate into a decrease in shipments.
Both of you have vision, since you sit on the boards of your associations. How do you envision agriculture in the West in 10 years? Let's pretend we take a picture of agriculture today in the eastern Prairies and another one 10 years from now. Could you tell us how you picture it?
[English]
Mr. Edie: Mr. Chairman, Mr. Chrétien outlines the question very well, and that is something that we have been wrestling with over a period of time. Our organizations have consistently pointed out that diversification is not easy, it is not without its problems, financially and as far as markets are concerned, and, therefore, we should be careful about how we go into it.
Both the Saskatchewan Wheat Pool and Manitoba Pool Elevators are involved in more than just shipping raw grain. We are involved in oil-seed crushing, oat milling, and we are even into bakery products, flour milling, malting barley. We will continue to look in those directions. How farmers will react over a period of time depends on forces that we can't foresee. I am starting to sound like the two-handed economist now, on the one hand and on the other hand.
It depends not only on the relative prices of grain, but on the absolute prices of grain. The relative price of canola and flax has been higher than wheat and barley, so we have seen a shift from 27 million acres of wheat before the Crow benefit came into place to 20 or 21. So farmers have done that kind of adjustment already.
We are also involved in having livestock auction markets. Between the three pools we operate 13 yards. We are working through that area. Certainly the concerns of an unlimited market, that there will be an upward amount of those products that can be produced, are real. It will be somewhat of a combination of all of these things, I guess.
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One thing hasn't been mentioned yet, and we have mentioned it from time to time: a lot of farmers will exit the industry. That has been going on over time, and this could be part of it too depending on how products move out.
I know it's not a clear, complete picture you're asking for, but in agriculture, like in all business, so much depends on markets, relative prices, absolute prices, inflation, shifting case in consumer demands, European restitution, the United States Export Enhancement program, and even the state of the economy in China, which has turned into a very large buyer of wheat, malt and barley, canola seed and canola oil. If Asia continues to boom, then some of these things may take up some of the slack.
In Europe, their oil seeds regime did change with some reduction in acres and some lower yields that were weather-caused. This year we are shipping considerable amounts of canola through Thunder Bay. Now if Europe removes some of their acreage set-asides and changes their restitution, how much they will use for export subsidy, if that market is not available to us then that again will change. It is a great number of continually shifting demands and markets, and we will work whatever we can to do it, as will farmers.
Mr. Sefton: I want to add further to what Mr. Edie says, but first let me clarify that I am not part of the management team. I am an elected official, elected by producers as a director of Saskatchewan Wheat Pool, and I am not in the management of the company as such, other than from the board of directors perspective.
What I envision, and I am sure Mr. Edie will concur, is that producers - farmers - will move from commodity producers, from strictly grains-type producers, to becoming food producers. That becomes part of the vision Mr. Edie refers to, in owning companies and being part of companies that produce value-added food.
Ken listed some of the companies that are into that. CanAmera is the largest oil seed producer-refiner in Canada, owned by Saskatchewan Wheat Pool, Manitoba Pool, and Central Soya from the U.S. We have companies like Pound-Maker, which is a integrated feedlot ethanol plant, the only one in Saskatchewan that producers ethanol and uses the refuge production as feedstocks for a feedlot. We have Dawn Foods, which is the largest bakery supplier in Canada and is owned by Saskatchewan Wheat Pool and Dawn Foods out of the U.S. Prairie Malt is one of the largest exporters of malt out of Canada.
He referred to our livestock area, but what he didn't mention is that we are in a feeder finance program, which encourages the finishing of beef cattle on the farm. So that will become part of the new vision.
Infraready foods is a new technology of precooking pulse crops - peas, lentils - so that when you want to make a pot of pea soup, for instance, instead of taking three hours or whatever to cook the soup, you can do it in 15 minutes because the peas or the lentils have already been precooked.
Bioriginal Food & Science Corp. is moving into the pharmaceutical area, using western Canadian grains and products to produce pharmaceutical types of products, which can of course be moved at the same $37 a tonne transportation rate, but you're moving a $200,000 product instead of a $200 product.
Those are the types of things I envision, but we need that transition type. Robin's Donuts - Saskatchewan Wheat Pool has ownership in that company, and I am sure most of you have seen a Robin's Donuts. I know I've seen too many of them.
The Chairman: That is a great value-added thing.
Mr. Sefton: Print West...that's what we have to move to, but you can't do it just at the snap of a finger.
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The Chairman: David, do you see any sort of role for government in that? That's something we deal with all the time here in committee. Let's get those exports and let's get to that value-added. What role do you see for government?
Mr. Sefton: The role of government is to provide the research and the infrastructure. Primarily I look in the area of being able to help fund the idea part of moving into these areas, and then, to be blunt, not get in the way when things are starting to move. I see them as a third partner. It'll take the farmer, it'll take the commercial companies, and it'll take the government and its policies to allow these things to happen.
Again, going back to the reason we're here talking about the pooling changes, that's why we need a commitment in the bill that there will be some dollars. That's why we need a commitment as to how long those dollars will be, so that we can start to make the transition. We know where we're going; we just can't get there in 15 minutes. That becomes the problem.
Mr. Reed (Halton - Peel): My question centres partly around the transition time that you need. I was in the west last winter, and I talked to a number of farmers, growers, and so on.
I suppose we're always walking this tightrope. If sufficient subsidy is supplied, there will be no incentive. Then if all of a sudden it evaporates, the adjustment becomes quite horrific in the process. But I understand that. How do we find that happy medium?
I've met with people in the west who want to get into more value-added operation. So what do we look at in terms of time, and what do we look at in terms of what is an appropriate transition?
Mr. Sefton: The brief states three to five years. We know we're going to end up paying the full cost. You know as well as anyone that if you're going to develop new agricultural methodologies and new agriculture products, or even build some new cookie plants, you can't do it between now and August 1.
I think it's a case of accepting that ultimately we are going to face that monetary challenge in the future. But because all of this is taking place after the seeding plans were even made for this year - although some of us were pretty slow in seeding, we did have our plans made back in the early part of the winter - we need a little bit of transition time to build feedlots, or another oat plant, or another crushing plant, or whatever it takes. One crushing plant has already been announced for Saskatoon, but it won't be running until 1996 or 1997. Those are the types of transitions and why we need the transition time.
Mr. Reed: Because grain commodities are things I don't follow very closely in the market and haven't for a number of years, I wonder what the trends are. I understand that recently canola is strengthening, and it looks as if it has good prospects for the future. What about the other grains? What about wheat? Are we looking at an overall strengthening there in the future? Are we tossing the dice?
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Mr. Edie: I think the wheat that's in the bin for human consumption in the world is at its lowest in 23 years, or something in that order. That hasn't really translated into a significant increase in the price of wheat for a number of reasons: the European restitutions, the export enhancement, the ability of buyers who over time have learned how to reduce their inventories. So there hasn't been a run-up in prices. If you look at that, there could be some things that are helpful there. They haven't yet turned into significant dollars in the farmer's pocket.
Canola has had a tremendous advance, and this has been done by market development and research. Here I'd like to give the government some congratulatory remarks on the kinds of research and availability of funds that were made to canola where they saw an opportunity. The industry saw an opportunity and it was coordinated through an industry body with governmental involvement, producer involvement, processors, handlers, and provincial governments.
If we go back to the vision that was started at the bequest of Mr. Goodale just a little over a year ago, it came out that we wanted to export $20 billion worth of agricultural products. That's a very high goal and it may be achievable.
Then, depending on where you choose your numbers and how many years you lump in and if you put the Crow benefit in with Ag Canada as a reduction of support in all of Canada, you see that agriculture is reduced by something like 62%. You can pick those figures and come out at that.
Now, whether it's 42%, 52%, or 62% is immaterial. What is important is the kind of support we can get from Ag Canada for research and development, the kind of support we can get from Transport on infrastructure to create the opportunity to do these things, remembering that the infrastructure is GATT green. There are no ramifications in our trading relationships.
Mr. Reed: With the industrialization of these very large, heavily populated countries like China and India, obviously there's going to be some increased demand on Canadian food products. If you look at the world population graph the way it seems to be headed, around the cusp of an exponential curve, does that not bode well for the future of agricultural products in terms of food production?
Mr. Sefton: I guess my comment would be that it bodes well for agriculture production, but if we continue to export solely a raw product, then we are not going to see high prices for those products. If we can export a partially finished product or put it into the next step.... Canola oil versus canola seed is a good example. You can sell canola oil for almost the same price per tonne as you can sell the seed, and you've still got the meal to sell. Those are the types of things that have to happen.
That again will only happen through trade devolution, where you don't have barriers against finished products. Again, we have to be careful about what types of products we move into. If a container of product weighs five tonnes because it's mostly air because you have a bag of cookies in there as opposed to a tonne of grain, then you have to get more value out of the product you're shipping.
There are some great and some horrendous opportunities out there. By shipping malt instead of shipping malt barley to China, you can almost double your price. The example that is used is if each Chinese person drank one more bottle of beer per year, Canada could not produce enough barley to satisfy that one. Now if you put that in terms of beef or canola oil or whatever, there are some tremendous opportunities, but we have to work through all the other problems out there.
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Mr. Reed: You obviously have the vision and you've obviously started down that path.
Mr. Sefton: We're short of two things, time and money. If we don't get the time as producers and I'm not there, so that instead of one farmer or one farm unit producing 1,600 acres of crop, as in my case, you have one farm unit producing 5,000 acres of crop, you are not going to get the same type of management and production out of the country. You will still get the land farmed, the land will always be worked, but instead of getting....
You can go back to the canola industry as a perfect example. We put in 7 million acres of canola 10 years ago. When we blipped up the number of acres, our production per acre went down. The last two years we have doubled; we have gone to 14 million acres. Because we have some good, conscientious producers, we have barely dropped in our production.
Those are the types of things we need that adjustment period for.
Mr. Edie: With very intensive agronomic extension that has been developed to make it a package.
Mrs. Cowling: It's my understanding that the reason you're before this committee with respect to Bill C-92 is that you're saying -
The Chairman: It was kind of hard to know at some points during the meeting. I think most of the meeting was on something else.
Mrs. Cowling: It would be my understanding that you're recommending to this committee that we go slow and give the producers in Manitoba and eastern Saskatchewan some time to adjust. You would need to know from the minister, fairly soon, the amount of dollars so you can make that adjustment. Is that correct?
Mr. Edie: That's correct.
Mr. Sefton: I have three things that I'd list we need.
First, if the legislation is going to be implemented, it must be implemented soon so the Wheat Board and the grain companies have an opportunity to have their house in order for August 1 so that various costs, such as transportation, can be deducted off the initial price.
The second thing is that we need a firm commitment in dollars. We need to know what's out there. We can't make a judgment as to whether the dollars are adequate or inadequate because we don't know what the dollars are. There's nothing in the legislation that outlines whether it's $1 or $100 million. We need to know that, and we need to know the timeframe in which it's going to be put out there.
We also need to have consistent regulations for all the rail transportation sector; as Mr. Edie indicated, the short lines should not be getting a cross-subsidization from the total industry while Saskatchewan and Manitoba are paying the full cost of the seaway shipping.
The Chairman: Gentlemen, I want to thank you very much for appearing before us today on Bill C-92. Even though we got off the topic quite a bit, it was a very useful discussion, actually. It's very helpful. We don't get an opportunity to hear from the pools that often. We appreciate your being frank and open with us, and we look forward to seeing you back here again. Thank you.
Mr. Edie: Thank you very much; we appreciate your time.
The Chairman: The meeting is adjourned.