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EVIDENCE

[Recorded by Electronic Apparatus]

Wednesday, March 19, 1997

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[English]

The Chairman (Mr. Lyle Vanclief (Prince Edward - Hastings, Lib.)): Ladies and gentlemen, we will get started if the committee members will come to the table, please. Could the representatives of the first three groups presenting this morning come to the table, if they're not already there? We have the Saskatchewan Women's Agricultural Network, the University of Saskatchewan, and the National Farmers Union.

I do want to thank you for coming to the committee. We are here, as you all know, as the Standing Committee on Agriculture, to listen to people's thoughts and views on Bill C-72, which is an act to amend the Canadian Wheat Board Act.

We have been at hearings in Winnipeg and Regina already. Tomorrow, we will go on to Calgary. Friday, we will go on to Grand Prairie.

When we return to the House of Commons, we will continue hearings on the bill. We'll then go into clause by clause, in which the committee has the opportunity to make further amendments to the bill that we think will improve it. These changes to the bill may have been suggested to us, which is why we're here: to hear people's views.

The bill came before the committee after first reading, which is a new process of this Parliament. When a committee gets a bill after first reading rather than after second reading, it gives the committee more flexibility and opportunity to work with those involved with the bill as it goes through the process.

Just to make sure that everyone is clear with the process, we have three groups at the table now. You have been informed - I know you will cooperate - that your presentations will be 15 minutes. I will try to give you an indication when you've got a couple of minutes left.

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We are going to stick pretty hard and fast throughout the week so that we're fair to everyone. After that, we will have about a 45-minute period during which the committee members can dialogue with you for questions, comments, or points of clarification with all three groups at the table. Then we will move on to the next group of presenters.

I believe we have ten groups and nine individuals presenting before the day is over. So I thank you again for coming before us.

We'll first call upon the Saskatchewan Women's Agricultural Network.

Noreen Johns and Elaine Meachem, welcome to the committee. This is a joint presentation. Noreen, are you leading off at least?

Ms Noreen Johns (Executive Secretary, Saskatchewan Women's Agricultural Network): Thank you. We certainly appreciate this opportunity to add our analysis to Bill C-72. We thank the committee very much for travelling into our agricultural province.

I think I'll take to reading my brief.

Through past resolution, our membership has endorsed a strong position in support of the Canadian Wheat Board and its single-desk selling advantage. The concept of Canadian Wheat Board marketing, which is, in Canada, cooperation versus competition, continues to be sound.

SWAN has been active in the Pro-Canadian Wheat Board Coalition, which came together in response to recent attacks upon this institution. We are not opposed to changes to the Wheat Board, but we ask for those changes to be tested for their ability to enhance and actually strengthen the corporation.

Some of the goals of Bill C-72 appear very valid. Arguments for other proposed changes appear quite weak. Are we trying to fix some problems that really don't exist?

Unfortunately for us, some of the proposals offer possibilities to erode the very fundamental strengths or pillars of the Wheat Board: the single-desk selling advantage, price pooling, equitable delivery opportunities, government guarantees, and customer confidence.

The theme of our SWAN presentation is to urge caution and much analysis before moving to implement the proposed changes. We are concerned with the broad scope of this enabling legislation. So much is being left to the discretion of the new board, which in itself has an uncertain make-up. We have to ask: what is the full intent of some of the proposed changes? Where can, and will, these changes lead?

It's hard to speculate or comment without asking for a clear definition of the intent of the potential direction. We would urge, first and foremost, an extensive analysis of the possible implications. Farmers are all too familiar with the dire consequences of quick-fix, ill-planned policy changes. One is easily reminded today of the example of broken promises, broken highways, and a mess in agricultural transportation as a result of the Crow sell-out.

Let me give our thoughts on some of the proposed amendments. In looking at the positives, the bill has several admirable goals: modernizing our western Canadian marketing system; enhancing the relationship with farmers with increased accountability; improving the responsiveness to changing producer needs; creating opportunities for more immediate cashflow for farmers; and most importantly, building upon the proven strengths of the existing marketing system. I highlight that last goal to emphasize that we do really indeed have a quality product.

As a personal aside, I recently participated in the CIGI 24th annual farm leaders course in Winnipeg. Every producer should have the opportunity to visit the grain marketing institutions at Portage and Main in Winnipeg.

Our high calibre of market development, monitoring, coordination, and expertise was most evident. An interesting survey report from CIGI indicated that the importer countries rating exporters ranked Canada highest in providing quality, cleanliness, consistency, technical support, dependability, and customer service, but on price, Canada ranked last. In other words, we are viewed as high-priced sellers.

The Canadian Wheat Board helps to provide benefits to our importer countries without compromising the price paid to Canadian farmers. I, for one, am not willing to risk losing that.

We would agree with the accommodation of an earlier payment and the distribution of final payments. Modern computer technology should allow for quick tabulations and distribution with removal of the date restriction from the present Canadian Wheat Board Act. The opportunity to receive storage costs, interest, and other delivery-rated amounts creates some fairness in unbalanced delivery opportunities.

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There will be some efficiencies by not having to draw evenly from all areas. However, we do not want to see a chronic situation that erodes the pillar of equal delivery opportunities that exist under the contract-call system. Unbalanced delivery opportunities are unacceptable if they repeatedly create cashflow problems for certain areas, especially for any lengthy period of time. The prospects of road bans this past weekend reminds us that farmers can be disadvantaged with delayed calls. Grain moves most efficiently over winter roads, not during spring thaws, and certainly not when we're involved in spring seeding operations.

SWAN finds the bill a bit contradictory in terms of offering cashflow to farmers. While tinkering to get quick cash into their hands, we perceive that the bill, with its contingency fund, transferable certificates, and shorter pooling periods, may actually cost farmers more in the long run. Maintenance of the current cash-advance program can answer some of the needs for cashflow.

Under governance and accountability, the working of Bill C-72 is very vague in regard to the formation of the new board. While allowing for the election of producer representation, the numbers, electorate, candidacy, and process are undefined. We believe the potential exists to politicize board elections, encourage third-party influences, and create a house divided against itself. An appointed board has allowed for a balance of expertise and an opportunity to let the facts get in the way of opinion.

Have false expectations of a greater accountability been created around the opportunity for an elected farmer voice? In our estimation, a clearer communication plan and a stronger ear to the current elected advisory board system would have alleviated many of the problems and concerns we face today. Unless the new board has a communications budget, the time, and the inclination for two-way dialogue with farmers, the grassroots voice will be no more significant than now.

It seems ironic that those who first raised the rally cry for more accountability from the Wheat Board are those who favour an open-market system that offers no accountability.

How much will farmers really achieve? As we read it, under Bill C-72 the government is in reality maintaining much control over the appointments within the board and for the CEO. While we appreciate the basis for the decisions in this regard - meaning the government would continue to guarantee the Canadian Wheat Board's business transactions - we already hear the cries that this is not accountability.

As it moves from a crown corporation to an even freer free enterprise system, what could happen to the government guarantees? Today, this is worth $60 million to the Wheat Board and to farmers. Additional credit costs will cost farmers.

What happens to our customers' confidence, which for many countries is very much tied to that linkage between the Canadian government and the Canadian Wheat Board? We do not believe the current accountability is so out of line as to risk the loss of those guarantees. I guess I'd like to hear what the cry for more accountability is really asking for.

In 1994-95, the Canadian Wheat Board missed an opportunity to capitalize on one high-priced sale of feed barley to Japan. Today, do we want to risk an effective price-pooling system to offer this opportunity on an ongoing basis?

It is our opinion that the cash-purchase option should apply only under very stringent guidelines and circumstances. We recognize the need for strong feed-grain exports to maintain an honest domestic price. So we do want to capitalize on such opportunities that existed in 1994-95, but too much cash buying will undermine the principles of price pooling and orderly deliveries.

The cash price offered must always remain lower than the pooling price or farmers will become reticent to commit to contracts under the Wheat Board and the price-pooling pillar will be eroded, as will orderly marketing opportunities.

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Let us remember that the Canadian Wheat Board is our marketing agent, not a buyer of grain. The Saskatchewan Women's Agricultural Network would like to know the definition of significant mandate changes. Removing any category of wheat or barley crops from the Wheat Board will be significant in eroding its single-desk selling position. It seems ironic that mechanisms are being created to remove grain from the Wheat Board, but the opportunity to bring other crops under the Wheat Board is being denied.

SWAN passed a resolution at its February 1997 AGM in this regard, and we'd ask your consideration of it. It is:

We are hearing more and more people, especially canola growers, who are questioning the erratic and seemingly manipulated purchasing systems inherent with current price determination. In considering the negotiable certificates I will admit a certain confusion in this area. My question is, how will this benefit farmers in the long run?

A price is certainly to be extracted for transfers. Risk-management techniques will certainly discount the potential end value of the certificate when it is accepted. At year end a farmer's gross income will ultimately be less. We have to ask if this is setting up farmers for the golden goose scenario.

Defining pooling periods for less than a year certainly has its disadvantages in terms of winners and losers and destroying equity created by the pooling pillar. Farmers needing cashflow will be forced to sell in a fall pool, when prices are traditionally lower. Those who can afford to wait can capture a more lucrative spring pool. If more farmers can wait for later delivery, elevator congestion and constricted marketing opportunities will exist for the corporation.

When the current barley vote is tabulated and the results known, it is our expectation that the laws of the land will prevail and that those who continue to defy the law will be dealt with in an expedient and effective manner.

In a democracy, when a majority determines that their individual rights are best served in the collective, in this case the Canadian Wheat Board, then rules or laws are established for operation within the society that apply to all, and they must be enforced. One might relate the current situation to a hockey game with a weak referee who has allowed the game to get out of hand. We in SWAN are very worried about a building tension among farmers and the potential consequences.

In conclusion I quote ``all change is not progress, just as all movement is not forward.'' I repeat our call for a careful analysis of the changes proposed for the Canadian Wheat Board through Bill C-72. Some of the changes may indeed benefit some farmers on a short-term basis. Some have the potential to destroy the proven advantages of the Canadian Wheat Board.

We have offered here our red flag to assist your consideration in redesigning a marketing system to service grain producers in the long run. I emphasize grain producers, because we believe in any changes to programs or institutions designed for them their best interests must prevail.

These changes are not something that should be jumped at too quickly in an attempt to smooth troubled waters, to download federal government responsibilities and commitments, to create cheap domestic prices, or to apologize for a trade world that recognizes the strengths and reputation of the Canadian Wheat Board seemingly better than we.

I thank you for your attentiveness and look forward to your questions.

The Chairman: Thank you very much, Noreen, for a very good presentation.

We will now go to Professor Fulton from the University of Saskatchewan.

Welcome, Murray.

Professor Murray Fulton (University of Saskatchewan): Thank you very much.

I'd like to start off by saying I'm delighted to be able to make a presentation to the committee.

I have a presentation that's in the form of a discussion paper I released in December. I have a few copies here that anybody can get after my presentation. I'll try to get some more up as well.

The Chairman: You may give a copy if you wish to the clerk, Murray, and we will get them circulated once they're translated.

Prof. Fulton: I've already given one to the clerk. If any other people would like one, I'll make sure that there are some additional copies this afternoon.

The Chairman: Thank you.

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Prof. Fulton: I want to start my presentation by saying that in my view the Canadian Wheat Board has a number of unique characteristics as a grain trader.

These characteristics, among others, are: first, the Canadian Wheat Board has single-desk selling authority for the marketing of wheat and barley in the CWB area, with of course the exception of feed grains to the domestic market; second, the Canadian Wheat Board operates on behalf of farmers to maximize the returns from the sale of wheat and barley; and third, the Canadian Wheat Board requires the ability to enforce the decision it makes regarding contracts and sales. This ability depends critically on the support of farmers.

These three characteristics together create some special issues for governance. As I said earlier, the ability of the Canadian Wheat Board to act as a single-desk seller ultimately depends on its ability to generate the support of the majority of farmers within the CWB area. If it doesn't have the support of farmers, it's not going to be able to operate effectively.

In my view, generating the support of western Canadian grain farmers requires two things. One, farmers must be able to express their views on the CWB with some chance, some reasonable chance, that these views will be listened to. Secondly, farmers' representatives must have effective control over the CWB's policies and operations. If farmers are not provided with both voice and control - and for me these are the two main ingredients, voice and control - it is unlikely that over time they will continue to support the Canadian Wheat Board.

Historically, it is my view that this voice and control have not been present in the CWB. Although an advisory committee is elected, there is no expectation by farmers that this body has any direct authority on Canadian Wheat Board policy.

There's another wrinkle I want to put in here. That is, the Canadian Wheat Board faces some problems of evaluating operating and marketing efficiency. If you are in a publicly traded company, your shares are traded and other people, brokers and so on, evaluate the performance of your corporation.

Evaluating the performance of the Canadian Wheat Board is not so easy. For one, there's no trading. But two, the traditional things one would look for in a publicly traded corporation are not the things you want to look for within the Canadian Wheat Board. You're not interested in things like rate of return on equity or the debt-to-equity ratio. You're interested, in the case of the Canadian Wheat Board, in how well that Canadian Wheat Board is doing in getting the grain from the farmers and marketing it for them and returning the highest price on the world market.

That problem of being able to evaluate the performance of the Canadian Wheat Board raises some questions about how farmers can judge the efficacy of the Canadian Wheat Board, but also has I think some governance issues. I will get to those in a minute.

In short, what needs to happen is that the Canadian Wheat Board must become much more democratic in nature, and it must be seen to have done so. The new government structure must provide farmers with a substantial voice and it must give them some effective voice and control.

What about the proposed legislation? Does it meet the test? At the general level I think it does. The legislation clearly talks about the possibility of elected representatives. When you start to get into this deeper, I believe the provisions within the proposed act reflect a lack of confidence in the democratic structure. And I think if we really want to have a governance structure that is truly democratic, there need to be some major changes to the legislation.

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The ones I would propose are the following. First, I think the legislation should provide the board of directors with the power to appoint and remove the CEO. This is the traditional governance structure in cooperatives and corporations, and I believe that's what will be required within the Canadian Wheat Board if it's to be really governed by the board. The board really is the group in charge. They need the ability to appoint or remove the CEO. Having that ability vested in the minister is I think insufficient.

I believe the legislation should clearly indicate that farmer-elected board members are a majority of the board. It's silent on that particular issue. And I would argue that it should probably be at least 75% of the board. Farmer-elected members of the board should be 75%. But that's my own personal view. I believe the CEO should not be a board member, as is outlined in the legislation. I believe the board chair should be elected by the board.

The legislation should also outline, I believe, how the farmer board members should be elected. The choice I have put forward in my paper is a delegate structure. I've given quite a bit of thought as to whether a delegate structure, or direct representation, would be the better way to elect the farmer members of the board.

My sense is that a representative structure would provide some of the voice that's really required within the Canadian Wheat Board, because a representative structure would have a number of representatives all across western Canada. These representatives would each represent a geographical area, and they would be the people who would be bringing the concerns of the farmers within their area to the delegate body. And from that delegate body, then, the views would go up through members of that delegate body who would be appointed to the board.

I think, in this day and age of further processing on-farm and at the community level, some thought should be given to creating constituencies that are non-geographic, constituencies that would.... For instance, there would be a constituency of people involved in value-added activity on the farm, and they would get the ability to elect one of the delegates to the delegate body.

Finally, I believe the proposed legislation does not give sufficient attention to how the transition between the current structure and the new structure would occur. I think this is absolutely critical. Let me just take a moment on this.

As I said before, my view is that the new government structure should be of a CEO who is appointed by the board. I think this needs to be part of that transition structure. So I think it would be quite reasonable to have an interim board and an interim CEO in place while the elections for the delegate body would take place. But in fact there needs to be an interim CEO to get the corporation through that particular period of time. Once the elections have taken place, and the farmer members and the other members are on the board, that board should be given, as one of its first tasks, the task of appointing the CEO it wants for the Canadian Wheat Board.

I think if one doesn't put that kind of a transition phase into place, we're going to have some of the members of the board being elected by farmers, but farmers having no control, ultimately, over who the CEO of the Canadian Wheat Board would be. I think this fails the democratic test of voice and control that I mentioned before.

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The comments in the discussion paper are all about governance. I would like to take this opportunity to briefly talk about some of the other elements within the bill.

One of the questions that arises in terms of changing the governance structure is that a change in governance structure involves more than just who elects the board. In fact, it involves a change in whether the CWB is an agent of the government or a mixed enterprise. There is some concern that as its legal status changes, the commitment to the Canadian Wheat Board by Parliament, by the government, will in fact change.

There are a number of concerns that, for instance, the financial guarantees could be withdrawn at some point down the road. I think we already see some of this happening within the bill. The guarantees are extended to the initial payment, but they are not extended to any interim and adjusted payments. As an economist, I can't see any reason for this distinction. It seems to me that if the government is willing to guarantee the initial payment, they should be willing to guarantee any adjustments along the way, particularly when none of the adjustments over the past 60 years or so have resulted in a shortfall.

It seems to me to be a fairly small risk to take, and I don't see why there's a difference at all in those two ways. I think it points to the concern that the government may decide at some point that they're going to withdraw their support on some of these guarantees. Clearly, that support is necessary for the effective workings of the Canadian Wheat Board.

Very quickly, in terms of cash trading, although there are times when cash trading would be beneficial, I believe it must be used very sparingly by the board if it's given the power to do so. The reason is that the times when one would want to use cash trading would be those when the cash market and prices in the export market are greater than the estimated pool price and the Wheat Board would want to use those to pull some grain from the system in order to be able to meet some of these export opportunities.

This would seem to be desirable because it would get the grain moving and meet some of these markets. However, if the Canadian Wheat Board routinely uses cash payments in this fashion, farmers will catch on to what's happening and they will start to anticipate not having to deliver in the fall. They will wait until this market is short and the Wheat Board comes and offers them a cash deal. What you've really done is transformed the board into a dual market system. If you like, it's dual marketing through the back door.

My own views on the sustainability of a dual market are laid out in a brief I made for the Western Grain Marketing Panel last year at around this time, as well as in other work I've done in this particular area. If people would like to see something on that, I would be more than happy to get it to you, but my view is that a dual marketing system ultimately is not sustainable, at least within grain and barley marketing in western Canada. There are other instances where dual marketing will work and has worked, but I don't believe it will work in this particular instance.

Finally, I'd like to say something about the National Contingency Fund. Part of the reason for the contingency fund is the need to be able to guarantee these adjusted payments. It's being put in there for a reason that I have trouble understanding. I'm worried about the contingency fund. I think the Canadian Wheat Board having that chunk of money, which is really farmers' money, and holding it outside, even though there's interest being paid on it, is a bad political position for the Wheat Board to get itself into.

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I think there's also going to be the temptation for the Canadian Wheat Board to decide that it would like to use this fund to finance the purchase of processing facilities or other such activities. I think there's a very good public policy argument that can be made for why there's a Canadian Wheat Board and why it has single-desk selling powers in terms of marketing grain of prairie farmers. I don't think there's a very good public policy argument to be made for the Canadian Wheat Board investing in processing facilities and so on. I'm worried about the contingency fund in this regard.

Those are my comments. Thank you very much.

The Chairman: Thank you, Professor Fulton, for your thoughts and comments.

We'll now go to the National Farmers Union.

Welcome to the committee. You're aware that the time allotted is 15 minutes, and I will give you some indication as the last couple of minutes approaches. Then we'll go to questions and comments to all three groups for 40 or 45 minutes.

Ms Nettie Wiebe (President, National Farmers Union): Thank you.

Let me introduce Darrin Qualman, the executive secretary of the National Farmers Union, who will also participate in the response to questions.

I want to begin by thanking you very much for coming out west to hear from us. Those of you who are coming from afar should know that the weather is not always like this here. Welcome to the west to those of you who are coming from elsewhere. I'm particularly pleased because I think it shows that you recognize that here in western Canada, the Canadian Wheat Board is in fact a key and fundamental agency and we have a keen interest in seeing that it remains strong.

In my mind, there is the thought that it might have served us better if parliamentarians came out west to fix something that is broken. I'm thinking now about the transportation system. We would dearly love to have hearings on the CTA. It's working badly for us. The Canadian Wheat Board is working well for us. I think it would have been time better spent if we were working on something that's broken.

That aside, we are working on the Canadian Wheat Board, so let us just put in front of you our brief, which I recommend for your reading. I'm told I won't have time here to read through it.

The Chairman: Thank you for circulating it in both official languages. We know you will touch the high spots.

Ms Wiebe: That's what I intend to do, because I'm assuming that you'll read the written brief at your leisure.

You recognize that the National Farmers Union is a national organization, the only direct membership national farmers organization in this country that's voluntary, and we have traditionally worked hard on behalf of farm families. When we focus on this legislation, it's with a keen eye to how western Canadian grain producers will fare here. That's our keen interest.

We've touched on the range of recommendations out of this legislation, and I want to go through them in a relatively systematic way. I want to say that the National Farmers Union supports increased flexibility in Canadian Wheat Board operations and more options for farmers. However, weakening or partially dismantling the Canadian Wheat Board will increase neither the options for farmers nor flexibility for the Canadian Wheat Board.

For this reason, the farmers union opposes many of the changes that the current legislation proposes. Reasonable analysis shows that many of those proposed changes do in fact weaken or have the clear potential to weaken the Canadian Wheat Board. We're eager to accept changes to the Wheat Board, but we want only such changes as will expand, enhance, and strengthen the Canadian Wheat Board and hence strengthen the position of prairie farmers in a global grain economy.

The Canadian Wheat Board rests on three pillars: price pooling, government guaranteed borrowing, and single-desk selling. Bill C-72 damages two of these three pillars and has the potential to damage the third. Further, it does little to improve accountability to farmers, which was a stated aim of this legislative change.

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Let me begin by pointing to one of the pillars, which is price pooling. For us farmers, this is a very important component. Price pooling allows us to deliver some grain at harvest and still receive the higher prices that come later in the August to July crop year.

It protects farmers from the risk of sudden price declines during the year and those of us who market some grains in the open market are acutely aware of what those risks are. It saves them the high costs associated with commodity market hedging. It facilitates orderly and predictable deliveries into elevators and to port. It saves farmers time, and it provides us with some peace of mind.

I want to remind you that when farmers fought for order and fairness in grain marketing between 1910 and 1940, they fought for price pooling. In the fight to establish the prairie wheat pools and later incarnations of the Canadian Wheat Board, farmers asked first and foremost for price pooling.

Single-desk selling is a critical component of the Canadian Wheat Board in terms of the prices we get for our grain, but pooling is equally indispensable to the farmers who grow the wheat and barley. That's why we focused on the cash buying of Bill C-72, proposed section 39.1, with particular concern.

Our analysis shows that proposed section 39.1, which would give the Canadian Wheat Board basically a carte blanche or authorization to buy wheat and barley from any person or any company, any place, any time, and under any arrangement the Canadian Wheat Board elects, would in fact constitute a serious threat to price pooling.

The proposed section, like many proposed sections of Bill C-72, is vague and unclear, but it provides for a wide range of scenarios, from once-in-a-decade limited Canadian Wheat Board cash purchases from grain companies or the trade to fill a particular contract and avoid demurrage, to the total elimination of pooling wherein the CWB purchases all western wheat and barley on a cash basis.

The bill doesn't restrict how the cash buying will be used, so one can quite clearly envisage that it could be used any time and any place and in fact completely undermine price pooling for farmers.

It has many dangers. Some of them have already been pointed out. It has the danger of giving farmers an incentive to maintain supply on the farm and not deliver to the Canadian Wheat Board in the hope that at a later time the board will be constrained to come to them and buy for a higher price. We think pooling and cash buying cannot exist side by side.

If the Canadian Wheat Board chose to cash-buy wheat and barley directly from farmers and if that cash price eventually proved to be higher than the pool return, few farmers would participate in the pools in subsequent years. We are not slow learners on the farm. If it looks like this is a system that has big cracks in it, in fact it will fall apart.

Cash buying from producers would disrupt the smooth flow of grain into the elevator systems. Farmers who sell on a cash basis need to deliver when the price is high. Cash buying from producers would destroy the fair and equal treatment farmers value in their relationship to the Canadian Wheat Board. That is the basis of their trust in the Canadian Wheat Board. So the National Farmers Union recommends the government delete proposed section 39.1 from Bill C-72.

We think another mechanism that's noted in Bill C-72 has some potential but needs to be rewritten. As it is, it is simply an exclusion clause for grains and types of grains from the Canadian Wheat Board and sets out a mechanism by which such exclusions could be made. The proposed legislation is supposed to allow for a producer vote when the exclusions that the board of directors deems necessary are deemed significant.

We find this mandate change a change that allows a future board of directors of the Canadian Wheat Board to weaken and dismantle the board but is unbalanced in that it doesn't allow for any strengthening or adding of grains to the board.

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We recommend that Bill C-72, proposed section 45, be amended to allow producers to add such grains as rye, oats, canola, whatever grains they deem necessary, to the Canadian Wheat Board's jurisdiction. The mechanisms for such additions should be the same as for exclusions; i.e., they should be subject to a producer vote.

Further, the National Farmers Union recommends that the legislation include a clear definition of the word ``significant''. We give an example: ``Where, in the opinion of the board, the kind, type, class or grade of wheat is significant'', but ``significant'' remains undefined.

The legislation should also state that if there are any grounds for doubt in terms of whether it's significant or not, the minister must seek broad producer opinion. We think this has some great potential, this particular amendment that we suggest to the amendment, because once and for all it gives us producers in the west here a clear mechanism whereby we could in fact put grains under the board or take grains out from under the board as deemed necessary in a fashion that's publicly understood.

We think this would be a tremendous advantage. We cannot see that the amendment as it stands is balanced. We think it's completely unbalanced and that it would be of great interest to make it balanced and allow for both the exclusion and the inclusion of grains with the same mechanism.

I want to move now to another recommendation, and that is the pooling periods. In all of our analysis - and we have held some public seminars on this and done our best to understand this - we cannot find any persuasive reason why shortened pooling periods would be an advantage, and we can see all kinds of disadvantages.

In fact, unless it was a daily pooling period, which would be a lot like the cash market, it wouldn't have the benefit of meeting the arbitrage problem between the cash price and the pooling price. So it wouldn't have that particular upside and in fact it has many disadvantages.

The Canadian Wheat Board would have less security and predictability of supply if we could choose which pooling period we wanted to ship into. Moving to quarterly pooling would encourage farmers to hold barley back for later, possibly higher priced pools. Holding barley for later pools would increase the possibility that it would be ultimately sold on the open market. This would create a smaller barley pool and decrease the return to pool participants.

Prices tend to rise as the crop year progresses. That's very general; none of us depends on that. If later sellers are rewarded with higher pool prices, farmers would then tend to choose the third and fourth quarters and the Canadian Wheat Board might have difficulty drawing wheat into the system earlier on and in a timely fashion.

Quarterly pooling would destroy the equity of treatment among farmers and undermine their trust in the Canadian Wheat Board. So the National Farmers Union recommends that proposed section 31 of Bill C-72 be deleted because variable pooling periods are unnecessary and potentially damaging.

Our recommendation on producer tradable certificates is that we support Bill C-72's amendment to paragraph 32(1)(d) of the Canadian Wheat Board Act, which would allow for the creation of producer tradable certificates...with the public puzzled over how this might work in terms of the reality. I think it needs a great deal more study. It has some potential, but we need to see how it might in fact function.

I move to the final section of my brief. I want to say a bit about the contingency fund but more importantly something about governance. We think the contingency fund is an unnecessary fund. It would take money out of farmers' pockets, out of the pools. We want to recommend the government continue to guarantee the adjustments to the initial price. It's not a financial risk to the government and has not been in the last 60 years. We don't anticipate it will be, and it is a tremendous benefit for farmers.

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The partnership of the federal government with the Canadian Wheat Board is worth about $60 million annually. That more than covers the entire operating costs of the Canadian Wheat Board. Let me point out that this does not add to the deficit of the Canadian government.

So it is the best of all possible arrangements in terms of public government and the benefit of government to a broad base of citizens and to the economy. We think it should be left intact. We want the crown status to remain. We recognize that the government changes. As soon as you have one elected member of a board of directors, in fact, crown status cannot be maintained.

We want to give a recommendation that allows for a government structure that retains the crown status and the full financial partnership of the government with the Canadian Wheat Board. It would give farmers those tremendous benefits and allow farmers, in fact, more say over the policy and direction of the board.

Our recommendation reads as follows:

Thank you.

The Chairman: Thank you very much, Nettie, for your concise presentation. You have, as you said, submitted your brief in more detail to us. The committee will certainly review that.

I thank the three presenters for being concise and to the point. We will now go to a 45-minute period, maximum, of questions, comments, and dialogue. I will begin with Mr. Elwin Hermanson.

Mr. Elwin Hermanson (Kindersley - Lloydminster, Ref.): Thank you, Mr. Chairman. I welcome the witnesses to our hearing this morning in Saskatoon.

I lead a very interesting life, Mr. Chairman. I have a number of political and farm leaders from the Kindersley - Lloydminster constituency. I have a number of members of Farmers for Justice; I have a number of NFU members.

The Chairman: Are you a member of all of those?

Mr. Elwin Hermanson: I'm not a member of either of them actually.

The Chairman: I thought you said ``member'', and I wanted a clarification.

Mr. Elwin Hermanson: I have them as my constituents, and I do appreciate hearing from all of them.

The presentations were very good, very precise. We heard a lot of the evidence in Winnipeg and in Regina yesterday. What we haven't heard is very much in the way of solutions to the rancour and the division that are across the prairies right now.

We've heard from the pools; we've heard from the National Farmers Union a couple of times now; and we've heard from several individual farmers who have said they don't like much in Bill C-72 for various reasons.

We haven't heard from very many witnesses on how we can resolve the division that's not only between say, Alberta, and the other prairie provinces, but also within the province of Saskatchewan, just as it is within the riding of Kindersley - Lloydminster.

I'll perhaps address this primarily to the National Farmers Union. I'm concerned that what you are proposing...and what I understand here basically is that your organization opposes Bill C-72. You oppose the governance, which I think the government is committed to. You oppose some of the basic elements of the bill. You oppose just about every element of the measures to make the board more flexible: cash trading, shortening pooling periods, contingency funds. I would then take it that you oppose the bill.

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It seems to me that if we don't make constructive changes to the Canadian Wheat Board, if we'll let it thrive into the 21st century, then looking at the numbers of people, even in my riding of Kindersley-Lloydminster, I see support for the status quo board gradually being eroded. I see a movement for significant change, for changes that the NFU is actually opposed to, increasing. I would suggest that if we don't make some changes - we'll allow the board to continue to thrive and perhaps be more flexible even in ways that you don't like - the eventual outcome will be that you will lose absolute influence on any changes that are made. The board will not exist in any way, shape, or form as you would like to see it exist in the next century. In fact, there may not even be a Canadian Wheat Board if supporters of the three pillars are intransigent.

What I'm saying basically is that the NFU is probably doing more to destroy the board than the Farmers for Justice will ever do. The Farmers for Justice and those who want some fairly significant changes are at least prepared to see the Wheat Board continue to serve farmers in a monopoly situation, as long as they're able to market outside that monopoly. How do you respond to that? Don't you agree there might be some truth to what I'm saying?

The Chairman: Nettie.

Ms Wiebe: I'll begin with the last point because you've just in fact noted what is so puzzling about this. You've just said they want to market in a monopoly situation outside that monopoly. Even the irrationality of that language is mind-boggling: a monopoly and then marketing outside of that monopoly. Precisely, what's the monopoly interest that you market -

Mr. Elwin Hermanson: Farmers from Ontario are marketing outside the monopoly. Farmers in the United States are marketing outside the monopoly. We have a global marketplace. Not everyone who markets wheat is marketing through the Canadian Wheat Board today. You have to agree with that.

Ms Wiebe: There's never been any question. The Canadian Wheat Board is in a competitive international market. The monopoly phrase specifically applies to those of us who grow grain and sell into that international market through that single desk. Ontario has its own monopoly. The Ontario Wheat Producers' Marketing Board also has a monopoly.

Let me just move to the questioning here about the constituency. As a matter of fact I'm one of his constituents. I would like to remind him that some thousands of farmers, he'll recall, gathered in Rosetown only last summer to demonstrate their clear support for the board and in fact to demonstrate their support for some of the recommendations. Here I point particularly to the recommendation for a mechanism to increase board-marketed grain and oilseeds, to in fact add grain and oilseeds to the board. So I think in that sense we have overwhelming support in the constituency and across western Canada for those recommendations.

It seems to me always unwise to try to shape legislation to suit the renegades and those who are prepared to use undemocratic means to change the law. I consider illegal means like border running undemocratic means. I think that legislators would do very poorly by the rest of us citizens who do in fact respect the law and do want in a very democratic and civilized way to make such changes as are recommended.

And I want to admit this up front: the farmers union is focused firmly on the benefits for grain farmers. The changes we recommend in this legislation are specifically geared not to benefit the trade, not to benefit the truckers, but to benefit those of us who produce that grain and need to market it into the international arena. So I think the legislation should be focused on that key point. I recommend that you do not in fact find yourselves shaping the legislation to suit those who are running the border. That's not how to run a country, I would say.

In terms of losing the influence in the board, we've quite clearly recommended that the producer-elected advisory board have larger powers. We took the question of accountability and the value of the government guarantee and the role of the Canadian Wheat Board in the international marketing arena and the powers it needs, and balanced it with what farmers are asking for in terms of accountability. We thought an elected group of people with policy development options and who have to approve the appointment of our key sales people - the commissioners - was the right balance.

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Mr. Elwin Hermanson: But Nettie, you didn't answer my question about the fact that actually your position may be the primary destructive force on the board.

I reminded our provincial minister of agriculture yesterday that his own survey, commissioned by his own government, an NDP government in Saskatchewan, showed that 58% of the 800 farmers sampled want the Canadian Wheat Board to be an institution in which farmers participate voluntarily. That was clearcut right across the province.

An Angus Reid poll commissioned by Minister Goodale indicated that a majority of barley producers wanted a voluntary Canadian Wheat Board as well. Once they were led and manipulated to conclude that malting barley prices might be lower if there were such a thing, it became more of a 50-50 scenario.

You're making it look like there are thousands on one side and a few renegades on the other, but the Saskatchewan provincial government's own numbers tell us that's not the case.

The other interesting thing about that survey is it showed it's younger farmers, the farmers under 40 years of age, who are the most supportive of a voluntary board and it's the farmers over 40 years of age who are the least supportive.

What I'm saying about Kindersley - Lloydminster is true. There's going to be growing support for a more flexible Canadian Wheat Board. If you resist that, eventually it's going to break and it's going to be like the Crow, where all of a sudden it's gone and we're far worse off than we were if we had worked out a better transportation system and worked cooperatively.

It's like Article 11 of GATT, where there was resistance to change and all of a sudden, bang, it was gone overnight. What's going to happen is that in about five or ten years the Wheat Board will be gone unless we look at some reforms to the board that are going to make it fit the economic climate of the next century.

Ms Wiebe: I won't speak to polls that I haven't seen. I do want to say the following. It seems to me an idle threat to say if we don't dismantle it, it will crash on its own. This legislation would dismantle large parts of the Canadian Wheat Board. It doesn't lend it only flexibility, it in fact damages some of the key components.

I'm persuaded that when all the information is in front of people, they in fact will opt for a system that has the kind of flexibility and characteristics that this would introduce. When they tally the kinds of losses this would spell for them, I'm persuaded they will in fact continue to want to stay with a stronger Canadian Wheat Board.

Mr. Elwin Hermanson: I'd be happy to show you the poll.

Ms Wiebe: I think we need to look at this legislation, not in terms of a relatively few who are pushing to dismantle the board, but we should look at it in a much more positive way of what's possible. We've got a world-class agency here. What's possible in terms of strengthening its marketing components in such a way that in fact it takes us into the next millennium and allows us to be competitive there?

The Chairman: Just before I move on to Mr. Easter, I would ask if Noreen or Murray wish to comment briefly and then we'll go on to the other questions.

Noreen.

Ms Johns: I'd like to agree with what Nettie is saying. I think our brief stated that by not dealing with this renegade issue that's out there, this popularism and the media heroes we have created are manipulating lots of farmers to conclude they are not having their individual rights.

I guess I find that very unfortunate. Again I repeat that if we could take every farmer to the Canadian Wheat Board and to all the institutions in Winnipeg and have them find out exactly what is going on on our behalf, there would be some mind changes. I think in some ways then facts would get in the way of their opinions. This happened personally to me on a bus tour we organized from our district a year ago. The marketing club young people went along with a mindset that changed when they got to see it.

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We, through our farm management programs here in this province, are promoting free enterprise marketing. We can sit in front of our computers and do it on our own. We can go to our ``boys night out'' at the marketing club and become marketers.

When we took those people to Winnipeg and showed them what is really going on and what is really involved in marketing on our behalf, they changed their minds. They are the young people in our communities and they have now become very active and keeping their minds open to the marketing opportunities, growing specialty crops and things like that. But they certainly had that opportunity to change their minds, which would not have happened without that experience. I believe they were being brainwashed through our farm management training to believe they can be the marketers in the world.

The Chairman: Professor Fulton, do you wish to comment?

Prof. Fulton: No.

The Chairman: Okay, Mr. Easter.

Mr. Wayne Easter (Malpeque, Lib.): Thank you. I like Noreen's suggestion. I think we'll ask Preston to send Elwin to the CIGI.

Just to begin, Elwin, I really think it is unfair to accuse those who support the Canadian Wheat Board remaining intact as being the primary destructive force. I'm really pleased we came out here because I thought there was a groundswell. I used to be out here all the time.

In my experience out here there was stronger support for the Wheat Board, but listening to the media and listening to some of the comments in the House of Commons, I expected there was a groundswell of opposition. Where are these farmers for justice? I haven't seen them before this committee. Can they not articulate their arguments? I've seen all kinds of support for the Wheat Board.

So I think it's unfair to accuse those who support the Wheat Board as being a primary destructive force because those renegades, as Nettie calls them, have never shown up to come before this committee to be questioned and to articulate their point of view on how it would be better for the farming community.

Coming back to Mr. Fulton, I think we have a couple of new concepts thrown in the mill here that may divert from your point.

One concept is a proposal that maybe there's too much left to the discretion of the new board and it's not spelled out enough in terms of the bill of what a new board can do regarding addition or deletion.

The second is the proposal by the NFU to allow the advisory committee more power to maybe do some of the things that the legislation is basically saying it could do in terms of accountability to producers.

The big point of divergence by many of the witnesses thus far has been on accountability to producers and safeguards to taxpayers. It comes down to your point of who should appoint the CEO and chairman of the board. I think there may be flexibility in the chairman of the board, but I do not see any flexibility on the part of government on the appointment of CEO.

You do make the point on page 7 of your paper that:

There are major points of divergence on that. I think we have to recognize what is on the table. The legislation specifically states the government would appoint the CEO and chair. As I say, I think there might be flexibility in the chair. They do that because of the three government guarantees.

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One of the presentations pointed out that the borrowing guarantee is worth $60 million. The trade-off might be to lose that borrowing guarantee. Do you think that's too high a cost, and how do you see greater accountability to the farm community by the board of directors appointing the CEO?

The legislation is very specific. It says the CEO, on behalf of the board, has responsibility for the direction and management of the business and the day-to-day operations of the corporation, with authority to act subject to resolution of the board. We're talking of appointment; we're not talking of the corporate plan or the business plan.

Prof. Fulton: Let me try to address some of those points. I think what you've done is very nicely laid out the conflict that I see present in this particular piece of legislation. I think there's a real conflict between giving what I would call effective voice and control to the farmers of the running of the Canadian Wheat Board and retaining some of the guarantees by government. It appears we can't have it both ways, as much as we would like to have it that way.

I think the legislation represents an attempt to compromise on those two issues in saying it'll give a little bit of control but it'll retain a bit of guarantee. My own view on this is that it's a poor compromise. Compromises of this nature often make for poor legislation.

I would be much more comfortable with it either giving the voice and control or keeping the guarantees and dispensing with trying to give the charade that there is effective voice and control. I think the attempts at the compromise are rather ineffective.

I happen to personally come down on the side of voice and control. That is what I would choose. If that means giving up some of the dollar benefit of the guarantees, I would be prepared to go in that direction.

Others will be different, but I would say that in terms of thinking about legislation, this kind of a compromise, where you try to do a little bit of both, probably will in the end not be that effective. Farmers won't really feel they have any effective voice, and at the same time you've lost some of the guarantees that you would have otherwise had. You're not really going to get what you need on either side of it.

It's clearly a personal view in terms of what one of these is more important.

Let me then address your final point, and that is in terms of whether the CEO is appointed or whether they're given direction by the board. Notwithstanding what I said earlier, I don't know enough about how these things go on. It may well be that in fact the board would have the effective ability to appoint the CEO, even though it's stated that it was by the minister, if the minister in fact really made sure they solicited the views of the board in making that decision.

The problem with that, of course, is that it's never laid down. The current minister or the next minister may well do that, but at some point they may decide they're not going to have anything to do with that. So one could easily move within a range where even though it is said on paper it was the minister who made the appointment, in fact it really was the board making the appointment all the way to in fact the minister making the appointment.

I think it is important, not just symbolically but in terms of the operation of a corporation, for the CEO to be chosen by the people for whom that CEO is working. I think if you went into one of our major cooperatives or corporations and said here's a board that represents the shareholders but somebody else is going to appoint the CEO and you don't have any say over that, I'm not sure that company would work very well.

Mr. Wayne Easter: But we're dealing with a different entity. We have a crown agency now. We're moving to a mixed enterprise, which leads me to my second point.

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You said it's hard to evaluate the workings of the Canadian Wheat Board. You'll not get anything much more public than the annual report of the Canadian Wheat Board in terms of its workings. But in terms of that evaluation, compare it to the big grain companies, the merchants of grain. How great an evaluation do you get from Cargill and Bunge Dreyfus and so on? You don't get a good evaluation. You can't see the inside story. On this one you see it intimately.

The other question I have before I run out of time is that as the chairman has said, we're here to hear and to look at what changes can be made. The proposal coming forward from the NFU, as I understand it - and this is the first time we've heard it - is that the current advisory committee be strengthened and empowered to do what we claim we want to do in the legislation with the election of a new board. There isn't an electoral process set up.

How does that concept fly in your terms, Professor Fulton, or in SWAN's?

Prof. Fulton: Quickly, my view is that while I think the powers of the advisory board could be strengthened, I don't think they can be strengthened to the point at which farmers would feel they really had effective voice and control over the Canadian Wheat Board. I don't see how that's possible. Yes, they can be given some additional things, but as long as it's clear within the legislation that the commissioners are in charge, they will be in charge. That's the way government structures work.

I'm fully aware of why this is an attempt to try to get around this. My own view is that it's not going to work.

The Chairman: Noreen, do you wish to comment?

Ms Johns: I have a brief comment on it, and I think we alluded to some of this in our brief.

I know in the past I have been very negative about some of the appointments of commissioners, and we all know some of them have come through from different political sides than mine, obviously. I have been remarkably surprised at the level of expertise and work they are now doing on our behalf.

As individual personalities, we're not running in an election on a platform in which very often we put ourselves on a platform and when we get elected we'd darn well better keep that platform while we're in there. We don't have that opportunity to let the facts get in the way of our opinion. These things for me have changed within the existing commissioner's structure. Indeed they have had open minds and they have become strong board supporters, whereas in the past I don't think some of them were. I think they got their minds opened and they began to work really hard.

In this system we have now, I didn't find great fault with it even though from time to time I thought oh my God, we're appointing somebody I don't believe is going to serve the Wheat Board and its best interests. But in the long run I have been proven wrong, and on behalf of the advisory board and what I see happening there...they don't even have a budget to come and hear or listen to us at all.

That's where a lot of the problems are coming from now. I think if farmers had felt in the past that they had an avenue that would be listened to when they arrived back there, there wouldn't be a lot of this cry for unaccountability that's out there.

I agree with Mr. Easter about the annual report. We will never see this annual report from anybody who will be handling our grain if we lose the Canadian Wheat Board. We will never have a document that spells it out or is audited and open to the public like that one is.

In a way, I agree with Nettie that maybe, had we looked to and listened to the advisory committee, we would have alleviated the problem. Simply by electing a board at this stage does not give us any guarantees that the farmer voice is going to be heard.

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Once again, I will repeat that if we run on a platform, we seem to back ourselves into a corner and it doesn't matter what we learn in the meantime, we have to stick to that platform because that's what we ran on. If we have two or three people even within the board who are really in opposition, we've created that house divided against itself and I don't think we can have an effective elected board if it is divided within itself.

The Chairman: Just before I go to Mr. Hoeppner, I'll personally ask for a point of clarification from Professor Fulton.

Professor Fulton, you mentioned that your suggestion is that the board of directors select its own chair and choose the CEO. That's the process in private corporations.

Are you aware of private corporations having done that if the government gives that private corporation a full guarantee; in other words, the backing and the guarantees? Do governments give that to private corporations without having any connection with them whatsoever?

Mr. Elwin Hermanson: Bombardier.

Prof. Fulton: For the kind of guarantees we're talking about in the case of the Canadian Wheat Board, no, of course they don't.

The Chairman: All right, thank you.

Mr. Hoeppner.

Mr. Jake Hoeppner (Lisgar - Marquette, Ref.): Thank you, Mr. Chairman.

It's been an interesting morning, and we welcome you people who are coming before us.

I heard this morning statements such as we have to support the three pillars of the CWB. I heard mention of people being brainwashed or renegade. When I got elected to the House of Commons, I never thought I would deal with one of the big issues, which was the CWB.

I'm a little astounded by Ms Wiebe saying that she wants to support the three pillars of the CWB. I wrote her a letter on September 16, 1996, informing her of the huge bonuses being paid as selection premiums and wanting to know how this fit into one of the pillars of the CWB. I never got an answer.

To me, this is something that is destroying the CWB. I would like to tell you people here today that Bill C-72 is legalizing the irregularities that have been going on in the Canadian Wheat Board for a number of years. It's there to protect present and probably former CWB commissioners, and it will be approved.

I asked the minister in the House of Commons how he could condone...or where in the Canadian Wheat Board Act these premiums were allowed. He refused to answer it and said he would get the CWB to answer it for me. This is what Mr. Klassen, one of the commissioners, wrote me - and I had an opinion done by my own lawyers first of all. He said:

Judge Wright of the Queen's Bench in Manitoba ruled on that point. He said that's dead wrong, because the CWB has a monopoly. It has a duty of care to producers that they each get equally treated under the pooling system, and that will be proven.

On the other question, when I got involved with this issue it was because of the CWB not buying fusarium wheat. There was no sale for it. Farmers in my area were told they could export it themselves if they got export permits. We heard testimony yesterday that export prices set by the CWB were such that they could not afford to export.

I will just read you a little bit of testimony from the cross-examination of a CWB official, Lawrence Klassen, who is with the corporate policy development. Under oath Mr. Riley said:

Mr. Hay, the chief counsel for the Department of Justice, answered: ``Is there an export contract between the producer and the Board?''

Mr. Riley said: ``Yes. Your position is that's not correct?'' Mr. Hay answers yes. Mr. Riley then said:

Mr. Hay, the chief counsel for the department, answered yes.

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Tell me how farmers can export their own grain at a fair price if that's what is going on.

The Chairman: Ms Wiebe.

Ms Wiebe: I'll address the second question first. My understanding is that there is a formula for setting the buy-back price, and it's a formula that takes into account what the Canadian Wheat Board could have achieved for prices on that out of the American market. That's my understanding of the process, and I assume it has been followed.

In terms of the fusarium, fusarium was a quality problem and it's toxic, as we know. It was handled in various ways. In North Dakota, some hundreds or perhaps thousands of acres of fusarium-infested grains were burned. We didn't take that option in Canada. Of course, there was some attempt to market it. The attempts were not obviously efficacious at the beginning, but I think the problem has been resolved. I don't think that is in fact relative to the discussion of how we want to reshape the Wheat Board at this point to do future work.

In terms of the first question, like you, I'm a very committed proponent of equality of treatment for farmers under the board, and you see that a lot of the recommendations we make are specifically with that in mind. We have a very deep-seated trust in western Canada and I think a well-warranted trust in the equity with which the board serves us. We value that principle a great deal. I understand from what you say that you also value that, in fact you value it to the extent that you think any delivery incentives on specific marketing should be ruled out. They've done that in the past -

Mr. Jake Hoeppner: Isn't that the basic principle of pooling?

The Chairman: Let her respond.

Mr. Jake Hoeppner: I just want to know if that doesn't fit into the basic principle of pooling.

Ms Wiebe: I think you have to show some reason and flexibility when you determine how those pools are set and which pools you set. We do in fact want higher prices for certain higher grades, and we achieve those. As the gradations have become finer, we've achieved more differentials in the system, which I think is a kind of flexibility we all appreciate, as the protein gradations become finer.

These are specific markets of specific quality and quantity, to specific agents. I understand that is what delivery incentive is about. I can't speak to the conspiracy theory. I never engage in conspiracy theory, so I have no basis -

Mr. Jake Hoeppner: I think this really points out the issue that the professor raised. We really do have a dual marketing system right now coming in through the back door. I had a permit book for 35 years before I retired. Never in that lifetime was I ever offered an incentive to deliver a board grain to another elevator on the basis that they wanted to take away business. I was offered maybe a little better dockage or I was offered sometimes that they could upgrade it by mixing a grade and have it still qualifying for that grade, but to give a $54-a-tonne premium outside the pooling system in 1994, when there was no fusarium, to a farmer who had 600 tonnes of quota and delivered 4,000 tonnes, to me that is a dual marketing system for the elite.

The Chairman: Professor Fulton, would you like to comment? Then I have to move on toMrs. Ur. Professor Fulton?

Prof. Fulton: Just on that, in barley and feed grains there of course is a dual market in the domestic arena. I don't believe there is a dual market in wheat. Yes, premiums are given. They take various forms. Grading of course is a long-standing one, which has been used by elevator companies over the years to pull some extra grain in. Trucking premiums are being used extensively across the prairies, where elevator companies are essentially waving the transportation charges or picking up the tab.

Those do not constitute a dual market. Those are activities by those elevator companies trying to pick up a bit more market share.

The Chairman: Okay, Mrs. Ur.

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Mrs. Rose-Marie Ur (Lambton - Middlesex, Lib.): Thank you, Mr. Chair.

I want to thank the presenters this morning. They were excellent briefs. I will turn towards the governance in terms of what Nettie and Noreen had projected as to the board make-up and the concept that basically what we have now is working and we should only fix it if it needs to be fixed.

I think both of you outlined in your presentation that really the advisory committee was doing a good job. I think Noreen said that yes, they are doing a good job, but perhaps the message isn't going out. People should be checking with the board, seeing exactly what's happening. As the professor said, we'd be better served by a farmer-elected board with farmers being elected to the board. Is the advisory not farmer elected as well?

Prof. Fulton: Yes, it is. The difference is that at the current time there is no belief on the part of farmers or on the part of the advisory board that they have any effective control at all in the running of the Canadian Wheat Board. Yes, they are a body that farmers may take their complaints to, but the advisory board has no ability to see those put into action.

Mrs. Rose-Marie Ur: Would it seem more accountable if you move it away from the fact that there was any government involvement in the board aspect?

Prof. Fulton: I'm not arguing at all that there should be no government involvement in the board.

Mrs. Rose-Marie Ur: At what position, then?

Prof. Fulton: My own view is that the government should have a number of positions on the board. I would say they should have about 25% of the positions on the board. I think they need to be at the board table. If they are providing guarantees, they need to be there to make sure the money is being used properly. Clearly, as a major stakeholder, they have the right to appoint their members to the board.

At the same time, I would like to see the farmers have a strong representation, a majority, on that board. There's a real means by which the concerns of farmers and the support of farmers at the grassroots can move up into the boardroom of the CWB and manifest itself in the policies that the board undertakes.

Mrs. Rose-Marie Ur: You don't see that there with the advisory?

Prof. Fulton: Not at the current time, no.

Ms Johns: I'd like to comment on that as well and maybe clear up a bit of a misconception. I did not suggest that the advisory board system right now is working effectively. I suggested that they have not been given a budget to get out there and hear from farmers often enough. We have the Wheat Board annual meeting come to our province, but that is not nearly ongoing, nor does the advisory committee have a budget to be able to do that.

On the other hand, when they do make recommendations, I don't think we are guaranteed that they are listened to at this stage. I do suggest, as Nettie did, that if we take the time to work with the system and fix the system, maybe we won't have to move away from the crown corporation status. We could effectively have a farmer voice through that structure and not jeopardize the government ties.

Mrs. Rose-Marie Ur: I certainly agree with you there. Maybe that needed fixing rather than total upheaval.

Ms Johns: Yes. I think the communications haven't been there and we haven't felt they have been listened to. It's not their fault; it's just the way it is.

Ms Wiebe: Let me just point two things out here. One is that this is a phenomenally large financial back-up. It's a northern net that's often had to catch a ball. We have a good catcher there in terms of the Canadian Wheat Board financially, but it is a $6-billion net that the Canadian government and Canadian taxpayers are putting up there behind the agency that markets our grain. It's a tremendous benefit to us. I can't imagine any government, Reform or any other, being so irresponsible about the taxpayer's money that they would say go ahead, take the back-up, and let us just turn our faces away and walk away from this, you look after it. That's not in fact how taxpayers' money normally gets allocated or spent.

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We as farmers are acutely aware that if there is a problem with government guarantees for farmer income, governments are not loath to walk away from it. They're anxious to walk away from backing up farm income. It's an expensive proposition when there's a downturn in the market and they're anxious to just free themselves and walk away from it. Taxpayers have so far aided and abetted it and have also said let them be on their own.

We've watched this in terms of farm programming systematically across western Canada. I can't imagine that if we set ourselves up in the Canadian Wheat Board for that scenario, any future government will be anxious to step right into the breach and back it up when it hasn't even been their decision. That's one thing.

The other thing is that we make a recommendation that the Canadian Wheat Board Advisory Committee be given the authority to approve all appointments of commissioners. That's a significant authority and would alleviate the problem Noreen had pointed to, where you have government-appointed commissioners who have tremendously large responsibilities in this marketing agency and farmers who have no say over it. Farmers would have a say over that.

We think we've balanced that and have focused on the doughnut here and not the hole. The doughnut is the financial partnership with the Canadian government and hence with the Canadian taxpayer.

The Chairman: I'll advise everybody that we have a maximum of five minutes left before we start hearing the next group.

Mr. Fulton, do you wish to comment?

Prof. Fulton: Yes, briefly. First of all, I want to agree with Nettie. The guarantee that's provided by the government to the Wheat Board is large and is important. She's absolutely right: the government hasn't had to come in very many times to actually offer up that guarantee. There have been some occasions.

One of the things I want to stress is that the reason the government has not had to step in very often over the past 60 years is that the Canadian Wheat Board has single-desk selling authority. If that authority is threatened in any way - and I bring this back to the cash trading and the dual marketing - then the risk of that loan guarantee will escalate exponentially. It could become very large, because what will happen in the dual market situation is that the pool will get the prices during the low periods, and that's exactly what you don't want to have if you're guaranteeing initial prices. You want to get the grain when the price is low, but not to have to sell it when the price is low.

There is a strong linkage between some of these other things that are going on within the legislation - cash trading and so forth - and this guarantee. I just wanted to point that out.

I want to come back to the point I made about there being a clear choice here. Clearly if the decision is made not to embark upon a series of changes that would make the Canadian Wheat Board much more democratic along the lines of what I've put in my paper and if the decision is made to stay with the Canadian Wheat Board as a crown corporation, then I think it's absolutely imperative that the kinds of changes that the NFU is proposing be put forward. The advisory board would have to be strengthened to the best of its ability. Again, I think there is this choice.

The Chairman: Now I go to Mr. McKinnon for a question. You have about 30 seconds each to answer it, if you wish.

Mr. Glen McKinnon (Brandon - Souris, Lib.): I have pages of them.

The Chairman: Well, you only have 60 seconds. We have a full day.

Mr. Glen McKinnon: Yes, I can come back to some of them later.

First of all, I'm working on the assumption that we will be following through with the CWB, that there will be some changes in structure. I know that basically Nettie and perhaps even Noreen are saying that the status quo is more favourable to what I sense you were talking about. I would like your comments about third-party influence in terms of electing a board of directors of the farmer component.

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Second, what numbers do you think we should be putting in the bill when it comes to the size? Notice in the writing that we're talking in terms of a non-finite set here...you talked about 25%, but 25% of what number?

I'll stop at that, Mr. Chairman.

The Chairman: Noreen, quickly please.

Ms Johns: In terms of third-party influence, money speaks. There's a lot of backing out there for some organizations. The rest of us don't have any. I am really worried about who is going to represent me. Also, even if they don't have a big majority within it, the fact of strong divisions within the Wheat Board would make it unworkable, I believe.

As far as representation is concerned, I am on a number of boards and too many is cumbersome. Making sure that there is representation...and putting feelers out in the countryside has to balance that as well. For clear representation, we'd have to look at a dozen to fifteen.

The Chairman: Thank you.

Murray.

Prof. Fulton: In terms of the numbers, that would be where I would fall in. In terms of third-party influence, yes, it's always an issue. That's the nature of our democratic society. We have had to deal with that in health care. We've had to deal with it in lots of other areas. That's all I can say. It is an issue. It's part of our system. It's part of what we're about.

The Chairman: Nettie, quickly please.

Ms Wiebe: I'll omit the second question. I'm not interested in the size of the board. We're not interested in that structure.

On the first question, the third-party influence, I just want to say something that is important to understand from the farmers' point of view. One of the worries here is that we're moving towards a politicization of a marketing agency. That's very unhappy news.

There are people who talk to me about accountability. When you ask them whether they are prepared to go to many meetings to understand a complex marketing system and in fact decipher who will represent them best and whether they are prepared to go to hear political speeches from campaigners who want to represent them on the board, etc., everybody clears the room. They don't want any of that.

Thanks to our company here, we have a lot of ability to engage in political electioneering and voting and so on and so forth. Many farmers don't think that this politicization of the board would be a particularly good step forward. They think it would be an interference in terms of orderly and efficient marketing of grains.

The Chairman: Thank you very much to the three presenters for your cooperation and contribution to this discussion on Bill C-72.

This meeting is adjourned.

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