AGRI Committee Meeting

STANDING COMMITTEE ON AGRICULTURE AND AGRI-FOOD

COMITÉ PERMANENT DE L'AGRICULTURE ET DE L'AGROALIMENTAIRE

EVIDENCE

[Recorded by Electronic Apparatus]

Thursday, April 2, 1998

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[English]

The Chairman (Mr. Joe McGuire (Egmont, Lib.)): I call the meeting to order. Good morning, everyone.

This morning, pursuant to the order of reference of the House of Commons of March 27, 1998, we are studying Bill C-26, an act to amend the Canada Grain Act and the Agriculture and Agri-Food Administration Monetary Penalties Act and to repeal the Grain Futures Act.

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As witnesses this morning, we have, from the Canadian Grain Commission, Barry Senft, chief commissioner; Marilyn Kapitany, director of corporate services; Valerie Gilroy, barrister and solicitor; Regis Gosselin, acting manager, corporate information services; Reg Gatenby, chief, regulatory affairs division, office of the vice-president of public and regulatory affairs, the Canadian Food Inspection Agency; and also, the parliamentary secretary for Agriculture and Agri-Food, Mr. John Harvard.

How do you want to proceed, Mr. Senft?

Mr. Barry Senft (Chief Commissioner, Canadian Grain Commission): Mr. Harvard will open up the meeting and I'll make some remarks following that.

The Chair: Okay.

Mr. John Harvard (Parliamentary Secretary to Minister of Agriculture and Agri-Food): Thank you, Mr. Chairman. As Barry indicated, he'll give some remarks after I've given what I believe to be a short overview of Bill C-26.

As you know, Mr. Chairman, Bill C-26 is entitled An Act to amend the Canada Grain Act and the Agriculture and Agri-Food Administrative Monetary Penalties Act and to repeal the Grain Futures Act. The bill, which was introduced in the House last December, will encompass a separate licensing, security and regulatory system for the special crops industry. The legislation will also repeal the Grain Futures Act, which will allow the Manitoba Securities Commission to assume sole responsibility for regulating the Winnipeg Commodity Exchange.

The provisions of this bill were developed and recommended by the Canadian Grain Commission, the organization responsible for administering both the Canada Grain Act and the Grain Futures Act.

The need for special crops legislation became readily apparent during the Bill C-51 hearings held in 1995. Members from both sides of the House commented that regulations that worked well when applied to producers and companies dealing in standard crops did not work well when applied to producers and companies dealing in special crops. The urgency for a customized and comprehensive licensing and security system is due in part to the 300% growth in special crops production in the last 14 years.

Special crops will initially include beans, buckwheat, corn, fababeans, lentils, mustard seed, peas, safflower seed, soybeans, sunflower seed and triticale. A new class of licence for special crop dealers will be established. Special crops dealers will be elevator operators or grain dealers who purchase only special crops from producers. Special crops dealers will be required to be licensed by the Canadian Grain Commission and to demonstrate financial stability in order to become licensed. Special crops licensees will not have to post security to cover payment obligations to producers.

Individuals and companies buying and selling standard crops such as wheat, barley and canola will continue to be licensed under the current provisions of the Canada Grain Act. They will not have to obtain a special crops licence to deal in special crops, but will be required to participate in the insurance program. Security, posted by commission licensees to cover liabilities, will be reduced accordingly.

The producer insurance program will compensate special crops producers who sell to a licensed dealer or elevator that is later found to be unable to pay for the crop. The program is voluntary and coverage is extended only to producers who choose to participate.

At the outset, all producers will be considered participants in the insurance plan and eligible for coverage. Licensees buying special crops will collect a levy from all producers from whom they buy special crops. The levy will be 38¢ per $100 of sales, that is 0.38% of the value of a sale, and will be remitted to the commission. This works out to between 50¢ and $1 per acre, depending on crop price and yield.

Producers will have the opportunity to opt out of the plan. Those opting out must notify the commission in writing prior to the start of a crop year, and may apply for a refund of premiums subsequently paid.

An advisory committee will be established to advise the Minister of Agriculture and Agri-Food on the operations of the special crops program. Each province and industry sector will be represented, with the majority being producers, and we think that's important.

Linking the Canada Grain Act and the Agriculture and Agri-Food Administrative Monetary Penalties Act will provide the commission with a more appropriate system of enforcing the Canada Grain Act and penalizing violations of the act. Currently, the only enforcement tools available are either suspension/revocation of licences or criminal prosecution. Both options are often considered to be clumsy and punitive when dealing with relatively minor violations.

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The repeal of the Grain Futures Act will clear the way for the Province of Manitoba to assume sole responsibility for regulating the Winnipeg Commodity Exchange. The enabling Manitoba legislation provides for a regulatory oversight of all activities of the Winnipeg Commodity Exchange, which plans to expand its operations into non-grain commodities. Repeal will prevent overlap and duplication of regulatory oversight, prevent potential federal-provincial conflict arising from joint jurisdiction, and enhance the level of confidence in the Winnipeg Commodity Exchange and its clearing house.

A transition plan will be developed by the Canadian Grain Commission and the Manitoba Securities Commission to minimize any disruptions and ensure continuity.

Mr. Chairman, we believe the special crops initiative will encourage growth of this industry by providing an affordable licensing of special crop dealers, an affordable voluntary insurance program for producers, and a comprehensive, effective and efficient regulatory system. An extensive consultation process, with all sectors of the special crops industry, has clearly shown that there is a significant base of support for the licensing and security provisions in Bill C-26.

Stakeholders involved in the trading of grain futures and options were also consulted, with most expressing support for the repeal of the Grain Futures Act. The special crops insurance plan is also an example of this government's rural impact test in action, since it will facilitate the expansion of the special crops sector. It demonstrates our commitment to building stronger rural communities by ensuring that federal policies and programs support community development.

Mr. Chairman, that's the end of my prepared remarks, and now I'll cede the floor to Mr. Senft.

The Chairman: Mr. Senft.

Mr. Barry Senft: Thank you for the opportunity to discuss Bill C-26. I'm pleased to be with you here today.

This is my second opportunity to appear before the committee as the chief commissioner of the Canadian Grain Commission. Since joining the commission about a year ago, I have gained a greater appreciation for the work that's done by our organization, and I'm proud to be part of an institution that has been serving the grain industry since 1912.

For the benefit of the newer members of the committee, I would briefly like to describe the role of the commission, which derives its authority out of the Canada Grain Act. It has two main responsibilities: the regulation of the grain-handling system, and the establishment and maintenance of standards for quality for Canadian grains.

We strive for excellence in adding value to the Canadian grain industry and to be a leader in providing grain quality management and quality assurance. We are dedicated to delivering world-class service and support to producers and to all sectors of the grain industry and their customers. The commission provides expertise and the science and the understanding of the end-use grain quality, thus enhancing the marketability of Canadian grain.

The commission is a special operating agency. It has an annual budget of roughly $52 million and is almost self-supporting. I would estimate in the 1997-98 budget we will receive over 90% of our budget through industry fees.

We have 25 offices, employing over 750 people right throughout Canada. The majority of our staff is located in Winnipeg, Vancouver, Thunder Bay and Montreal.

The commission carries out many activities in support of the objectives—for example, the commission, licensed grain dealers, primary process and terminal elevators in western Canada, and transfer elevators in eastern Canada. At present, there are over 1,100 primary elevators, which are operated by 26 different companies. There is a total of 73 grain dealers that currently hold the licence issued by the CGC.

Before a person or a company can be licensed, they must provide financial information and they must tender security to cover their grain payables to producers. This security usually comes in the form of a letter of credit or that of a bond. If the licensee fails to pay for the grain purchased from producers, the security can be used to make payments to those producers.

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Satisfying the security requirements can be difficult for new or existing dealers or elevator operators because it is expensive and imposes a heavy burden on their financial situation. This is due to same basic economies of scale.

The security requirements are designed for high-volume standard crops that are handled by larger grain companies. The requirements were not designed for much lower-volume special crops that are handled by small seed-cleaning plants, special crop dealers and processors. The result is that companies that could otherwise be licensed stay on the sidelines. Unfortunately, some of these companies have bought grain without a licence, exposing producers to risk of loss.

Restricting the number of outlets available reduces the level of competition. This may mean that special crops producers are unable to maximize earnings for their crops. The consulting firm retained by the commission, Kelly Associates, has estimated that an additional 125 firms could be licensed under the plan that you are considering. So the result may be that while small elevators close to accommodate the new large facilities, small seed plants and dealers may remain in those affected areas.

The proposed legislation being considered by this committee recognizes that the special crops industry is different from the standard crop industry. When Bill C-51 was being considered by the House in 1994 the problems of how security and licensing affected seed cleaning plants, special crops dealers and processors were raised by members of the Parliament and discussed at some length. Transcripts from those meetings of the Standing Committee on Agriculture and Agri-Food clearly showed that members felt changes to the regulations affecting special crops were needed. Some members were saying that their constituents said that the status quo was not an option. The proposed legislation now before the House is a move to address those concerns.

The legislation also provides for amending the penalty provisions set out in the Canada Grain Act. The current penalties are too severe. As a regulatory agent, the commission has been reluctant to use the enforcement tools available in the current legislation, especially when it comes to relatively minor violations. We need new tools to handle these minor violations and this bill gives us those tools.

The proposal to repeal the Grain Futures Act is also a response to changes happening in the agrifood industry. The commission is only mandated through the Grain Futures Act to regulate trading and grain futures. The Winnipeg Commodity Exchange intends to expand its contracts to include non-grain commodities such as hogs.

The Province of Manitoba has enacted the Commodity Futures Act to regulate the non-grain contract. If the commission remains in the business of regulating the grain futures, the Winnipeg Commodity Exchange will be answerable to two regulatory bodies, one that's federal and the other that's provincial. The exchange recommended a change too in its regulator, and this was supported by the industry.

The Canadian Grain Commission is aware and wants to be responsive to the constantly evolving needs of the industry. The commission consulted with producers and other members of the special crops industry on licensing and security for special crops between 1994 and 1996. An update on the status of the process was provided to these stakeholder groups in 1997. The committee representing producers, producer processors and exporters developed a concept of a special crops insurance program.

We have worked very closely with producer and industry groups involved in pulse crops because pulses represent the bulk of special crop production. However, we ensured that individuals and organizations representing all commodities named in the proposed legislation were given the opportunity to provide input and we have kept them informed on the development. As a result of this consultation process, we are confident that the proposed provisions of this bill have the approval of most stakeholders.

One issue central to a producer-funded insurance program is the option available to producers of opting out and back into the program. This proposal was discussed at some length by the interim Special Crops Advisory Committee. The committee debated whether the plan should be mandatory and at the end it was decided that producers would prefer an optional scheme.

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Concern has been expressed by some members of the House about the mandatory deduction taken from all producers, whether they are in or out of the program. They have compared the scheme to a form of negative billing.

The advisory committee recommended that the levy should be collected from all sales. This would keep the costs to a minimum. Furthermore, the committee felt that if it's too easy to opt out, participation levels would suffer and the viability of the plan would be affected.

This mandatory refundable model has been successful in uses in other programs. It's similar to the provincial pulse crop levies and the Saskatchewan canola levy.

For these reasons, the advisory committee felt that it should be applied to this program.

Another concern expressed was that the commission's administration fee was too high, and it is set at 18¢ per $100 of sales. Again, some people saw this as too high and have questioned whether the commission expects to profit from this role as administrator. The commission does not intend to make a profit from this plan. As stated earlier, it's expected to recover our operating costs through fees collected for services provided. If the administration portion of the levy is found to be too high, adjustments will be made to reflect the actual costs.

We have already made some contact with Levy Central, an organization in Saskatchewan that already collects levies for several organizations and that would be prepared to assume some of the administrative elements of this plan. We'll be pursuing with that organization the issue of whether there's an opportunity for them to administer some of this program.

Members had questions concerning the decision to have the Canadian Export Development Corporation act as the insurer for the program. During consultation there were attempts to find a private insurer to participate in the program. However, at that point the attempts were not successful. This may change in the future when some important factors, such as the number of producers and companies that will be involved, are known. The plan does provide for the insurer to be replaced; thus a private company could replace the Export Development Corporation.

An important aspect of the proposed legislation is the formation of the Special Crops Advisory Committee, formed with the majority being producers. The advisory committee will be appointed by the Minister of Agriculture and Agri-food and will represent special crops producers, processors, producer/processors and exporters. The committee will advise the minister on the operations of the special crops program. The committee can recommend to the minister that the administrator of the insurance plan or the insurer be replaced.

Another concern raised is the issue of the addition of crops to the plan. It would not be possible for the commission to unilaterally take this sort of action. Such a decision would have to receive support from affected producers and be vetted by the advisory committee. The advisory committee wanted the plan to be flexible to allow special crops to be added or removed. It did not contemplate that the plan would be extended to the standard crops.

In closing, Mr. Chairman, I wish to acknowledge the work done by the Special Crops Advisory Committee, composed principally of special crops producers who have worked closely with the commission in recommending the amendments that are now before the committee. Also, at this time I'd like to express my appreciation to the staff of the commission for the work they perform each day in enhancing the marketability of Canadian grain. Again, thank you for the invitation to be present before the committee and we will try to address the questions that the committee may have.

The Chairman: Thank you, very much.

We'll go immediately to questions. Mr. Hill.

Mr. Jay Hill (Prince George—Peace River, Ref.): Thank you, Mr. Chairman. Thank you, ladies and gentlemen, for appearing before the committee.

I think the most contentious part of this bill, which I'm sure you're well aware of at this point, is the mandatory nature of the way in which the levy is at least initially collected. You referred to it, Mr. Senft, in your submission this morning as negative-option billing.

What prevents making it truly voluntary? In your comments you said something to the effect, and it may not be word for word, that the commission felt if it was too easy to opt out, participation levels would suffer and the whole program would be in jeopardy. At the same time you're saying the vast majority of producers are supporting this initiative. I would think that if that's true, that the vast majority of producers are supporting it, why would they opt out and therefore why can't you make it truly voluntary?

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Mr. Barry Senft: With the introduction of the new program, this is a different way of insuring these types of crops, other than the traditional crops. I talked about the special crops committee feeling it wanted the mandatory check-off, not the commission. It was the special crops committee that felt it was important to have it in the form you see it in today.

By providing their thoughts on this and introducing it this way, as producers look at exactly what the rules of the game are, if they had to opt into the program at the outset it might easily be missed. Not knowing what the full implications of being involved or not being involved would be, this gives them the opportunity to look closely at this and puts the onus on them to opt out and, through that discussion, recognize the implications of participating or not participating.

Mr. Jay Hill: But what I hear you say then is the special crops committee that drafted the proposal or the commission itself, in supporting this initiative, has done a poor job of educating farmers. You're basically saying let's tax them up front, and once they come to understand the program better, they'll leave their money in it.

I suggest that if you had done a better job of educating the producers upfront, they would know the advantage of the program and of participating. Then you could have made it voluntary and the majority of them would have opted in.

Mr. Barry Senft: That was one part of the reason. I should also mention the other part of having to opt out is the administration issue this brings. The cost of administration was raised as a concern. If one were to have an opting in process, it could raise the administration fees of the grain companies or dealers in having to determine who's in and who's out, forwarding some of those levies toward the administration, with some of them not being collected.

This was the major reason for it being presented to you this way also. From the administration point of view, if this all moves forward, it's the administrator, through us, who deals with it, not the people who are on the front line.

As for the issue of discussing this with producers and producer organizations, as you're aware, this has gone on for a period of time. We've raised it at farm organization meetings and we've discussed it. I think the point is, whether it's the educational process or not, it's the issue of people having to look at it and make a decision on it. That's not to say they don't know about it, but once they have to decide whether this works for their farms or not, this will be a reason for them to look at it more closely. They need to know the implications.

Mr. Jay Hill: I think if you throw enough roadblocks in their way, obviously it's going to make it more difficult for them to opt out. That stands to reason.

How much time do I have left?

The Chairman: Three minutes.

Mr. Jay Hill: I want to get to another issue.

There's a certain amount of fear associated with this bill in the sense that we've just gone through a very lengthy debate of Bill C-4, the amendments to the Canadian Wheat Board. Presently the Senate is wrapping up travelling across western Canada.

One of the big fears with that particular piece of legislation is the so-called inclusion clause. The Canadian Grain Commission has circulated a communiqué with some questions and answers.

I'll read one here, just for the record. The question was whether the script could be extended to include cereal grains and oilseeds, the so-called six standard grains. The answer you provide is that it is conceivable that this model could be applied to cereal grains and oilseeds, and then you go on from there.

In light of what Mr. Harvard just said, that it became plain in consultation with farmers and farm groups over the last number of years—he just said this to the committee—that what was working well for the standard grains didn't necessarily work well for special crops, why would you make a statement like that and provide a bit of fear to the producers of the standard grains that at some point in time there might be a levy applied to those grains to insure them?

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Mr. Barry Senft: It was a point raised in the discussion in the formation of the program. Again, clearly, the special crops committee worked on this from the perspective of development of a special crops program. It was raised just as a question of whether this worked well in special crops, whether it was something that could work on standard crops.

Again, it isn't the intention of the committee, or of the Canadian Grain Commission—

Mr. Jay Hill: Maybe I should direct the question to Mr. Harvard, because I clearly heard him say—I think all of the committee heard him say it—that what works well for the standard grains....

In other words, I'm left to assume that the present system is working well for standard grains. Why raise this bugaboo that at some point in the future farmers may be facing a levy on standard grains? That doesn't make sense to me, if you're looking for support from the farmers.

Mr. John Harvard: In a way, Mr. Hill, I think you've answered your own question. The system works well for standard crops. If the system works well for standard crops, why change it?

We're not suggesting—

Mr. Jay Hill: Why put that in the communiqué, then, that it could be applied to cereal grains and on oilseeds?

Mr. John Harvard: Mr. Hill, the question has been raised. You've raised the question. Are we supposed to sit here and say nothing when a question is asked?

Mr. Jay Hill: Why wouldn't you put it to rest by saying the present system is working well and we have no intention of ever applying it to those grains?

Mr. John Harvard: I said that 20 minutes ago. Obviously, it wasn't good enough to put that to rest for you. You've reiterated the question.

I repeat, Mr. Hill, it's working well for the standard crops, so in our opinion, leave well enough alone. I can't predict what might happen 30 or 40 years down the road. It's possible someone may change their mind, or they may ask the question again, but it's not working well for the special crops industry, and the dealers and the producers want a change. There's been wide consultation. As a result of the consultation, a decision has been made to bring forward this insurance plan.

So I don't think there's anything mysterious here.

The Chairman: Mr. Senft, do you want to add something there?

Mr. Barry Senft: The industry is changing quickly. Mr. Harvard made my point that you never know what will go in the future. Clearly, it isn't the intention today, but again, as this industry changes.... It wouldn't be as the program's presented, because there would be a lot bigger volume of crop. It would need to be adapted if it was ever contemplated, but clearly, it isn't at this point.

[English]

The Chairman: Ms. Alarie.

Ms. Hélène Alarie (Louis-Hébert, BQ): Thank you for coming here. I read with interest the literature which came unfortunately only at the last minute. I would have liked to have a look at it earlier.

How comes that this legislation only applies to Western Canada? I am trying to find out what benefit or what disadvantage there can be in the implementation of this legislation, both for producers and for Quebec millers. I cannot make sense out of all this. I can see that provincial plans, namely in Quebec, already cover the grain market. In fact, I am trying to see if this concerns me in the slightest way.

[English]

Mr. Barry Senft: The short answer is, no, it doesn't. In central Canada and eastern Canada they have a different provision for licensing elevators and the security that goes around that.

[Translation]

Ms. Hélène Alarie: Okay. Then, I give the floor to my colleagues so that they have more time. Thank you.

[English]

The Chairman: Mrs. Ur.

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

This may be a point of clarification just for me.

It's been stated that the commission is dumping the responsibility and cost of security on farmers. Is this levy already there, or is this a new levy?

Mr. Barry Senft: The traditional way of bonding, through either a bond or a letter of security, is that the company that's licensed has to provide that to the CGC. There's a cost of buying that bond from the lending institution. That is covered within the basis—the tariff they charge producers, the upfront tariff, the basis of the grain that's purchased from the producers.

So it is there. It isn't as open and visible as the plan that's proposed today. It is there within the traditional way of bonding and security.

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Mrs. Rose-Marie Ur: This new way is more transparent, so it should be better for farmers, then?

Mr. Barry Senft: They will know the true cost of the security program, whereas today it is within the cost of doing business for the grain companies and reflected in their tariffs.

Mrs. Rose-Marie Ur: That should be a positive, then.

Mr. Barry Senft: Producers will again have the opportunity to decide whether that security is something that they want. Today they have no choice on that.

Mrs. Rose-Marie Ur: There was also a question raised regarding the advisory committee that was an unnecessary bureaucracy added to the system. Can you give me your opinions on that?

Mr. Barry Senft: I believe that it's good to have the people who are being directly affected represented somewhere in the system. As I mentioned, producers are going to hold the majority of positions within this committee. They're the ones who are using this program for their operations. The advisory committee provides that forum for discussion with that stakeholder.

Mrs. Rose-Marie Ur: What is the number of the committee, eight or nine?

Mr. Barry Senft: Nine.

Mrs. Rose-Marie Ur: Also, there were concerns raised that EDC, as the insurer, wouldn't allow for competitive premiums. What is your feeling on that?

Mr. Barry Senft: That the Export Development Corporation wouldn't—

Mrs. Rose-Marie Ur: Yes.

Mr. Barry Senft: Again, they're going to be there at the outset as the insurer of this program, and they can be changed at any time through the life of the program.

One of the roles of the committee and of the commission would be to look at the competitiveness from other insurers to make sure that the Export Development Corporation is in line.

It's going to be part of the competitive process within this program. They're there at the outset, but that doesn't mean that they're there forever.

Mrs. Rose-Marie Ur: What timeframe are you looking at to review the fees if they're too high? Is there a deadline for this to take into consideration whether this is—

Mr. Barry Senft: We would look at those yearly, again, because it's a new program and some of the issues are known and the fees have been set at this level, taking into consideration the unknown factors. If we see at the end of the first year that fees were too high both from the insurer's perspective and from the administrator's perspective, then we would adjust accordingly.

Mrs. Rose-Marie Ur: Would it go back to...? Would there be a rebate back to the farmers?

Mr. Barry Senft: That would be reflected in your next year's—

Mrs. Rose-Marie Ur: Payment?

Mr. Barry Senft: —administrative costs. If you have a surplus or a deficit, you'd have to reflect that in your next year's cost of administration.

What you'd want is something in which you wouldn't have the spikes. You would want something that over a five-year period would see relatively no changes. But you would reflect any of those surpluses, if there were great surpluses, in the next year's administration or insurer's cost.

Mrs. Rose-Marie Ur: You stated that the private insurers weren't receptive to this. For what reason? Is it because the numbers were so small? Why did they not want to be part of it?

Mr. Barry Senft: I would like Marilyn Kapitany, who was involved more at the outset than I was, to address that.

Ms. Marilyn Kapitany (Director, Corporate Services, Canadian Grain Commission): It was more because of the uncertainty. They weren't sure how many companies would become licensed or what the volume of crop flowing through the system was. So they weren't willing to take it on at that time.

However, EDC, because they have a large system, they are a very large organization and are heavily involved in the export side of any number of businesses, was willing to take it on. This was assuming that there would be about 65% participation. They said that they would take it on and then review it as time went on to see how viable the plan was.

Mrs. Rose-Marie Ur: Do you see that changing?

Ms. Marilyn Kapitany: It depends upon the amount of participation.

Mrs. Rose-Marie Ur: Do you have a feel for this? Obviously, you must have done some kind of work as to the participation level. Percentage-wise, obviously it must be something that the producers want or we wouldn't be going ahead with it, I'm sure.

Ms. Marilyn Kapitany: Yes, that's what we believe.

Ms. Valerie Gilroy (Barrister and Solicitor, Canadian Grain Commission): It will be easier later on to determine the nature of the risk as well. It was difficult for the private insurers to determine the nature of the risk that they would be underwriting.

Mr. John Harvard: Rose-Marie, if I could just jump in here for a second, if the insurance plan works as a spur to the industry in the way we hope it will work, and at some time in the future we see a large increase in the number of special crops dealers, a huge increase in the volume of special crops and naturally a huge, say, participation rate, I would think that once you get to that point, the private insurance industry might be very interested in this insurance business.

• 0945

I think we just have to watch. Right now, though, we have the Grain Commission and the EDC to start it up. Let's hope that the market will develop the way we want it to.

Mrs. Rose-Marie Ur: You say there are presently 73 grain dealers and you anticipate maybe 125. My question may be a little naive, but do you see it as a positive or a negative that you're going to have that many, or that every other person is going to be a dealer?

Mr. Barry Senft: We see the increase in competition as a positive. That doesn't mean that everyone can become a dealer. They have to go through the process of applying for a licence, and we have to look at their financial ability to be involved in the business. So there are going to be criteria for them to be involved in this program. It isn't a case that because producers are funding this, that everybody is going to be able to have a grain dealer's licence.

Mrs. Rose-Marie Ur: Could the larger numbers be a negative in the end? Can there be such a thing as an over-amount of people participating as dealers—in other words, saturation?

Mr. Barry Senft: I think the market would drive what the end result was. If it became too competitive, then the grain dealers have to cover some of their costs of the licences, employees, etc. I think the market would then dictate whether it pays for the dealers to be in business, or whether there are too many. The market would give you the results of what exactly is needed out there as far as grain dealers or elevator operators go.

Mrs. Rose-Marie Ur: Thank you.

The Chairman: Thank you, Mrs. Ur.

I was just wondering what you attribute the 300% growth of specialty crops to.

Mr. Barry Senft: During the grain trade war there was, as we are fully aware, a reduced return on some of the cereal grains, and at the same time some of the breeding programs and some of the new markets were opening up in the special crops, making that more attractive. It was an issue, from a producer's perspective, of cash return.

The Chairman: Would there be any relationship between losing the Crow rate and the farmers diversifying more?

Mr. Barry Senft: That would be the other issue. With producers bearing the full cost of transportation, they would be looking at higher-value, lower-volume crops versus the higher-volume crops. That's a good point. There are a number of issues that have given rise to this growth and potential growth.

The Chairman: Mr. Harvard said that this bill or the reasons for this bill would enhance community and rural development, which would be a pretty positive thing for a province like Saskatchewan, where there's a lot of out-migration.

How do you attribute that, Mr. Harvard? Is it that more people would be involved in the community?

Mr. John Harvard: It just seems to me, Mr. Chairman, that if this particular industry can be stimulated, if we can have a large increase in the number of dealers and an increase in the production of special crops, that's going to have a spin-off effect. I'm not an economist, but it seems to me that the more you have in this market, in this industry, the more jobs there will be one way or the other in the small communities in rural Canada. I think if it works as well as we want it to, this can't be anything but good news for rural Canada.

Mr. Barry Senft: I'd just like to add that the handling of this crop is significantly different from the bulk handling. It's more work-intensive. There's bagging for some of these products for the different markets, and there are different sales that need to be made. It's a different industry from the bulk handling, and that's where it gives rise to job opportunities within some of these communities.

The Chairman: Mr. Proctor.

Mr. Dick Proctor (Palliser, NDP): Thank you very much, Mr. Chairman. Welcome, everybody.

• 0950

Either you or Mr. Harvard indicated that, in part, the insurance premiums were based on what you had found out in terms of pulse crops and canola in Saskatchewan. I just wonder if you could elaborate on that. I guess my particular question is, what is the percentage of people, of farmers, who opt out of the insurance program in the crops that you've looked at in basing your proposal?

Mr. Barry Senft: In Saskatchewan, on the canola check-off, it's mandatory. It's not refundable, so there is no return.

I'm just going to ask Marilyn if we have the numbers for the crops.

Ms. Marilyn Kapitany: The Saskatchewan plan is mandatory non-refundable. Alberta and Manitoba are mandatory refundable, but both of them have told us that their level of refund is quite low. No more than about 10% of producers ask for refunds in any one year in the two refundable plans.

Mr. Dick Proctor: Is there an average that you'd be looking at as to what a producer would pay in terms of his or her insurance premiums overall?

Ms. Marilyn Kapitany: That would depend on how much of each crop they produce. For example, for a producer farming maybe a hundred acres of peas, we estimate he would pay maybe about $380 a year in premiums, and that wouldn't all be paid at the beginning of the year, as you would do with house or car insurance, for example. It would be paid throughout the year as he delivers his product into the system. At any one time, only a part of that premium would be outstanding.

Mr. Dick Proctor: On the dealer side, you indicated that they would have to demonstrate “creditworthiness”—that's what I wrote down; I don't think those were your words. Can you explain how you'd establish that? What criteria are you looking for there?

Mr. Barry Senft: Again, I'll ask Marilyn to follow up on this, but they'd have to provide the financial statements. We have criteria for what we consider a viable operation to be. To the extent of how much volume they want to handle, some would be larger than others. For example, some dealers may only contemplate doing a $500,000 of business, while others are looking upwards towards $40 million and $50 million, so we look at their financial statements to see if they're viable for the operations they intend to run.

Marilyn, did you have anything to add?

Ms. Marilyn Kapitany: Yes, for new dealers coming in, we'd be looking for a business plan, and we'd be looking for what kind of financial backing they have, either public or private. For dealers who are more established, as Mr. Senft said, we'd be looking at financial statements, and we'd be tracking on an ongoing basis the level of their credit outstanding in order to be sure they are falling under the credit that has been approved by the insurer.

Mr. Dick Proctor: With this 300% increase that the chairman referred to a moment ago, there must be a lot of new folks coming into this sector. Is that the case? Are all of them viable? Have any of them gone under, as far as you know? I'm talking about—

Mr. Barry Senft: Of the dealers themselves?

Mr. Dick Proctor: Yes, the dealers.

Mr. Barry Senft: It's like any other business. Again, we feel dealer involvement is somewhat limited because of the current criteria, and that's the reason for bringing this forward. But it's like any other business. There are going to be successes and there will be failures. There have been some, but that'll continue.

Mr. Dick Proctor: My last question, if I may, is directed to Mr. Harvard. I think the committee heard you say this morning that there were no plans to have this kind of insurance premium on the major crops, yet in the précis that we received on November 7—and I'm now going to quote directly—it says: “The insurance plan could serve as a model for standard crops in the future and could lead to a producer-funded insurance system for all crops produced in Western Canada”. I just wondered if you would comment on what I heard you say today, and on what is in this statement.

Mr. John Harvard: As with anything else, Mr. Proctor, I guess we'll have to see what's down the road. There is simply just no intention whatsoever to extend this plan to standard crops.

I don't what the future holds. If someone out there feels this is a program that is offered to special crops and others would like to have it, I guess they can show an interest. It would have to be taken up by the advisory committee, and I don't know what the advisory committee would recommend.

• 0955

That is such a large unknown, Mr. Proctor. At this moment, there's just no plan. This plan is for special crops, period.

Mr. Dick Proctor: Thank you.

The Chairman: Mr. Steckle.

Mr. Paul Steckle (Huron—Bruce, Lib.): Thank you, Mr. Chairman.

This bill is a very comprehensive bill. It takes into account many jurisdictions. The kind of questioning I want to put to you this morning has to do with some of those questions that come out of ignorance as an eastern farmer rather than a western farmer.

The need to change legislation or the requirement of new legislation often comes about by the fact that there there is a need requested by, in this case, farmers. Obviously, we see a need developing here because of the increase in special crops that are being grown now in the west that a number of years ago were not there. I think the number of 300% was mentioned by the parliamentary secretary this morning. Obviously some of those crops, even though they're new to the west, have not been new to Ontario, particularly corn and soybeans.

Given the climate and given that research will certainly over a period of time allow us to grow crops in areas where we haven't previously grown them, the need for this, of course, and the ability to grow some of these crops obviously will develop over a period of time, in all likelihood.

The question I have is regarding the provisions for the Grain Futures Act as it pertains to the commodity exchange in Winnipeg. Can you not now trade corn and soybeans in Winnipeg?

Mr. Barry Senft: I'll ask Reg to address that.

Mr. Regis Gosselin (Acting Manager, Corporate Information Services, Canadian Grain Commission): Right now, no, you can't. In order to be able to trade that, the exchange would have to develop a contract to do that. At the moment, there is no provision for corn or soybeans.

As you know, those commodities are traded on U.S. exchanges.

Mr. Paul Steckle: Yes, I know.

Mr. Regis Gosselin: It would be very tough for a commodity exchange like Winnipeg to develop a contract in competition to those major exchanges.

Mr. Paul Steckle: How do you see this applying to specialty crops, because specialty crops do not have the volumes? You talk about lentils, you talk about some of these other commodities that do not trade—even navy beans in Ontario—on the exchange.

Mr. Regis Gosselin: They have tried a pea contract in Winnipeg, and it's still on the board. The difficulty is in attracting enough interest from participants to buy and sell that contract.

So in theory, they could develop a contract for most of these specialty commodities. The problem is getting enough interest from buyers and sellers to participate in the market.

So the answer to the question is that you could in theory develop contracts for most of these, but the difficulty is getting the kinds of volumes you need to make it worth their while.

Mr. Barry Senft: If I could just add something, I want to clarify that the repeal of the Grain Futures Act is a separate issue from the new special crops program. The issue with repealing the Grain Futures Act is again because of the commodity exchange wanting to trade other things than grain and oilseed commodities, such as energy, hogs, etc.

So the two issues, although they're within one bill, are two separate issues.

Mr. Paul Steckle: Yes, I understand that. I wanted to follow some logic, because obviously when we look at pork bellies, I guess we'll see pork bellies are more logically traded in Winnipeg now than they were perhaps 25 years ago, given the numbers of hogs that are being grown in Manitoba.

The nine members who are going to be sitting on the Special Crops Advisory Committee I understand are being appointed by the minister. Does this give any cause of concern to western farmers? How have they received that?

Mr. Barry Senft: Again, it would be through a process of organization, such as pulse growers, etc., submitting names to the minister for approval.

Again, the issue has been raised as to whether or not they should be elected. I think the issue here is that the appointment through nominations by different organizations is seen to be a cost-effective way of bringing these people to the table. The cost of an election itself would be more than we're thinking of for the total budget of this committee's function. So appointment through nominations is seen as being an effective, cost-efficient way of having those stakeholders represented at the table.

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Mr. Paul Steckle: Would these nominations come about as a result of each commodity putting forward its own representative as a nominee, or how would that take place?

Mr. Barry Senft: That's how it has happened in the interim. Nominations have been made by the Alberta pulse growers and the Saskatchewan pulse growers—that type of approach—and that's how I envision the next committee to be formed.

Mr. Paul Steckle: I also heard you mention it's anticipated they're probably looking at 65% of farmers participating in this as volunteers.

Over the years, I have had considerable experience dealing with farm groups, having come from the agricultural community. Volunteerism has not always been as positive as it could have been. I'm just wondering whether you're really positive about that 65%, or whether you're being overly optimistic.

Boards work best when it's mandatory that you're in because there's some opportunity for forward planning. Volunteerism doesn't give that, and you're basically saying that on each crop year you can be either in or out. Is that the way we should be doing it, or should we be looking at being in for two years and out, if you care to go out, but at least giving some sense of direction?

It's pretty difficult to plan ahead, simply based on anticipation of what the weather prognosis is. Reading the almanac for the next year is basically not a good way to project. I'm just wondering whether you feel that's the right way to go.

Mr. Barry Senft: The mandatory participation, from an administrative point of view, with the program being actuarially sound, would be the ideal. I don't think there's any question about it. But in today's environment, the committee thought it wouldn't fly, and that's why it's again closed, as it is today.

Mr. Paul Steckle: Going back to my initial comments, given the fact this is a new venture and these specialty crops have been grown now for a number of years, how have they marketed these crops prior to this? Given that these people have been able to market their crops, they must have done some investigative work in terms of how they market, defining markets and developing those markets. Would they see this as an encroachment upon work they have already done? What would farmers have to say?

I'm being very negative in my questioning, but there's a purpose in that.

Mr. Barry Senft: Again, from the farmers' perspective we feel it will be positive because there's more competition out there in purchasing and the special crops commodity. As far as some of the other dealers go, there will be more competition, and that's what this SCRIP is all about. It will facilitate more competition within the industry. So other grain dealers, elevator companies, etc. that have been in this business and have been trying to get through the traditional ways of security will likely have some concern because there is more competition. But that's what it's about from the farmers' perspective—more competition.

Mr. Paul Steckle: So previous to this legislation, farmers went through some sort of a dealer organization to get rid of these commodities. They haven't had any direct selling into markets offshore, if you wish.

Mr. Barry Senft: There's a whole host of different ways producers have marketed their special crops. Some of it may have been direct, but they have had some contact with customers either south of the border or overseas, or it might have been through a dealer, who in turn sold their grain to a larger dealer. There isn't any one or two ways it would have been marketed. But it would be under the traditional way of security with grain dealers today.

The Chairman: This is a follow-up to Mr. Steckle's question. Do you see private insurers coming in at some point, instead of the Export Development Corporation?

• 1005

Mr. Barry Senft: Again, it will depend on the participation of producers and on the risk that's out there. After this program is up and running, hopefully there will be some competition to be the insurer of this program, and that's going to be to the benefit of producers.

The Chairman: Does private insure these crops in the United States?

Ms. Marilyn Kapitany: There are a number of different schemes that operate more on a state-by-state basis in the United States. Some of them are funds into which producers put funds, and some of them operate on a security basis, similar to what we're doing now. I'm not aware of any American insurance plans of the type that we're proposing in Bill C-26, but I could check on that and let you know.

The Chairman: So if it was assured that there were mandatory deductions, we'd be more apt to get a private....

Mr. Barry Senft: The participation rate would be high, and it would be more actuarially sound because you would have all risk covered. I think there would be more interest in it.

The Chairman: So if we went with Alberta's suggestion that it should be mandatory, the thing may operate much more smoothly.

Mr. Barry Senft: It would be more efficient, and it would be cheaper to everyone because you would have the higher-risk organizations involved along with the lower-risk ones. It would be no different from any other insurance scheme. When you cover all types of risk—

The Chairman: The safer it is.

Mr. Barry Senft: Yes.

The Chairman: Mr. Hill.

Mr. Jay Hill: Just following up on this issue of competition and insurers, how is it handled now? If a company is buying special crops now and wants to purchase a bond to cover the crops that it has in storage, can that company shop around for it?

Mr. Barry Senft: Yes.

Mr. Jay Hill: But under this scheme, at least at the start, there's going to be one insurer, and that's going to be the Export Development Corporation. I keep hearing you say that SCRIP is all about facilitating more competition. In fact, I just heard you make that statement. While you say that, one of the complaints I hear from farmers, on the other hand, is that once Export Development Corporation has a monopoly on being the insurer, you're eliminating competition, not enhancing it.

Mr. Barry Senft: If a monopoly means they're going to raise prices, again this is going to be open for bids. Again, it's at the outset that they're going to be involved in it, and if it looks like a really lucrative opportunity to return capital back to the insurer, then other people are going to be quite interested in getting involved in bidding for that opportunity.

Mr. Jay Hill: But the intention is always just to have a bid process and just one insurer, not open competition. The companies won't be able to shop around, as they do now, for the best bargain.

Mr. Barry Senft: The companies or the producers? It's the producers who will be paying the premiums towards the insurance.

Mr. Jay Hill: But right now the companies, the buyers of the product, can shop around to get the best deal for the bond. Therefore, if they download to the producer—which I'm sure they do—the producer is ultimately going to pay that cost anyway in some manner, whether it's through increased handling charges or whatever. But if you have open competition, in theory at least, the producer hopefully ends up getting the best bargain. Why would a buyer insure with the highest?

Mr. Barry Senft: Again, subject to this being an area of business that private insurers want to get into, we're going to leave that opportunity open in the committee. It may be yearly or on a two-year basis or however long that insurer is in place, but there would clearly be competition in choosing that insurer from a year-to-year basis. It's not, as you're saying, on a day-to-day basis—

Mr. Jay Hill: One buyer to another.

Mr. Barry Senft: —because just as the dealers pick the bonding companies or security companies today, they will choose those people on a yearly basis.

Marilyn may correct me, but I don't think there are very many people who decide to change their bonding companies halfway through their fiscal year.

Mr. Jay Hill: But what I'm pointing out is that there are a number of them presently, and under this deal there would be one.

• 1010

I want to get back to the inclusion of the standard grains. The parliamentary secretary said something to the effect that he doesn't know what the future holds, so he therefore shouldn't make a statement that there's absolutely no intention of doing it. What is the process? Under Bill C-4, we know very clearly what the hoops are that will drive the inclusion of other grains if they ever come, and the worry is canola. Under this legislation, what are the hoops whereby the advisory committee can move to include some of the standard grains in the future?

Mr. Barry Senft: The advisory committee would recommend to the minister, with the minister having the ultimate decision on what's included or not included.

Mr. Jay Hill: So there's nothing in place. There are no safeguards for the farmers in the sense of Bill C-4, under which there has to be a plebiscite of farmers; under which a recognized farm group representing that commodity must first of all come forward, and then there has to be a referendum. There's nothing like that in this bill that would prevent this advisory committee from advising the minister, only to have him ultimately arbitrarily deciding to include one or more of those grains.

Mr. Barry Senft: We feel that through the minister and through the Canadian Grain Commission, which now oversees the current security, this wouldn't be by the stroke of a pen. If there were reasons to do it that were advantageous to everyone involved, again, it might then be contemplated. Again, though, it wouldn't be under the program as it stands today because there's a higher-volume crop.

I just want to give you an example of the issue. Organic grains are almost considered special crops by the dealers who deal in them, but because those crops are wheat, barley, etc., they have to deal under the current system. Now, if there was a time for those commodities, the problem is that we can't differentiate, as the commission would have you do, between what constitutes an organic grain versus a traditional grain. Is there some role within this legislation? Because it's a minor crop with low volume but higher value, from the dealers' perspective there are some of the same issues to be dealt with as there are for the special crops.

Is there an opportunity there? Again, I just don't envision this being implemented right across the board without there being some real advantages to everyone involved. It was raised in the context that there clearly might be. It's too bad that it's thought of in the context that it will just be extended, and that's because, as I said before, that clearly isn't the intention.

Mr. Jay Hill: On the advisory committee, will those be paid positions? Mr. Steckle raised the issue of whether there's any concern amongst farm groups about them being patronage positions. Is it envisioned that they would be paid to do that?

Mr. Barry Senft: Yes, that's what the initial thinking of it is. We have a western grain standards committee and an eastern grain standards committee, and their per diem is $125 a day.

Mr. Jay Hill: And is there any estimate at this point on how many days a year they would meet?

Mr. Barry Senft: Again, at the outset, they might meet more frequently than they would once the plan is up an running, but I would think three times a year, a day each time, would be the....

Mr. Jay Hill: I'm assuming those wages and the expenses of that committee would come out of the levy fund that's collected.

Mr. Barry Senft: Yes, it would be part of the administration cost.

Mr. Jay Hill: You said earlier that you undertook very extensive consultations—not just yourselves, but the SCRIP committee that was struck. Can you give us a brief outline of who was consulted? One of the concerns I'm hearing from producers is that it seems that a lot of producers of these crops aren't aware that this thing is even happening, but they're going to be facing this levy.

Mr. Barry Senft: It gets back to your first question about consulting with every farmer within the prairie growing region, the 150,000 or 160,000 or whatever that number is. Not every one of those has been contacted or is even aware of it today. We need to be clear on that. Those who were involved in the commission can add to some of my remarks, but the consultation process started with facilitators in each of the prairie provinces going out to hold meetings with producers, with farm organizations, with the stakeholders. That started in 1993, bringing together with the commissioners of the Grain Commission...starting to formulate this plan, along with the Special Crops Advisory Committee.

• 1015

So there were public meetings, and I can recall and we can go back to some of the meetings. But there were meetings held that were open to the public in the discussion of this program. As the program gelled, we talked to farm organizations about it.

One of the things is that this is has evolved over a lengthy period of time, and people have changed within farm organizations, within grain companies, and haven't been up to speed. Again, as I commented in my opening remarks, at farm organization meetings that I attended, it was part of my prepared text that I talk to people about our intention to bring this forward in the next Parliament. We had questions from some of the member meetings that we attended.

Mr. Jay Hill: Have you a list of the groups that support this legislation as it is that you could maybe not read out but provide to the committee?

I know of four. I referred to them in my speech at second reading in the House: Saskatchewan Canola Growers Association, Western Canadian Wheat Growers Association, the Saskatchewan Pulse Crop Development Board and the Western Barley Growers Association, all of whom are at least opposed to the negative-option billing form of collection of the levy.

So there are clearly four organizations that represent thousands of western farmers that aren't in support of at least that part of the bill. I think it would be helpful to support your arguments if we had a list of all the organizations and perhaps a rough idea of their membership numbers—whether they represent 12 farmers or 1,200 farmers—that are fully in support of the bill as it exists now, without amendment.

The Chairman: Sure. Contact the clerk and the clerk will—

Mr. Jay Hill: Okay, that would be good.

The Chairman: Ms. Alarie.

[Translation]

Ms. Hélène Alarie: You are talking about a levy of 38¢ composed of an insurance premium of 20¢ and an administrative charge of 18¢. What participation threshold enables you to keep this cost which is, I imagine, an optimal cost? You are looking for 65% but this percentage may decrease or increase. Is there a moment where it does not work any more? What is your ideal rate of participation? Where does it start breaking down?

[English]

Mr. Barry Senft: Thank you. The estimates have been made in the plus-60%, and again, not unlike any other insurance program, the more that participate, the more actually sound it becomes.

I guess if we drop below half of the volumes involved, again, it would reflect in the premiums, and people would have to choose. It could work the other way, too, that if there were more involved than the 60%, premiums might be reflected the other way and build even more support for it. But those numbers will reflect in the premiums paid, and if it gets too high, then it doesn't become actuarially sound for the program and that will be an issue.

[Translation]

Ms. Hélène Alarie: At the present time, the 18¢ also include the administration charge for the 40% of producers who are going to opt out, because it will still cost something.

[English]

Mr. Barry Senft: Yes.

[Translation]

Ms. Hélène Alarie: Okay. My second question is of a completely different nature. Clause 49.02 proposed in this bill provides that the Minister may establish a committee, referred to as the Special Crops Advisory Committee. You are saying that you consulted with farm groups. As you know, farm groups dealing with special crops are very diversified. Haven't those groups expressed their will to elect one member by crop at this committee rather than having patronage positions? How did you manage that?

• 1020

[English]

Mr. Barry Senft: Again, the way in which the formation of the committee is made up is open for discussion. The thought of it being appointed through interested organizations, such as pulse groups, for example, was thought to be an efficient way of bringing this committee together. If you go through an election process, it could cost more than what was contemplated as the total budget of the committee's work for a year.

I guess it's up for discussion about how these producers come to the table. The thinking there was that it was an efficient way of....

Again, back to an earlier question, the people won't be involved, from a time requirement, on a lengthy basis. So to go through an election process for a group that's going to work three or four days a year.... That brings us into the efficiencies of it.

[Translation]

Ms. Hélène Alarie: I would like to make a remark to my colleague, Mr. Harvard. In the French text, the third paragraph of clause 49.02 does not have at all the same meaning as the English. It is just a remark.

[English]

Mr. John Harvard: Your concern is duly noted.

[Translation]

Ms. Hélène Alarie: Thank you.

[English]

The Chairman: Mrs. Ur and then Mr. Proctor.

Mrs. Rose-Marie Ur: The Saskatchewan Canola Growers Association made a presentation. Their concern was that there was questionable support at the farm level. I've been reading through some of their documentation. They thought the pulse organizations in each of the prairie provinces have expressed support in varying degrees—organizations representing about 4,500 specialty crop growers in Alberta, 15,000 in Saskatchewan, and about 2,100 in Manitoba.

Do you find those numbers reflective?

Mr. Barry Senft: Reflective to the support of the program?

Mrs. Rose-Marie Ur: Yes.

Mr. Barry Senft: Yes. I sat through one farm organizational meeting where they debated this issue. Clearly, there was some misinformation in the debate of that meeting.

For example, there was a thought that there was some fund that was building up somewhere, and that this might be a trade issue, for example. So in the debate of that discussion there was some misinformation. There is no fund. It's an insurance program. It shouldn't have any trade implications, because it's producer funded.

So there were varying degrees of information given at some of those debates.

Mrs. Rose-Marie Ur: With that, the Canadian Grain Commission didn't initiate this, then. It was the producers of the plan.

Mr. Barry Senft: It was out of recognition, again, out of some earlier discussions regarding security, that collectively, we recognized, along with some of the producers who were making their points and some of their concerns known to us, that the current way of security wasn't addressing their needs. Collectively we decided to work on something that was going to address the concerns.

Mrs. Rose-Marie Ur: Right.

In some of my correspondence, it also states:

Individuals and companies that buy and sell other crops such as wheat, barley and canola will continue to be licensed under current provisions of the Canada Grain Act. They will not have to obtain a special crops licence to deal in special crops.

Will that be to the detriment of people who wish to become dealers? Obviously, these companies must be a lot larger than the ones that will be getting into the specialty crops.

Mr. Barry Senft: I'm not clear on the question.

Mrs. Rose-Marie Ur: Basically, these individuals who are obviously there now, dealing with wheat and barley, certainly have a lot more dollars behind them than an individual who's going to just go into the specialty crops.

I'm comparing it...I'm on the gas committee, so I'm looking at the small business person.

• 1025

Mr. Barry Senft: The special crops business is different. They're a smaller market crop. Some of these markets are handled a lot differently from the bulk grains and commodities that some of the larger companies have the majority of their business within. Again, it'll be market-driven. A grain dealer or a licensee decides whether he can compete with whoever is in the market, and that's not only the large operators but other operators. They'll have to decide that and the market will dictate whether they're successful or not.

So yes, competition will be stiff, and again, this is part of the reason for bringing this forward: to create more competition.

Mrs. Rose-Marie Ur: And I understand that competition's good, but when you're dealing with a big giant and the little guy wants to get started, it's pretty hard to have a level playing field when you have the other bases behind you.

Mr. Barry Senft: Yes. And I think a dealer would look to see if there was a market niche he could fill and would act accordingly.

Mrs. Rose-Marie Ur: Okay. Also, the producers will have to notify the commission if they don't wish to participate. Is there a cut-off time? Or if a farmer forgets, is there any grace period?

Mr. Barry Senft: August 1 would be the notification. That's the start of the crop year. The producer would have to decide whether he is in or out. When they opt out, they'll opt out once and that'll run until they decide...but August 1 of the crop year would be the date.

Mrs. Rose-Marie Ur: I'm led to understand, though, that if they want to opt out and they have qualified before August 1 their premiums will not be refunded to them until the end of the year. So obviously they're working with their farmer's dollars over that period.

Mr. Barry Senft: There are a couple of different approaches to that. We're looking again at Levy Central, and in Levy Central one of the discussion items is whether to refund it more than once a year. The other thing is that this isn't tying up money for a full year. Not a lot of producers sell their specialty crops August 1 and then have that money tied up—even if it were only once a year—for the full year. Specialty crops, like other grains, are marketed throughout the year. So if we can build that refunding more than once into the administrative functions, I would hope that the money isn't tied up for a very lengthy period.

Mrs. Rose-Marie Ur: I certainly agree with you there: get the money back to the farmers as soon as possible. But are we really causing a paper world out there again if we're going to be doing this two, three or four times a year? There are positives and negatives. It causes a bureaucracy of accounting.

Mr. Barry Senft: From the farmers' perspective they would have to decide, depending on the volume of grains they sold, whether it is to their advantage to do it, whether they have a significant amount of premium tied up in the administration or not.

If it wasn't, then they might only opt to ask for a refund once a year, limiting that book work. It's a matter of getting the paperwork together, yes, but if they know at the outset that this is going to happen they can adjust their bookkeeping accordingly, knowing that at some point they're going to need those receipts.

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

The Chairman: Thank you. Mr. Proctor.

Mr. Dick Proctor: Thank you again.

In the briefing notes from last November we read that this act would remove a potential federal-provincial irritant. I just wonder if you could take us through what the point is there.

Mr. Barry Senft: That relates to the Grain Futures Act and its repeal. Again, we do not have jurisdiction, other than grains, as a supervisor of the Winnipeg Commodity Exchange. And to expand their business, the Winnipeg Commodity Exchange wants to get into non-grain commodities, such as pork bellies, energy, those types of commodities, and we don't have it within our jurisdiction to supervise them on those non-grain commodities. The Manitoba Securities Commission would have to supervise them. So it was thought that for the sake of efficiencies we would pass that function in its totality to the Manitoba Securities Commission and the commodity exchange would thus only answer to one regulatory body.

Mr. Dick Proctor: And in developing this proposal, I take it that in addition to consulting with producers and dealers you've talked to the three prairie provinces about the act?

Mr. Barry Senft: The act in its entirety?

Mr. Dick Proctor: Yes.

Mr. Barry Senft: Yes.

Mr. Dick Proctor: To zero in on the insurance option, what advice did you receive from them? Did they think the voluntary aspect was mandatory and applying for the refund was the way to go?

• 1030

Mr. Barry Senft: I'm trying to recall some of the discussions with the provinces. I think everyone agrees the mandatory aspect of it would be the most efficient way of running any type of plan, but again it's the whole issue of whether producers want to be locked into something they may not see as a benefit to themselves.

I know in the province of Saskatchewan, for example, one of the issues raised was deductibility. Instead of 10%, should it be higher or lower? Marilyn, do you recall anything else? I don't recall the issue of mandatory versus voluntary.

Mr. Dick Proctor: But generally, the provinces seem to suggest mandatory would be better, but your sense is it wouldn't fly or it would present similar problems to volunteerism.

Mr. Barry Senft: We'd have to go back to the provinces and check.

Mr. Dick Proctor: Double check.

Mr. Barry Senft: I'm just saying everyone, I think, would recognize it's the most efficient way of writing the plan.

Mr. Dick Proctor: Yes.

Mr. Barry Senft: I think they, along with us, see it may not be a flyer.

Mr. Dick Proctor: Those are the questions. Thanks.

The Chairman: Thanks very much, Mr. Proctor.

For the third round, the only questioner we have is Mr. Hill.

Mr. Jay Hill: Thank you, Mr. Chairman.

In your communiqué, one of the principles you say you adhere to is that the system must not impose additional bureaucracy, public or private, and administrative costs on any sector of the industry, including growers, processors, dealers, elevators or government. hen you go on to say that the current plan fulfils these principles. And there were two others as well as that one.

Do you honestly believe that under this legislation there won't be any additional bureaucracy, public or private, or administrative costs on any sector of the industry?

Mr. Barry Senft: The hope here and the intent of the bill is to have more competition within the industry. Yes, there'll be more bureaucracy within the administrative functions, from farmers having to request their levies back through elevator companies, but the intent of this is to create more competition, thus having higher commodity prices for producers. It is the intent that even after you net those off, there will be a gain to the introduction of this.

Mr. Jay Hill: But your communiqué doesn't say that's the intent. It says “The current plan fulfils these principles”, and yet by your own admission, right now you're saying there will be an additional cost and administrative burden on producers who will have to not only make a decision to opt out of what in essence is a mandatory upfront plan, but they will have to sit at their desks and write letters saying they want to opt out this year, and then keep track every time they haul a truckload of whatever it is—one of the designated crops—keep track of how much is off, tally that up at the end of the year and submit a request to get their money back.

Mr. Barry Senft: Again, this is a bill with the intent to create more competition for those commodity prices. It is more than what is currently the practice, but clearly the stakeholders have said the status quo doesn't work for this commodity pricing. We've tried in this to balance the cost of administration to that of making it user-friendly for everyone involved. Yes, there will be some additional costs to some of the stakeholders.

You raised the issue having to keep track of receipts. I would suggest producers do that today. They keep track of the different commodities and what their returns on those commodities are versus their investment.

Mr. Jay Hill: They certainly do it with the GST and they're not too pleased about it.

Those are all the questions I have, Mr. Chairman.

The Chairman: Okay. Thank you very much for coming today.

We'll continue our consideration on April 21, the first Tuesday after our break.

The meeting is adjourned.