AGRI Committee Meeting

STANDING COMMITTEE ON AGRICULTURE AND AGRI-FOOD

COMITÉ PERMANENT DE L'AGRICULTURE ET DE L'AGROALIMENTAIRE

EVIDENCE

[Recorded by Electronic Apparatus]

Wednesday, October 29, 1997

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[English]

The Chairman (Mr. Joe McGuire (Egmont, Lib.)): I call the meeting to order to resume consideration of Bill C-4, an act to amend the Canadian Wheat Board Act and to make consequential amendments to other acts.

Appearing in front of the committee today are witnesses from the Canadian Oilseed Processors Association, the Baking Association of Canada, the Canadian National Millers Association and the Malting Industry Association of Canada.

Welcome, gentlemen—I don't think there are any ladies with you. As you probably know, we have ten-minute presentations from each group and then open the meeting to questions from the opposition parties and the government party. You can use your full ten minutes or any part thereof, but we have to stay very close to the ten-minute deadline because everything is congested here. We have two extra parties this term, so in order to accommodate everybody we'd like to keep everything as efficient as possible.

If you could introduce yourselves, we'll start first with the Canadian Oilseed Processors Association.

Mr. Robert Broeska (President, Canadian Oilseed Processors Association): Thank you, Mr. Chairman. My name is Bob Broeska. My office is located in Winnipeg, and I serve as the president of the Canadian Oilseed Processors Association. My colleague with me today is Mr. Si Sigal, who assists us in matters of policy.

The Chairman: Proceed, please.

Mr. Bob Broeska: I have a seven-page statement that was submitted to Ms. Santosh Sirpaul earlier. I would like to read briefly from it and highlight some of the major issues that we have in our industry in regard to the matter of Bill C-4.

First I'll provide a little background on our industry. The Canadian Oilseed Processors Association is composed of those companies in Canada that purchase oilseeds from farm producers, that is, soybeans in Ontario and canola and flax in western Canada, and process that into vegetable oil and protein meal for both domestic consumption and for export.

The companies in the Canadian Oilseed Processors Association account for 100% of the oilseed processing capacity in Canada and approximately 85% of the edible oil refining in Canada. In the past crop year, the industry processed about 4.2 million tonnes of oilseeds, both for domestic use and for export.

By way of a little history, the industry went through some very serious economic times during the 1980s and really struggled for existence. As a result of offshore trade wars, virtually every plant in Canada was under financial duress and in fact came under new ownership. Each and every company is now owned and operated by larger interests. The period of the 1980s was seen as a disaster, I guess, but also as a turning point for our industry.

The development of the Canada-U.S. trade arrangements and the elimination of the Western Grain Transportation Act were seen as the key turning points for the industry. Following those events, the industry redirected itself to a north-south market axis, from Canada into the U.S., and made substantial new investment into the industry.

What emerged in the past decade is a very competitive, very well-managed, very large processing industry, capable of competing with all of the major oilseed processing competitors around the world.

In the last decade there's been a 60% increase in the capacity of the industry, from 3.3 million tonnes to 5.3 million tonnes. The share of domestic oilseed production that is processed in these plants has increased from 48% to approximately 60% today. There are major contributions to the Canadian economy, with $3.2 billion in terms of economic contribution by way of farm seed sales and value added, and $2.1 billion in terms of balance of trade, which is domestic and export sales.

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The oilseed industry operates solely in the commercial environment. It does not require any form of government or risk guarantees on sales of its commodity. The main requirement of the industry in terms of its reliance on government is for the creation of commercial and trade policies that foster industry growth in export and domestic markets on the basis of fair and equitable trading rules.

Here are a few words with respect to Bill C-4, Mr. Chairman, in particular with clause 26, also known as the inclusion clause, which would provide for the monopoly marketing of canola and flaxseed by the Canadian Wheat Board.

It has been the opinion of our industry since the time of and throughout the minister's grain marketing review panel that the current marketing regime for oilseeds should remain the same; it should not be altered.

The position that the industry put forward to the minister's grain marketing panel review was that all processors should support the continuation of the current open-market system. We're not aware of any producer groups that would not support the same position.

There does not seem to be any support that we know of from either producers or processors, or from the marketplace, that calls for a change in the regime for the products from the open-market system to a monopoly marketing control of the Canadian Wheat Board.

Furthermore, we feel that the current market system for non-board grains is consistent with the marketplace in which the products must compete with alternative competing products, not only in the U.S. but around the world.

The following issues, Mr. Chairman, outline the basis for the COPA position on the inclusion clause. The first of those is that the industry believes the clause is without constructive merit. The position of the industry is that oilseeds face two major hurdles in terms of being able to be competitive at the farm level and to survive and compete both in the domestic market and in international trade.

The first of those is the issue of dealing with the competitiveness of farm production. Currently, the industry feels that the competitiveness of farm production is not substantial enough to carry oilseed crops into the next decade. There must be some way to resolve that problem. The industry is working on it.

The second issue is the elimination of the protectionist barriers to offshore markets. Currently, the only major unfettered market for access is the U.S. market under the Canada-U.S. Free Trade Agreement. We don't have unfettered access to offshore markets. That's impeding the ability of the industry to grow.

This proposal to make an inclusion clause that signals the government's intention to provide for monopoly marketing for the Canadian Wheat Board on oilseeds does nothing to address these fundamentals. Without addressing these fundamentals, this industry fears for the future of oilseed crops in Canada.

In fact, we think that the message being conveyed with the inclusion clause in the wheat board amendment act is exactly the opposite to what the industry is seeking. We appear to be moving toward more protectionism and dependence on border control rather than toward the scenarios of liberalized free trade and the level playing field that the industry is trying to pursue through trade negotiations.

Our second issue, in terms of our resistance against the inclusion clause, is the lack of support in the industry. We feel that the panel accurately reflected the position of the industry, which is that no fundamental changes in the marketing system for grains, oilseeds, or special crops are recommended. We think the government's inclusion clause is really a contrivance that's superimposed unilaterally. It was without subsequent consultation with our industry or any producer sector as far as we know.

The next issue we take exception with in terms of the inclusion clause is that we believe it imposes an impediment to industry and places market achievements at risk.

Following the development of the Canada-U.S. Free Trade Agreement, the processing industry in Canada, which was substantially reinvested, increased its market share in the U.S.A. from 0% to 7% of the vegetable oil market. This development happened over the decade following elimination of the WGTA and substantial reinvestment of the industry.

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Now, 63% of the vegetable oil produced in Canadian plants and approximately 80% of the protein meal finds a market in the U.S.A. We are keenly aware of the resistance factor in the U.S.A. by producer groups there for the market share we have achieved. We substantially fear that to place oilseed under the monopoly marketing of the wheat board would embroil oilseed in the controversial arguments that now surround the marketing of wheat and barley in the U.S.

The second point in terms of jeopardization is the trade liberalization goals. We've worked long and hard with this government in terms of trying to establish level playing fields, zero-for-zero policy, for oilseed, and we believe this is a move in exactly the opposite direction. We feel this could jeopardize those attempts.

Finally, Mr. Chairman, on the erosion of value-added processing benefits, we believe our industry is about value-added processing. It's about investment in Canada and it's about the export trade of value-added products. We believe it is not a fit with the monopoly marketing principles of the wheat board, which really is to support extensive agriculture and the export of raw, unprocessed grain. We would seriously ask for a reconsideration of the inclusion clause and its impact on our industry.

Thank you.

The Chairman: Thank you, Mr. Broeska.

From the Baking Association of Canada, Paul Hetherington.

Mr. Paul Hetherington (President and Chief Executive Officer, Baking Association of Canada): Thank you, Mr. Chairman.

The Baking Association of Canada is a not-for-profit trade association representing Canada's wholesale, in-store, and retail bakers. Our membership is comprised of everything from the small baker on the corner who has a handful of employees, five or thereabouts, who does half a million dollars a year, to the large wholesale bakers in the $400 million to $500 million range, doing business on both sides of the border. So our members vary in the degree of sophistication as well as operation scale. Our membership is comprised of both.

Our memberships produce a variety of different products. There are breads and rolls; bread-style products such as bagels; good stuff like sweet goods, pastries, snack cakes, etc.; and frozen-dough products used by in-store bakery operations and food service operations—made, shipped and sold on both sides of the border.

From a size prospective, the domestic baking industry has approximately $3 billion in sales annually. By way of reference, we note in our submission that the domestic industry uses approximately 5% to 6% of the total western crop milled for baking purposes.

As well, wheat sold domestically provides one of the highest marginal returns to the Canadian Wheat Board, and therefore producers. However, I want to make it very clear that we are not here this afternoon to talk about price. We don't have a concern about price.

We have two main issues today. One is what we call acknowledgement of the domestic market, and the other is pertaining to an appeal mechanism to decisions by the board of directors. I'll take the domestic market first.

We notice in the legislation of the Canadian Wheat Board that, quite frankly, there is no reference to the domestic market in its mandate. In our submission we refer to subclause 7(1):

Pricing, Profits and Losses—Sale and disposal of grain:

Subject to the regulations, the Board shall sell and dispose of grain acquired by it pursuant to its operation under this Act for such prices as it considers reasonable with the object of promoting the sale of grain produced in Canada in world markets.

There is no reference to domestic markets. We find this extremely confusing, considering the promotion of value-added products that's been the statement of previous ministers of agriculture and the establishment of export targets for the value-added sector, first $20 billion and now $40 billion. We find it very strange that there is no reference to the domestic market in this statement.

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We are also in that regard, therefore, proposing an amendment to that section, which again we included in our brief, to the effect that, subject to regulations, the board should sell and dispose of grain acquired by it pursuant to its operations under the act for such prices as are considered reasonable, with the object of promoting the sale of grain and value-added grain products produced in Canada for both domestic and world markets. We feel that it's extremely important, considering the new mandate and the new operation of the wheat board that is being proposed by Bill C-4.

The second issue we have is the right to appeal decisions of the board. We note in our brief that as a monopoly, the board operates with authority that is unique to many areas within Canadian business. While we believe the board has and in the future will act and make its decisions after the appropriate due diligence, there's always a possibility that those practices may not be in our best interest or, we believe, in the Canadian consumer's interest.

Especially concerning is, as proposed by the bill, the election and appointment of board members to the CWB with 10 elected positions being allotted to producers. We believe there is potential that the selection process may develop platforms with potential negative impacts to our members and to our customers. Should such a situation arise, there is no formal mechanism currently allotted, unlike, as we reference, the supply-managed chicken, turkey and egg marketing agencies under the National Farm Products Council, for any domestic stakeholder to appeal these practices. We have encountered such problems in the past, and that is the reason we are making the recommendation for a change to this amendment.

We note in two specific areas, one being in Ontario that occurred in 1996 with the Ontario Wheat Producers' Marketing Board, where there was believed to be a unilateral change in the farm storage differentials without consultation with the Ontario Flour Millers Association. This issue was headed towards discussion and mediation assistance through the Ontario Farm Products Marketing Commission that exists in Ontario. The issue then became somewhat moot after what was essentially a failure of the Ontario crop, but there was a situation that arose and there was an appeal mechanism to the situation.

Our industry is also somewhat unique around this table, I would suggest, because we deal not only indirectly with two single-desk sellers, the Ontario Wheat Producers' Marketing Board and the Canadian Wheat Board, but we also deal with two regulated marketing agencies, the dairy and egg marketing agencies. We have a number of situations where concerns have arisen pertaining to, especially in the dairy industry, practices on which we believe unilateral decisions were made, not supporting efforts on our part. Those decisions were made by producers and were not subject to appeal, and therefore we have no mechanism with which to take the issue forward.

Indeed, we were into a situation just recently with the promotion of our interest to access the class 5 program, otherwise known as special classes, for fresh baked goods and the dairy ingredients that go into their production. We made application under the program, based on the criteria that those products are under threat of import competition. They were $20 million annually, according to the Department of Agriculture and Agri-Food, which developed the statistics. That information was put forward, and the result of that review by the Canadian Dairy Commission and the Dairy Farmers of Canada was, yes, indeed, we recognize the imports and we recognize the threat, yet the producers are not willing to take any less for their milk, and therefore you don't have access to the program. We have communicated that to the minister.

So we have ample reason to believe that an appeal mechanism is a necessity. We don't believe it would be often used, but we believe very strongly that indeed there must be some formal mechanism to appeal such decisions should stakeholders feel the necessity.

Those are my comments. Thank you.

The Chairman: Thank you very much.

From the Canadian National Millers Association, we have Gordon Harrison and Howard Rowley.

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Mr. Gordon Harrison (President, Canadian National Millers Association): Thank you very much, Mr. Chairman, members of the committee. I'm from the Canadian National Millers Association office in Ottawa. Howard Rowley is chairman and is with us today from Cambridge, where he is vice-president and general manager of Dover flour mills.

The Canadian National Millers Association is Canada's national trade industry association for the wheat flour milling industry. Our membership is wheat flour millers only, although some of those members mill other commodities. We have 14 member companies, which represent approximately 95% of Canadian milling capacity. I think it's a factual statement that the international trade in the wheat flour and bakery mixed products is predominantly conducted by the members of the CNMA. The members of the Ontario Flour Millers Association, referenced by Mr. Hetherington, for the most part are also members of the Canadian National Millers Association.

A point to note in our brief is that our member firms collectively purchase and process roughly 10% of the Canadian wheat crop annually. The majority of that wheat is purchased from the Canadian Wheat Board, a lesser amount, roughly 12%, from the Ontario Wheat Producers' Marketing Board. Some wheat is sold directly by producers to flour mills in other regions of Canada, notably Quebec and Atlantic Canada.

We would like to make sure there's a clear understanding of our commercial relationship with the Canadian Wheat Board and the role of the Canadian flour milling industry and the food and beverage processing sector. The relationship with the Canadian Wheat Board is over 60 years of age, as is noted in our brief. It is one that has been, for the majority of the duration, regulated, but not regulated in the sense of a fixed domestic pricing policy. We have had periods of time when there have been closely regulated prices. Latterly, since 1991, we have operated entirely within the North American trading environment. This supplier-customer relationship is one that has evolved considerably over the past decade, since the signing and the implementation of the Canada-U.S. Free Trade Agreement, and laterally NAFTA.

Our industry in turn sells to quite a range of food processing industries, including the baking, breakfast cereal, biscuit, cookie manufacturing, meat processing, confectionery, and snack food industries. We have quite a diversified value-added or further-processing customer industry base in Canada and the United States.

It's important to understand that both our members as flour millers and the Canadian Wheat Board operate within the North American free trade environment and the relationship that exists with the Canadian Wheat Board takes note of that. The understanding of the milling industry customer needs the Canadian Wheat Board has developed over the last decade through long and sometimes difficult discussion has resulted in what we believe is a fundamentally functional and sound supplier-customer relationship, which today, as this legislation is now under consideration by this committee, is in fact fully functional and has in it inherent attributes which we describe in our brief as essential attributes in the wheat marketing system.

The attributes of this system, which we refer to in the brief, are those of price transparency; hedging ability and the management of risk; forward pricing, which we are able to do in Canada through the Canadian Wheat Board; and in fact the assurance of supply, which the Canadian Wheat Board plays a role in providing in the way it takes the trouble to inform itself of the needs of the domestic milling industry, in the way it manages stocks, in the way it allocates stocks for sales, and in the way it facilitates the movement of wheat stocks into the regions of Canada where flour millers and other processors have need of them.

This price transparency attribute is particularly important. We're in a North American free trade environment. There's a free flow of wheat, wheat flour, and wheat-based products across the Canada—U.S. border. The transparency we refer to is that which is in evidence and reflected day to day in the Minneapolis Grain Exchange and the North American trading environment.

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Wheat prices in the Canadian flour milling industry, as determined by the Canadian Wheat Board, are very closely linked to those fluctuations and market signals that occur day to day and in North American exchange rates.

We have fundamentally one recommendation to bring to the committee for consideration. This also concerns the composition of the board of directors to be created pursuant to Bill C-4. The recommendation we have is that the minister will take into account—the act should be in fact be so worded—for those members who are appointed by governor in council, that experience and knowledge are to be held by a significant number—we propose it should be not fewer than two—of directors. This knowledge is of the grain-processing industry and food-processing customers to which I referred.

We think it's in the interests of producers, the Canadian Wheat Board itself, and all customers of the Canadian Wheat Board, direct and indirect, who are processors, to have such a knowledge and understanding.

We also make that recommendation on the assumption that the hard-won experience and understanding that now exists within the management of the CWB is going to continue to be at the disposal of the board and the new CEO.

The only additional information that's contained in our brief that may be of interest to members of the committee is to be found in appendix A in the tables. This provides an illustration of trading patterns. These patterns show that under the current marketing system we have in Canada, the Canadian flour milling industry is competing rather well within the North American free trade environment. Some of our customer industries are also doing well, but perhaps not equally so. But I think that information is all to be found in the tables.

Thank you very much.

The Chairman: Thank you very much, Mr. Harrison. Mr. de Kemp.

Mr. Phil de Kemp (President, Malting Industry Association of Canada): Thanks very much, Mr. Chairman, and ladies and gentlemen of the committee. My name is Phil de Kemp. I'm the president of the Malting Industry Association of Canada. Our offices are here in Ottawa.

In the ten minutes, I guess, I'll give you a little bit of background about the industry. To start with, it's comprised of four companies. Right now, we are the largest purchaser of malting barley from the Canadian Wheat Board. We get about a million tonnes a year, which in any given year could be 40% or 50% of what the Canadian Wheat Board sells either directly through itself or through its agents.

The industry is probably the best success story in terms of the export of value-added grain products over the last 10 years. We were at about 40,000 tonnes 10 years ago; we are at almost 600,000 tonnes of exports today.

The industry has invested more than a quarter of a billion dollars in the last eight years on new plants, plan expansions, and plant upgrades. We envisage right now that hopefully over the next five years we will be able to increase our world market share by another several percentage points, which probably could translate into another couple of hundred thousand tonnes.

As for the industry principally, right now 60% of what they produce is exported, while 40% is domestic. It's a bit of an oddball in the sense that the majority of what they purchase is strictly two-row versus six-row malting barley varieties. The domestic industry has tended to shift to two-row over the last 10 years. Certainly on the export side, it's all two-row. That's principally a relationship among most of the brewers worldwide. They're European-trained, and most European supplies are of two-row malt.

There are really only two issues that we have some concern with and that we'd certainly like to address. Prior to stating that, the issues we would like to discuss have nothing to do with changing any of the governance or accountability for producers under CWB operations. I think it's certainly good as far as the producers are concerned, and as far as having more transparency is concerned, more accountability to producers.

However, there are two areas we'd like to touch upon. Certainly, this committee is called the Standing Committee on Agriculture and Agri-Food, which hopefully will take a look at the interests of both producers and processors. I think we've heard the rhetoric a lot over the last five or six years that there is a value-added industry out there. Sometimes perhaps they feel that not so much their interests...or perhaps their voice is not as loud, nor is it taken into consideration as much as producers'. However, I think what we're dealing with here under this bill, with some of the suggestions Paul Hetherington has made—and we're basically going to reflect that, again—won't change that.

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When the wheat board was formed, even under the act, under subsection 7(1), which obviously isn't in the amendments, it's under the current act, it dealt with the fact that the wheat board would be responsible for the promotion and sale of grain, period. Obviously the wheat board and the industries have come a long way. We have done an awful lot of work in developing markets, developing varieties, doing the testing, and basically being the point man on the development of malt and barley in Canada. As such, all we would look for is a recognition of the inherent benefits and importance of value-added.

So we're pretty well dittoing the baking industry in asking that subsection 7(1) now be changed to say there is a recognition for the board to promote on a competitive basis the sale of both grain and value-added grain products, both domestically and internationally. It's as simple as that. There's no smoke and mirrors and there's no rocket science in that.

The second point has to deal with the fact that as far as the new board of directors is concerned the industry is very skittish, and rightfully so, in my view, about future planning, whether that's going to be on corporate market development or additional expenditures here in Canada, when you're not going to know from one year to the next what the sense is amongst the board of directors. I think now everyone recognizes that every time there's an election there is going to be a plebiscite, a mini-vote amongst the producers in particular areas, as to whether or not, certainly in our case, malting barley is under the board or not under the board or there will be dual markets or what have you. That does create some concern for us with respect to future planning.

I think we've been able to back it up with.... We walk the talk and put our money where our mouth is in developing a very good return for producers. Right now it's probably the highest per-acre return. Right now we're paying well over $200 a tonne for malting barley for domestic.

So what we are looking for is not so much taking or reducing the power of the board of directors or withdrawing some of their autonomy. In the past whenever there has been some sort of discrepancy in future direction or perhaps even pricing, depending on where the markets are...in the future, if there are some discrepancies with the board, that we have recourse. In the past we've had recourse to the minister. We've had recourse to the department, at least to take a look at that and address it with commissioners. I think there's going to be increasing pressure on the board of directors to increase the amount—and we say it in the press releases—with the minister in premiums, or increase the returns to producers. We see Minister Goodale's office putting out a bit of a précis on what the act says.

If it's not at market prices, we do have a concern. Obviously there is no WGTA and there are questions about the safety nets issue. This will be the only opportunity for producers, obviously, to have more of a direct say on the marketing of the board.

All we are saying is that in the case of all other supply-managed industries, or rather industries that are managed by a board of directors of producers, there are not so much checks and balances...but we have the ability to raise an issue outside the board if it's strictly going to be their way or the highway. That precedent has always been set even with the Liberal government back when supply management was there, through the National Farm Products Marketing Board. The Ontario government certainly has had that through the Ontario Farm Products Appeal tribunal. There is no sense in taking a look at future operational capabilities and expanded capacities or whatever if perhaps—and again it's only perhaps—at some point you're going to be held hostage.

There are a number of instances, certainly in malting or in milling or what have you, where if you go back over a number of years you've had to go for recourse on certain issues. We're not going to have that. In any of these things. Again, for what we're looking for as far as an opportunity to have the minister appoint an arbitrator is concerned, it's not going to take away from the transparency or the governance or the accountability. It's agriculture and agrifood, and all we're looking for is a recognition of that through either subsection 7(1) or certainly the appointment, the possibility, of an arbitrator.

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Thank you, Mr. Chairman.

The Chairman: Thank you, Mr. de Kemp. Ladies and gentlemen, just before we go to questions, I want to remind all colleagues there's a vote. The bells ring at 5.30 p.m. for a vote at 5.45 p.m., so be prepared for the interruption there.

Mr. Hoeppner.

Mr. Jake E. Hoeppner (Portage—Lisgar, Ref.): Thank you, Mr. Chairman, I'll try to put my questions quickly to certain individuals and then let them respond.

Mr. Broeska, I see that you don't like the inclusion clause. We always hear at committee when we talk about the wheat board that customers abroad insist on single-desk selling. Do you find that with your customers abroad? What kind of problems do you run into with demurrage payments at the coast when you ship, which is a continuous problem with wheat board grains?

Mr. Hetherington, you said you're worried about value-added industry, domestic markets. When I talked to my Royal Bank manager the other day, I saw an invitation to a seminar on value-added industry promoted by the Royal Bank and the Canadian Wheat Board. That scared me and I said, do you want to lose a customer or not? How do you look at the Canadian Wheat Board getting involved in value-added industries?

Mr. Harrison, in terms of forward pricing, can you forward price all your grain right at the start of the year for your needs in the milling industry? Also, you said you'd like to have qualified professionals from the milling industry appointed as members on the Canadian Wheat Board. Do you have farmers on your boards in the milling industry to give you advice on what farmers' needs are?

Mr. de Kemp, you quoted a price that you were paying $200-plus a tonne for malting barley. Is that the price you pay to the wheat board or to their accredited exporters? I can guarantee you that is not what farmers are going to get in the end result. How do you address that? Where do those funds go? Where do they get siphoned off so that farmers don't have the benefits?

So those are quick questions, and each one can address them the way they feel they need to.

The Chairman: Mr. Broeska.

Mr. Robert Broeska: Thank you, Mr. Chairman. I'll go quickly on the two questions I was asked.

First of all with respect to customers, I would like to make a couple of points. The minister's grain marketing review panel was very thorough in its analysis of the position of customers. They did an interview with major buyers of Canadian oilseeds in Japan, the U.S. and Mexico, and all of those customers gave their unqualified support for the current open market system and did not express any need or any desire for wheat board monopoly marketing of oilseeds.

Secondly, with respect to the U.S. marketplace, our concern is mainly amongst the U.S. soybean growers who are very sensitive to the fact that Canada won and the U.S. really were net losers under the Canada-U.S. Free Trade Agreement in the trade of vegetable oil products. Our industry went from supplying 0.0% of the U.S. market to 7% of that market, and we are deathly scared that the arguments that surround wheat and barley marketing by the board into the U.S. would carry over into oilseeds under a monopoly oilseed marketing regime.

Thirdly, internationally vegetable oils, meals and oilseeds all trade on open markets, and there is a need to hedge those purchases of seed on the open market under prices that are posted publicly and visible to all producers, exporters and processors. In Canada it happens to be that we use the Chicago market for the product hedging and the Winnipeg market for the seed hedging, and it's open and available to everyone to see.

With respect to the demurrage question, our industry doesn't get involved in demurrage to any extent whatsoever. The industry takes seed from farm by truck delivery direct to plants. The industry supplies its own shipper-leased, shipper-owned tank cars for oil and the majority of its meal cars. We own export bulk tank facilities on the east and west coasts through which we move that oil to export vessel under charter party, which our industry arranges directly with vessel owners internationally.

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With respect to the movement in the U.S., we have free cross-border interchange of both our vegetable oil tank cars and our meal cars, and so we control our own movement to the extent that we are able, with a minimum of demurrage.

The Chairman: Mr. Hetherington.

Mr. Paul Hetherington: With regard to the member's question, I am aware of the seminar being produced by the board. Unfortunately, we weren't invited to participate in a seminar function.

Mr. Jake E. Hoeppner: I wonder why.

Mr. Paul Hetherington: However, that aside, I think it's fair to reference also the fact that over the last two years we've experienced a stronger relationship with the board. In comparison to when we talk about promoting value-added, I think it's fair to reference two particular situations.

The Canadian Wheat Board, along with the Baking Association of Canada, the Canadian National Millers Association and others are supporting a study done by the National Institute of Nutrition, looking at doing an analysis of previous research done on the consumption of grain-based products. The idea, then, is to take that information and target Canadian consumers, demonstrating to them that they should be eating more grain-based products.

We have also had very preliminary discussions regarding some means of working together collectively, as stakeholders, on some form of generic promotion of grain-based products domestically.

So there are some initiatives going on. However, that's under the current regime, if you will, for lack of better terminology. That doesn't mean that policy, these programs and these initiatives will move forward under any new regimes.

The Chairman: Mr. Harrison.

Mr. Gordon Harrison: On the question in regard to forward pricing, I believe you asked if our industry was able to forward price all of its requirements from the beginning of the crop year.

Subject to the availability of the desired stocks, which is normally forecast for a considerable time period, the milling industry is able to forward price wheat and, in turn, forward price flour to customers about six to eight months at a time. This forward pricing takes into account carrying costs that the wheat board would incur, as well as the storage charges. So it is possible under ordinary circumstances, roughly six months in advance. As we said in our brief, this offers a measure of predictability and price stability for further processors, which would include Mr. Hetherington's members.

On your question in regard to our recommendation for the qualifications of directors, our brief does not say, nor did I mention, I don't believe, that we necessarily wish to have flour millers or representatives of the flour milling industry sitting as directors of the Canadian Wheat Board. We think it is, however, in the interest of the Canadian Wheat Board to have directors on the board—and these may well be producer representatives who are elected with that experience—who have knowledge and understanding of the entire value chain of wheat-based industries. We think it's essential. We think that's in the interests of the corporation that's in the business of selling the primary commodity that is used and the corporation that's involved critically as a link between producers and value-added customer industries, which historically, we would argue—although not in this brief—have been a very favourable market for producers, the processing industry as opposed to offshore or unprocessed markets.

The Chairman: Thank you.

Mr. de Kemp.

Mr. Phil de Kemp: As to domestic price, Mr. Hoeppner, the prices are actually published. You'll see that everyday in the newspaper, whether it's two-row select, or six-row, or what have you. But they're well over $200, and again, that's domestic. Again, you're priced to market, as the board does.

The issue of recourse, certainly for our industry, has been raised a number of times over the last couple of years, in that it's said, well, if you don't like the price.... And it's not a question of price on this; it's just a question that if in the future things got a little wacky we would have recourse at least to talk to somebody, because under this, we're not going to. What we're asking for is that ability. It's not going to take away from the governance or the accountability.

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But in the case of the malting industry, because the dominance now is on two-row—because that's where the market is and that's where the international markets are—we don't have even recourse to go the States because virtually most of the malting barley down there is six-row. In the domestic industries and our export stuff, the vast majority is two-row.

So if you're held captive, sure, but that's not an issue right now with us.

But it certainly is an issue if you're a CEO and you want to take a look at putting in some more expenditures again. It gets very difficult if there is only x amount of dollars and you're Canada Malting and you can put your money in Canada or you can put it in Argentina, in your U.K. operations or in your Australian operations.

You have to make a case before your board of directors and say that things are pretty stable here in Canada, that you know the direction, that you have a pretty good relationship with the board and that you don't think anything funny is going to happen in the future. The added expression is that the best surprise is no surprise. So if you don't have that, it's one less thing as far as a arrow in your quiver is concerned to shoot in order to make a pitch for additional value-added dollars to be spent here.

The Chairman: Thank you.

Mrs. Alarie.

[Translation]

Ms. Hélène Alarie (Louis-Hébert, BQ): My question is for Mr. Broeska.

First, as a short preamble, I would like to say that in Quebec, we feel less concerned with the Canadian Wheat Board. As a new member of Parliament, I didn't know the work achieved by the Standing Committee on Agriculture and Agri-Food before I got here.

However, I am impressed with your brief and I realize that the whole of the oilseed processing industry is part of COPA and that 85% of all vegetable oil is traded by you.

Roughly, you say that you don't agree with the inclusion clause. You have succeeded over the years in adjusting as transformers and as suppliers and you don't see any interest in that clause. Have I understood correctly?

[English]

Mr. Robert Broeska: Yes, the question is about whether have we been able to adjust to market conditions for competition under the open market system. That is correct. We feel the open market system has served the industry well and we've been able to compete, not only in growing the industry by working with producers to expand acreage but also by expanding the investment, the amount of oilseeds processed and the amount of product exported.

Mr. Si Sigal (Policy Adviser, Canadian Oilseed Processors Association): I would just like to make a couple of statements, if you don't mind. I'll tell you something about this industry that perhaps some people are not aware of. The Canadian government spent $8 million to get GRAS—generally regarded as safe—approval in the United States.

We are competing against one of the largest vegetable oil producers in the world, soya. Procter & Gamble spent spent $10 million just to introduce canola into the United States. Today, wherever you go, you see canola on the shelves.

I've been meeting with the Japanese crushers and refiners for 20 years. Some of the crushers that I meet with also mill wheat bought from Canada. They have said unequivocally that they do not want the system in Canada changed from the open market system to single-desk selling. They've said it to the panel and they've said it to me every year that I've been there: “Please inform your people not to change the system.”

If we put the inclusion clause into an act, you must think about our customers that are offshore and down in the United States. Everyone will know that it's in there. Do we have to run around for the next two years reassuring them that this is only done for purposes of symmetry and that we really don't mean it? Do we have to tell them that nobody is going to trigger it, so they don't have to worry about it because the system isn't going to change?

Why should we have to do that? We have a marvellous trade built up. As Mr. Broeska explained, the investment in Canada has been huge, and it's expanding, but it's not going to expand in the face of closing the doors, to some extent.

• 1620

We are now in the process of entering the WTO negotiations. The Canadian government is committed—and they're going to bring it up at the APEC meeting in November in Vancouver—to zero for zero for oilseeds in the world.

How do we go to these people and say, well, we may change that, when we are making this commitment? We just don't understand why there is so much determination to put an inclusion clause in there that would jeopardize our industry.

The Chairman: Thank you.

Ms. Alarie.

[Translation]

Ms. Hélène Alarie: If the inclusion clause had nothing to do with the oilseed industry, essentially, you would be happy with the status quo. You don't want oilseeds to be included in article 26. It's very clear. Thank you.

[English]

The Chairman: Thank you.

Mr. Calder.

Mr. Murray Calder (Dufferin—Peel—Wellington—Grey, Lib.): Thank you very much, Mr. Chairman. I'm going to keep on going with this inclusion-exclusion. It has to be one of my favourite subjects.

We heard witnesses yesterday talk about the time when the Canadian Wheat Board used to market flax, and market oats, and feed barley, and now it doesn't. I went back and looked at the act, C-24. Section 46 says that Governor in Council can make regulations “to exclude any kind of wheat, or any grade thereof”. So there's an existence of an exclusion clause and it must be more than wheat, because flax and oats were in there at one time, too.

Then in subsection 47(1), it says that: “The Governor in Council may, by regulation, extend the application of Part III and of Part IV...to oats or to barley or to both oats and barley.” hen of course it goes along a little further that they can even substitute the word “oats” or “barley” for the word “wheat”, and the expression “oat products” or “barley products” for “wheat products”.

So in essence, within the act right now there is exclusion and inclusion—in Bill C-24 as it exists.

Yesterday we listened to the canola growers, for instance, and what I've been trying to find out is who represents the commodity group. Obviously at that point, the way we have it set out at the present time, it would be up to the representatives of a commodity group to decide if they wanted to be included. We found with the canola growers that they were having a problem as to who does represent them.

I have a question here for you, and I would like your comment on it. How would a rogue commodity group bring that commodity into the Canadian Wheat Board against the will of the whole commodity?

Mr. Robert Broeska: I don't know if I'm qualified or if I've given adequate thought to that, Mr. Chairman. Let's be clear—our group of processors does not represent any producers who would be eligible to raise the issue under the legislation, nor are we here to try to put any compromise on any particular producer group. However, the way we see the wording in the legislation leads us to believe that it certainly hasn't given well definition to those particular commodity groups that we know and are aware of. Therefore we believe it opens it up to some political process that may or may not be evident at this particular point in time.

We do know, from talking to our friends who represent those oilseed producer groups, that they are concerned about that very issue, and are therefore raising the question before the minister and before the government as well.

The Chairman: Thank you. Mr. Calder.

Mr. Murray Calder: I think at that point I'll share my time with one of my colleagues—whoever wants to pick it up.

The Chairman: Mr. Harvard.

Mr. John Harvard (Charleswood—Assiniboine, Lib.): I'll continue this, and I'd like to continue it with Mr. Broeska—if you don't mind, Mr. Broeska.

In your prepared statement you say that the open market system for pricing is the preferred system for both producers and for processors. I happen to agree with you, but I know nothing in the inclusion clause that would either challenge that or dispute it. If you can find something in the inclusion clause that disputes that, I would like you to show it to me.

• 1625

You also say in your statement that processors support the continuation of the current open market system. I agree with that. Is there anything in the inclusion clause that disputes that? If there is, I want you to show it to me.

You also say you don't want the wheat board coming between the producers and the customers. You say producers certainly are not asking for it. I agree with you. I would challenge you to show me anything in the inclusion clause which would dispute that.

Your sidekick Mr. Sigal says foreign customers of oilseed products do not advocate a change. Now, you read to me the inclusion clause and you show me where it advocates change—advocates change. The fact of the matter, Mr. Broeska, is that the inclusion clause advocates absolutely nothing. It simply sets out—-

Mr. Jake E. Hoeppner: Then take it out.

Mr. John Harvard: —-a set of rules and a procedure whereby if there is a political movement then there would be certain guidelines. You suggest you would somehow just feel safer if there were no inclusion clause. Well, I can tell you, Mr. Broeska, that if you look at the Canadian Constitution, there is no exclusion clause when it comes to the separatists. Does that shut them up? No, it doesn't, not for a second. So if you think somehow or another if you could just put words into the Canadian Wheat Board Act that will somehow shut down anybody who is your adversary or somebody you don't agree with, it simply won't happen.

Really, when you come down to it, Mr. Broeska, it's this; and this is where I would share your concern. As far as I know, all the oilseed producers are in favour of the status quo. My guess is that 90% to 100% want to continue with the open market system. I think it's incumbent on you to show me how the inclusion clause could somehow subvert that, could somehow be abused, so a tiny group of only 5% to 10% could somehow hijack this whole thing and bring you people into the wheat board against your will.

You're a witness, and I think it is your responsibility, Mr. Broeska, to show us clearly, unequivocally, how that abuse could occur. I can tell you that if you can introduce that evidence, if you can tell me how that system can be abused by a rogue group, by God, I'll be with you and I will ask for amendments, because that is the last thing I want—for some small rogue group to do something that is against your will.

Do you have the evidence?

The Chairman: If you can do it, Mr. Broeska, in a minute and a half.

Mr. John Harvard: If you are that concerned—you were very concerned—obviously you must have the evidence. Why withhold it?

The Chairman: Let the witness answer.

Mr. Robert Broeska: If I could respond using your own words, sir, you had indicated that the inclusion clause advocates nothing. If that is the case, the question from our industry then would be is this the basis on which we make amendments to legislation on wheat marketing in western Canada?

We don't believe in fact we should take this lightly. I've been around in the grain industry long enough to know, especially with transportation legislation, that words in legislation can be made to mean things by politicians and lawyers. In the early 1980s I was astounded when the issue of the minimum compensatory rates for Canadian oilseed products shipped from western Canada to eastern Canada resulted in a Federal Court case taking up an endless amount of time over the word “annually”. The National Transportation Agency had failed to publish rates within a 12-month period, and we took up the time of the courts, the time of the railways, the time of shippers, over the issue of “annually”. That was the basis of the court case. When it was established that “annually” meant once a year, then we could proceed by getting rates for our industry.

I say this clause opens up the issue of whether or not we're going to have state trading, monopoly control, of oilseed marketing. Otherwise what is the intent of the clause?

Mr. John Harvard: How?

Mr. Robert Broeska: I don't know how. Who is the politician who is going to deal with it? It might not be dealt with this year.

What is the intent of the clause? The intent of the clause is monopoly marketing of oilseeds.

• 1630

The Chairman: Thank you very much. We'll go now to Mr. Proctor for five minutes.

Mr. Dick Proctor (Palliser, NDP): Thank you, Mr. Chair.

I wanted to pick up on something. Mr. de Kemp, I thought you said something that we hadn't heard before this committee, if I have it straight. I think you were talking about the election of board members. There were some concerns about stability and continuity if there were a sea change.

I think the committee has talked about perhaps staggering the elections of board members the first time out so that there's some continuity there. But this is not for future years. I'm wondering whether your association is thinking that perhaps we should not elect all of the board at one time, but rather have two sets of elections. If we did it on a regional basis, I don't know how we could work that out. This is to get at your point about the continuity and the stability of the farmer-elected board or the producer-controlled board.

Mr. Phil de Kemp: First of all, as far as staggering them goes, we want to stay personally out of that. Again, we have no problem with governance, accountability, or an elected board of directors.

Mr. Dick Proctor: Yes.

Mr. Phil de Kemp: I think it's a wonderful idea. When I was at Agriculture Canada many years ago as a departmental assistant in the minister's office, I was trying to take a look at some things. I couldn't even take a look at what happened with oats in terms of pricings and contracts. There was no accountability even between commissioners and the minister.

The issue had to do with the fact that, whether it's smoke and mirrors or what have you, part of this.... We started with the grain marketing panel. All of this had to do, a lot of the time, with dual markets, continental barley marketing, etc. A lot of positions were taken by a lot of groups, either for or against.

My sense is two things. One is that the elections themselves will turn into that, as they have always been with respect to the Canadian Wheat Board advisory, and that's fine. That's a producer's right.

The difficulty is this. Say you're going to be planning something two years from now, and all of a sudden the person who's elected has a mandate. They say that if you elect them and they want to—I don't know—get rid of barley or wheat, then it would be hard to position a company or a corporation to take a look at what they are going to do then. If you stagger it, I don't think it's going to make much difference.

The difficulty is that in every board of directors commercially, as far as the company is concerned, the people who are appointed to that board who are from other industries have a fiduciary responsibility. They leave their hats at the door and do what's good for the corporation. I see a lot of words in here that say they're supposed to take a look at that, but I don't see that really nailed down.

Here's the other issue. I can see it right now. I'm a corn and soybean farmer from just out of town. Say I have an opportunity, as a farmer, to have more of a say in the running of an operation. I see it even here when it talks about extracting premiums or higher prices. It's just not an issue about prices just yet, but I've seen it in the past, when we had seven-bushel wheat. Consider the reason it was put in. It was okay for the milling industry in the sense that it was a closed border, but it sure as hell hurt the baking industry because they had to compete with imports.

We're not going to have that ability for malting because we can't buy two-row south of the border if we say take it or leave it. We can't leave it because we have nowhere to go.

Again, more power to producers to do this, but I think it's going to create a little bit of a sense of insecurity even within the board if the direction changes every two or three years or what have you. People who are on the boards of any company are there to do what's good for the board in terms of stability and long-range planning. I think we're supposed to leave the politics outside the room.

It's hard to do, I know. I've seen it with the Canadian Wheat Board advisory. Whether you're in Alberta or Manitoba, if you're on the Canadian Wheat Board advisory, you get a lot of differences of opinion on a lot of things. I think you're going to see that again.

But if that translates into directions for processing, for value-added, then we're nervous. All we're looking for is an opportunity in which at least we can go to an arbiter. That's if it ever gets to that, but I don't think it ever will. There have been instances in the past, and I can share that in camera.

The Chairman: Thank you, Mr. de Kemp. I think you could go on for a long time.

Mr. Phil de Kemp: Oh, absolutely.

The Chairman: Mr. Borotsik.

Mr. Rick Borotsik (Brandon—Souris, PC): I would ask the witnesses please to keep their answers very short. We only get five minutes for our questions.

To COPA, to Mr. Broeska, we'll go back to the inclusion clause. Mr. Harvard made some great, eloquent speech about how only one word doesn't seem to change the concept of having canola in the Canadian Wheat Board. In your opinion, does having that one single word, “canola”, allowed into inclusion cast a black cloud over your industry? Will there in fact, and could there in fact, be capital investment in crushing plants moving outside of Canada because of that single word in this act?

• 1635

Mr. Robert Broeska: Let me tell you—

Mr. Rick Borotsik: Briefly, because I only have five minutes, and I have another question.

Mr. Robert Broeska: Very briefly, putting the word “canola” in the Canadian Wheat Board amendment act jeopardizes our industry because it casts a degree of doubt over what will be the commercial infrastructure under which the industry will operate. It does not know what in fact will be the pricing mechanism. It does not know what kind of authority—

Mr. Rick Borotsik: Okay, I have your answer.

I have another question. I've been told that prior to Bill C-4 and Bill C-72, thousands and thousands of people came forward to the committee and said they must have inclusion clauses. That may be a bit of an exaggeration, but that's what I hear. I haven't heard a lot of those thousands of people, quite frankly. However, I've also heard across the table that if you have exclusion, you must have inclusion. In your opinion, would you suggest that both exclusion and inclusion could be struck from this particular act?

Mr. Robert Broeska: Our mandate is not to deal with the act in its entirety with respect to exclusion and inclusion. We are merely here representing the oilseed processing interests.

Mr. Rick Borotsik: If it meant getting rid of canola in the inclusion, would you also agree that exclusion should go?

Mr. Robert Broeska: I would certainly support that.

Mr. Rick Borotsik: Thank you.

The next question is to Mr. Harrison, please. Actually, I think you were the one who said that we insist the government appoint to the board two members who have knowledge in your particular industry. This may be a bit of a facetious question, but do you not think the government would appoint knowledgeable people to the board? And I suggest the Freshwater Fish Marketing Board, but that's another thing.

Mr. Gordon Harrison: I would not begin to suggest that the government would appoint people who are not knowledgeable. What we're seeking are people who are knowledgeable in cereal grain processing or further processing. Thank you for the question.

Mr. Rick Borotsik: Thank you. That was a bit facetious.

A question for Mr. de Kemp: would your association prefer not to buy from a single-desk seller? Would you prefer to buy in the open market?

Mr. Phil de Kemp: If the question is—and this has been our position before—whether it's either all or nothing, we prefer no dual market. Either you're in or you're out, but there's nothing in between.

Mr. Rick Borotsik: The question is simple. Would your association prefer to buy on the open market, on a free-market system as opposed to a monopoly?

Mr. Phil de Kemp: Nine times out of ten right now, it's working well for us. We prefer the way it is right now.

Mr. Rick Borotsik: You prefer the single desk.

Mr. Phil de Kemp: There are some number of attributes right now that certainly do provide us with an ability to market malt.

Mr. Rick Borotsik: How much time do I have?

The Chairman: You have one minute.

Mr. Rick Borotsik: I have another minute left. I'll ask another question of the flour millers, if I could, please. I think it's Mr. Harrison.

Would your association prefer to buy on the single desk, as you do currently right now—you buy it from the Canadian Wheat Board—or would you prefer to have the open market?

Mr. Gordon Harrison: I think the answer is found in our brief. The current system has the essential elements and attributes of wheat marketing in Canada, under the Canadian Wheat Board as it exists today. So long as the Canadian Wheat Board provides for those essential attributes, the answer is yes, we would prefer to buy from a single-desk seller.

Mr. Rick Borotsik: One other very quick question: you also asked about an appeal process.

Mr. Gordon Harrison: I did not. That was the maltsters.

Mr. Rick Borotsik: I'm sorry. The maltsters and the bakers wanted the appeal process. If everything's working fine now, why would you require an appeal process?

Mr. Phil de Kemp: I said that nine times out of ten, there have been a number of issues in which.... This is important, particularly for malting barley, because we have no recourse. I've seen a number of times in the past that it doesn't work.

Mr. Rick Borotsik: That's where I have difficulty. You say you have no recourse because you only have one single source of supply.

Mr. Phil de Kemp: No, we have recourse right now. If we have a problem, we can raise it with the department or we can raise it with the minister. But this new legislation, rightfully so, should put the minister at more of an arm's length from the day-to-day operations of the board, putting the board more in the hands of producers. Absolutely. But the issue is that if at some point something blooey happens—God knows what—we'd need to know that we have an opportunity to talk to somebody about it for planning purposes. If it's like supplied management, we're not going to have it.

Mr. Rick Borotsik: I have one more very quick question. Before we get into that—

The Chairman: I have to go to Mr. McCormick.

Mr. Rick Borotsik: I guess I don't get that quick question.

• 1640

Mr. Larry McCormick (Hastings—Frontenac—Lennox and Addington, Lib.): Thank you, Mr. Chair.

My comments are directed to the Baking Association of Canada, although I do question the malting industry's questioning of the producers recognizing the agrifood part of agriculture. I wouldn't think they'd want to share that everywhere in this country.

I want to acknowledge seriously that I'm thankful as a consumer that we do have the best and safest food supply system in the world. We like to say that, and it's true. Today, we're hearing about your right of appeal. That's what your association should do—represent your membership.

I don't think there's any connection to the fact that of the Fortune 500 companies, one-half of all those companies were not in existence 21 years ago. But you want a right of appeal, and in your statement you're saying there is always a possibility that practices may not be in the best interests of the baking industry or Canadian consumers.

On behalf of my constituents, my friends and family, what about the right of appeal for consumers? On Highway 401, halfway between Ottawa and Toronto, or halfway between Toronto and Montreal, at Napanee, Ontario, there's a big billboard that was erected by the farmers. It tells about the three and a half cents' worth of corn that goes into a box of corn flakes. The fact is that when grain went up x amount of cents per bushel, bread went up in every A&P store in Ontario by 10¢ a loaf until some people questioned it, and then it went back down by 8¢.

We all want a right of appeal. I'd like to have it, too, but I just wonder if you would like to speak to that.

Mr. Paul Hetherington: Certainly, Mr. Chairman.

With regard to the member's questions on the retail price, my members don't set the price, the grocery stores set the retail price of the bread. My members wholesale to them. If you're talking about a retail baker who is selling on the corner, yes, indeed, he does set the price.

Mr. Larry McCormick: That's not what we hear from the retail stores—of whose association I was a member, and I operated one for 21 years—but go ahead.

Mr. Paul Hetherington: I would question that seriously, sir. The grocery stores control the retail pricing. That is not being driven.

Conversely, during the same time period you were talking about, I happened to be talking to my members in Saskatoon. One of them was telling me about a retail store that was selling bread for 49¢ a loaf. I happened to be out in Winnipeg in August, and I went by a store that was promoting selling it at 45¢ a loaf. So I would suggest, sir, that there is very strong competition that exists in the industry in order to bring that counterbalance.

When we questioned the issue of appeal, I referenced two other examples whereby situations have arisen in single-desk selling and regulated marketing. We have encountered those situations in the past. They exists. They are reality. We are saying that we believe that because of the changes happening with the CWB and pertaining to its governance, such a mechanism is desirable and is required now.

Finally, I trust that with the board of directors of the new CWB, those elected will operate in good faith. But I also have faith that they will have the same human shortcomings the rest of us have. I also had faith in the board of directors of Ontario Hydro, and now we are saddled with how many billions of dollars of debt?

Mr. Larry McCormick: Well, I'll just close by saying that I certainly wouldn't argue the hydro question.

Mr. Paul Hetherington: I'll take that home, sir. Thank you.

Mr. Larry McCormick: But I have certainly sold bread for less than 49¢ a loaf as a loss-leader in the last ten years, and that was to everybody's benefit.

Thank you, Mr. Chair.

The Chairman: Thank you.

That concludes questions for these witnesses. We thank you very much for coming, for making your presentations, and for letting us know your point of view.

Mr. Jay Hill (Prince George—Peace River, Ref.): I thought we still had a minute, Mr. Chairman. I thought I had a chance for one quick question.

The Chairman: Well, it will have to be very quick.

Mr. Jay Hill: It's just a quick question to Mr. de Kemp.

In light of your revelation that you prefer the monopoly system, why couldn't an open system work if you were contracting directly with the farmers rather than with the wheat board?

Mr. Phil de Kemp: We can do it if it's only between the industry and the farmers, but if we are only doing it domestically while the board is still able to do it offshore, it doesn't work. You have to have the ability to arbitrate. So if it's all in, sure, we can do it, absolutely.

Mr. Jay Hill: And it would work as well?

Mr. Phil de Kemp: But it has to be everything, because again it is only malting barley we selected.

Mr. Jay Hill: Thank you.

The Chairman: Thank you all very much.

We'll now call to the table the Winnipeg Commodity Exchange and the Western Barley Growers Association.

We'll suspend for five minutes while we're making the change.

• 1645

• 1650

The Chairman: We will now reconvene our meeting.

Welcome, gentlemen. I believe you know the routine. We'll go first to the Winnipeg Commodity Exchange, Mr. Bennett Corn, to make a 10-minute presentation. Then we will go to the Western Barley Growers Association.

Mr. Corn, you're on.

Mr. Bennett Corn (President and Chief Executive Officer, Winnipeg Commodity Exchange): Thank you, Mr. Chairman.

Mr. Larry McCormick: On a point of order, a point information or whatever, Mr. Chair, just to help in this, because I want to hear all this, have you or have we decided how we're going to address the situation of the vote in the timing here? I only want to spend seconds on that. Is there a vote?

The Chairman: There will be a vote, we're told. The bell rings at 5.30 p.m., so we'll suspend and come back as soon as the vote is concluded.

Mr. Larry McCormick: Thank you, Mr. Chair.

The Chairman: These people have come a long way for them to—

Mr. Larry McCormick: Gentlemen, I'm sorry. I just wanted to ask that.

Mr. Bennett Corn: Thank you, Mr. Chairman. I'd like to thank you for the opportunity to speak to you today on behalf of the Winnipeg Commodity Exchange.

Accompanying me is Mr. Keith Lewis, a public governor on Winnipeg's board for the past six years. Mr. Lewis has facilitated futures and option courses for farmers, sponsored by the WCE, for approximately five years. He operates the family farm business and authorized seed plant in Wawota, Saskatchewan, producing seed grains and oilseeds. He has given six years of service as a director of the Saskatchewan Canola Growers Association, two as president, and two years as a director of the Canola Council of Canada. He is also president of Mainline Terminal Ltd., a farmer-owned regional elevator company based in Saskatchewan.

Again, thank you for the opportunity to express our concerns with the inclusion clause for Bill C-4, an act to amend the Canadian Wheat Board Act, which is to be revisited by the House of Commons. Given the limited time available, I would like to focus your attention on concerns the exchange has with motion number one, dated April 17, 1997, known as the inclusion clause of Bill C-4.

The exchange is concerned that the inclusion clause of Bill C-4 is a move in the opposite direction of the global, national, and provincial trend towards a more open market structure. The proposed inclusion clause would have an adverse impact on the exchange's marketplace and its ability to discover prices and transfer of price risk—a critical component of the competitive agricultural industry.

Furthermore, this clause would undermine the relevance of the exchange's marketplace and adversely affect a broad range of market participants, including producers. If accepted, the inclusion clause creates the mechanics for empowering the Canadian Wheat Board with single selling desk authority for grains currently not under its mandate. This is contrary to the recommendations made by the Western Grain Marketing Panel on July 9, 1996, regarding the marketing structure for non-CWB grains, and in opposition to recent statements by numerous organizations, including the exchange, the Canadian Oilseed Processors Association and its individual members, the Canadian Canola Growers Association and its provincial counterparts, and so on.

The exchange is concerned that the inclusion clause has not been subject to the needed public debate on a provision of the act that would have significant implications on the Canadian agricultural sector. This clause would allow one segment of the industry to impose a fundamental change without the input of the rest of the industry or consideration of what is best for Canada as a whole.

Futures markets are essential to a competitive marketing system for agricultural products. These markets allow the risks inherent in agriculture to be borne as efficiently as possible, without the need for government participation. They also improve the competitiveness of markets by providing timely, reliable and visible prices that level the playing field between buyers and sellers.

Farmers are a major beneficiary of these services. Efficient risk bearing reduces middlemen's margins and thereby raises prices paid to producers. The ability of farmers to shift risk through futures markets reduces their costs and facilitates improved management decisions. More competition and better information also results in higher prices and lower cost to producers. The primary role of the futures market is to facilitate price discovery and to provide a mechanism for dealing with price risk. A futures market provides equal access to all participants, whether large or small, domestic or foreign.

• 1655

The WCE is Canada's only exchange providing price discovery and risk management tools for the agricultural industry. The WCE offers trading in both futures and options contracts, using the open outcry system. Its mission is to provide a public marketplace for responsive price discovery and risk transfer of commodities with efficiency and integrity.

The exchange is a not-for-profit membership corporation. Its members represent all sectors of the industry and include major international grain-trading companies, elevator companies, domestic merchants, exporters, processors, international brokerage firms from around the world, financial institutions, farmers and independent traders.

Futures contracts traded at the exchange include canola, flaxseed, domestic feed wheat, western domestic feed barley, oats and feed peas. Options on canola, flaxseed, feed wheat and feed barley are also offered.

The exchange is the world's leading provider of price discovery and risk management tools for canola and is the only futures price discovery mechanism for flaxseed and feed peas.

The WCE is an international marketplace, attracting buyers of Canadian grains and oilseeds from around the world, for example, Japan, Mexico, the U.S., Germany, Poland and Australia.

The total value of futures contracts traded on the exchange in 1996-97 was $13.8 billion. Record volumes of over two million contracts were traded this past year, which reflects the global demand for exchange-traded risk management tools in the agricultural industry.

Canola is the exchange's largest traded commodity, with 1.4 million contracts traded during the 1996-97 crop year, the equivalent of over 28 million metric tonnes. The Canadian canola crop this past year was 5.6 metric tonnes. The exchange has been an important contributor to the success of the Canadian canola industry, and the inclusion clause threatens its long-term viability.

Beyond the direct economic activity occurring at the exchange, trade in its products supports a brokerage industry, specialized trading and support staff, and foreign investment. This represents a large investment in trading the exchange's contracts and supporting the trade in those products. Therefore, any limitation to the exchange's products would have a direct impact on the economic activity it creates.

The exchange is a critical part of Canadians' grain industry, providing risk management tools to meet the needs of domestic and international participants in today's global marketplace.

The proposed inclusion clause would introduce a mechanism to fundamentally change this price discovery process and reduce the relevance of the exchange's market to both domestic and international participants. If used to grant authority over canola to the CWB, it would allow for the price discovery process supporting the canola contract to change from an open market system to a closed regulated system and would eliminate the relevance of the contract as an international pricing and risk management tool.

For example, the exchange's canola contract provides a benchmark price and effective hedging tool for producers, grain merchandisers, exporters, importers and processors, both domestically and internationally. The futures price for canola reflects the world value of this commodity.

This change in the underlying market, or even the introduction of the potential for the change, would significantly reduce the efficiencies and the competitiveness that have been developed in the marketplace for non-CWB grains and oilseeds. It contradicts domestic and global trends towards open markets. Governments around the world are being encouraged to move towards an open market structure. Domestically, the federal government has been moving towards deregulation in the agricultural industry.

In support of this trend, the government has contributed significantly towards the development and training associated with the implementation of an options market on the exchange. This training program focused on how to use the exchange's markets to manage price risk, enabling the farmer to become more self-reliant.

In a further move towards deregulation in the agricultural sector, the prairie provincial governments have eliminated single-desk selling for hogs. In support of this, the federal government has funded research aimed at developing a futures contract at the WCE for hogs and has also approached the exchange to list an exchange-traded cattle options contract.

The inclusion clause puts in place a mechanism that would move one segment of Canadian agriculture in the opposite direction. The move to open markets is further supported by the move toward more liberalized trade, as seen in the Canada-U.S. Free Trade Agreement, the North American Free Trade Agreement and the ongoing negotiations aimed at including additional countries.

• 1700

Even broader in scope, the General Agreement on Tariffs and Trade, focused on opening the world markets in the next round of World Trade Organization talks, is likely to pay a significant amount of attention to dealing with state trading. These agreements clearly define the trend to deregulate markets.

In a less regulated environment, market participants must manage their risk more efficiently and effectively if they are to remain competitive. Futures markets provide the ability to manage risk. The clause represents the mechanism to create a new state trading agency for grains currently not under the CWB's mandate.

In conclusion, the exchange is an established marketplace that provides a level playing field in the trade of grain-based futures and options contracts. It is these products that allow Canadian producers, processors and grain merchandisers to allocate their resources efficiently and to compete in the global marketplace.

The adverse impacts of the proposed inclusion clause include: a fundamental change in the market upon which the exchange's current and potential products would be based in the future; the demise of the exchange's futures contracts as an effective international price-discovery mechanism and hedging tool; a contradiction to the domestic and global trend toward more open markets, including significant federal government investment in supporting a more open, self-reliant Canadian agriculture; the potential reduction in the pricing alternatives available to producers; increased uncertainty regarding the future market structure of Canadian agriculture, thereby representing a significant disincentive regarding investment in product development for Canadian grains and oilseeds-based industry; and the introduction of an opportunity for one segment of the market, producers, to make a fundamental change to the market structure without adequate representation from all interested parties and without adequate consideration of the best interests of Canada as a whole.

The inclusion clause would damage the well-being of our free and open markets. Furthermore, the exchange believes it would be detrimental to the Canadian agricultural industry and the economy, and strongly recommends that this inclusion clause in Bill C-4 be removed.

Thank you, Mr. Chairman.

The Chairman: Thank you, sir.

Mr. Spencer.

Mr. Buck Spencer (President, Western Barley Growers Association): Thank you.

With me today is Mr. Doug Robertson, first vice-president of the Western Barley Growers. I am the current president. We're going to share reading this brief.

We would like to thank the standing committee for allowing the Western Barley Growers a chance to present our views on this highly contentious bill. We will leave with you a formal written presentation outlining our points in greater detail and hope it will be of help in your deliberations.

Doug.

Mr. Doug Robertson (Alberta Vice-President, Western Barley Growers Association): First and foremost, let us be clear that although the Western Barley Growers Association recognizes the need to overhaul Bill C-4 as it now reads to make it more workable, our preference is for a voluntary Canadian Wheat Board and not a new and improved monopoly.

Most of the problems in the Canadian Wheat Board Act and the Canadian Wheat Board in general would be gone under a voluntary Canadian Wheat Board. The markets and the competition there generated would guarantee that.

We'd also prefer a true annual auditing of the Canadian Wheat Board by the Auditor General to make it more accountable to farmers, even if older records, not current crop year data, were examined in order to remove the concerns expressed by the Canadian Wheat Board about possible competitor advantage from the release of their secret sales information. These changes, we feel, would go far further to bring the board into the market realities of the late 20th century than any changes proposed in Bill C-4.

With regard to the bill, one of our major concerns about it is with regard to the inclusion clause, as mentioned by the WCE. Farmers have embraced canola despite its riskier growing habits versus wheat and barley because it is a non-board crop and could generate badly needed cashflow at a time when board grains are paying very little.

The price risk can be handled by using the futures market. It's easy and quick to sell and be paid. The world market price is visible. It's set by a free market as opposed to board grains, which are always below world price and set by bureaucrats. In fact, the only trouble farmers have had with canola is when federal bureaucrats have messed with it—for example, the ridiculous cash-call market in Vancouver; preventing farmers from getting producer cars; and the routine dumping of canola screenings into export barley, making it twice as dirty as when farmers combined it. That's to name just three.

• 1705

It seems Mr. Goodale and the cabinet would like to play with a new toy. Canola is one of them, and putting it and other grains under the wheat board umbrella is their new toy. This has very little to do with what farmers wanted and everything to do with what the federal Liberals and the three prairie pools want.

The Western Barley Growers Association is fundamentally opposed to the Canadian Wheat Board having control over any more grains when independent studies show it can't successfully market the grains it has control of now. Farmers grow canola to avoid the board. We will never support its inclusion.

MPs from Ontario and Quebec should closely examine this inclusion clause. It is our opinion and that of our legal advisers that there is nothing to prevent a producer group such as the Western Barley Growers Association from petitioning the Canadian Wheat Board to get all barley grown in Canada under control of the Canadian Wheat Board and therefore under federal control.

The same could occur with all grains grown in those two provinces, including corn and soybeans, and I'm sure your farmers would be as happy as heck to have the federal government telling them when, where and how much they can get for their agricultural crops. No one on this committee, I have been informed, has ever had to work under this regime. As a farmer in western Canada, I do, and I assure you that you do not want to support this inclusion clause in any way, shape or form.

Another problem we have with this bill is the identification of employees. Howard Migie, one of the key authors of Bills C-72 and C-4, and Mr. Goodale and his press secretary have taken great pains to deflect criticism about the identification clause, claiming it is the same as the one UGG uses. When that was proved wrong, they claimed the exact words of the Canada Business Corporations Act were used to write the clause. This is also wrong. Investigative work by a reporter from Alberta Report, Joshua Avram, found the identification clause in Bill C-4 to be unique in that it gives legal protection not only to officers and directors past and present but to every Canadian Wheat Board employee past and present, right down to their fitness instructor.

It was also unique in that it did not require that somebody be worthy of identification or even innocent in a court of law. Mr. Migie counters that the French-language version of the bill, which does not include employees in the blanket identification, whereas the English version does, would apply anyway so there was no need for concern. Legal opinion Mr. Avram got for his article disputes that.

Mr. Migie should rewrite the clause so it is exactly like the CBCA model in both languages.

The exclusion clause is another aspect of the bill that we feel again illustrates how little attention the federal government paid to the actual reforms farmers wanted to the Canadian Wheat Board Act. Instead of a voluntary Canadian Wheat Board, which we wanted, we got a set of rules removing a grain from the Canadian Wheat Board control, which would ensure anything the Canadian Wheat Board gets included in their control will never come back out again. In order for a grain to be excluded, it must first of all be recommended by the board of directors, which is highly unlikely since they are required to support the best interests of the corporation as defined by Ottawa and as defined by the bill.

Mr. Jake E. Hoeppner: Right on.

Mr. Doug Robertson: Second, the Canadian Grain Commission must establish a program to preserve that grain's identify from all others, a monumental and quite ridiculously unnecessary task.

Third, a producer plebiscite designed and run by Mr. Goodale must be one that, given his question-tailoring abilities in the recent barley plebiscite, would never be fair or likely.

And finally, both the minister and the cabinet must approve the exclusion, leaving the whole process open to political whim at the end as well.

We find it highly improbable that any grain would pass all five stages. Therefore, the exclusion clause should be stricken in favour of one that is a simple plebiscite vote by farmers, administered by an independent body free of the influence of the minister, the wheat board and the pools.

Mr. Goodale knows full well that a voluntary Canadian Wheat Board would survive and thrive. The justification for keeping the wheat board mandatory is merely one of power and control over western agriculture by the federal government.

The primary advantage of this bill, according to Mr. Goodale, is that it will give farmers control over the wheat board because he's allowing 10 of them to be elected as members of the board of directors. This is completely untrue and he knows it.

First of all, he, not the board, will appoint the president or CEO. The president is charged with running the Canadian Wheat Board. The board has no control over the president and therefore will be the kind of rubber stamp body that we see with the three prairie pool delegate assemblies, nothing more.

• 1710

Secondly, since Mr. Goodale appoints five directors including the president, he need only get three more pro status quo directors elected to subvert the wishes of the majority of producers. Even if 70% of farmer directors favour a voluntary CWB. they will be outvoted eight to seven.

There is no commitment in the bill that the 10 elected directors will be farmers, and Goodale designs the election anyway so we have little hope that it'll be unbiased.

Mr. Buck Spencer: If Mr. Goodale were serious about giving farmers the accountability we ask for, he would have to look no further than the Ontario Wheat Producers' Marketing Board.

Ottawa guarantees their financial arrangements in the same way as they do for the Canadian Wheat Board, but 10 elected farmers operate and oversee the Ontario Wheat Producers' Marketing Board without any federal appointees thrust upon them. They have complete authority to hire and fire anybody they want within their operation and do not have to ask permission from Mr. Goodale or the federal cabinet whenever they rearrange their affairs.

This double standard is unacceptable and puts western agriculture at a great disadvantage.

It is the contention of the Western Barley Growers Association that a political solution to the many problems already inherent in the Canadian Wheat Board, and those that will be created in addition by Bill C-4, is not possible. The federal Liberals and Mr. Goodale see the Canadian Wheat Board as a tool to keep power out of the hands of western farmers and in the hands of the federal bureaucrats and politicians.

We therefore recommend that barley be removed from the Canadian Wheat Board and that a voluntary Canadian Wheat Board for wheat be established. While only a tiny percentage of barley is sold by the Canadian Wheat Board, as long as farmers have no access to world prices, all western barley suffers in both price and market opportunities.

Numerous independent studies, polls, plebiscites and even Mr. Goodale's hand-picked grain marketing panel have all called for a voluntary Canadian Wheat Board or for barley to removed from the Canadian Wheat Board. Mr. Goodale has ignored them all and now attempts to make the Canadian Wheat Board even more intrusive with his inclusion clause.

And just to quote Mr. Goodale: “one person's definition of a freedom is another person's straitjacket”, and through Bill C-4 he is putting western farmers in a straitjacket when all they ask for is the freedom to market their own grain.

The Chairman: Thank you very much. I guess there's not much disputing where you stand on that.

Mr. Hill.

Mr. Jay Hill: I can tell you fellows are from western Canada because you're pretty blunt, and I appreciate that.

Call me a cynic or suspicious, but it strikes me that there's been one person who has really pushed this inclusion clause, and it's Mr. Easter. It seems like it's become the flash point at this point, and I wonder if it's been designed to distract the attention of farmers and farm groups from across the country away from the central focus you alluded to, and that's the fact that this bill does nothing to move us towards a voluntary system for the farmers to market their product.

Earlier, during a tirade by Mr. Harvard directed at the Canadian Oilseed Processors, he said, show me an inclusion clause, and he inferred some sense of paranoia on the part of those who would question this inclusion clause.

If we look at clause 26 and the old section 47.1 we see three things: (a), (b) and (c).

The first is that, as you, the barley producers, have pointed out in your brief, when it says “a producer association that represents the producers”, my concern and yours is that this hasn't defined what a producer association is.

Secondly, under proposed paragraph 47.1(1)(b), “the extension is recommended by the board; and”, as you point out, and as we've pointed out, all you'd have to have is three of the individuals out of the ten elected side with the five appointed ones and effectively the majority of the elected directors would thereby be overruled.

Of course, as you also pointed out to Mr. Harvard and others, since he asked the question, proposed paragraph 3.12(1)(a) says that the directors are to act in the best interests of the corporation. It says nothing about operating in the best interests of farmers. Furthermore—and you pointed this out as well—proposed paragraph 47.1(1)(c) says that a vote should be in a manner determined by the minister.

Maybe we're all paranoid, but I would say that there's certainly great cause for concern in all proposed paragraphs (a), (b) and (c)—all of the hurdles that would have to take place before any product, canola or others, was brought under the monopoly of the Canadian Wheat Board. There's concern there.

• 1715

I just wonder if you would elaborate a little bit more on your concerns about that so that we could, in effect, answer Mr. Harvard's concerns on the earlier affiliation.

Mr. Buck Spencer: The very process we go through would subject our customers to a lot of concern. It would put people in the marketplace. I don't see how this would ever work. I really don't see how going through this process would ever allow us to exclude a grain from the process. We just feel it would be impossible.

Do you want to add to that, Doug?

Mr. Doug Robertson: Are you asking whether we like either clause, inclusion or exclusion?

Mr. Jay Hill: That's what I was coming to. If it came down to it, as for both representations here this afternoon, would you support dropping both the exclusion and the inclusion clauses? That's the argument we always get. If you have exclusion, then you have to have inclusion because of fairness.

Mr. Doug Robertson: It's interesting to see the change between C-72 and C-4. Suddenly, this inclusion clause came on board. I guess this was rightly so, as you triggered the person or the group that pushed so hard for that.

An hon. member: A group of one.

Mr. Doug Robertson: I'm not quite sure how they justify it, except for the fact that it has been a longstanding hope of the pools especially to get canola under the board. Every year when I went to the canola producers association meetings, some nut case stood up and asked for it, and every year he was defeated 200 to 1. But every year, there's somebody who is hoping.

When you question these individuals and ask them what their problem is, they say their neighbour got eight bucks for his canola yet they only got seven. Well, what's the problem with that? Did the neighbour hustle for it? Did he phone around? Did he phone more than one elevator company? Did he look for the free market? Well, yes. Well, what did these individuals do? I found that they stayed at home and phoned one person. They got it, but then found out that their neighbour in the coffee shop got seven bucks. So they got a buck less than the neighbour did.

There's a long silence in the room every time. People wonder whether they expect to get that eight bucks for doing no work. Yes, they do. They say they expect it, damn it. They say it's their right to get that money without doing any work.

I'm sorry, that's not the way the real world works; that's the way barley and wheat is sold under the board. That's not the real world, I'm sorry.

Mr. Buck Spencer: There's also a clause in Bill C-4, if I'm not mistaken, that says the board could now go outside the Canadian Wheat Board's designated area to buy grain. They could go into areas that weren't included in the Canadian Wheat Board's designated area.

Would that also give the farmers the right to sell outside of that designated area? Shouldn't one be good for the other? Shouldn't we have the right to sell outside Canadian Wheat Board's designated area if the board has it?

Mr. Doug Robertson: We have no trouble losing either or both clauses. Losing the exclusion clause would—

Mr. Jay Hill: Thank you.

The Chairman: A very short question, if you have one.

Mr. Jake E. Hoeppner: We heard from the millers today that they could forward price six months' worth of supply. Does the Canadian Wheat Board hedge that supply they've sold so as to protect farmers' interests?

Mr. Bennett Corn: My understanding is relatively new here. I've been up here six months. They're not using the Winnipeg exchange. They may be using some U.S. markets. The hedging facilities for most futures markets go out anywhere from a minimum of 18 months. Some of the products that trade around of the world even go out to three to four years. But they may be using it to some degree.

Mr. Jake E. Hoeppner: This is the suspicion that exists. We never see any of those accounts in the estimates, whether there's money flowing in or out. That concerns me when you can forward sell, which was something the board said they would never do. They were going to price manage it by selling just a certain amount, but when you sell six months of flour to the milling industry, you better hedge it somewhere, or we're going to take the big losses.

Mr. Keith Lewis (Public Governor on the Board, Winnipeg Commodity Exchange): Mr. Hoeppner, the Canadian Wheat Board does use commodity futures in the United States to hedge.

The Chairman: Madame Alarie.

[Translation]

Ms. Hélène Alarie: The goal of the Canadian Wheat Board's reform is orderly marketing, mainly to the satisfaction of the producers groups. It is quite clear to me, from what I hear this afternoon, that all oilseed producers do not feel at all concerned or don't want to feel concerned with the Canadian Wheat Board.

• 1720

As you are in the middle, according to you, what are the lobbying groups at the root of an inclusion request for the oilseed producers only?

[English]

The Chairman: Mr. Corn, you might as well go first.

Mr. Bennett Corn: I'm not familiar with all the groups, but from the short time I've been here and gotten to know a lot of different groups of farmers, there seems to be a lot of different groups of farmers saying they represent farmers.

I think the real issue with this market is that it's an international marketplace, and the cloud of uncertainty over that market stops a lot of people from adding domestically to the infrastructure of Canada and its value-added and processing. The fact that it's a world market means you have Europe and the U.S. and Australia using the market. This market can go anywhere. It's not a domestic market. I mean, I've seen markets disappear.

When I started in the business 30 years ago the world centre for sugar trading was in London. The U.S. took it away from London. There is no longer a viable sugar market there. It was through a lot of hard work, and they screwed up a lot of things there.

You have something here that's developing. It's a small market compared with a lot of other markets around the world, but it's growing. There's keen interest to invest here. When you talk to people around the world they see the importance of this market. They're paying more attention to it. They see the growth for this market right here in Canada for the processing.

That's a real value-added. From the short time I've been here I've seen a lot of raw materials move back and forth in Canada. Anything where there's value-added and processing will add to your economy.

So this market is growing, and it adds benefit. The minute anyone thinks their hedge can be undone, or someone can pull the plug on this market, they're going to look elsewhere, and it's going to undermine....

I'll give you a good example of that. I hate to bring it up, but look at what happened in your options market recently when two exchanges fired at each other. It created a real lack of credibility in the options market here. The banks stepped in and said to take it out of the public domain.

So any public loss of confidence in that market and you're going to lose it. It's a real plus for the Canadian economy, and it's growing. It adds a lot. In six months I haven't met all the farmers, but there are a lot of them up here who see this as a real opportunity for them to freely market their products.

The Chairman: Mr. Spencer.

Mr. Buck Spencer: I want to comment on what I believe is a misconception here. The Canadian Wheat Board was not established to set up orderly marketing. It was established as a war measures act to prevent inflation and to generate grain for the war movement that was on. At the time it was done, it was probably the right thing to do. We never had a choice. It was legislated. We woke up one morning and all of a sudden we were under the control of the Canadian Wheat Board.

Ms. Hélène Alarie: Okay.

The Chairman: Thank you. Mr. Calder or Mr. Easter.

Mr. Wayne Easter (Malpeque, Lib.): Thanks, Mr. Chair.

Well, we've had a pretty good rant against the Canadian Wheat Board, the minister, and anybody who believes in collective marketing. I'll submit, Mr. Chairman, for the record that there was a lot more heat exercised on the subject than there was light.

I have no comment to make on the barley growers' presentation other than to say that they are factually wrong on their comment on the Ontario wheat board. The government does not guarantee borrowings for the Ontario wheat board. But it's not unusual for the barley growers' facts to be wrong.

Maybe one reason your anger is showing through is because you're never able to come up with the votes when there is a real vote on a black and white question in terms of who supports the wheat board and who doesn't.

In terms of the Winnipeg Commodity Exchange presentation, I guess if anything has convinced me of the need for the Canadian Wheat Board versus the Winnipeg Commodity Exchange, certainly this submission has. I can understand the spokespersons from the Winnipeg Commodity Exchange in regard to the fear that they have of the wheat board, because if the players in the Winnipeg Commodity Exchange gouge the farmers, as has happened in the past, and was clearly shown that way, under Bill C-4 farmers do have an option open to them. They have an option other than the Winnipeg Commodity Exchange or the grain companies. That's what Bill C-4 allows.

• 1725

You indicate in your brief, and I'll quote you, that:

If accepted, the inclusion clause creates the mechanics for empowering the Canadian Wheat Board with single desk selling authority for grains currently not under its mandate.

Again, Mr. Chair, for the record, I'd like to correct that statement, because what is really happening with the inclusion clause and the Canadian Wheat Board in general is that the mechanics are there under the Canadian Wheat Board for empowering the farmers in terms of selling through a single-desk agency to maximize returns in that international marketplace.

Mr. Jake E. Hoeppner: It doesn't even say that in the act.

Mr. Wayne Easter: The question I have really relates to the last paragraph on page 1 of the Winnipeg Commodity Exchange brief, which basically says:

This clause would allow one segment of the industry to impose a fundamental change without the input of the rest of the industry or consideration of what is best for Canada as a whole.

That is fundamentally and absolutely wrong, Mr. Chair. I'll put that on the record as well.

Let me put it this way. Do you not see protections in the bill? It's spelled out in the bill under proposed section 47.1, in subsection (1) and in subsection (2), paragraphs (a) (b) and (c), in terms of the procedures. What the act sets up in terms of the inclusion clause is what now can be done by a minister politically, without real discussions with the industry. What the act sets up is a clear-cut procedure in which certain regulations and certain rules have to be followed in order to put a new crop under. Can you not see that?

The Chairman: Mr. Lewis, please.

Mr. Keith Lewis: I just have a comment for Mr. Easter regarding his comment that the Winnipeg Commodity Exchange gouges farmers. I happen to be grower of non—-

Mr. Wayne Easter: On a point of order, Mr. Chairman, this is the typical game that is played.

Mr. Keith Lewis: Mr. Chairman, I have the floor.

The Chairman: Order, please.

Mr. Wayne Easter: Mr. Easter did not say the Winnipeg Commodity Exchange gouges. I said if you gouge there's an opening—-

The Chairman: Order.

Mr. Easter, we'll let—

Mr. Keith Lewis: I suggest to you, sir, that you left the order—

The Chairman: Order.

Mr. Keith Lewis: —to me. If the Winnipeg Commodity Exchange gouges farmers, then I suggest to you that my experience this year with my oat and canola crop, which earned me many more net dollars in my pocket than wheat board wheat, which I refuse to sell...I'll tell you, if that's gouging I'd like to know what the hell a real good market would do.

The Chairman: Mr. Corn, do you want to answer the question?

Mr. Bennett Corn: Yes. I'm not going to get into that kind of rhetoric. I'm not used to that. But I am going to answer the question about the industry because Mr. Easter, now that I finally got to meet him...I've heard about him—

Some hon. members: Oh, oh!

Mr. Bennett Corn: —so his reputation precedes him.

Some hon. members: Oh, oh!

The Chairman: Order.

Mr. Bennett Corn: As for the issue with the industry, I'm talking about the industry as a whole. I'm talking about every part of the industry from the production to the processing. At the end of the day the customer is not the farmer, the customer is the end-user, whether he's buying a pair of pants or a car or whatever: the customer drives the market. Okay?

There are a lot of choices. We are talking about freedom of choice and opportunities that are happening around the world. If you want to ignore that global trend, fine. There are a lot of multinational players out there who are dealing in all the markets, and they'll go and source the most efficient and the most effective. And every country is looking at those changes. I'm just saying that if you're going to call a vote, you get everyone involved who's put dollars on the table to grow this industry, and his bill does not allow for that; it only says someone who grows the product.

The Chairman: Mr. Byrne, you have two minutes.

Mr. Gerry Byrne (Humber—St. Barbe—Baie Verte, Lib.): I have just a couple of quick questions.

There seem to be a lot of references to credentials, to witnesses and to honourable members sitting around this table, which I quite frankly find somewhat offensive. But just very quickly, Mr. Corn, if I could ask you this as an expert witness, are you a Canadian citizen?

Mr. Bennett Corn: No, I'm not.

• 1730

Mr. Gerry Byrne: So you're not a western Canadian. You're not a Canadian citizen. You are an American. Is that—

Mr. Bennett Corn: Right. What does that—

Mr. Gerry Byrne: Just expert testimony...because I want to observe the credentials of the witnesses. I'm not passing any—

The Chairman: Mr. Byrne, I think he was hired by the commodity, so—

Mr. Gerry Byrne: I'm not; I'm just—

The Chairman: Mr. Byrne.

Mr. Gerry Byrne: On a point of order, Mr. Chair—

The Chairman: There are Canadians working in the United States too.

Mr. Gerry Byrne: On a point of order, Mr. Chairman—

The Chairman: Yes.

Mr. Gerry Byrne: —I'm not making a disparaging comment. I'm just asking a question to find out the expert witness's credentials. That's all.

Mr. Bennett Corn: Mr. Byrne, I'm here. I have 30 years' worth of work in the commodity futures industry. I was the president and CEO of the coffee, sugar and cocoa exchange in New York City. It's the world's largest marketplace for those three products.

I was hired by the Winnipeg Commodity Exchange to come up here and run the exchange and to help grow and develop its markets.

Mr. Gerry Byrne: Fine.

Mr. Chair, I'll just continue with my questions. I'm delighted to have you here, sir. I'm not posing any disparaging comments on the fact that...I'm just seeking evidence.

Mr. Bennett Corn: All right. I'm talking about free markets. I'm not here as an expert about the—

Mr. Gerry Byrne: Yes.

I'll pose my next question to Mr. Robertson. Is it your view that the Canadian Wheat Board should wrap up and just terminate its operations?

Mr. Doug Robertson: Our organization does not believe that the Canadian Wheat Board should be disbanded, despite disparaging comments made by other organizations that we have advocated that. We have never advocated such a thing. We have given ourselves more credit than they have given us in that we would like a voluntary wheat board. We would like them to compete, and they counter that it is impossible. They can't compete: “By God, we have to have it all. We're all powerful, but when we do compete, we can't.”

The Chairman: Ladies and gentlemen, the bells are ringing, so I'll suspend this sitting until the conclusion of the vote in the House. We'll resume right after the vote.

• 1732

• 1814

The Chairman: I'll call the meeting to order. We shall resume where we left off, if the witnesses would take their places. We'll begin with Mr. Proctor from the New Democratic Party.

Mr. Dick Proctor: Thank you very much, Mr. Chair. I have one question for each of the groups that are before us.

• 1815

First of all to the barley growers, I note on the bottom of page 5 of your brief in the last sentence it says: “everyone farming at least 100 or more acres of barley or wheat per year, whether they have a permit book or not, should be eligible to vote.”

I wonder if you would give us the rationale for having the permit book or not. What's behind that?

Mr. Buck Spencer: There are many people, especially in Alberta, who no longer have permit books but produce a lot of barley. A lot of people produce silage. At some time they may get out of the cattle business or whatever they're doing and still have the ability to grow barley. If they're growing barley now and don't have permit books, they should have the right to have some say in what happens to the barley market. Don't you agree?

Mr. Dick Proctor: Yes. They have obviously opted to sell their product off the board.

Mr. Buck Spencer: But that doesn't mean they're going to do that forever. They're barley producers actively producing barley, and things change. Maybe a farmer gets older and doesn't want to raise cattle any more. He's been cutting all his barley for silage so now he's going to grow malt barley or whatever. So at some point he may want another permit book. There are quite a few people who grow barley who don't have permit books.

Mr. Doug Robertson: There is a huge number of people—I can speak for our area—who are presently growing a lot of very risky crops, and they're growing them because they don't want to grow board grain. That's the only reason.

In my area it's a no-brainer to grow barley and wheat. We could get paid for it if we could get a world price and I could live with it. But I can't access that so I have to make the decision year by year, and sometimes mid-season, as to whether I can make a go of it with a different crop that is maybe risky.

Look at the amount of peas and canola that was grown this year and the huge drop in the number of board grains that were grown this year. That's a real reflection of what happens when farmers say “I'm not getting paid. I'm worried about the system as it is. I'm going to vote with my truck. I'm going to do everything I can to get away from this structure.”

We are concerned it's going to kill the board. The board needs to exist, because there are obviously people who want it, but it doesn't need to exist in a monopoly situation.

Mr. Dick Proctor: That kind of ties into the question I wanted to ask Mr. Corn.

You used the example, in answering one of the earlier questions, of the sugar market and how the Brits basically screwed that up and lost it to the Americans.

We have, with the Canadian Wheat Board, an organization that sells between $5 billion and $6 billion of wheat, barley and durum around the world every year, and I don't think we want to screw that up. If changes need to be made, fair enough, but how can we do that and protect the interests of the western grain farmer in the process?

Mr. Bennett Corn: I'm not an expert on your single-desk market system. It's something I'm just becoming familiar with.

That has to come from within the industry. I'm representing the free market system that exists around the world, where a lot of institutions like the Winnipeg Commodity Exchange exist to create price discovery and risk transfer, where people can use the markets as a hedging tool. It provides this service for a very broad industry from the production to the end-user.

I'm here to represent that we serve a significant economic purpose to the Canadian economy and to the world economy, because it is a world market. I think any time you give people free choices and opportunities and you have competition, it creates a better marketplace where the farmer has opportunities to market his product in other places. I think it's a better system.

• 1820

I'm talking in general about a free market system. I'm not directing anything directly to the wheat board. That's not the purpose of my testimony. I didn't come here to be anti-wheat board.

The Chairman: Thank you, Mr. Corn.

We'll go now to Mr. Borotsik.

Mr. Rick Borotsik: Mr. Robertson, you just made a comment that the board grain volumes are down and more people are getting into canola, lentils and peas. Is that the case? Was there less acreage planted this year to wheat and are the volumes down?

Mr. Doug Robertson: Yes, that's a fact, and there was a drop in tonnage because of the type of year we had. Some areas actually had better yields than they thought they would and some had worse.

Mr. Rick Borotsik: But is acreage down?

Mr. Doug Robertson: Yes.

Mr. Rick Borotsik: If that's the case and volumes are down with the Canadian Wheat Board, obviously taking the administration fee off its volume sales, its costs are staying the same and the volumes are down. Does it make sense to say the return to the producers will be less because of that?

Mr. Doug Robertson: We're never allowed to see the books, so how would I know? It can do what it wants.

Mr. Wayne Easter: Mr. Chairman, here are the books right here. What other agency does that?

Mr. Rick Borotsik: I'm sorry, Mr. Easter, I do have the questions. I would like that time added, if you don't mind, Mr. Chairman.

The Chairman: All right, Mr. Borotsik.

Mr. Rick Borotsik: Mr. Spencer, you're very passionate. You obviously have some very strong feelings and I value your opinion, unlike others who perhaps think your opinion isn't valued. I do believe that.

You have a very passionate belief with respect to barley coming out of the Canadian Wheat Board. I say that because we have an option here on inclusion clauses and you spoke to that in your brief. The comment is always that if you have exclusion you should have inclusion. Even though you know barley would remain a board grain, would you support getting exclusion out of this particular piece of legislation in order to get inclusion out?

Mr. Buck Spencer: Yes, I would, because I feel the present legislation that's proposed would maybe harm some of the other commodities and make it more difficult for some of the other commodities such as canola.

Mr. Rick Borotsik: Thank you.

Mr. Corn, I've read your brief on the Winnipeg Commodity Exchange, and canola is without question the kingpin of this particular commodity exchange. Even with the language of this legislation identifying the slim possibility it will be there, as suggested by members across the way, is there a danger it could jeopardize your position in the Winnipeg Commodity Exchange?

Mr. Bennett Corn: Yes, there is. Several people who use the markets have raised questions with us about the viability of our market and whether this is really going to happen. I've had people who were looking to buy memberships on the exchange who've asked us if this is really going to happen, because if it is, they're not going to buy a seat and they're not going to get active in the marketplace.

I've been interviewed by people from some overseas publications. It really surprised me that they were aware of this. In the Futures & Options World magazine they wrote a pretty big piece about it.

It's like a cloud overhanging the market and it affects people's decision-making. When there's that type of uncertainty the market doesn't function correctly and people will look for other options. They can go elsewhere. You don't have an exclusive on this. This is a world market and it's like any world market. It's not a domestic market. So I think it creates a lot of uncertainty for the industry within Canada and for the industry outside that's trying to use this market as a pricing and hedging mechanism.

Mr. Rick Borotsik: Again, I'm not going to make any apologies for things I didn't say, but just because you've only been here for six months doesn't mean I don't value your opinion as well on the world trade situation.

As you said in your brief, almost everyone else is getting away from monopolization or single-desk selling and into the open market system. I believe you mentioned hog marketing in your brief, for example, but do you know of any public sector organizations that have, with competition, gone to the private sector now and have perhaps increased their opportunities and service to their customers?

• 1825

Mr. Bennett Corn: Yes. I know the telephone industry is. I don't know about across all of Canada, but I know in Manitoba they're going through that right now. I know public utilities in the U.S. are. The utility markets now, because of deregulation, are looking and have set up trading operations to trade electricity. There are electricity contracts trading in the U.S. and New Zealand and over in Switzerland. There are people trying to trade natural gas. We've been approached by Manitoba Hydro to look at an electricity contract. We've been approached by another utility to look at another contract that I can't go public on.

Mr. Rick Borotsik: In your experience—

The Chairman: Thank you, sir.

We'll now go to Mr. Easter again.

Mr. Wayne Easter: I just have a point of information, Mr. Chair.

It was alluded to that there's no information from the Canadian Wheat Board. In fact the Canadian Wheat Board's annual report is tabled every year. There are 84 pages of documentation in there, audited by Deloitte & Touche. I would like to see the annual reports of other grain companies, such as Cargill and others, come up with that transparency in reporting to the public. You won't find it.

This is available to the public. It's very good information.

The Chairman: Mr. Robertson, do you want to respond to that?

Mr. Doug Robertson: I would like to see the Auditor General, as we said, do a true accounting. Will that happen? Not ruddy likely. This is not true accounting.

Mr. Wayne Easter: Are you...?

Mr. Doug Robertson: I want the Auditor General to do a true accounting, as they can do with everything else.

Mr. Wayne Easter: Are you suggesting that Deloitte & Touche, as an accounting firm, does not have credibility?

Mr. Doug Robertson: I am suggesting that they deal with what they are given.

Mr. Wayne Easter: I can't believe what I'm hearing, Mr. Chairman.

But I guess the last point I would make is to the Winnipeg Commodity Exchange. It's been put forward....

Your point on the inclusion clause creating some uncertainty in the market I find astounding. With the safeguards in the inclusion clause in terms of the process that has to be gone through, it's far more technical and specific than the current process under the Canadian Wheat Board. And the current situation, in which the minister could include or exclude, under the act as it sits now, hasn't caused that kind of uncertainty in the market. I'd think you'd have to agree with me on that point.

So do you think it's appropriate for producers, if they collectively want to come together—the majority of producers in a commodity—to have the option of going to a market other than the commodity exchange itself?

The promoters of the Winnipeg Commodity Exchange are not offering a choice. They're not offering options. It's either the open market or the open market.

What the bill allows, and what the Canadian Wheat Board allows, is the choice and the option of going to a single-desk selling agency that markets and maximizes returns on behalf of producers. In fact, it's outlined right in the annual report, and I'll quote it for the record:

A performance evaluation conducted during the 1995-96 crop year showed Canada ranks highly with its customers in such areas as quality of product, consumer service, technical support and dependability of supply. Another study conducted by three economists showed that the CWB's single-desk system generates an additional $265 million in wheat revenue for farmers, thereby enhancing Canada's competitiveness. It also showed the CWB provides a low-cost marketing service to farmers.

That's pretty good, Mr. Chairman.

The Chairman: Do you have any response to that before we go on?

Mr. Keith Lewis: I assume that information was provided by the Canadian Wheat Board?

Mr. Wayne Easter: That information was a study done by Tyrchniewics.

Some hon. members: Oh, oh!

An hon. member: Who paid for it?

Mr. Keith Lewis: Mr. Chairman, might I respond?

The Chairman: Briefly.

Mr. Keith Lewis: I would like to tell Mr. Easter that there was another study done at approximately the same time by Colin Carter, also an eminent professor, who found entirely different conclusions. I would suggest that Mr. Easter read that report as well.

An hon. member: Maybe we'll have to go to the Auditor General.

• 1830

Mr. Wayne Easter: Mr. Chairman, on that point, I would refer the responder back to the record. Colin Carter was before the previous committee in Calgary, I believe, and we debated that issue of Colin Carter's study extensively as well as the results of a wheat board evaluation of some of the misconceptions in Colin Carter's study. It's on the record of the last committee hearing process.

The Chairman: We can refer to that, if anybody wishes to do so.

Mr. Hill.

Mr. Jay Hill: The wheat board evaluation has a lot of credibility.

Mr. Wayne Easter: It does indeed.

Mr. Jay Hill: A couple of quick questions to the Western Barley Growers Association. Are both of you producers? Do you both actively farm in western Canada?

Mr. Buck Spencer: I'm just in the process of turning my farm over to the third generation now. The farm is still in existence and my daughter and her husband are farming it, yes.

Mr. Jay Hill: How many producers does your organization represent? Do you know what your membership is?

Mr. Buck Spencer: Six hundred.

Mr. Jay Hill: Six hundred active farmers. I noticed in your brief that you go through the bill very thoroughly. You talk about the need for a voluntary wheat board, partly to protect the Canadian Wheat Board, to ensure that it's there for future generations of farmers. You talk about the problems you see with the inclusion-exclusion clause. You talk about the indemnification of not only the directors and officers of the new corporation—you called it a new corporation; “new and improved” I think was the term you used—but also for anybody acting on behalf of the corporation.

You talk about the ineffectiveness of the new board of directors, or what you see as an ineffectiveness, and you talk about the problems you see with the contingency fund. In the view of your association, given all that, it strikes me that perhaps you could help us understand what you see as good about the bill.

Mr. Doug Robertson: Get through to the advisory board!

Mr. Buck Spencer: We have a real problem with the monopoly and this enshrines a monopoly. We feel we're living in a democratic country and people should have a choice. If Mr. Easter and his family want to sell to the Canadian Wheat Board, I don't want to take that away from them. They should have the right to do so. But if only one person in the whole of western Canada wanted to sell his grain outside the board, on his own, in a true democracy he should have the right to do it. So we would like to see a situation set up where people can opt in or opt out or have a choice and we can make this kind of arrangement—

Mr. Jay Hill: Do you see anywhere in this bill, or anything in this bill that would help put to rest some of the very serious problems facing grain marketing in western Canada? Do you see anything in there that's going to help?

Mr. Doug Robertson: This is not what the bill was designed to do anyway. This bill is designed to make the wheat board be more under the control of the minister and the cabinet. That's the only thing it was designed for.

The idea of having ten representatives means nothing as long as they can't elect and fire their own president and CEO. As long as they are nothing but this rubber stamp board, what difference does it make? The analogy that was made—

The Chairman: Mr. Hoeppner.

Mr. Jake E. Hoeppner: Thank you, Mr. Chairman.

I've been trying to find in the Canadian Wheat Board Act any mandate for the board to sell my grain at the highest price possible. We know that the appeal court ruled they couldn't find it. Now, have you looked at the bill closely and seen whether it is a mandate for them to extract $365 million somewhere, as Mr. Easter claims? I haven't been able to find it and I know that's what's bothering my producers. If there were a mandate to get the best price, not just orderly market, they might support this bill.

Mr. Buck Spencer: It's hard for anybody to get the best price. Whether the board had a mandate to do that or not, I doubt if they could do it consistently, because like the old fellow who made a lot of money on the Winnipeg Commodity Exchange, he always sold too quick.

People have payments to make and people have money commitments to meet, so what we want to do is to have it set up so the person can manage his own operation and get his cashflow going the way he needs to and the way he wants to. So it has nothing to do with the best price, it's how your personal operation should work.

• 1835

Mr. Doug Robertson: The thing about farming is that if you examine two neighbours or any group of farmers, there is no way you could come up with an average farm. I do things entirely differently from my neighbour, and he does them differently from his neighbour and all the neighbours down the line. Sometimes I have to sell my canola too cheaply because I need cashflow and the banker is knocking on my door. I use the commodity exchange at times to then go into the market to try to make that back. I don't always make that back, but that's my choice to screw up.

The Chairman: Madame Alarie, do you have a question?

Ms. Hélène Alarie: No.

The Chairman: Mr. Proctor.

Mr. Dick Proctor: No.

The Chairman: Mr. Borotsik.

Mr. Rick Borotsik: Oh no, I'll pass.

Some hon. members: Oh, oh!

An hon. member: You said you had to have more time.

Mr. Rick Borotsik: Well, I did have a question but I forgot what it was.

The Chairman: We'll conclude with Mr. Harvard, then.

Mr. John Harvard: I have a few short remarks and a question for Mr. Corn.

You mentioned that the inclusion clause represented a bad signal for world markets. The inclusion clause is not a political movement in itself. If there ever was going to be a change for, say, oilseed products towards the board, there would have to be a political movement. It wouldn't matter whether the inclusion clause is there or not. Only political support for such a venture could make something happen.

I also want to remind you, Mr. Corn, that probably at any given time, there may be 1% or 2% of our growers who would be in favour of taking, say, any oilseeds under the wheat board. What do we do about them? Even if it's only 1% or 2%, are they a bad signal to the world market? Gee, you know, we might have 150 farmers out there in the whole of Canada who are in favour of monopoly control. What are we going to do? Are we going to take them out and shoot them? Are we going to somehow gag them? We live in a democracy.

The other thing is that even if we did not have an inclusion clause there, Mr. Corn, and if there was sufficient political movement—whatever that is—they could always come to petition us. They could ask for a change, and they could ask for an inclusion. Do you follow what I'm trying to say? You can have your way and have no inclusion clause, but if some people are bound and determined to make a change, they can express themselves in our democracy.

For example, right now, the Canadian Wheat Board Act doesn't tell the wheat growers or the barley growers what rules to follow with respect to a voluntary board or a dual market. Does that stop them from talking? No. They have a political view. They have a market view. And it doesn't matter how the bloody Canadian Wheat Board Act is written, they will express themselves, as they should in a democracy.

So I guess all I'm saying is that when you go on and on about the inclusion clause, that somehow or other it's going to take off all by itself, that it's on some kind of an automatic pilot...it's simply not going to happen. You have to have political support for that kind of a change.

The Chairman: Mr. Corn, would you like to respond?

Mr. John Harvard: Am I not making sense to you, Mr. Corn?

Mr. Bennett Corn: Do you want a very frank answer?

Mr. John Harvard: Yes.

Mr. Bennett Corn: You're not making sense to me, and the reason you're not making sense to me is the very fact that the clause is there. It has created attention to something that no one was aware of. More importantly, your inclusion clause does not—

Mr. John Harvard: [Editor's Note: Inaudible]

Mr. Bennett Corn: Yes, it goes back to when this industry as a whole was surveyed and said it liked the way things were, leave it alone. No one has paid attention to it.

You put an inclusion clause in that basically says only one segment of the industry as a whole, or one part of anything—I don't care whether it's a country or a province—is going to decide for everyone else. That's not a democracy.

There are other people who are adding to the viability of the industry. They're not growing canola for the sake of growing canola, just to have it pile up in their back yard. It's because there's an industry that is using it more and more, and it has sunk a lot of money into it. That inclusion clause does not allow that part of the industry to come to you and say this is a bad thing. It just helps the farmers going to the wheat board.

• 1840

If you're going to have a debate about whether something's not working, have the debate here and have everyone here like we are today. The minute you put it in, you've excluded a significant part of the industry domestically and worldwide. That's the thing that's hanging over their heads. They have no say. They have no representation, yet you're expecting them overall, running the country, to continue to add to the viability of your economy.

Someone's going to make a business decision that they're not going to do it here. That's all I'm saying.

Mr. John Harvard: I want to get a clarification from you. If the inclusion clause goes ahead as envisaged by the bill, does that somehow muzzle you? With the inclusion clause, are you not going to be able to speak any more?

Mr. Bennett Corn: Well, where's my forum? Do I have a standing before the wheat board? Where does it say in this act that anyone other than a farmer can go to the wheat board or have a vote or anything like that?

Mr. John Harvard: Is that the fault of the inclusion clause?

Mr. Bennett Corn: Well, that's the way the clause is written. It's saying this half of the room can decide what's going to happen to that half of the room. If that's democracy, then put it in.

The Chairman: The power is in the producers' hands, not in commodity boards or....

Mr. Rick Borotsik: That's the point, Mr. Chairman. That's exactly what they're saying.

The Chairman: I'm agreeing. That's what the bill says, that it's the producers' decision as to whether they want to be included or excluded.

Mr. Doug Robertson: Who is a producer organization? Please define that for me. We have no idea. Is the NFU a producer organization? Is the Canadian Federation of Agriculture a producer organization? It probably will be, won't it? I don't consider them to be the barley producer organizations.

Mr. Buck Spencer: Is the United Grain Growers a producer organization?

A voice: Or the Alberta Wheat Pool?

Mr. Buck Spencer: As far as I can understand the bill, you have to be producing that particular grain and represent people in that particular grain to be involved in—

Mr. Doug Robertson: It just says “a producer organization”, but it doesn't define that term.

Mr. John Harvard: The organization itself doesn't make the ultimate decision. It's the growers who will make the decision. An association that you may dispute may want to start the process and trigger the process, but at the end of the day, Mr. Robertson, it is the producers of that particular commodity who will make the decision. So this whole thing about an organization, which you may or may not support...your contention about a particular organization is a specious argument. It is the growers of the commodity who will make the decision.

Mr. Doug Robertson: If they are allowed to vote fairly on a fair question.

The Chairman: To conclude, Mr. Hill.

Mr. Jay Hill: That's exactly the point I wanted to make, that the barley growers have provided in their brief a point-by-point analysis of the inclusion clause and the problems with it. As he just correctly stated, for the benefit of Mr. Harvard and the Liberal members on the committee, the problem is that the power doesn't rest with the producers, the power rests with the minister to design the question. We saw last winter that the minister put a question, “Do you want all barley in, or all barley out?” That does nothing for the producers who want the freedom to choose.

They don't want to destroy the wheat board, and even in light of that, it's somewhat surprising that a loaded question still achieved the result that 37% of farmers opted to completely remove all designated barley from the wheat board's control. I am sure, if you ask the Canadian Wheat Board when they appear before the committee—hopefully we'll get the chance to—that the number being that high somewhat surprised them.

The Chairman: Gentlemen, thank you very much for coming in. It's been a very interesting afternoon.

The meeting is adjourned until tomorrow in room 269 at 9 a.m.