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37th PARLIAMENT, 3rd SESSION

Standing Committee on Agriculture and Agri-Food

EVIDENCE

CONTENTS

Thursday, March 11, 2004

0935

The Chair (Mr. Paul Steckle (Huron—Bruce, Lib.))

Mr. Brian Bohunicky (Director, Habitat Policy and Regulatory Affairs, Department of Fisheries and Oceans)

0940

The Chair

Ms. Paula Caldwell St-Onge (Director General, National Programs Directorate, Environmental Protection Service, Department of Environment Canada)

The Chair

Mr. Gerry Ritz (Battlefords—Lloydminster, CPC)

0945

The Chair

Mr. Gerry Ritz

Mr. Brian Bohunicky

Mr. Gerry Ritz

Mr. Brian Bohunicky

Mr. Gerry Ritz

Mr. Brian Bohunicky

Mr. Gerry Ritz

Mr. Rick Borotsik (Brandon—Souris, CPC)

0950

Mr. Brian Bohunicky

Mr. Rick Borotsik

Mr. Brian Bohunicky

Mr. Rick Borotsik

The Chair

Mrs. Rose-Marie Ur (Lambton—Kent—Middlesex, Lib.)

Mr. Brian Bohunicky

Mrs. Rose-Marie Ur

Mr. Brian Bohunicky

Mrs. Rose-Marie Ur

Ms. Paula Caldwell St-Onge

Mrs. Rose-Marie Ur

Ms. Paula Caldwell St-Onge

0955

Mrs. Rose-Marie Ur

Ms. Paula Caldwell St-Onge

Mrs. Rose-Marie Ur

Ms. Paula Caldwell St-Onge

Mrs. Rose-Marie Ur

Ms. Paula Caldwell St-Onge

Mrs. Rose-Marie Ur

Ms. Paula Caldwell St-Onge

Mrs. Rose-Marie Ur

Ms. Paula Caldwell St-Onge

Mrs. Rose-Marie Ur

Ms. Paula Caldwell St-Onge

Mrs. Rose-Marie Ur

Ms. Paula Caldwell St-Onge

Mrs. Rose-Marie Ur

Ms. Paula Caldwell St-Onge

Mrs. Rose-Marie Ur

Ms. Paula Caldwell St-Onge

Mrs. Rose-Marie Ur

Ms. Paula Caldwell St-Onge

Mrs. Rose-Marie Ur

The Chair

Mr. Brian Bohunicky

1000

Mrs. Rose-Marie Ur

Mr. Brian Bohunicky

Mrs. Rose-Marie Ur

The Chair

Mr. Rick Borotsik

Mr. Brian Bohunicky

1005

Mr. Rick Borotsik

Mr. Brian Bohunicky

Mr. Rick Borotsik

Mr. Brian Bohunicky

Mr. Rick Borotsik

Mr. Brian Bohunicky

Mr. Rick Borotsik

Mr. Brian Bohunicky

Mr. Rick Borotsik

Mr. Brian Bohunicky

Mr. Rick Borotsik

The Chair

Mr. John O'Reilly (Haliburton—Victoria—Brock, Lib.)

1010

The Chair

Mr. Brian Bohunicky

Mr. John O'Reilly

Mr. Brian Bohunicky

Mr. John O'Reilly

The Chair

Mr. Gilbert Barrette (Témiscamingue, Lib.)

Mr. Brian Bohunicky

Ms. Paula Caldwell St-Onge

Mr. Gilbert Barrette

Ms. Paula Caldwell St-Onge

Mr. Gilbert Barrette

1015

Ms. Paula Caldwell St-Onge

Mr. Gilbert Barrette

Ms. Paula Caldwell St-Onge

The Chair

Mr. Gerry Ritz

Mr. Brian Bohunicky

Mr. Gerry Ritz

Mr. Brian Bohunicky

The Chair

Hon. Mark Eyking (Sydney—Victoria, Lib.)

1020

Mr. Brian Bohunicky

Hon. Mark Eyking

The Chair

1025

Ms. Paula Caldwell St-Onge

The Chair

Mr. Brian Bohunicky

The Chair

Mr. Brian Bohunicky

The Chair

Mrs. Rose-Marie Ur

1030

The Chair

Mr. Larry Hill (Director, Board of Directors, Canadian Wheat Board)

1040

Mr. Adrian Measner (President and Chief Executive Officer, Canadian Wheat Board)

1045

Mr. Leon Benoit (Lakeland, CPC)

The Chair

Hon. David Kilgour (Edmonton Southeast, Lib.)

The Chair

Mr. Adrian Measner

Mr. Larry Hill

The Chair

Mr. Leon Benoit

Mr. Adrian Measner

1050

Mr. Leon Benoit

Mr. Adrian Measner

Mr. Leon Benoit

Mr. Adrian Measner

Mr. Leon Benoit

Mr. Adrian Measner

Mr. Leon Benoit

Mr. Adrian Measner

Mr. Leon Benoit

Mr. Adrian Measner

Mr. Leon Benoit

Mr. Adrian Measner

1055

Mr. Leon Benoit

Mr. Adrian Measner

Mr. Larry Hill

Mr. Leon Benoit

Mr. Larry Hill

The Chair

Hon. Mark Eyking

Mr. Adrian Measner

Hon. Mark Eyking

Mr. Adrian Measner

Hon. Mark Eyking

Mr. Adrian Measner

1100

Hon. Mark Eyking

Mr. Adrian Measner

Mr. Larry Hill

Hon. Mark Eyking

Mr. Adrian Measner

The Chair

Mr. Dick Proctor (Palliser, NDP)

Mr. Adrian Measner

Mr. Dick Proctor

Mr. Adrian Measner

Mr. Dick Proctor

1105

Mr. Adrian Measner

Mr. Dick Proctor

Mr. Larry Hill

Mr. Dick Proctor

Mr. Adrian Measner

Mr. Dick Proctor

Mr. Adrian Measner

The Chair

Mr. Rick Borotsik

1110

Mr. Adrian Measner

Mr. Rick Borotsik

Mr. Larry Hill

Mr. Rick Borotsik

Mr. Larry Hill

Mr. Rick Borotsik

Mr. Larry Hill

Mr. Rick Borotsik

Mr. Larry Hill

Mr. Rick Borotsik

Mr. Larry Hill

Mr. Rick Borotsik

Mr. Larry Hill

Mr. Rick Borotsik

Mr. Larry Hill

Mr. Rick Borotsik

Mr. Adrian Measner

1115

Mr. Rick Borotsik

Mr. Adrian Measner

Mr. Rick Borotsik

The Chair

Mr. Adrian Measner

The Chair

Hon. David Kilgour

Mr. Adrian Measner

Hon. David Kilgour

Mr. Larry Hill

Hon. David Kilgour

Mr. Adrian Measner

1120

Hon. David Kilgour

Mr. Adrian Measner

Hon. David Kilgour

The Chair

Mrs. Rose-Marie Ur

The Chair

Mr. John O'Reilly

Mr. Adrian Measner

Mr. Larry Hill

1125

The Chair

Mr. Dick Proctor

Mr. Adrian Measner

The Chair

Mr. Leon Benoit

Mr. Adrian Measner

Mr. Leon Benoit

Mr. Larry Hill

Mr. Leon Benoit

The Chair

Mr. Adrian Measner

1130

Mr. Leon Benoit

The Chair

Mr. Leon Benoit

Mr. Adrian Measner

The Chair

Mr. Larry Hill

The Chair

CANADA

Standing Committee on Agriculture and Agri-Food

NUMBER 008

3rd SESSION

37th PARLIAMENT

EVIDENCE

Thursday, March 11, 2004

[Recorded by Electronic Apparatus]

¿ (0935)

[English]

The Chair (Mr. Paul Steckle (Huron—Bruce, Lib.)): I call the meeting to order.

This morning we're going to look at the whole issue of surface water and exclusionary fencing for livestock.

We have before us this morning Brian Bohunicky from the Department of Fisheries and Oceans and Paula Caldwell St-Onge from the Department of Environment. These people are going to take us through this issue of waterline fencing. It's something that is very much at the forefront of our concerns right now as it relates to farming right across this country.

We have one hour with you. If you could keep your presentations succinct, we will then get on with the questioning.

Mr. Bohunicky, are you first?

Mr. Brian Bohunicky (Director, Habitat Policy and Regulatory Affairs, Department of Fisheries and Oceans): Yes. Thanks, Mr. Chair.

I'll make some brief general remarks, which will attempt to cover the mandates of both departments. My colleague will follow up with a few more specifics.

[Translation]

Thank you for the opportunity to address the Committee.

[English]

I'd like to explain briefly the role of DFO's habitat management program and the context for our interaction with the agriculture sector, particularly with regard to the issue of livestock in waterways.

Canada's Constitution assigns the federal government exclusive legislative authority for sea coast and inland fisheries. The Fisheries Act recognizes that you can't have fish without fish habitat, so in the 1970s the act's main habitat protection and pollution prevention provisions were adopted. These are section 35, which prohibits harmful alteration, disruption, or destruction of fish habitat, unless authorized by the Minister of Fisheries and Oceans, and section 36, which prohibits pollution in waters inhabited by fish, except by regulation.

[Translation]

The Habitat Management Program’s mission, therefore, is to conserve and protect fish habitat in the context of sustainable development. It is both a natural resource management program and an environmental program.

[English]

The policy for the management of fish habitat is another element of the foundation of our program. It articulates key goals and principles, which guide us day to day, as well as a balanced approach--a balance between meeting our regulatory responsibilities and more proactive measures to foster awareness, stewardship, and public education. On the regulatory side, we respond to potential violations, and we review development projects, working with proponents to avoid damage to fish habitat. Where damage cannot be avoided, we occasionally authorize it, with conditions. On the proactive side, we work to promote stewardship of fish habitat with a variety of partners, including other governments, the private sector, and volunteer and aboriginal organizations.

[Translation]

DFO is responsible for the administration of section 35 of the Fisheries Act pertaining to physical harm to fish habitat. In 1978, the federal government assigned responsibility for the administration of section 36 pertaining to pollution prevention to Environment Canada.

In addition to the Fisheries Act, DFO has responsibilities under the Canadian Environmental Assessment Act, and now the Species at Risk Act, both of which have major implications for habitat protection.

[English]

In 1999, following lengthy but ultimately unsuccessful discussions with provincial governments about formal delegation of the responsibility for fish habitat management, the federal government decided instead to retain its full obligations and strengthen the habitat management program, notably in Ontario and the prairie provinces, where our presence before that time had been very minimal. Since that time, we've worked to establish a more effective, fair, coherent, and consistent national program through elaboration of operating policies, training of field staff, and negotiation of cooperation agreements with provincial governments, industry organizations, and aboriginal organizations.

Today much work still remains. Under the rubric of the Government of Canada's smart regulation initiative, we have embarked on a modernization of our processes, which will see us rely much more on appropriate risk management and partnerships. We intend to streamline the review of low-risk and highly repetitive activities through the provision of more information and guidance up front to proponents about how to avoid harm to fish habitat. This will provide greater transparency and will allow us to focus our resources more effectively on development projects of higher risk to the resource.

¿ (0940)

DFO's class authorization system for maintenance work in agricultural drains in Ontario is an example of such a risk management approach, of which some members of this committee may be familiar.

The issue of access to waterways by livestock is a concern to our two departments with respect to a number of things, including physical damage to spawning and rearing habitat, bank erosion, sedimentation, and the deposit of substances harmful to fish and the aquatic environment, in general, and mainly, the livestock's urine and feces. The Fisheries Act sets out clear responsibilities for both departments, which cannot be ignored.

[Translation]

For out part, we respond to complaints we receive under Section 35 of the Act, and we take appropriate actions according to the unique circumstances of each case. This is no different from our response to any other types of activities.

Our goal, however, is the balanced approach I referred to earlier. In agriculture, as in other sectors, we engage in outreach and education, and we provide technical support to efforts to find solutions.

[English]

In Ontario, for example, regional staff have participated in a multi-stakeholder group, which includes the Ontario Cattlemen's Association, to develop a buffer-zone, best-management-practice guide. We're also working collaboratively with provincial agencies, Ontario's conservation authorities, and agriculture groups on farming issues, more generally, in Ontario.

In Alberta, DFO has partnered in the “Cows and Fish” program, which focuses on developing and maintaining healthy streamside areas.

In British Columbia, DFO staff have worked with the B.C. Cattlemen's Association to develop alternative watering methods for cattle. More broadly, habitat management staff are working with Agriculture and Agri-Food Canada on environmental components of their agriculture policy framework, providing, for example, specialist input to the environmental farm plan initiative.

From the point of view of conservation and protection of fish habitat, which is, after all, our mandate, clearly, the objective is to avoid livestock in waterways. The means for pursuing conservation and protection must include fair and reasonable enforcement action where necessary, but our emphasis is on cooperative and collaborative work with producers to find practical solutions.

[Translation]

We recognize that we are not always perfectly consistent across all regions in our interaction with the Agriculture sector, or other sectors. We know improvements in our operations are possible and we are committed to achieving them.

[English]

We're also committed to working with our colleagues in Environment Canada, and indeed other agencies, to ensure coordination. We owe it to Canadians to strive for the most fair and efficient means possible for fulfilling our respective mandates.

Thank you very much for your time.

The Chair: Thank you very much.

What about you, Paula? Do you have something to add?

[Translation]

Ms. Paula Caldwell St-Onge (Director General, National Programs Directorate, Environmental Protection Service, Department of Environment Canada):

Yes, I’d just like to add a few words on behalf of Environment Canada.

[English]

The goal of Environment Canada's enforcement activities is to protect our natural environment and also human health. We undertake our compliance and enforcement activity under the Canadian Environmental Protection Act, as well as the Fisheries Act, to achieve an environmental benefit for all Canadians.

We are committed to working with the farming community on the issue of livestock access to water courses and compliance solutions. We do have a very strong compliance in the farming community. We continue to work closely with them, with a goal of fulfilling our obligation to protect the environment by ensuring the compliance with the Fisheries Act, but while balancing the needs of the farmers.

[Translation]

Thank you very much. This was just an introduction.

[English]

The Chair: Thank you very much.

We will go to Mr. Ritz for seven minutes.

Mr. Gerry Ritz (Battlefords—Lloydminster, CPC): Thank you, Mr. Chairman.

I have mixed feelings about this whole push that you folks are proactively taking on. I'm wondering where the data, the studies, and so on are, the scientific evidence that points to the need for this intrusion--and I'll call it an intrusion. You talk about a cooperative, collaborative effect, but then you talk also about the fact that the provinces didn't leap onside quickly enough so you've gone on ahead without them, and there's a lot of conflict there.

You also have to realize when you start to fence out livestock, you're fencing out wildlife as well when you take away that access to water.

I know in my riding we have a lake called Brightsand Lake. It's an alkaline lake. We do have farmers and ranchers who have watered out of that lake forever. A lot of deer and wildlife water out of that lake. Testing is done on a monthly basis. There is no damage, none, zero, and yet we have fisheries and wildlife folks in there running around with their hobnail boots telling us what we can and cannot do. It's creating an animostic type of atmosphere there, and it doesn't need to happen.

If you guys read your own test results you'll find out there's no problem as well. Certainly we all have to be stewards of the environment, but if there isn't a fire, let's not run the fire trucks out there.

I have it again from wildlife people, outfitters, and so on who have sent in complaints to your operation in Saskatchewan about the overfishing, about the overnetting of certain lakes in our province, and you guys will do nothing about it. You talk about doing something proactive, yet when people get a netting licence to fish out of ten lakes--they're supposed to take their quota out of ten lakes--and they take everything out of one lake and you guys will do nothing, even though there are complaints registered, it's at total cross-purposes to the whole program you're trying to implement here.

So clean it up. Get it right. Work in conjunction with the provinces or shut it down.

¿ (0945)

The Chair: Is there a question there?

Mr. Gerry Ritz: No, I'd just like a comment on that.

Mr. Brian Bohunicky: Sure. With respect to the first part on the impact, from our point of view in the Department of Fisheries and Oceans, the division of the responsibilities is that we focus on section 35, which is about physical damage to habitat. There are very few enforcement actions with respect to that provision. If there are any, the damage must be documented for any action to go forward in the particular circumstance.

DFO enforcement of section 35 is an extremely rare occurrence. The reason for this is that, by and large, we would agree that the livestock issue in streams in the vast majority of cases is a low-impact and low-risk activity. Depending on certain circumstances, it can warrant action, but most often it's low impact. In the vast majority of the cases it's certainly true, and we recognize that farmers do put in a great deal of effort to be good stewards of the land.

With respect to overfishing in Saskatchewan, I hate to give what might sound like a bureaucratic answer, but it's not our jurisdiction; it's the provincial government's.

Mr. Gerry Ritz: Well, you talk about non-enforcement. Your guys run around with guns on their hips. We don't even let our park wardens do that. So what is the point? You talk about low impact in most areas. Do you assess this, then, on a case-by-case basis, or are you going to come down with a one-size-fits-all program?

Mr. Brian Bohunicky: No, any action has to be tailored to the specific circumstances of the particular case, and the responsibility for the management of the fisheries is formally delegated under the act to provincial governments and lands.

Mr. Gerry Ritz: I talk about Brightsand Lake, and I own a quarter section that runs into the lake. I don't have livestock on it, but my neighbour does. It's not a concern to me, and I live there.

The concern I have, then, is this. The next time the DFO boys show up and start pushing us around, I can actually tell them to take a hike, I'm waiting for the provincial guys to come in and they don't have a problem. So I'm within my rights to do that, then, according to what you're telling me today?

Mr. Brian Bohunicky: With respect to overfishing, management of fishing is provincial. Protection of the habitat is the federal jurisdiction.

Mr. Gerry Ritz: There are no fish. It's an alkaline lake. There's no habitat to protect.

A voice: Oh, but there is under DFO regulations.

Mr. Gerry Ritz: It's an alkaline lake. They've restocked it for years, and there are no fish there. There are suckers.

A voice: Well, suckers are fish.

Mr. Gerry Ritz: That's not a fish.

I'm done, Mr. Chairman.

Mr. Rick Borotsik (Brandon—Souris, CPC): I also come from the prairie province of Manitoba, and I can assure you that since 1999, DFO and its regulations have caused me nothing but consternation and difficulties. It seems your enforcement officers certainly take their responsibilities very seriously.

Why is it that when a small municipality wishes to put a culvert in to replace a bridge over a creek that runs only two weeks out of the year, DFO has a tendency to come down on that with hobnail boots, but as my colleague just said, when there is a circumstance in Asessippi Lake in Manitoba, where there has been overfishing by the first nations, DFO throws up their arms and says it isn't their responsibility?

Can you tell me, first of all, what is the definition of a navigable waterway under the legislation? Why is there no flexibility with your enforcement officers when dealing with these circumstances? It seems it's the legislation, it's the law, and if you don't like it, change the law. Why is that the attitude of DFO?

¿ (0950)

Mr. Brian Bohunicky: I come from your province as well, so I'm somewhat familiar--

Mr. Rick Borotsik: Please visit us again. I'll take you out to see some of my farmers. By the way, I'll also talk about the fencing, because I think that's a good program. Don't get me wrong. There are some environmental aspects we have to deal with, but I am frustrated with the way your officers have been dealing with some of my constituents.

Mr. Brian Bohunicky: On navigable waters, our colleagues in the coast guard do have some technical tests. I'm not able to describe them to you, but someone from the coast guard would be able to do a better job.

We're acutely aware of the frustration you're talking about in Fisheries and Oceans. We are striving for a great deal more flexibility.

I referred to risk management in my remarks. We have a modernization process underway that we hope will get our staff spending much less time on the review of routine, repetitive, and low-risk activities, such as the ones you're describing. We have work to do to ensure that we can do that responsibly and still be able to meet our obligations under the act, for which our minister is responsible to Parliament. That means doing a lot of work to explain our decision-making to people, make it clearer, and provide them with information on what they can do to avoid harm to fish habitat, without having to go to DFO for approval.

Mr. Rick Borotsik: I have another seven minutes, so don't go away.

The Chair: Thank you very much.

We'll move to Mrs. Ur.

Mrs. Rose-Marie Ur (Lambton—Kent—Middlesex, Lib.): I'm very pleased to see you here today. The 150 farmers who came to a meeting I had in my riding with the chairman, Mr. Steckle, are certainly waiting to hear about some results from this meeting.

I can tell you that the people who come to the farms are very intimidating. They come unannounced. They feel it's their God-given right to walk anywhere, go anywhere, drive anywhere, guns in tow. It's totally inappropriate. The farmers are on their knees now with the way the situation is in the cattle industry, and one more knock is all you're delivering to them. That's certainly not what they deserve.

According to the Ontario Cattlemen's Association, it would cost them approximately $500 million to obey the regulations that both of your departments are putting forth. Is that an accurate estimate?

Mr. Brian Bohunicky: I'll turn it over to Paula on the enforcement actions of Environment Canada personnel, but in DFO we're not insisting that anyone build fences.

Mrs. Rose-Marie Ur: No, but the gentleman who was there indicated it would not necessarily be fences--build a big buffer or plant some trees. Perhaps the people who are coming out should be educated that cattle can walk up a hill and around a tree. When individuals go out to the farming community and make those kinds of statements, it certainly doesn't set the tone for a good meeting.

Mr. Brian Bohunicky: I would also say there's a broader range of possible measures to take to achieve an appropriate level of exclusion in order to meet the requirements of the act. We're working, as I said, with the provincial department and the Ontario Cattlemen's Association to come up with practices that have consensus among all those groups at the table. We think we've achieved that with the best management practices guide.

Mrs. Rose-Marie Ur: Well, the Ontario cattlemen were there that day, and that's not the same story we heard at that meeting. So maybe if the enforcement sector would like to answer, I certainly have a lot more questions.

Ms. Paula Caldwell St-Onge: Thank you.

First of all, our enforcement officers do not carry guns.

Mrs. Rose-Marie Ur: It was reported at the meeting.

A voice: Fisheries do.

Ms. Paula Caldwell St-Onge: Yes, Fisheries do.

¿ (0955)

Mrs. Rose-Marie Ur: We're not going back and forth here. I only wanted to take that back.

Ms. Paula Caldwell St-Onge: At Environment Canada, we work with many partners. We have our stewardship program that we've been working on since 2000 in that watershed.

Mrs. Rose-Marie Ur: That's very good.

Ms. Paula Caldwell St-Onge: We have spent a lot of time with our partners. The enforcement officers have gone out with our compliance promotion people as well, to all the farms.

We put a press release out that we were visiting these 192 farms to explain the Environment Canada and Fisheries Act regulations, and also the other programs under our stewardship programs, as well as the Great Lakes sustainability fund.

We've spent $1.5 million putting together programs for cattle access. We have 42 separate grants, 82 in total in the last three years, to improve the landowners programs that they want to put in place, for example, to limit livestock across the streams. We've improved and created manure storage and run-off collection facilities. We've created enhanced wetlands with the farmers. We're very open. We continue to work with the farmers and the communities. We will go to any meetings we're invited to.

We also have our own workshops. I can provide the committee with a list of the workshops that took place in several of the areas, not only in Ontario, but also in other parts.

Mrs. Rose-Marie Ur: Right. It was also noted at that meeting that your offices received complaints. There's no appeal mechanism. There's no way of finding out who's making the complaint. It could be a disgruntled neighbour. Unfortunately, that does happen, and the onus is put on the farmer to prove differently.

They get warning letters in the mail from the Department of Justice. You can rest assured, they're not pleasant letters. It doesn't indicate what they have to do or what timeframe they have to work with. All of a sudden, you're guilty. Guilty of what?

Ms. Paula Caldwell St-Onge: Yes. On our warning letters, if I may, I know that came up very strongly at that meeting.

Mrs. Rose-Marie Ur: Oh, yes.

Ms. Paula Caldwell St-Onge: They are, if you will, a justice template that we use in order to be consistent across the country.

Mrs. Rose-Marie Ur: These are law-abiding people out there. They don't like to be found guilty without even having an opportunity to plead their cases.

Ms. Paula Caldwell St-Onge: These warning letters are not a finding of guilt.

Mrs. Rose-Marie Ur: You tell them that.

Ms. Paula Caldwell St-Onge: They are only a heads-up. In the particular case of the Sydenham watershed, which is your area--

Mrs. Rose-Marie Ur: Yes, that's correct.

Ms. Paula Caldwell St-Onge: --we actually called 24 out of the 25 people before they received the warning letters to explain it to them, because it does look intimidating, since we cut and paste part of the law.

Mrs. Rose-Marie Ur: Mr. Leach is still waiting for his. He has been told he has received a letter, and he has no letter.

Ms. Paula Caldwell St-Onge: Okay, I will check into that. Thank you.

Mrs. Rose-Marie Ur: If there's any opportunity for changing the law, they certainly want to look at how quickly that will happen. This is very time-sensitive. They're in dire straits. Can you foresee these farmers being able to let their cattle graze on their pasture land this year, with the case of BSE and everything else? Surely to God, we can have a bit of a moratorium or something that will help them ease the burdens they're experiencing at the present time. Farmers were environmentalists before the rest of us thought it was a cute thing to do. These people live where they work. I don't know whether everyone understands that.

Ms. Paula Caldwell St-Onge: Our people in the regions who work with the farmers and with other communities do understand that.

We will continue to work with the farmers in terms of explaining the due diligence--i.e., what they can do and what programs are out there. We have our agriculture colleagues, who have our environmental farm plan program with incentives that are going to be rolled out soon. Hopefully, that will help.

Mrs. Rose-Marie Ur: Will they be able to put their cattle on pasture?

Ms. Paula Caldwell St-Onge: Our law, as Brian was saying, is very clear in terms of the prohibition of depositing deleterious substances. We will work with the farmers in terms of what can be done and how to help.

We also look at the risk factor models. The farmers have a very high compliance rate. Farmers, as you said, very much live with the environment.

Mrs. Rose-Marie Ur: I'll only add this to the picture. The city of Kingston, in 2003, discharged 700 million litres of raw sewage into the creeks and rivers. That was 8,700 swimming pools full of material, to put it into our perspective. The Ministry of the Environment has never prosecuted the city. Is a farmer having a few cattle in the creek really going to damage the water system?

I understand heavy-density farming cattle, as does every farmer. One man did research way back in the 1940s. There were 2,800 cattle along that waterway in Sydenham. There are 400 now. No one died, I believe, from pollution back then.

They understand that there's a situation in some areas, but I don't think you understand where they're coming from.

The Chair: Thank you, Ms. Ur. I'll allow a response to that, because I think you deserve a response.

Mr. Brian Bohunicky: I've noted all the issues you've raised. In our work with the multi-stakeholder group, including the Cattlemen's Association and other producer organizations, we've had no intention whatsoever to prevent farmers from grazing their cattle.

À (1000)

Mrs. Rose-Marie Ur: That's the interpretation they have, that they are not allowed. If they have these warning letters, God forbid they let their animals out this spring, or that gentleman in the nice shiny white truck will be out to see them again.

Mr. Brian Bohunicky: As I said, for section 35 purposes, warning letters over the past few years have been extremely rare.

Mrs. Rose-Marie Ur: I know there have only been two prosecutions in the last seven or eight years, but these people are stressed, and we're stressing them more.

The Chair: Thank you, Ms. Ur.

Mr. Borotsik.

Mr. Rick Borotsik: Thank you.

I suggest that you've got the tenor of the discussions that have been going on right now. There are frustrations out there in our constituencies, and DFO is part of the problem. Environment stay over there, and we recognize that you're part of the solution.

It seems the management style of DFO is one of confrontation; that's usually the way they start to attack this issue. When you start with confrontation, that's what you in fact get. Perhaps the management style in the department should be questioned, and perhaps you can go about this a little differently. I think you'll get more cooperation then than by simply sending warning letters. You say that under section 35 you don't have warning letters. I can get you copies of warning letters to my constituents who are threatened by what you're saying. Rose-Marie is right. You ask them to comply, but you don't tell them how, and if they do comply and it's not right, you go in and say it's not right, and you have to do it over again.

There seem to be a lack of guidelines and a lack of cooperation. I go back to that term all the time. My people seem to think this is simply a matter of territorial protection, empire building, if you will, on the prairies, and they don't like it. Prior to 1999 things ran pretty well. Now, all of a sudden, you're getting your face into their issues, and they're not really pleased about it.

You referred to “ultimately unsuccessful discussions with provinces about former delegation of the responsibility.” Who caused that lack of cooperation between the provinces and DFO? Was it DFO that backed away from the table on that one, or was it the provinces? And is there opportunity to put the jurisdiction back in the provinces? You've already said the provinces have jurisdiction over the fishing, but they don't have responsibility for the fish habitat. There seems to be a lack of connection there. How can we get that back together?

Mr. Brian Bohunicky: We're working very hard to. In 1998 and 1999 DFO was seeking to delegate the responsibility for habitat management to the inland provinces. It was a policy decision that we should do that. The discussions really focused on the Government of Ontario at the time, when relations between the two levels of government were strained in general, and they didn't succeed. But our objective was to do that. The government decided, since those negotiations did not succeed, that there was a legal obligation that was not being met sufficiently, so we strengthened the program.

I and my colleagues could not agree with you more. We can do better by the resource and the people involved with a cooperative approach, having people onside. We haven't always succeeded in doing that, but we're working very hard to go ever more in that direction.

I mentioned the class authorization for agricultural drains in Ontario. Several years ago--some members of the committee might be familiar with this--we had a similar, perhaps greater level of frustration on the part of the agricultural sector with respect to agricultural drains. Now in Ontario there's a very thorough system, which gets rid of the need for specific DFO review in almost all the cases where we used to have to do a review previously, which means people can go ahead with that work, with some information from DFO, with some guidelines, which we've developed with them, practical solutions. They know, if they do those things, there won't be a concern under the Fisheries Act. We want to replicate that approach in Manitoba and elsewhere, we want to broaden it, we want to bring risk management more to the forefront, so that we're not spending time on those things.

À (1005)

Mr. Rick Borotsik: Excuse me, Brian, but part of the excuses I always hear, whether it be first or second hand, is that “We're just doing our job, it's the legislation we have. We recognize that it's fairly strict, but if you don't like it, change the legislation.”

Do you believe there have to be legislative changes made so that you can do your job better than you are doing it now?

Mr. Brian Bohunicky: No.

Mr. Rick Borotsik: When I say better I mean more effectively and more cooperatively.

Mr. Brian Bohunicky: No, I don't. I think you were right when you said it's a management challenge, and that's exactly what we're working on.

Mr. Rick Borotsik: Do we have a timeline on this management challenge, a working paper? Are we expecting a few changes in management?

Mr. Brian Bohunicky: What I'm referring to covers a broad--

Mr. Rick Borotsik: I know, I appreciate it covers a broad area. Management comes from the top, and I suppose it comes from the top of the department.

Are those changes in the works right now, or can we expect for the next two years to have the same kinds of answers that I've been getting for the last two years?

Mr. Brian Bohunicky: With respect to agricultural drains in Manitoba, for example, this season there is a pilot project that takes an approach that succeeded and is working, not perfectly but very well, in Ontario, and brings it on the ground in Manitoba.

Mr. Rick Borotsik: Are you prepared to give your managers more flexibility and a little bit more latitude with the definitions they have to deal with?

Mr. Brian Bohunicky: We are working to change the philosophy of our approach on the ground, which does give our managers more flexibility, which does provide proponents much more information, which clarifies the rules of the game and which tells them what they need to do without having to worry about a DFO review.

If you'd be interested, my staff and I, and regional staff in the Brandon-Souris area, would be more than pleased to give a presentation on the risk management approach I'm talking about and explain where we want to take the program in the near future. We'd be pleased to give a more detailed explanation of it than what's possible here.

Mr. Rick Borotsik: All right, I'll be talking to your office.

The Chair: We'll allow the two of you to work that out among yourselves.

Mr. O'Reilly, please.

Mr. John O'Reilly (Haliburton—Victoria—Brock, Lib.): Mr. Chair, I thank the witnesses for attending.

I'm from central Ontario and I have a large agricultural riding and it takes in the Trent-Severn waterway. It takes in the Kawartha Lakes and deals with a large population of commercial tour boats and a fishing industry that runs from Lake Ontario to Georgian Bay.

When we try to do something in that area--and what I'm getting at is your modernization program--we have to deal with Fisheries and Oceans, the Coast Guard, the Trent-Severn waterway, the Ministry of the Environment federally and provincially, the Ministry of Agriculture federally and provincially, the local police forces, the OPP, the RCMP, the conservation authorities, the local planning departments, the Ontario Clean Water Act and the Fisheries Act. There are 27 agencies that we have to deal with to deal with something that involves shoreline erosion.

A standard answer takes two years. My frustration is that I have farmers, recreational boaters, a commercial fishing industry, a recreational fishing industry that is bigger than the whole east coast, bass tournaments and so forth, who all use the waterway. It's a huge industry. To take two years to fix a problem with a dock that gets passed from one department to the next department and nobody ever seems to be in charge is so frustrating.

So when I have a farmer who comes to me and says that his shoreline is eroding, the cattle are going down to the shoreline, they are getting mired in it and all he wants to do is pull the stuff back out, build a wall and make sure they have a pond that isn't in the waterway, because they are good land stewards, they can't get an answer for two years, and yet they can be prosecuted in ten minutes.

I'm not blaming you, by the way; this isn't a rant against you. You may be one or two of the 27, I just need the other 25 at the table. This maze of who's in charge is absolutely mind-boggling.

I've been in the real estate business for over 30 years, and I have to tell you, developers are frustrated. We have an order now to do an environmental study on 40 municipal buildings in my riding to comply with the Clean Water Act. I have nothing against that, I think every place that serves water to the public should comply, but this is going to kill people in one way or another. We have municipalities shutting down facilities because they can't afford the regulations that are there and they can't afford to clean up the shoreline. They can't afford to meet the regulations.

I'm frustrated, and I thank you for coming, because it gives me a chance to express my frustrations with the various departments.

À (1010)

The Chair: You've had three and a half minutes to express your frustrations, and one minute and a half remains to deal with them.

Mr. Brian Bohunicky: We're familiar with the frustration of the multiple agencies involved. We share it. We have an agreement in place for Trent-Severn with Parks Canada—

Mr. John O'Reilly: Oh, I left them out.

Mr. Brian Bohunicky: —that Environment Canada is involved in, which is an attempt to try to streamline the maze a little bit. If it's not working very effectively, I'd like to take that message back with our colleagues and continue working to try to tackle the jurisdictional labyrinth.

Mr. John O'Reilly: Well, it's not working.

The Chair: Your time has expired, and I know there are at least seven frustrated people in this room this morning. In order to accommodate all of us, I'm going to go to another Liberal before I come back over here.

Mr. Barrette.

Mr. Gilbert Barrette (Témiscamingue, Lib.): Thank you, Mr. Chair. I'll use French, if you don't mind.

[Translation]

Quebec and Ontario have similar geography. How come we don’t seem to encounter the same problem of understanding and application of the regulations in Quebec? Could you clarify that a bit?

[English]

Mr. Brian Bohunicky: Yes, I suppose there are similarities in the environment and the geography, although there are many differences as well. There are differences from one part of a region to another, differences from one part of a province to another. In our work, one thing that differs from one province to another is the structure of the provincial agencies we attempt to coordinate with. Provinces don't have their bureaucracies structured identically. This means in each province we have a different array of players to try to work with. From the province's point of view, as indicated by the last question, there's always an array of federal agencies, but the dynamics differ administratively from one province to another.

[Translation]

Ms. Paula Caldwell St-Onge: We’re working with the Province of Quebec. In Quebec, there’s now a draft regulation dealing with this issue in agriculture. Once it’s passed, we can harmonize it with Quebec. I have a draft with me; I could give it to you after the meeting, if you’d like.

Mr. Gilbert Barrette: For the agreement, could it take long?

Ms. Paula Caldwell St-Onge: For the regulations, it’s the Province of Quebec that will have that. So I don’t know. I was told this week, for this meeting, that the draft was already public, so that people could comment on it. I could contact my people in the province and give you the answer, if you like.

Mr. Gilbert Barrette: Yes, please.

In Quebec, producers have to have what’s called a buffer zone, that is, shrubs or brush. Will they also have to put up a fence?

À (1015)

Ms. Paula Caldwell St-Onge: I don’t know the specifics of the Quebec regulation, but the buffer zone is still in the plans called the Environmental Farm Plans. I haven’t read the Quebec regulations in detail.

Mr. Gilbert Barrette: are you going to ask to have a fence in addition?

Ms. Paula Caldwell St-Onge: We never ask for a fence; we say that there must be something to prevent access to the water. We don’t talk about fences. With the regulations, of course, there are lots of different solutions and techniques. It depends on the farm, the farmer and the work being done with the Department of Agriculture, Fisheries and Oceans, Parks Canada and also the provinces. The various solutions and the funding of these different solutions are up to the farmers working with the provincial and federal committees.

[English]

The Chair: Mr. Ritz.

Mr. Gerry Ritz: We're having an interesting discussion here today. We're finding out a few things.

I'm a little frustrated, in that you are going after agriculture in a big way. It's a captive target. It's an easy target. I would suggest you might also want to clean up your own backyard. I see a lot of things in here where bureaucrats from this department are going to work with bureaucrats from that department. It's a huge workload for bureaucrats, and that's a wonderful thing. But the practicality of it is, our national parks fall under bureaucratic purview.

Our first nations are also under bureaucratic purview. I was in Jasper Park last fall, and there was a fire roaring up the side of a mountain, away out in the boonies, that wasn't going to affect anything where anybody lived, so they let it burn, because their firefighting budget was slim. But there is fish habitat—real fish habitat—in those areas, and the smoke and ash, of course, is a major problem. Yet the federal government allowed it to happen, and it is not cleaned up.

On the first nations reserve in my area, they do a little thing called a spring burn-off of the whole reserve. They always lose a house or two, but that's inconsequential to getting that early greening. We have rivers and fish-inhabited lakes throughout those areas as well, and the smoke and ash is a major problem. I have called year after year for someone to look into this, and nobody will.

When you're talking about responding to potential violations, there is one for you—I will give you names and addresses if you would care to have them—and there's the whole parks situation where everybody looks the other way, with TB, and the animals in the parks, and so on, and nothing happens. Yet you're going after agriculture. I just don't understand how you can square that circle.

Mr. Brian Bohunicky: We could take the information about the specific instances you are talking about. I can't comment on them here, of course; I'm not familiar.

I would like to say again that we are not targeting agriculture. We are, in fact, seeking to develop stronger partnerships with them.

Mr. Gerry Ritz: With the bureaucrats in Agriculture Canada, but not necessarily with farmers.

Mr. Brian Bohunicky: I referred to an effort my colleagues in Ontario have put a great deal of time into, sitting down with the Cattlemen's Association, and there are similar efforts in other provinces as well, to try to find pragmatic solutions that work for everyone and meet the requirements of the Fisheries Act. Yes, we have enforcement powers. Our approach, and the philosophy we're trying to implement, is that the emphasis should be on those proactive efforts, and on enforcement only when absolutely necessary.

Another thing I would add is that a large part of the modernization effort I spoke about is a real emphasis on partnerships, and more specifically on integrated planning, so that DFO becomes a member of watershed planning bodies that exist across the country provincially and municipally. We have big tables with lots of bureaucrats together, but they come out with an integrated plan. For the citizens, what that means is there is one plan, one place to go, while behind the scenes officials have gotten their act together across all levels of government so that citizens don't have to figure it out each time themselves.

The Chair: We'll move to Mr. Eyking for five minutes.

Hon. Mark Eyking (Sydney—Victoria, Lib.): Thank you, Mr. Chairman.

We have a farm, and DFO once came to us about our spring, before I got into Parliament. So we've had quite a few words with you guys.

Anyway, I've been dealing with fishermen since then. They complain about DFO and about how it delivers its programs, and its communication.

Last summer we had our rural caucus in the Yukon. I figured, there's a spot where DFO can't get into trouble. So we got off the plane, and there were signs, “Down with DFO” and “No DFO”.

I think some of the things you people are doing are not bad. It's just the way you're coming across, the way you're delivering it. You take a group of farmers in a rural area, and if somebody came to them in a community hall in the middle of winter and said “Okay, this is what we're trying to do over the next ten years, and let's go through this...”. Most farmers want to be good stewards of the land and good environmentalists; they want to evolve, and they don't want to look bad in the community's eyes. But they don't like this being heavy-handed and the costs being downloaded onto them. I think that's the whole problem.

There has to be a different approach from DFO, because they're getting in trouble with everybody across this country, and I don't think there's any need for it. When I was in the Yukon talking to these people who were digging the gold mines, they were saying “These are the best fish pools”. When they're leaving them, the fish are laying their eggs, and that's where everybody's going fishing. Yet all of a sudden, they're chastised for it.

So I think DFO really has to do a wake-up call on how they distribute these programs and how they're managing the stakeholders, because farmers cannot adjust that quickly to it financially. I think that a whole process has to take place.

I know that you have a lot of scientists in your department who know everything that's going on, but their communication and delivery have left a lot to be desired. I think somebody has to check that out.

I think a lot of things can work. Maybe farmers have to apply, or DFO will have to say “How are we going to cost-share on setting up a fence or a buffer zone?” The first thing is your intrusion on the rights of the farmer, and then the next thing is how you're going to pay for it.

As I see it, I think that's one of the biggest problems, the way DFO handles the whole thing. It's just not the right way.

À (1020)

Mr. Brian Bohunicky: I'd agree with most of those sentiments. I'd agree that we often find ourselves in controversies in places where I wouldn't have expected them before I went to work for the department.

I might add, not with respect to agriculture, but more generally, that we often get pressure and challenges from the other side of the equation, from environmentalists, who say that we're not doing enough to implement our laws. We're often caught in the middle. That's not an excuse, but it is a reality that we do work in day to day.

As I said, the thrust and spirit of the modernization plan we're embarking on in our program is a real attempt to do what you've just articulated that we should do.

Hon. Mark Eyking: Well, let the environmentalists come to a meeting in an area and let the fish and wildlife people come to the meeting, and say okay, everybody wants this to be cleaned up or changed; let them set up a fund. I think that Ducks Unlimited is doing a lot of good things in this country; let them pay the shot. If they want things to change and the farmer has to change that quickly, there should be funds and whatever set up for an area, because the way the farmers see it now, it's just a bunch of urban people ganging up on them and wanting them to change their whole lifestyle and everything they're doing.

I think you have to encourage all of them to get to the table and say “If you want to get it done, somebody has to pay for it”. That kind of approach has to be taken.

The Chair: I think we've come to the end of the question period. I know Mrs. Ur had some questions.

I think what you heard this morning is a representation of the kind of thinking that's going on out there. A lot of people are really concerned as to how they're going to face the reality of these letters that have been coming. Considering the language that's used in these letters, a lot of confusion and stress is being added to a level of stress that's almost beyond people's ability to handle.

What kind of timeline are you giving these people? Obviously, when you've put out letters like this, a fence has to be erected at some point in time. Are the timelines realistic in terms of where the fences should be applied?

I attended the meeting that Mrs. Ur convened in her area. These people weren't unreasonable people. It could have been a very rowdy meeting. These people were very tempered in the way they presented their issues.

The feeling out there is that farmers are being targeted because they're 1.5% of the population. We're asking the farm community to assume responsibility for something on which they really can't fight back. They have no money to fight back. They're easy targets. Somehow society gets a good feeling in its belly because they've cleaned up a stream, when in fact it really has nothing to do with cleaning up streams but rather with giving that good feeling. Asking people to fence areas such as flood plain areas, where you simply can't fence, in reality just doesn't work.

I'm glad to hear you say, Mr. Bohunicky, that things have changed in terms of the way DFO responds to the needs of municipalities in terms of drainage repair and alterations. That had to change. Somehow we need to catalogue streams that are not in the framework of other agreements. They're outside of that, and the criteria don't apply.

Are there timelines? Can you find a way to ameliorate some of the problems we have right now going into this spring? This is the worst time to be hitting farmers.

I realize we can't send the message that we no longer care about this kind of thing. Farmers care, too. But when the same stream they're asked to fence carries the water from an upstream side of a lagoon at a time when it shouldn't because they have no alternative but to dump it... How can we expect farmers to be responsible for all of this? If there's a common good and a public good, then the public good and the common good should be represented in who pays for it.

À (1025)

Ms. Paula Caldwell St-Onge: Farmers, like most other Canadians, want to be in compliance with not just environmental laws but all laws.

In terms of timelines, I'll use the Prince Edward Island example. Some warning letters were given out in Prince Edward Island. Our enforcement officers, as well as our program people, are reasonable. We will sit down. We will look at a phased approach. We will see what can be done. It was not realistic in P.E.I. to have expected everything to be done in the first year. So we did sit down with the farmers, and we did go through what we call due diligence, which I mentioned before. As long as the farmers will work with us and others to demonstrate that they are doing something, that they will improve some of the practices--i.e., for the water quality aspects and of course the bank and stream erosion--we will sit down, and we're more than happy to do that.

The Chair: What alternatives other than fencing can be used to keep cattle out of a waterway? You talk about dry crossings and all this kind of thing. If cattle are 40 rods away from a dry crossing, they're not going to walk 40 rods across the creek. They're going to cross the creek wherever they are.

Mr. Brian Bohunicky: In the context of the best management practice guide, which we're working on with the Ontario Cattlemen's Association, I'm not a technical expert on it, but I know that there are a range of steps that can be taken, which include fencing in some cases and timing considerations. There are certain times of the year when the fish habitat is more sensitive and times when it's not. If it is acceptable to have crossings, to move them around from season to season, vegetation as well.... There's more that I'm not listing now. There are a range of possible measures, not all of which are expensive, some of which are virtually cost-free. But together we hope that best management practice guide will provide a set of pragmatic solutions for them.

The Chair: I know you're speaking in generalities, but to ask you specifically, what one barrier can you provide to keep cattle out of a stream, other than a fence, other than a thorn hedgerow, which takes years to grow, or a shepherd out there with a stick?

Mr. Brian Bohunicky: We're not saying that's the requirement, though.

The Chair: Anyhow, we have to terminate this part of the morning's discussions.

Ms. Ur.

Mrs. Rose-Marie Ur: You've said here all morning you want to sit down with the farmers. I was there. You sit with farmers, but you don't listen. That's the problem. You can sit till the cows come home, whether it's across a creek or down the road, you don't listen to their concerns. You can write the BMP and all the rest, but you don't take into consideration what you're hearing. This is the frustration out there, that you don't understand the situation.

À (1030)

The Chair: You have to understand that there's a lot of frustration. All of us around this table need some assurance, going back to our constituencies and our farmer friends, that another letter will follow the one that's gone out. These people are in fear of what that letter might mean. They need another letter, saying we apologize for this misrepresentation or misunderstanding, and some pause should be given. Our farmers right now just cannot undertake another one of these kinds of issues. We need some assurance from you that this is going to happen. I realize that somebody higher than you may have to tell you that, but I'm asking you to go back with that message on behalf of all of us here.

A good friend of mine's brother did away with himself last week in the dairy business. We don't need another one of these things to cause further people to take these kinds of actions. So please take that message back.

Thank you very much for appearing this morning. We will just have a slight pause in our meeting while we have new people take their places at the table, then we will continue.

À (1031)

À (1038)

The Chair: We have our guests from the Canadian Wheat Board, Mr. Adrian Measner, president and chief executive officer, Larry Hill, director, board of directors, and Deanna Allen--I don't know her title. Welcome.

Mr. Hill.

Mr. Larry Hill (Director, Board of Directors, Canadian Wheat Board): Thank you, Mr. Chairman, and good morning.

I farm 4,800 acres near Swift Current, Saskatchewan. I have been the farmer elected director of the CWB since 1999, and I chair the trade committee of the board of directors. With me today, as mentioned, are Adrian Measner, our CEO, and Deanna Allen, our vice-president of communications.

Thank you for inviting us to speak to you this morning. We'll be happy to answer any questions that you may have of us later, but we'd like to start by discussing some of the issues we face, both domestically and internationally, in trying to meet our mandate of maximizing farmers' returns from the sale of wheat, durum, and barley. Adrian will briefly paint a picture of the current environment in which the CWB operates and some of the important initiatives we have undertaken to maintain and strengthen our role in the world grain trade. I will then close our brief presentation to you today by examining some of the trade issues we face and how these are affecting us, the farmers of western Canada.

Adrian.

À (1040)

Mr. Adrian Measner (President and Chief Executive Officer, Canadian Wheat Board): Thanks, Larry, and good morning.

The current environment in the grain market is offering us a number of challenges, but at the same time a number of opportunities. I'm going to discuss this morning some of the factors we currently are facing that are shaping markets, and then turn to how we're addressing some of these challenges as we move forward.

One of the challenges has been the change in ocean freight rates. They've exploded since last September, and this in large part is due to the exploding economy of China. They've experienced a 17% growth in industrial output since 2003, which has boosted demand for minerals and iron ore. That's really tightened the supply of vessels overall, for all commodities, including grain, and we've seen shipping rates double and even triple from a year ago. Just to put that in perspective, if you had been chartering a vessel from the Gulf of Mexico to Japan a year ago, it would have cost you about $25 a tonne. If you did that same charter today, it would be $75 a tonne.

So it's a major change on that side. It's an adjustment for us and an adjustment for our customers. Eventually we would expect the freight market to come back to a more reasonable level; however, given the tightness and supply of vessels, that's probably going to be a year or two down the road.

On the positive side, international wheat stocks have fallen by about 70 million tonnes over the last couple of years, and that has helped stabilize the market and has been somewhat bullish for the market. Our pool return outlook has moved from $195 for number one Canada western red spring wheat, 13.5% protein, last fall to $206 today. Really, that's a result of a bit tighter supply situation on world stocks. The market, of course, remains very dependent on weather, and it will be interesting to watch as we go forward.

The increase in the value of western Canadian wheat would have been much more significant if not for the strength of the Canadian dollar. Because the international market trades in U.S. dollars, the position of the loonie has a direct negative impact on the price farmers are receiving for their grain in Canada. Economists around the world were certainly taken by surprise by the rapid devaluation of the American dollar during 2003. If you remember, it took eight years, from 1994-2002, for the Canadian dollar to weaken by 28¢, but only 10 months for it to strengthen by the same amount versus the U.S. currency.

The result is that western Canadian farmers are getting less money for their grain. And while the CWB cannot control these market forces, we do minimize the impact on pool accounts by hedging foreign exchange risks throughout the year. In such a volatile and unpredictable economic environment, this policy provides long-term risk management for farmers.

The CWB must compete in an environment shaped by factors such as these, factors that have ultimately led to lower prices for prairie farmers. We are extremely concerned by this outcome and are doing everything we can to counter this downward pressure on prices through the promotion of the CWB brand and the use of the single desk as a means of extracting premiums for this branded product.

We've taken this opportunity to bring a few examples along--a few flour sacks from some of the countries around the world--that we thought you might find interesting. First of all, we have a bag here from Rank Hovis Ltd., which is a large miller in the U.K. They label their product as being “Canada best”. They buy Canadian wheat, pay a premium price for it, and label the product that way. We also have a smaller producer of flour in the U.K. that actually puts a Canadian flag on their product and refers to the fact that it is made from Canadian product. Those are both very positive developments.

In Mexico, we have a large customer that actually labels their product as being made from Manitoba wheat. If you recall, if you go back 20 or 30 years, the wheat used to be called Manitoba wheat, so this customer and the consumers down there remember that brand name from before and still label the product that way. This just shows how powerful a brand can be. And there certainly are other customers that do the same thing.

Finally, we have one from Japan where the customers are labelling the product, again, as being made from Canadian wheat.

So these are very positive. We have a number of other examples I'm going to touch on, but certainly the branding of the product has been successful, and we see a lot of opportunity in the future as we look ahead.

In Poland, and this is on page 3 of the presentation, pasta maker Danuta actually produces a premium pasta made from 100% Canada western amber durum wheat, and they very proudly advertise that on the label. The company has even hired Italian film star Sophia Loren as a spokesperson for their company and for the pasta they're producing. Again, that's very positive advertising for the Canadian products we're exporting.

In Japan, the Mr. Donut franchises launched a three-month campaign last year advertising that their donuts were made from Canada western red spring wheat. All of the tray liners--there's a small illustration on page 3 of those tray liners--actually say in Japanese that it's made from the finest wheat in the world, and that wheat comes from Canada. And they have 1,300 shops around Japan, so certainly it's a very positive recognition of the products that are produced in western Canada.

À (1045)

Finally, just on the malting barley side, Tsingtao Brewery is the largest brewery in China. They export to more than 40 countries the beer that they produce. They have about 80% of that export beer market. They also advertise that their beer contains 50% of Canadian malting barley. To put that into perspective, this one brewery produces more beer than all of Canada's output. China, in total, is the largest beer producer in the world, so has surpassed the U.S. in terms of beer production.

The strong commercial relationship that we have developed with China will be a key asset as we move forward in our efforts to maximize farmer returns. Certainly China's booming economy may have negative impact on ocean freight rates, but this growth also represents numerous opportunities for Canadian wheat and barley because individuals have higher disposable incomes than ever before.

Mr. Leon Benoit (Lakeland, CPC): On a point of order, Mr. Chair, with all due respect, we have the Wheat Board representatives here to talk about the Wheat Board pricing policy. Quite frankly, this brief--

The Chair: I think we have to allow these people, unless we stray substantially away from this.... They have their time, and if they don't give it, that will come up in questioning. You have the right to ask that question.

Hon. David Kilgour (Edmonton Southeast, Lib.): Mr. Chair, on another point of order, we have the statement. Do we really have to have them read the statement to us, since we're all capable of reading?

The Chair: Is there a consensus that we have read it, can read it, and we'll ask questions based on our ability to read the report?

Some hon. members: Agreed.

The Chair: Can you then summarize quickly? I apologize, but I think there are a lot of questions that want to be asked. If you can summarize, that would be good.

Mr. Adrian Measner: Okay. To summarize on my points--and maybe Larry wants to summarize on his--we do see some opportunities as we go forward and certainly pricing in that export market, and we're just trying to touch on those opportunities. We have a lot of market development activities with new white wheats coming on stream, which I think are very interesting, and new durum varieties and malting barley varieties that I think will position us well in that export market.

Larry, did you want to...

Mr. Larry Hill: Okay. Just to briefly summarize the points that I had at the end, we have a quality product and we're having trouble getting a good price for that. There are issues with tariffs on our grain moving into the U.S. We're trying to rectify that, to get rid of those tariffs, so we can be moving grain into the U.S.

We also feel that it's a difficult thing for Canadian farmers to be competing against other subsidies in countries such as the U.S. and the European Union. We think there are ways in which producers could be supported that wouldn't be drawing trade challenges and that would help producers get support now, because there's a huge issue today of income on the farm.

Thank you.

The Chair: Thank you very much. We're going to begin our line of questioning with Mr. Benoit, for seven minutes.

Mr. Leon Benoit: Thank you very much, Mr. Chair.

Thank you, ladies and gentlemen, for coming today. I do appreciate that.

I'd hoped to hear a little bit more about the pricing policy, which is what you were here to present today, but I'll ask you questions about that.

First of all, there are two things to hear about the Wheat Board from people in my part of the country more than anything else: the monopoly aspect, but also the missed opportunity at the first of the last crop here in terms of prices for wheat in particular. I would just like you to explain, if you could, why that opportunity seems to have been missed.

Mr. Adrian Measner: Well, in the last crop here in the fall, prices did peak in early October, and I think you're referring to that peak in prices. We were selling through that peak in prices, as we do in any year. You sell through the course of the year to try to make sure you're not missing any peaks in that market.

The market is always unpredictable. Certainly the market was indicating it would stay at a much higher level for a longer period. Ultimately, that did not happen. It moved down very quickly, largely because of the interplay of minor exporters. They're normally about 20% to 25% of the international marketplace, and they were 40% of the international marketplace in that particular year.

What they did is market their product at more than $100 under what the traditional exporters, like ourselves, were selling at, and customers did switch to that lower-priced commodity. Ultimately, what happened is the market did drop, and drop very quickly. The Minneapolis market dropped $135 Canadian from its peak in October into the spring period. We reflected a pool return outlook in that fall period that had a market projection in it. Ultimately, that market did not hold, and our pool return dropped about $65 during that period.

So it did not drop the full extent of the market. That was a result of fact that we were selling through the period and a result of where we were projecting the market. But it was there for a very short period of time, and we were selling through that period but certainly didn't sell our total crop during that period.

À (1050)

Mr. Leon Benoit: Thank you very much.

If you could, what was the price? What could a farmer selling number one, 13.5% protein, hard red spring wheat have netted if they were in the centre of the prairies—so the maximum freight rate—had that grain been sold into that market at the peak?

Mr. Adrian Measner: Our pro at that time would have a little over $300--

Mr. Leon Benoit: I'm not asking about the pro.

Mr. Adrian Measner: —or about $250 in the prairies.

Mr. Leon Benoit: Okay. That's net to farmers, so that would be roughly $7 a bushel. I'm doing quick thinking here, back to bushels again, in my part of the country.

You sold into that market as you always do, but in how many years and how many times do farmers get an opportunity to net $7 a bushel for number one, 13.5% protein? It's so rare. I just can't understand why the Wheat Board wouldn't have sold an awful lot of farmers' wheat at that price.

I'm one of those farmers, you know, depending on that market. I have another income, obviously, to make my mortgage payments. I'm disappointed that market was missed.

Mr. Adrian Measner: Can I make a couple of points on that?

One of the difficult things in that period was we didn't have our crop harvested and we were undergoing severe weather conditions. So there was a lot of uncertainty in exactly what our production was going to be and what our grade pattern was going to be. That certainly prevented us from going too far on that side. We did market through that period to our premium customers, but we didn't know if we were going to have enough to supply them through the balance of the year.

The other thing is we have introduced—with the new farmer-controlled board of directors—a number of pricing options so farmers can do their individual pricing. So there were opportunities for farmers, if they were part of those pricing options, to price their grain at that peak period, and some farmers did. A lot of farmers didn't because the market forecast indicated it was going to be there for a lot longer period, and could go even higher. But there was the ability for individual farmers to take those pricing options out and do that pricing.

Mr. Leon Benoit: Does the Wheat Board not hedge prices on its own?

Mr. Adrian Measner: We do some hedging, but our risk management policy for farmers is to sell the grain through the pool period, not do it all in one month or one time period, because nobody knows where that futures market is going to go. You don't control the environment in front of you. So our risk management policy is to sell that crop through the pool year so you capture all of the highs that may appear--

Mr. Leon Benoit: But any farmer could do that on their own. Surely the Wheat Board has something to offer that's better than farmers can do on their own. I think there's a lot of expertise on the board; I believe that. I know there are many good people. To me, that seems to be not taking advantage of that expertise.

So when you have a net price of $7 a bushel, which is available how often—I've maybe seen it once before, back in 1974 probably—when you see an opportunity like that, why wouldn't the board do better than farmers in just metering the product out so much per month? To me that's astounding; that's a failure on the part of the board.

Mr. Adrian Measner: I know it's easy to look back at what happened with prices, but 1995-96 was the last time we had a similar scenario. In 1995-96, the projections were for U.S. stocks to go below 10 million tonnes--the same projection as in October 2003. In 1995-96, the price went up to the same level--it was about $4.50 or $4.70 a bushel on the U.S. futures market in October, and by April or May it was at $7 a bushel. So exactly the opposite happened.

That's why it's difficult. You don't control those international factors--nobody does. You use your best market intelligence, but things happen.

Mr. Leon Benoit: But again, the probability of $7 net to farmers being a good price is extremely high. So you're justifying the action the board took, rather than saying you didn't do a good job, you'll do better next time, and explaining to us how you'll do it better next time.

Mr. Adrian Measner: I guess one thing we didn't do was read the minor exporter market correctly. I would say the Wheat Board was not the only organization, because the market certainly didn't read it either. We have sent the team over, so we have a better understanding on that side.

We will do things to make sure we can make improvements, but one thing we will never--

À (1055)

Mr. Leon Benoit: Can you tell me what, specifically? Tell me what you'll do so if we see another situation—God allow maybe this fall—where $7 net to farmers in my part of the country is available, you'll kind of lock more of that in, or do something to ensure that farmers do better in that market?

Mr. Adrian Measner: Larry wants to comment.

Mr. Larry Hill: Just to give you a bit of background on the pricing policy Adrian mentioned, that is the policy the board of directors approved. We approved our pricing policy previously.

Mr. Leon Benoit: Pricing policy being the actual action taken at that time?

Mr. Larry Hill: No, the sale of grain throughout the year. That's something the board of directors approved. We of course have seen that spike and looked back in hindsight and said there's something we have to look at here. So we are reviewing this. We were looking at actions we may take to give the staff more discretionary action if increases in price like that come along. So as directors we are looking at policies that would improve this situation.

The Chair: That's it for this round, Mr. Benoit.

We'll move to Mr. Eyking for seven minutes.

Hon. Mark Eyking: Thank you, Mr. Chairman.

My question is more to do with GMO and GMO wheats. I suppose it's your vision on dealing with the whole GMO issue. I'll put a few questions out.

First, is it a good thing for the grain industry?

Second, is there an opportunity for us, and if it comes through, should we be looking at having segregated areas of certain farms, something like we do with organic, or certain regions that are GMO or GMO-free?

The third question is on the whole transportation issue. When I was out in Regina I saw a lot of grain farmers or processors using containers instead of hopper cars in dealing with that. Maybe it's to do with food safety, but I don't know why they're using it. Perhaps it's for various reasons. If this is a thing that's coming, should we be looking also at transportation and grain elevators? What's your vision on that, and how do you see us adapting to the world? How is it evolving?

Mr. Adrian Measner: First of all, on the GMO side, we stay in touch with our customers on a regular basis, and the message from them at this point in time is very loud and clear that they're not in a position to buy GMO wheat and particularly will not buy Roundup Ready wheat. In fact, some of them have said if you start growing it we won't buy other wheat from you, because we're not going to take the risk of the contamination.

Hon. Mark Eyking: Is that a majority of customers?

Mr. Adrian Measner: Yes, over 80% of our customers have said that. The message is very strong, in some cases extremely strong. So what we've tried to do is develop a policy that takes that into account but also leaves the door open, because the future is uncertain. There may be better GM varieties that come along, and maybe customers will find more acceptance of it, but at this point in time we've been very strong that it is not accepted by customers and cannot be given unconfined release.

We've asked the government to consider a fourth pillar. We've asked them to also consider, in addition to food, feed, and environment, a fourth pillar, which would be a cross-benefit going right back to the farm. It would look at the benefit to farmers, to customers, and the cost involved in that. So we are trying to develop a process that looks ahead and does open the door if there are some varieties that come along at a later date.

We also know there needs to be a segregation system in place. We have invested money in automatic quality testing. We've put some money into research on that side to see if we can't get an automatic way of testing varieties on the driveway so it can be detected. Because at this point in time it's not distinguishable for someone who's buying the grain out in the country. So we're trying to develop the processes in place so that we can have some sort of segregation system in the prairies and be able to handle this maybe a few years down the road.

Right now we think there's major risk because of cross-contamination in the fields and so forth. If it is given unconfined release we think it will destroy our ability to properly service customers. Once we get to a point where we can say there are proper segregation systems in place, proper technology there, we may have a different view on that, but it does not exist today, and it is very dangerous from a customer perspective.

Hon. Mark Eyking: Right now the demand is definitely not there from the customers, and we're really not ready for it anyway in our system.

Mr. Adrian Measner: No, the industry is not ready.

I'd like to comment on food safety. There are two things here. GM of course is a food safety issue also, but overall food safety is a broad issue that is on the minds of many customers, and it is likely, at some point not too far down the road, that we will be asked to certify that the grain has been treated safely right from the farm through the supply chain, to the customer.

We have been working with the Canada Grains Council on some test projects, both on the farm and post-farm right through the supply chain, and we're looking at a HACCP-type system where you actually certify what actions have been taken and certify that they're safe actions through the system. We think it's only a matter of time, and we're looking at two or three years down the road that customers are going to come to us and say that they need that certification right through the supply chain because they have to satisfy their consumers that the product they are buying is safe. I think Canada is very safe, but we need to have the systems in place to certify it.

Á (1100)

Hon. Mark Eyking: That is where you see the sealed containers working more and knowing exactly where it comes from on the farm, all the way to the end user?

Mr. Adrian Measner: Yes. I think containers will have a role in that. Obviously you can't move the entire crop that way, but containerization will have a role in that. Certainly we will have to put other systems in place for bulk shipments too.

Mr. Larry Hill: I would like to add a little to the GMO issue.

I have been at about 25 meetings in the U.S., with the U.S. producers, and they are grappling with this in exactly the same way. The U.S. Wheat Associates have told the farmers there that the American customers have the same approach that Canadian customers have, and they are grappling with this in an identical way. Their major concern is that it doesn't get released in the U.S. prior to being released in Canada, so they are struggling with this just as we are.

Hon. Mark Eyking: That brings me to my question about the U.S. and how integrated we are, not only with grains, but also with cattle movement, and even hogs. We are selling weaners down there, and all this is moving back and forth. If we think that is the way for our customers to be GMO-free, it's going to be hard if the United States is going to go with GMO grains and everything they're going to do and we are shipping the stuff back and forth. So you'd have to have some sort of plan in place in case we are going to try to.... Or perhaps, at the end of the day, we are going to have to follow suit with the Americans and what they are doing because we are so integrated.

What's your view on this?

Mr. Adrian Measner: We are developing a contingency plan in case that does happen. What we have experienced is that the U.S. is very reluctant to go forward with GM wheat knowing that Canada is not, because they do know the impact that will have on their customer base. There is a risk that they will go forward with it and we will have to deal with cross-border flows and so forth. We are developing contingency plans around that in preparation for that. We still feel that Canada has some work to do here and we need to get our guidelines tightened up, so we're ready for whatever happens on that front.

The Chair: Thank you, Mr. Eyking.

I apologize to Mr. Proctor. I overlooked you. I'm sorry about that.

Mr. Proctor, for seven minutes.

Mr. Dick Proctor (Palliser, NDP): No problem. Thank you very much, Mr. Chair.

Welcome, folks.

Staying with the issue that Mr. Eyking raised, the government, the Canadian Food Inspection Agency, was doing an assessment of GMO wheat last year in terms of the safety, the science, and all that. I'm not aware that it has been completed. Are you?

Mr. Adrian Measner: No. That's still in process.

Mr. Dick Proctor: Okay. The assumption was that it would be completed by the end of calendar year 2003.

The other thing is, and I want to choose my words carefully, I don't think that the previous agriculture minister committed to it, but he hinted that we needed to look at a market analysis, in addition to the other components. If it's not good enough, in other words, for it simply to be safe, what is going to be the impact on the market? I'm wondering what discussions the Canadian Wheat Board might be having with government officials on that point, on the cost-benefit or the market analysis.

Mr. Adrian Measner: We have strongly recommended that this fourth pillar be put in place, which is really a cost-benefit or market analysis on the impact of GM wheat being introduced.

The government indicated they are prepared to look at that and start a consultation process to do so. I believe that was originally going to happen during the winter period, but I think it is going to be a little later this year. As I understand, there are going to be consultations across the prairies. We have received a recent letter on that. We will be providing input into that and certainly making our views known. We feel strongly that there needs to be this fourth pillar. It is not just the Canadian Wheat Board. An industry group that includes the millers across Canada, a lot of the grain handlers, and so forth have looked at that. There have been broader discussions on this issue with a number of farm groups and the Canadian Wheat Board. I think there is a general feeling that there needs to be something additional done.

Mr. Dick Proctor: Do you expect that this analysis, including the cost-benefit, the safety of the GMO wheat, will be done in this calendar year? Do you expect you'll complete that process?

Á (1105)

Mr. Adrian Measner: We would want that to happen. I'm not sure how long the consultations are going to take. The timeline has slipped a little, but we would strongly encourage that to happen, because customers are very concerned in terms of what Canada is doing. They are watching the press. They are watching daily comments on this issue. It would certainly be our goal to have it done by that time, but it's not our timeline.

Mr. Dick Proctor: No, I appreciate that.

I want you to elaborate on the arguments you made about the level playing field. We've heard this before. We have made many of the same arguments that you are making on page 5 of your document, which you didn't have a chance to read into the record.

It says that we need results soon. I've only been around here since 1997, but we basically have been saying that every year--we need results soon, the farmers simply can't compete. I agree with that, but here we are again.

You are talking about some supports that can be put in place that are not trade-actionable. I wonder if you could elaborate on that specifically, and on why you are so certain that we could do some things without inviting retaliation from the United States.

Mr. Larry Hill: I'll start on that.

With the big issue of margin we're talking about here the one thing is price, but the other thing producers are very concerned about is the cost of inputs. If there's research that makes varieties available where producers don't have to pay a fee to be able to purchase them to seed them, that helps.

There are all sorts of small things where producers have had costs downloaded on them, where they're having to share costs, and that all cuts from the margin. A lot of these things wouldn't be actionable; they would be green in terms of our trading position, and anything the government can do to cut the cost of inputs I think is what we were looking at on this issue.

Mr. Dick Proctor: There's just one other area. There was a story on the CP wire this week where somebody who was supposed to be very knowledgeable was saying the world is on the verge of a grain shortage that will destabilize poor countries, drive up food prices, etc. What is the Wheat Board's outlook over the next several years in terms of grain prices?

Mr. Adrian Measner: We're not projecting the shortage that was in that article, but what we are trying to flag here today is the significance of China in this international marketplace and the impact they can have on it. They have drawn their supplies down and have re-entered that marketplace. Right now they're producing about 85 million tonnes of wheat a year, and they're consuming about 105 million tonnes a year, so that's a 20-million-tonne deficit on a regular basis.

I guess once they use up the rest of their stocks, which we think will happen over the next year and a half, we see them very active in that international market. Without major changes in their production side--and we're questioning whether they can change the production side--they could be in the market for in the order of 15 million tonnes a year, and that would certainly help stabilize prices and provide some positive direction on prices.

We don't see it going to the extreme of food shortages because of the minor exporters I spoke about earlier coming on stream. Kazakhstan, Russia, Ukraine, and countries like that are also getting their act together in terms of producing and will be a sort of counterbalance to that extra demand.

We're somewhat mildly optimistic. I would say that there will be some improvement in prices but not to a very large extent, given these other suppliers.

Mr. Dick Proctor: In terms of the shortage in China, is Canada well positioned to get in on that shortage and get our fair share of the market?

Mr. Adrian Measner: Yes. We have an office in Beijing and we have a very strong relationship with COFCO, which is the main wheat buyer in China. We have done business this year. We actually announced the first part of that business here in Ottawa when Premier Wen from China was here. We signed an agreement with COFCO for 500,000 tonnes at that point in time.

We're in daily contact and we're very comfortable with the business we've done into the market. They are buying quality wheat at this point in time. They have their customer preference, and the quality of wheat preferred by consumers, as we highlight in here, has increased. They're looking for high-quality wheat, whereas ten years ago they were buying more medium-quality wheat. I think we're well positioned for that marketplace. We have the quality of the product they want and we have the relationship built to do the job.

The Chair: Thank you very much, Mr. Proctor.

Mr. Borotsik.

Mr. Rick Borotsik: Thank you once again for appearing. It's always nice to have the Canadian Wheat Board here.

On pricing policy, I understand averaging, I understand pooling, and I understand selling into the marketplace at different times so you can access the highs and the lows and stabilize. Can you give me what percentage you sell into that marketplace over a crop year in order to generate that kind of averaging you're looking for?

Á (1110)

Mr. Adrian Measner: The goal here is to sell a certain percentage of the crop and make sure at the end of each month that you're taking advantage of the prices that were there. It would mean, say, by the end of December you'd normally have 30% to 40% sold, at this point in time it would be more like 60% sold, and—

Mr. Rick Borotsik: Is there flexibility built into those percentages? I go back to what Mr. Benoit said with respect to that price spike. When you see a marketplace that's now paying some fairly high premiums, which you keep on telling us you're trying to generate, are you then flexible enough to be able to sell into that marketplace at that point in time? Or are you inflexible and do you say, well, no, we have this averaging, we have this pooling, and we have to sell into the marketplace how we've identified over the past years? Do you have that flexibility built into your pricing policy?

Mr. Larry Hill: We do have some of that built in, but the board of directors is looking at whether or not we have the appropriate amount. That's what we're struggling with.

Mr. Rick Borotsik: Let me ask what the existing amount is, and then let's see what the appropriate amount is. What is the existing amount? Does management have the ability to go and say, hey, right now we have a price spike we have to take advantage of? Do you, the board of directors, allow that management to go ahead and do that without a board meeting to say let's talk about it and let's see what our averages are? Do they have that flexibility management-wise?

Mr. Larry Hill: They do, within limits. The question is, how large should the limits be? That's what we're wrestling with, as a board of directors.

Mr. Rick Borotsik: I think that your decision, up to this point, has not been very beneficial for the farmers. If in fact they don't have the flexibility to buy into that, then you've failed in your mandate, which is to sell at premium to the producers. That's the mandate of the Canadian Wheat Board. You haven't bought at premium, have you?

Mr. Larry Hill: In hindsight, we certainly would have had that band wider, but we did have the pricing policies that Adrien mentioned earlier. If a producer takes a different view of the market, the producer did have the option to take out a basis contract and market more grain on that level.

Mr. Rick Borotsik: Do you know something, Mr. Hill? Producers have that option with off-board grains. They can sell off the combine or they can sell into those spikes. They have the option.

If that's the case and you're giving them that option now, then why should it be a monopoly situation? Why should they not have the option to do it on the open market, as opposed to going through the Canadian Wheat Board?

If that's what you're saying, they have the option to hit that spike themselves. Why do they have to have the monopoly with the Wheat Board to protect them, if you will?

Mr. Larry Hill: It's so that we can get larger gains in some premium markets, where we do have the opportunity to approach the threshold.

Mr. Rick Borotsik: Actually, there was a comment that was made, Mr. Hill--and I can't remember whether it was you or Mr. Measner--that said you're having trouble getting a good premium price. You said that you're having trouble getting that premium price because of these other factors, because of the factors of the Canadian dollar, and because of the factors of non-tariff trade barriers into the U.S. You said that, yet in your presentation it says “the single desk is a means of extracting premiums for this brand of product”. There's a contradiction there. You're saying that in fact because of these other factors you can't get premium, but because of the single desk, you get premium. What is it? Are you getting premium or aren't you getting premium?

Mr. Larry Hill: No, we are capturing premiums in those markets, but we're saying that the whole market platform is too low. We need to raise the whole market. That's what's wrong.

I talked to an American producer--

Mr. Rick Borotsik: Are you saying that no desk seller will do that?

Mr. Larry Hill: With a single-desk seller, the highest price is 59 months out of 60 selling to the U.S. on durum, compared to all of the durum sellers. That's on the U.S. trade site.

I talked to a Montana producer. Here's our dilemma. He's happy with $100 an acre gross. He can do that. He can make a go of that in the U.S. A farmer in Canada cannot do that. That's the whole thing. He's going to put his grain on the market because he can make a go of it at $100 an acre. Canadian farmers can't do that.

Mr. Rick Borotsik: It's because of the subsidy.

Mr. Larry Hill: Exactly.

Mr. Rick Borotsik: Mr. Hill, we don't have that subsidy. We have to be able to sell the crop for more than $100 net to the acre. You know that. What you're telling me right now is that we're not able to extract that premium; we're not getting that premium.

Mr. Measner.

Mr. Adrian Measner: Sorry, but I think you're misinterpreting what we're saying.

In the overall structure, each grain is different. On the wheat side, we are about 15% of that international market. Do we have the ability to take the market from $200 to $250? We don't, because you don't have that kind of market clout. The U.S. is a much bigger producer.

Can we, within that market structure, extract premiums? Certainly, and we do so on a regular basis. That's where we're trying to add value for farmers. We're trying to get them that extra value with the branding we spoke about.

Á (1115)

Mr. Rick Borotsik: There's the contradiction. You said that the producers now have the ability to get that premium themselves. Without the pooling system, they can make that call themselves, as producers, to go it on their own outside of the pool and sell into that spike. Correct?

Mr. Adrian Measner: They can book a fixed-price contract or a baseless-priced contract, which allows them, then, to pick the time in the futures market when they want a price. Yes, we've given that.

Mr. Rick Borotsik: Can we not do that with off-board grains?

The Chair: Your time has expired, Mr. Borotsik. We have to move on.

If you feel you haven't finished the commentary, go ahead.

Mr. Adrian Measner: I was going to comment on durum and malting barley because I thought it was important in the context here.

While we don't have the ability to influence that price on the wheat side to any great extent, the reverse is true on durum and malting barley. We are over 50% of the durum market. If we choose undisciplined selling, if we start moving the price down, the whole market will swallow us because we're going to be a leader in that.

We don't do that. We operate with a very disciplined approach to try and keep the durum price up as high as possible. It's the same thing in malting barley. We're so significant that if you undertake undisciplined selling, the market will follow.

I only wanted to clarify the difference in the durum.

The Chair: Thank you, Mr. Measner.

We'll turn to Mr. Kilgour.

Hon. David Kilgour: I understand that our grain producers in the prairies are at their lowest net income since the Great Depression. If that's the case, which I think it is, do you have any thoughts on how the Wheat Board might help our producers?

Mr. Adrian Measner: I saw the recent studies that were released, and that certainly indicated things were very serious. We hear that on a regular basis. We have a 1-800 number at the CWB. We're in constant contact with farmers and our board of directors, and so forth. Certainly we know that things are very tough out there.

We're trying to extract that extra value for farmers on all fronts. That's where the branding exercise that we talked about is: getting customers to understand the value of the product that you're delivering to them so they're prepared to pay for that value.

Our goal is to maximize revenue for farmers, a goal set by the board of directors. We're trying to really maximize those premiums on all fronts where we can, but do have to operate in that international marketplace. Unfortunately, it's not high enough for farmers to be sustainable.

Hon. David Kilgour: Does Mr. Hill have a comment, as a producer?

Mr. Larry Hill: Our system does give us some advantages. I'm just going to refer to some of the meetings I've had with U.S. farm groups and producers. They cannot get their grain to the marketplace in an identifiable quantity and get a premium for it. I have heard this in Nebraska, where they think they grow the best wheat in the United States but can't get it to the marketplace. They see we have a lot of advantages in Canada in the quality markets. I think our system helps us maintain this, and I think we need to be there.

Getting back to the situation where we had the short crop in 2002, what Adrian was referring to was where we continued to sell: to the long-term customers, who will pay more than the people who are just looking to buy straight protein. It's very important that you don't sell all the grain in one month and then not have grain for Japan throughout the year. That kind of thing is what I'm talking about.

Hon. David Kilgour: I have to raise a different subject. About two years ago I was in Libya, and Libya wanted to buy wheat on a continuing basis from Canada. You may recall this or you may not. They were told they had to buy through an agent in Switzerland, which they refused to do. I'm wondering what happened with the contracts with Libya, whether they were able to bypass your agent in Switzerland, and whether we're now selling grain to Libya.

Mr. Adrian Measner: We have sold some grain this year.

Á (1120)

Hon. David Kilgour: How much?

Mr. Adrian Measner: At this point it's around 50,000 tonnes. They haven't been large buyers. We understand their stocks are pretty low, so they are actively looking right now. We're hopeful we can sell some more.

In our involvement in that market, they had asked us to deal directly, and I think those may be some of the conversations we had. We weren't prepared to sell on the terms they had laid out, which involved acceptance of the cargo at discharge. It opened the door for its being rejected at the time the vessel arrived there. We weren't prepared to take that risk on behalf of farmers. We indicated we were certainly prepared to sell on traditional terms, which means certification at the Canadian port, but we were not prepared to sell for certification in Libya.

But we were prepared to deal through what at this point was a company in Europe, because they had been very successful in that market. That has evolved somewhat, and we have opened it up further. We have certainly sold to other companies in the Libyan market. We are basically trying to find the path that gives us the most success. It was with that one company for a while; now it's with broader companies, and we're offering it through broader companies. So that policy has changed somewhat in the course of the two years.

Hon. David Kilgour: Finally, I'll make a very small point, Mr. Chair, and I do so half jokingly.

In your statement you talk about western Canada with a capital “W”, and westerners are very sensitive about that: we like to see a capital “W”. But in your statement this morning there's a small “w”. Would you please use the capital in the future?

Thank you.

The Chair: That's a very important point.

I'm going to go to Mr. O'Reilly so that we'll get our members in. Then we'll move to the other side of the table. Do you have any more comments? Mr. O'Reilly? Mrs. Ur?

Mrs. Rose-Marie Ur: I will give my time to my honourable colleague.

The Chair: Are you sure? I want to make sure our western colleagues this morning get a turn. Some of them have had a greater interest in this issue.

Mr. O'Reilly.

Mr. John O'Reilly: I don't want to take a lot of time, because this is a very serious issue for my friends from the west, but all Canada is involved in the Wheat Board and in its the profitability. As a former printer, I always go to the annual statement to see how many pictures you've put of yourselves in it. I notice you've wasted two pages, pages 16 and 22, in a very glossy, expensive piece of material, and I'm going to criticize you on that as I do every company that comes before us which spends a lot of money on an annual report to brag about the good they're doing, when all we want are the numbers. We want to get to the bottom line; we don't need to spend acres of money on year-end reports.

When I go to your statement of administrative expenses and look at them, I would like a breakdown of them, personally, so that I could criticize you or not criticize you—or praise you. That's my first question.

The second one is does China buy barley only? I only noticed they were in the section you were talking about, the barley section. And do you feel that China is a stable market? It is a country that is run differently from most countries. They continually dump things on the market. They undercut everyone who gets in their way. They have no democracy such as that under which you operate, or under which we operate.

When I go to pages 53 and 59 of your report, I have multiple questions that would take a lot of time. I'm going to pass on them, because I want my western friends to also have some time. But those are my concerns.

I wonder also whether the input costs of some farmers are down who are feeding cattle, who are feeding dairy animals. Are they down because of the depression in your prices? Are they benefitting from it? Or is there any benefit to any farmer in the problems you've experienced in the past season with lack of rain? We can't do anything about BSE. We'd like to think we can control the weather. We can't. But from those kinds of things, usually somebody profits, and I just wondered: who do you think profited from them?

Mr. Adrian Measner: I'll go first, and then Mr. Hill will comment subsequent to that.

First of all, on the annual report, I actually do agree with you that we need to be diligent on that side, and we went to a two-colour annual report because it's a lot cheaper than the glossy, multi-coloured report. So we tried to streamline. We tried to cut costs on that to the extent we could. We're taking the same approach on our administration costs. We are trying to do the job as effectively as we can. We're accountable to the farmers that we represent, and we are doing everything we can.

We've just undertaken a corporate review, as you probably have heard, which went through the course of 2003 and was completed recently. We're trying to restructure the organization so we can be effective in the future and meet the five-year plan laid out by the board of directors. It did result in some staff reduction. That wasn't necessarily going to be the result going into it, but we were able to find a way to do things more effectively.

So we're very conscious of those costs. We watch them very closely, and as you saw, our costs would be down this year from last year if it weren't for the trade costs in those administration tables.

On the Chinese side, our objectives there have always been met. We've been very comfortable dealing in that marketplace. A lot of times it depends on the partners you're dealing with, but we've had very successful partners, ones who have always honoured their contracts and did what needs to be done there. It is more than a malt and barley market. It is important for us, the malt and barley, but it will probably be even more important on the wheat side. And we see, as I mentioned earlier, they probably will be importing in the order of 15 million tonnes two or three years down the road. So it is both of those markets.

Mr. Hill may want to comment.

Mr. Larry Hill: On the import cost side, I farm about 400 kilometres east of the hottest feed barley market in the world, and that's around Lethbridge. Feed barley prices around Lethbridge a little over a year ago were around $4 a bushel, higher than malt barley prices. But what happened was there was a huge influx of American corn, I think three and a half million metric tonnes, that just kicked the knees right out from underneath the barley market.

Now, with the BSE thing, the whole feeding platform has gone down. Feed prices have declined dramatically. So it's been very much a no-win situation for anyone here. It's just a difficult situation that the barley isn't moving, and the feeders can't feed it and make a dollar.

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The Chair: Thank you, Mr. Hill.

Unless you have a short question, I'm going to give the last word to Mr. Benoit.

Mr. Dick Proctor: Thanks.

Could you just tell us what impact the CN strike is having, if any, on movement of grain on the prairies?

Mr. Adrian Measner: At this point in time it has not had a large impact. We have been in close contact with CN and are watching the situation very closely. We're concerned if it goes on for a long period that it may start having an impact. We did see a reduction in the first week, but they have come back with much better programs over the last couple of weeks. I guess it's one we're watching very closely, but at this point it hasn't had a major impact. We are somewhat concerned about overall car supply on the CP side recently, but again we're hoping that can get corrected too.

The Chair: Thank you, Mr. Proctor.

Now, the last word to Mr. Benoit. You have about three minutes.

Mr. Leon Benoit: Thank you, Mr. Chair.

Unfortunately I have several topics to cover. The first is that the Agricore shareholders just passed a motion under which they're committed to working toward freedom of choice in wheat and malt barley marketing. They passed that by a wide margin. What they're concerned about is something that companies have felt in the past when they take a position like this: they're afraid of retaliation from the board in terms of car allocation, being cut back, things that are hard to really measure, yet they've been felt. I've had concerns expressed in the past about that.

Can you assure this committee that there will be no retaliation of any type on Agricore United for this position they've taken?

Mr. Adrian Measner: Yes, I can give you absolute assurance. We deal with their management the same way we would deal with any other company's management. We have a lot of interaction. We need to, because we're operating the same business and they're an agent of ours. So there will be no retaliation. We don't operate that way, never have and never will.

Mr. Leon Benoit: Well that's debatable. I know companies feel that you have.

There's a private member's bill before the Alberta legislature right now that will put in place a trial free market in Alberta for wheat and malt barley. What impact do you think that will have on the board, if any, if that is passed and put in place?

Mr. Larry Hill: Our position is that the current democratic process we have in place would be the proper way to address that issue. Our board of directors is going to look at the proposal we have seen from the Government of Alberta, and we will respond to them on that. But I think we have to realize that we either have the U.S. system in Canada or we don't. That's the option we face here. A lot of producers, I think, do not want to see that kind of system, so that's what we're going to weigh.

Mr. Leon Benoit: But surely you don't believe that the Wheat Board has control over the Government of Alberta and the people of Alberta. I think it goes beyond a decision that's just made by farmers who were appointed to control the Wheat Board. It goes down to a fundamental principle that when you're doing business you should have the right to have access to markets. Many farmers feel that their access has been eliminated.

The Alberta government, on behalf of an awful lot of farmers, is just taking a position that is widely supported. I'm just asking about what impact it might have on prices. Do you see any kind of price impact? Do you think it will really cause any concern for you?

The Chair: You are allowed a response.

Mr. Adrian Measner: Yes, it will have a major impact. The single desk can't be effective if we're going to be competing against other sellers. The goal here is to get the highest possible price for the product we're marketing, and do the branding we're doing.

If we're going to be competing against somebody else, customers are going to buy from the lowest seller, not the highest. It would erode those market premiums. The same thing happens in the U.S. market, where all grain is sold for the same price. It would have a major impact on our ability to be effective. It would take that away totally.

Á (1130)

Mr. Leon Benoit: Can I ask one short question?

The Chair: It has to be very short.

Mr. Leon Benoit: If that were to happen, are you saying that the board would really not be a worthwhile organization to keep around in a system where farmers had a choice?

Mr. Adrian Measner: If it's a multiple-seller environment, I don't see a lot of value that this organization could add. We don't own facilities. We don't have the same infrastructure other companies have. So if buyers are simply buying from the seller with the lowest price, I'm not sure what value we can add in that environment.

The Chair: We have to leave it. Mr. Benoit, the time has expired.

Mr. Measner, Mr. Hill, is there anything further? Do you want to respond any further to that?

Mr. Larry Hill: Thank you for hearing us today.

The Chair: Thank you very much, Ms. Allen, Mr. Measner, Mr. Hill, for appearing. It won't be the last time we'll ask you to come. It's always interesting to have you here and get your perspective. Obviously there are two sides to every story. We heard one side this morning. Thank you very much.

The meeting is adjourned.