:
Thank you very much, Mr. Chair.
I appreciate the opportunity to come before you today, particularly as chair of the task force on implementing marketing choice for wheat and barley. In addition to the two members of the task force here, the other members are Brenda Brindle, Mike Bast, John Groenewegen, and Bruce Johnson.
Our task, Mr. Chair, was to recommend options on how best to implement marketing choice. We were asked to identify and propose how to address certain technical issues and transition issues, both for a voluntary Canadian Wheat Board and for the Canadian grain industry.
Our report was released on Monday of this week by Minister Strahl.
In the report we used the name CWB II as the transformed Canadian Wheat Board, which would be owned by farmers and operated on a voluntary basis, without any government regulatory powers.
Paul Orsak will speak for four minutes or so on the proposed business model for CWB II and preparing for change in forming CWB II, and then Rob Davies will speak again for about four minutes on the launch of CWB II with transition measures and how a competitive grain industry would operate with marketing choice, and then we'd be pleased to answer question. So in total we think it will be about ten minutes maximum.
Let me turn it over to Paul to go over the first part of the report.
:
Good morning, Mr. Chairman and committee members.
Thank you for the invitation to be part of your deliberations as you discuss very important issues respecting the wheat and barley industry and its implications for farmers and the entire wheat and barley value chain.
The task force recognized early in its deliberations that while the issue of marketing choice is primarily a matter centred on how farmers such as me will market their wheat and barley, it has large implications for the Canadian Wheat Board obviously, but also for the entire value chain. It cannot be presumed that nothing would change except for the farmers or for the Canadian Wheat Board. The task force, by necessity, had to consider how the elimination of the monopoly powers of the Canadian Wheat Board would affect the entire industry. There will be a number of cause and effect situations that may happen, and while it would be foolish to predict how each and every business will react, we did have to consider whether certain business conditions would bring value to farmers and at the same time would not hamper competition for farmers' grain.
First, some context for our business model. My remarks this morning will centre on perhaps one of the more interesting components of the task force report. It's interesting I think because farmers, I believe, are genuinely hungry for information about what a new Canadian Wheat Board might look like and how it might operate in a market choice environment.
It is important to stress that the business model we propose for a new and restructured Canadian Wheat Board is but one option for a new model.
The task force was always cognizant of the need to ensure that our recommendations need not only provide a reasonable probability for a successful launch and a sustainable business model for the new CWB, but we had to balance this with the need to ensure that future enhancements to the competitive regime in grain marketing, handling, transporting, and processing would still proceed and that we would not see an erosion or flight of capital from the industry. In fact, we believe that creating a climate for even more investment in the industry in all areas is not only healthy for farmers and the industry, but necessary to ensure the western Canadian grain industry remains competitive with existing and emerging international competitors.
The task force felt it was important to suggest at least one option, even though, as will be obvious from a careful reading of our report, it ultimately must be up to the board and the management of what we call CWB II to consider what its business model and business plan should be. The task force did not want to presume or be too prescriptive about these matters, as ultimately it must be up to the CWB II to position itself and determine what its value proposition will be to competitively and effectively bring value to farmers.
Now I'd like to outline our suggestions for the business model. Our option envisages CWB II as a commercial entity owned and controlled by farmers. The task force believes CWB II can create value for farmers by building on the strengths of the existing Canadian Wheat Board, namely, its strong customer relationships and knowledge of their requirements; its solid reputation for pricing, delivery, and contract execution with buyers; the fact that many producers desire to see any new version of the Canadian Wheat Board as a producer-controlled grain marketer; and its experience in operating a pooling system for producers.
Additionally, CWB II could or should develop new, innovative pricing products or new food safety protocols. We believe it can build on its strengths by reducing supply chain costs through the purchase or contracting of facilities. It could sell some services, such as its transportation and weather expertise. Importantly, it could also market crops other than wheat and barley.
Our option suggests the sale of shares in CWB II. This would clearly enable farmers to see an alignment of their interests with CWB II by investing in it. It is, of course, also a mechanism to provide the company with additional capital. As you will have read, we suggest the shares not be tradable for a two-year period, the first two years.
Clearly, contributing to a high probability of success for CWB II would be the transfer of Canadian Wheat Board assets. Adding together the intangible assets I have just referred to and the tangible assets as outlined in the table on pages 6 and 30 of the report would give CWB II a significant start-up benefit.
Finally, if I can just take a minute more, I would like to give you a perspective that I think you might find interesting. Prior to my work on the task force, my personal belief was that the voluntary CWB would be competitive in the marketplace, and it would do so primarily through the offering of pooled and cash price options.
I did not force myself into the position of having to think deeply about what the value proposition of a CWB II type of entity would be. I looked at it more from the perspective of a farmer whose natural vantage point is as a supplier-customer. From that vantage point, I currently see a variety of offerings from a variety of companies.
Each company has its distinctive characteristics, and as a farmer, I fairly easily choose which best matches my needs. The farmer in me assumed and said that another entity in the business with a unique and different approach would bring value to me, both directly and indirectly, as competitive influence improved offerings across the board.
I still believe that to be the case. But I felt quite strongly that to be really competitive, a transformed Canadian Wheat Board would have to change its focus to cash price offerings instead of price pooling.
As a result of being forced to think much more deeply about it, along with the benefit of vigorous discussion amongst the task force, I've come to see things slightly differently. I believe the CWB II has an exceptional opportunity to differentiate itself in the marketplace, and a value proposition that includes price pooling as one of its features could be the underpinning of its success.
To many farmers, me included, the current price pools are relatively unattractive. There's simply too much cost associated with them. However, in a market choice environment, I believe price pooling can be an extremely valuable offering to farmers. A new environment, a new focus brought on by the discipline of a competitive marketplace will mean the management of CWB II would look at things much differently. With a focus on cost containment, without quality over-delivery, without arbitrariness in pricing between classes, with tighter management of the logistics end, and with our focus on risk management, I can get really excited about the possibilities. In fact, I can easily envisage that farmers will eagerly flow a significant portion of their marketable grains, including current non-board grains, through a pool.
It's a matter of price risk management for farmers. As margins tighten and risk management becomes much more important to farmers, this has the potential to be truly a unique and important value proposition for CWB II.
Some farmers may elect to put more through the CWB II than ever before by including other crops. I believe many will commit a significant proportion to CWB II when it has proven itself capable and professionally managed. Personally, I can foresee myself putting a significant portion of not only my own wheat production but now other crops as well into CWB II pools. I will view it as a highly valuable risk management vehicle with a level of professional management that is currently not easy to access and perhaps beyond my own level.
The best comparison I can think of is the mutual fund industry. Mutual funds are just really investment pools. They are voluntary, of course, and they compete in a very sophisticated marketplace. They are growing and thriving as investors commit large portions of their portfolios to them to avail themselves of the professional management they offer. I think there's very little doubt that the competitive nature of the capital markets is what drives value into this kind of investment.
The same, I believe, would be true for the operations of price pooling for CWB II, and it would provide a unique and competitive value proposition to farmers. Combined with innovative and farmer-friendly financing instruments, I can get positively excited about the possibility of marketing grains, oilseeds, and special crops, price pooled through an entity such as CWB II.
I thank you for this opportunity, and I'll turn it back to Howard.
:
Good morning, Mr. Chairman and members of the committee. I'll speak to the launch of CWB II and how a competitive grain industry may operate with marketing choice.
The launch of CWB II will require that significant preparation be undertaken by all marketplace participants, as there will be changes to many practices that have existed for years across the spectrum of the grain marketing system. Starting with the CWB, they will have time through periods A and B, as outlined in your report, to ensure they have a business plan in place and that they have the correct staff and skill complement to be successful in the new marketing choice environment.
CWB II will reinvent itself, creating a new vision and some new contacts, designing programs, and providing an outline of its value proposition to farmers to move forward with.
Ensuring that systems are in place for CWB II to access financing in the future, to allow the continuation of pools to farmers, and to access financing for export sales will require some lead time and some document creation, as well as practical experience in the new operating environment.
The federal government will have a number of transition issues to ensure required changes are made to the Canada Grain Act and the Canadian Grain Commission to support the requirements of a change to marketing choice for prairie wheat and barley growers. The changes required will provide certainty around the question of producer cars and will also provide authority to monitor, investigate, access necessary data, publicly report, assist in dispute resolution, and quickly resolve any issues of non-competitive grain handling industry behaviour, for both the benefit of producers and the industry.
In addition, the administration of the current cash advance system, which is now administered by the Wheat Board, would need to be moved to another body.
Finally, the government will need to move forward with measures to enhance rail competition, such as improvements to the shipper protection provisions in the Canada Transportation Act. Consistent concerns were raised regarding effective rail competition. These issues were outside the specific mandate of the task force; however, they are important in ensuring an effective transition to marketing choice. From the commercial industry perspective, we need to be very clear on one point. The marketplace needs certainty through the transition period. Industry will get contracts in place, both privately and at the Winnipeg Commodity Exchange, but certainty of timing is required, and that is part of the lead time provided by the task force recommendations.
New contractual arrangements between industry players will need to be established. This includes port and country terminal operators, exporters, and end-users such as millers and maltsters, both domestically and internationally.
While these changes will likely result in changes to cropping patterns, they may actually provide for more certainty for farmers and for industry and also give Canada additional ability to meet the requirements of end-use customers.
Farmer understanding will be a critical component of a successful transition. While farmers currently market some of their production, such as feed grains, oilseeds, and special crops, outside the CWB, a shift to marketing choice of previously controlled grains will require new risk management protocols for farmers, and they will need to review their sales and marketing strategies to ensure they meet the business needs of their farms in the new marketing choice world.
It's expected that shifts in crop production patterns will occur as the direct impacts of logistics and marketing costs become apparent. This is good for the industry and for farmers in the long term, but there will be a period of adjustment. Grain companies, too, will need to ensure that sufficient financing is in place and that their farm customers understand the new requirements in the marketing choice world. The current CWB contracts have fairly low levels of enforceability due to the ability of the CWB to market the entire western crop.
Wheat and durum growers will have to contract much more accurately than they were previously required to, and this will have collateral impacts on the Canadian grading system, as the current grade standards may no longer fit with the requirements of end-use customers for quality specifications.
While the changes required may seem somewhat daunting, the reality is, if we want to move to a Canadian grains sector that operates with effective competition in marketing, handling, and transportation, that has effective price-discovery and hedging mechanisms, and that has a strong, viable CWB II as an option for farmers, a lot of work will be required. This change should not be expected to be accomplished quickly.
In conclusion, in the package of recommendations provided, the task force sought a balance between giving CWB II financial transition measures and sufficient time to have a high probability of success, while still encouraging existing and new investors to participate in the Canadian grain sector, all within the context of providing farmers with marketing choice.
The task force believes that if marketing choice is introduced in a careful, considered way, but without unnecessary delay, an efficient, effective, and competitive grain marketing system will serve grain producers and the overall grain industry in the long term.
Thank you, Mr. Chairman.
Thank you, gentlemen.
If there's one thing your report has certainly done, it's made the United States grain industry happy, both from the multinational sector and from the producers in the United States. They've been trying to destroy the Canadian Wheat Board for eleven years, and in one fell swoop this minister seems to be going to do the same thing--going to do the U.S. bidding.
In any event, I've seen quite a number of task forces in my time, but I have never seen one such as this, with so little analysis, so little background data. Obviously, it was just working on assumptions before it started, without going out to collect the evidence to make its argument.
Howard, could you provide this committee with the following: first, a complete list of all the meetings held by this task force, the locations of the meetings, and a list of the attendees; secondly, a list of all the submissions made to the committee, and which were solicited and which were not; and thirdly—
:
Certainly, Mr. Chairman. Clearly, there are acreage shifts, price shifts; there are a number of reasons why the marketplace moves, from a logistical standpoint, to different selling markets, to different sales positions. A number of those changes occurred today.
If I can just briefly touch on the question to predict a future competitive market dynamic, as the CEO of a company, I wish I had that ability; I wish we all did. We would understand much more clearly how to set strategy, but the marketplace will develop very clearly. As Paul said, we tried not to be prescriptive with CWB II, because they need to create a business model that provides an effective alternate choice for producers.
One that can be very successful from a risk management perspective is pooling. It holds a lot of appeal to a big segment of producers. Depending on how they implement that market choice, depending on who they contract with, depending on how all those things play together, there can be significant opportunities for some small players that on the surface you may say are going to be significantly disadvantaged in the new marketplace, but that's very difficult to predict.
It depends on every individual strategy, it depends on the CWB II strategy, and it depends on farmers' uptake and the degree to which they want to be involved with CWB II as a risk manager for part of their farm operation. Those moving parts make it very difficult to predict where the wheel will stop. There's significant opportunity, but there clearly is risk, and those are things we can't identify to balance very well.
I'm going to continue what was asked earlier on.
What's happening today has the potential for significant change, positively or negatively, not only in the grain industry but in our rural way of life and in our country, as we know it. In other words, this is nothing short of a revolution, for lack of a better term. That's what I see in front of me. In retrospect, with revolutions, we always say there could have been a better way of doing this rather than changing drastically and having thousands and millions of people suffer. Russia is still recovering from the 1917 revolution, to put that in context.
You've been tasked to do this. In your opinion, could there have been a better way to examine the grain industry, to involve all players to come up with an evolutionary path, a fairer way to go than a one-month report? We're not sure how much of a comprehensive economic analysis was done.
My other question follows my colleague's point. Who is the loser? We've heard that while this company or that company may be a loser, what about the average grain producer in western Canada, not the person who is near the border who can farm and does custom farming from somebody else and has access to markets? What about someone near Blaine Lake, for example, where I spent summers as a kid? Let's look at the primary producer. We're all here because the primary producer is our number one focus.
Is he or she going to be the loser, and could there have been a better way? See if you have enough time to answer these questions.
:
If I could just speak very quickly to that, the marketplace changes everyday. It creates winners and losers by the very nature of the marketplace.
Two canola crushing plants have been announced for Yorkton. So for people who are within a freight effective area of Yorkton, it fundamentally changes the way they farm, the value of their farm, what they will grow going forward, and their net economic return. Those things have all changed. The marketplace did that.
An ethanol plant will be announced that will create a different marketplace in areas that get drawn to that. Wheat Board or no Wheat Board, those are just commercial impacts. The value of somebody's farm, the way they do business, and how they do business will change.
What that does is displace other areas. So in our specific area in southern Saskatchewan, as people grow less durum in some other areas because they're not freight effective, it opens the door to a greater durum marketing opportunity for us.
So it's very difficult to say there will be winners here and losers there.
I've been to Blaine Lake as well, and there are some unique marketplace effects in Blaine Lake. Perhaps that will get to more livestock because they're going to be close to an ethanol plan, and they'll be able to get distillers' grain to feed their livestock cheaper. It would be incredibly difficult to try to evaluate all of the impacts of the marketplace within this.
You're correct. We created a template to move forward with, but we can't investigate each of those possible impacts.
:
Thank you very much, gentlemen, for being here this morning.
I've come to the conclusion that in the absence of evidence, you are working in a bubble of faith. That puts us in that same realm, because we have to accept in faith what you've told us.
But I have some difficulty understanding how in one month's time, under the mandate you were given—and I have to put some faith in the fact that you guys are experts; at least, you were called to be experts. You have brought together all this knowledge, all this material, and have been able to put together a model for removing yourselves from single-desk selling and putting in place a model for transition, all in one month. Now that's a record. So we'll have to see where the future leads us.
But I really have a problem in understanding how we're going to move these assets, which belong to the Government of Canada, and it's now going to become farmer-owned. Farmers are broke, we're told, and they're going to now own $100 million, or whatever the assets are.
And you expect the government that is now providing credit for the Wheat Board to provide credit to this agency. Does the government have an opportunity to have some representation on this board of directors? Who owns the shares? You have outlined at $1 a share up to 2,000 shares, but you haven't indicated whether somebody in Illinois could own those shares also.
There are a lot of things I don't know about it. Is this going to be Canadian-owned, or is this another subsidiary of Cargill? What are we facing down the road? This is where my faith becomes rather weak.
:
In my opinion, the Canadian Wheat Board is an working tool for farmers. Let me tell you a little story, to put the issue into perspective.
Because my father was 44 years old when I was born, we often had differences of opinion, given the generation gap. We both worked on the farm. The time came for us to replace a withering tool and some old tools with newer, faster and better performing ones available on the market. After talking about it for a year or two, my father went out and bought a new piece of equipment. However, when he came home, I realized that he had bought the exact same old model. He observed that it would save us time, since we would now have two identical pieces of equipment.
A year later, I bought the farm from him. The first thing I did was to go and buy some modern equipment. My father said he would never use it. In deference to his wishes, I kept the old equipment so that he could use it. The next morning, I hitched up the new piece of equipment to my tractor. My father reluctantly gave it a go and later admitted to me: Son, you were right: we have to change with the times.
In this era of global markets, we need to ask ourselves if our competitors -- for example, the United States and Brazil -- have better performing marketing tools than we do. Are we impeding our own growth? If we fail to renew our marketing tool, will Canadian producers be adversely affected in the medium and long term?
:
Thank you very much, Mr. Chair. It is a pleasure for me to be here.
You do have a very short brief of the presentation I'm going to be making. I won't read that brief. I will relegate my comments to just simply verbal comments.
I would like to start out by applauding the minister and the government for taking a partial step in the right direction by announcing a plebiscite on barley. I would encourage the government and the minister to continue along that road of leadership and include wheat in the plebiscite as well. That's basically what I want to talk about today.
I'm not going to talk about the pros and cons of the Canadian Wheat Board. I'm going to talk about the importance of a plebiscite. Certainly, two weeks ago, CFA members from across Canada supported the call for a plebiscite because the principle of a plebiscite is very important to them. Also, there's the fact that in Ontario it was the producers who decided to eliminate the Wheat Board for wheat. In Quebec, they just recently decided on single-desk selling for wheat by producers as well, following what they've done in the hog industry, as well as in the maple syrup industry. My understanding is that they have it for rabbits now as well. But certainly CFA members called for a plebiscite.
I also want to talk about the importance of a debate on both sides of the issue, with adequate information to be dispensed. People can then look at this information, discuss the information, and then make a decision.
Why a plebiscite? I have several reasons why CFA members say it's very important to hold a plebiscite. Number one, of course, is that it's written in the act. CFA members feel that if it's written in the act, no other means should be taken or should be used to circumvent what is called for in the act. Let's simply do what the act defines we should do and ask farmers what they think should be done.
Secondly, there's a lot of talk about farmer empowerment and empowering farmers in the marketplace, but farmer empowerment is more than just that. Farmer empowerment, we believe, also entails allowing farmers to decide on what marketing system they want to use and what marketing system is best for the collective interest of agriculture.
Thirdly, many farmers have grown to depend on the Wheat Board as a tool that has empowered them in the marketplace. Given the fact that a decision on the Wheat Board, if it was deregulated, would be irreversible, we feel that's another reason these farmers need to be in on the decision that is made.
Fourthly, arbitrarily deregulating a marketing structure, we believe, sets a very important precedent for any other marketing structures that we have in Canada. I know the marketing structures themselves are very different, but the question is the same. Whether it's a provincial government or a federal government that deregulates a marketing structure, it does set an important precedent. Certainly, if a marketing structure is deregulated, that brings us much closer to either level of government deregulating other marketing structures arbitrarily as well.
Fifthly, it's all about partnership. I believe Minister Strahl said it best in his press release yesterday when he said that a plebiscite is a very important part of consultation, especially when you dispense all the information needed to make an intelligent decision. This is all about partnership, and, again, a plebiscite is an important way to consult with farmers.
But it does depend, then, on whether there's appropriate economic analyses and information out there. My second and last point deals with why we need that information out there.
First of all—and I believe it was Mr. Migie who it said earlier—there is a lot of information out there as to what benefits the Canadian Wheat Board accrues back to the primary production sector. There are all kinds of numbers out there. We believe it's important that farmers see all these economic analyses that show how much is accrued back to the farm gate, so that they can look at the numbers and determine exactly what the value is of the marketing structure they have had in the past and then weigh that value with value-added.
We've also heard a lot about value-added. We've heard people say that the Canadian Wheat Board is impeding value-added. CFA members would tell you that when you compare us with the U.S., the bigger impediment to value-added in Canada is our lack of competitive policy with the U.S., which we're currently working on, as you know. But certainly it has more to do with the lack of competitive policy than with any marketing structure we have in place.
But I believe it's very important to put that information out there as well. Last week when we had the three agricultural ministers here from western Canada, there was quite a discussion on value-added. Some of them had numbers to say that value-added has increased more in Canada than it has in, say, the states just across the border. But whatever information is right or wrong, that information needs to be put out there as well so that farmers can have a look at it. We then need to weigh the economic benefits of the value-added of whatever the Wheat Board accrues back to the primary production sector and have farmers have a look at it to again make sure they can make an intelligent decision.
The other point is that there has been a lot of talk that the Canadian Wheat Board could survive in a dual marketing system. This is where I'm going to be certainly not critical of the minister, but critical of the task force report. I believe the task force report had very little to do with the Canadian Wheat Board under a dual marketing system; it had more to do with how to start a new grain company. On that, I believe they were very long on rhetoric and very short on economic analysis.
This is about starting a new grain company. If I may be frank, Mr. Chair, it barely passes the laugh test. The fact is that we have just recently looked at what used to be three very rich wheat pools in western Canada. Because of a lack of competitive policy, they have either gone public or they have gone to partial foreign ownership. Basically, in terms of the control of these wheat pools by farmers, that control has been taken out of their hands.
To be able to say we could start a new grain company just like that to compete against other multinationals or even the large grain companies that we have in Canada, and the suggestion that $100 million should do it.... When you look at something like Agricore United, which has over $1 billion in capital assets, or something like the Wheat Pool, which has up to something like $300 million in capital assets, I believe there needs to be a heck of a lot more analysis and a much tougher look taken at the idea of starting a new grain company and saying it can be successful. That's true especially when you think that these farmers who are broke are supposed to start this new grain company.
To conclude my comments, Mr. Chair, those are the two points I want to make. Yes, there are arguments on both sides of the issue. Let's put all the adequate information and economic analyses out there that we can possibly get, have farmers look at the information, and then have farmers make the decision. We know there are good arguments on both sides, but the importance here is the information out there. Dispense the information and let farmers decide on a marketing structure, so that farmers across Canada who are involved in other marketing structures don't have the fear that they might wake up some morning and have their marketing structures deregulated as well.
Thank you very much.
I had a couple of photos that I was hoping to have distributed amongst the members, if that's possible.
To begin with, I would like to thank you for inviting me to speak to your committee today. Today I want to talk to you about producer cars, West Central Road & Rail, and the Canadian Wheat Board.
What are producer cars, and how did they come to be? A producer car is a railcar loaded with a producer's grain. It enables a producer to bypass the primary elevator system and ship the grain directly to destination, typically a port terminal.
How and why did the producers get the legislated right to load producer cars? Over a century ago, from the late 1800s to the early 1900s, producers were becoming increasingly discontented with the market power abuses of the grain companies and railways that were working together to dictate when, where, and how producers would deliver their grain. At that time, producers were able to influence the government of the day to draft legislation to address the market power and balance that existed. This led to the creation of the Canada Grain Act, which included provision for the right to load producer cars.
Producer cars were intended to serve as a competitive safety valve for producers. However, even with producers having the legislated right to load producer cars, grain companies and railways quickly found ways to stifle the practical application of that right.
Fast forward to the mid-1990s. As much as things had changed from the previous century, they remained the same. Once again, the railways and grain companies began working together to design a grain handling and transportation system that suited their best interests, at the expense of producers. This exercise by the railways and grain companies became known as rationalization and consolidation, which in the vernacular meant branch lines would be ripped up and elevators torn down. Enter West Central Road & Rail, a progressive group of producers in communities who in 1997 formed with the objective of retaining rail service to the region.
Initially, we watched helplessly as rail service dried up and elevators were razed to the ground. Finally, we decided enough was enough, so we went to the railway and told them that since they didn't want to service the line, West Central Road & Rail would buy it and operate it ourselves. The railway told us flatly to get lost—and I have the vernacular for that as well, but I won't share that with you. Why? Because according to them, they had already made agreements with the grain companies to abandon our line so that our area could serve as a catchment for high through-put elevators built on the line north of us.
Angered and dejected, we approached the Canadian Wheat Board for help. The Canadian Wheat Board informed us that they would need railcar orders before they could press the railway for service. That was when the idea struck us. We decided we were going to blow the dust off a century-old piece of legislation that gave us the right to load producer cars. Not only were we going to load producer cars, we were going to load a producer car train: one hundred producer cars in one day. In two weeks, we had one hundred producer car applications in hand.
Armed with railcar orders, we now had the leverage to enable the Canadian Wheat Board to press for rail service. But even with that leverage, it still took nearly three months of haggling and a formal complaint to the Canadian Transportation Agency before the railway begrudgingly provided rail service. It was that single event that launched West Central Road & Rail, an event that would never have taken place without the Canadian Wheat Board.
I have provided you with photos. You'll get to see how that event unfolded in the dead of winter, and why it was important.
What began as a one-time exercise to send a message to the railways and grain companies that we were not prepared to stand idly by while they demarketed our rail line into de facto abandonment became the catalyst that led to producer cars becoming a real, competitive alternative to the traditional grain handling system. West Central Road & Rail began offering producer car loading on an ongoing basis along our rail network, which generated orders and in turn gave the Canadian Wheat Board leverage to push for rail service.
Next, West Central Road & Rail went beyond our network and offered our producer car program across Saskatchewan. The success did not go unnoticed, and eventually several other entities imitated our model, and producer car numbers continued to rise. Never content with the status quo, West Central Road & Rail continued to grow and evolve. In 2001, West Central Road & Rail implemented a truly unique and innovative grain gathering system for the new millennium, based on producer cars. This included the construction of producer car loading facilities designed to support this new process.
One of my favourite pictures here is of one of the facilities. These facilities are capable of loading and unloading grain at a rate of 500 metric tonnes per hour. That means this facility can load 25 car blocks in less than six hours, while at the same time providing identity preservation to a high degree of segregation and quality control.
West Central Road & Rail's producer car system has moved producer cars beyond the competitive safety valve to a generator of intense competition. I will explain by citing a specific example. Trucking incentives across Saskatchewan average approximately $4.50 per metric tonne. In the West Central Road & Rail region, we are continually targeted with trucking incentives ranging from $10 to $14 per metric tonne. Why? Because West Central Road & Rail exists. And that's where the Canadian Wheat Board comes in.
Without the Canadian Wheat Board, it is unlikely that West Central Road & Rail would have ever come into existence. Think about the forces that were marshalled against us. Matched against the railways and major grain companies, what chance would you have given us to succeed? If your answer exceed 0%, I can tell you matter of factly that you answered incorrectly.
The Canadian Wheat Board brings balance to what would otherwise be an imbalanced system. The Canadian Wheat Board's ability to exert influence on the grain handling and transportation system is a direct benefit of the Canadian Wheat Board's single-desk marketing. It is a benefit that is often overlooked and undervalued. As an example, who in the grain industry has ever formally challenged the railways head-on? The grain companies? No. They're too afraid, rightly or wrongly, of railway reprisals. Only the Canadian Wheat Board, at least successfully, has been willing to challenge the railways head on. Ultimately, the Canadian Wheat Board allows for fair access to the grain handling and transportation system, and that fosters a healthy and competitive environment.
Going back to producer cars by way of example, in the absence of the Canadian Wheat Board, what real opportunity would an individual producer have to load a producer car? First, he or she would have to find a buyer for the grain, someone willing to accept it on the basis that it would be shipped as a producer car. That in itself would be no easy task. What incentive would a vertically integrated grain company with a prairie delivery point only twenty miles from the producer's loading site have in accepting that grain? I would suggest very little.
Let's assume, though, that the producer is an incredibly skilled marketer and locks up a direct sale to a mill out east for a single- or even a ten-car block of grain. As a condition of sale, it is immediate shipment upon three weeks, pre-advice. If such a condition is not met, discounts will apply.
What influence do you think a single producer will have in exerting influence with the railway to get his car spotted and lifted in a timely manner in order to stay within the shipping terms of his or her contract? The answer is none. And even if the producer has a legitimate complaint against the railway, it is unlikely that he or she will have the finances or resources to act upon it. In the absence of the Canadian Wheat Board, a producer could very easily be priced out of or serviced out of the practical ability to load a producer car.
You can have a neon sign flashing in every community and farmyard across the prairies, displaying the message that producers have the legislated right to load producer cars, but what good is it? Legislated or not, if you cannot practically utilize a right, then the right is of no value. That will become a very real scenario in the absence of the Canadian Wheat Board. Additionally, it is not only producer cars that will be in jeopardy if the Canadian Wheat Board is dismantled. It will also adversely affect independent and producer-owned terminals, whether inland or at port, and short-line railways.
In closing, I would like you to look at the last picture I have provided for you. You will notice that there is a very thin line that separates those two realities. The outcome of what happens to the Canadian Wheat Board will determine which side of that line we, as producers, will follow.
Thank you.
:
As I indicated, you might think I'm a little long in the tooth to be involved in this debate. But after hearing the wheat growers say they want to free up the industry and all those things, I'm going to give you a bit of a history about what happened when I was six years old.
I have farmed for sixty years in southern Saskatchewan, and my dad farmed for a long time before that. For farmers to get money to operate and buy groceries and whatever for the winter, right after the thrasher machine pulled out, they had to deliver grain. We were twenty miles from a small town that had three elevators.
My dad--I remember it very well--loaded up the grain in a tank on a sleigh, and he started out at the crack of dawn to go to that little town to deliver grain. When he got home, I remember he told my mother that all they would give him was the price for number three and that the price was down from the day before.This went on every day.
The farmers in the area decided they would measure that grain into the wagon and send it on the same route. There were a lot of farmers who lived behind us, and they did the same thing. They knew pretty well what they had on that load. When the load was weighed and they said it was not the weight they had when they first weighed it, the elevator said to take the weight or take it home. These were the days of the freedom the farmers had. There was no Canadian Wheat Board. There was no Canadian Grain Commission to judge what kind of grain you had. You took it or you left it. And that's the freedom the wheat growers now are asking for.
I should mention that the farmers even went so far as to buy a flat scale. They dug a hole about two miles from our farm so that when they drove over it in the morning, they would weigh it on this flat scale. They took it to the same town and they said this is the weight they got on a flat scale. They said to take their weight or take it home--twenty miles. You know what the farmers did? They had to take it home; they had no choice. There was no cash advance, no Canadian Grain Commission to even check the scales, and if there was a dispute about the grade, that was too bad.
Anyway, I want to tell you a little bit about myself. I said I farmed in southern Saskatchewan for sixty years and that my dad farmed before that. For every position I held, I was elected; I was never appointed. I was elected as a delegate to the Saskatchewan Wheat Pool. I moved up in the ranks, and I finally left as first vice-president. So I got to know a lot of ins and outs about the grain companies and how to deal with the Canadian Wheat Board.
At about that time we had grain up to here, and there was a report that there was virtually starvation in China. We had grain we could sell. They asked the former prime minister, the Right Honourable John Diefenbaker, if he could arrange that the board go into China. He did that. McNamara, who was the chief commissioner at that time, and a couple of others, went into China. They were holed up in a hotel in Beijing for two weeks and nobody knew what was happening. Word finally got out that they had made a large wheat sale to China.
Lo and behold, when the word got out, Mr. Alvin Hamilton--I can recall it--took the first route he could get to Hong Kong to meet them. That's why Alvin Hamilton got the name, because he sold the wheat. When Mr. McNamara was asked about that at a SaskPool meeting--and I can recall it because I was there--he said, “I don't give a damn who gets the credit, I sold a lot of Canadian wheat and a lot of Chinese had food to eat.” That's just one little bit of the history.
I happened to go to China—I've been to China and Japan—but I didn't go with the Wheat Board. I went with a group of U.S. cooperative people who asked me to go. We visited Japan, and then we went to China. When we got to Shanghai, I asked the tour conductor if I could see a discharge elevator in a grain mill, a flour mill. Oh, yes, so we drove and finally found it.
We were introduced to the general manager of that Chinese flour mill. We were up on top of that flour mill. I had a cap on with “CWB” on it. Incidentally, they were unloading a cargo of Canadian wheat. They always bought three because of price, but it was better than nothing. That Chinese guy grabbed that wheat, and he looked at me and he said, “Good, good”. I'll just tell you a little secret. I said, “Can I trade you?” This hat that I have here is the hat that guy wore in a Chinese mill in Shanghai, and he's wearing my Canadian Wheat Board hat.
The long of the story is that since then, the Wheat Board has sold more than 1.2 million tonnes of grain to China, and don't you think that hasn't resonated with the Chinese? So I suggest that if anybody goes to China, along with your maple leaf, you better take a Wheat Board logo, because it's pretty well known, not only in China but every place else.
I entertained a lot of Chinese delegations that came through Regina on their way to Winnipeg. They were still wearing the Mao jackets at that time and those kinds of hats, so you know when it was. That relationship has stayed with the Canadian Wheat Board ever since.
One day, my secretary came into my office and she said there were two fellows out there who were really upset about something. I told them to come in so that I could talk to them. They were two Japanese millers. They had a Reuters news release in their hands. It said there were farmers in southern Manitoba importing U.S. wheat and selling it for seed, so they were really upset. They said they buy 1 CWRS 13.5, and that was what they wanted. They did not want U.S. wheat mixed in with the wheat they got from Canada. So that's another experience that you better take.
When people start to talk about changing the grading system, eliminating the CWB, and all these kinds of things, that is the logo of Canada. That CWB is a logo, and you can distinguish it visually. Everybody knows what it is. If we were to drop that, it would be the same as General Motors dropping the Chevrolet logo from their cars. Don't ever forget that.
The wheat growers used to say that we're growing a Cadillac wheat but we should be growing a Chevrolet wheat. Well, I've been around this world long enough to know that there are a lot of Chevrolet wheats out there, but there aren't too many Cadillac wheats. Generally, we're short of that high-grade wheat to fill premium markets. So there's another thing. Don't get confused about some of these things that they're trying to go on about dropping this and dropping our grading system and all that. It's served us pretty damn well, and it's still going to serve us well.
Just as a little idea of my history, I was elected to the advisory committee of the Wheat Board. That area included almost all of southern Saskatchewan. Incidentally, it included Mr. Anderson's current federal riding.
I was at a good many meetings in that area. I've spoken to a good many farmers, and I still talk to many farmers from all political parties, incidentally. When he says the Wheat Board's ideological, well, I'll tell you that it's not ideological, it's monetary. It's dollars and cents. That's what it is.
I served on the standards committee of the Canadian Grain Commission, establishing grades and this type of thing. The U.S. was always very jealous of the Canadian Grain Commission and our quality control, so their producers set up a meeting in Washington. They were going to try to duplicate the commission, so they asked if somebody there who was involved in that could go down and be with them.
When I got to the meeting in Washington, lo and behold, there were more grain company officials there than there were producers. The very first words they said were that they didn't need an organization like that in their business. They said they could conduct their business by buying farmers' grain and selling farmers' grain.
If you don't mind one more point, I was on the marketing panel that was established the last time the wheat growers were trying to move the Wheat Board out of the picture. We sent a letter out to seventy producers and asked them what they liked about the Canadian Wheat Board and what they didn't like. We never got any negative responses back other than one that said they liked it but they thought they paid too much. The others were favourable, big time.
The biggest miller in Indonesia made a special trip over to see us, and he said that if he has to buy grain from anybody other than the Wheat Board in Canada, he's going to the other store, and he meant Australia. That was his final remark, and I remember it very clearly.
I don't know. Maybe I've used up my time, sir.
Thank you, folks.
Really, in one way or another, all of you mentioned the Canadian Wheat Board. Rob, maybe you said it best when you said the Canadian Wheat Board actually balances the system in terms of the powerful players out there, as opposed to the tens of thousands of grain producers up against the international grain trade and the railways.
Avery, you were vice-president of Saskatchewan Wheat Pool at one time, and when you were vice-president, the pools really worked in the farmers' interest. I spent years out there in western Canada, and I absolutely found it amazing how powerful those pools were. Now they really operate in the interests of their shareholders, who may be in New York or Toronto or elsewhere around the world. So at one time, where you did have allies in terms of your own pools that were working in your interest, to a great extent now they're just grain companies. They're out to make a buck for their shareholders, which I think comes to the point of the Wheat Board and this task force report that we heard some more about today: no evidence, no documentation.
Do you really think the answer is as the task force recommends, that what Canadian prairie farmers really need is another grain company?