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I've just given notice of a motion, Mr. Chair. The clerk has it. I'll just read it into the record so that it can be debated at the next meeting. The motion reads thus: “That forthwith all witnesses to be scheduled to appear before this Committee will only be determined by the Subcommittee on Agenda and Procedure.”
I'll be putting that motion at the next meeting. The reason is simple, Mr. Chair. We're doing a study in competitiveness. We've already had a number of witnesses. We asked that the Canadian Wheat Board be one of those witnesses. I now know that at that meeting, the Western Canadian Wheat Growers have been asked to appear at the same time. They were already before the committee on competitiveness on March 31.
The Grain Growers of Canada have been invited as well. They're really one and the same to a certain extent. They appeared on March 24. I don't know why we would be having two sets of witnesses twice. The Alberta Barley Commission and Grain Vision are also on at the same time. That's fine, but clearly the pressure's coming from the other side, Mr. Chair. I understand that the Wheat Board has been informed as well that the committee will most likely ask questions about their latest financial reports.
People are open to ask what they like. Their reason for being here, however, is to discuss the competitiveness issue. The slate of witnesses that I see on the agenda now are clearly set up to do a concentrated attack on the Wheat Board. That's not the hearing that we're supposed to be having.
Henceforth, the purpose of the motion is that the subcommittee on agenda and procedure--
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Thank you, Mr. Chair and members of the committee. We'd like to thank all of you for the opportunity to appear before this important committee. We are an agricultural industry, and a healthy and vibrant agricultural industry is essential to the Canadian economy.
The CFI is a not-for-profit industry association. We represent manufacturers, wholesalers, importers, and retail distributors of nitrogen, phosphate, potash, and sulphur fertilizers. With facilities located across Canada, our members produce over 25 million metric tonnes of fertilizer annually. We export more than 20 million tonnes of fertilizer to over 70 countries worldwide. Our members also import over one million tonnes of fertilizer annually.
Our mission is to be the unified voice of the Canadian fertilizer industry by promoting the responsible, sustainable, and safe production, distribution, and use of fertilizers. Today, we are here to discuss how, by delivering on this mission, the fertilizer industry can help promote the competitiveness of Canadian farmers and help them remain competitive in today's global agricultural markets.
I'd like to turn over to Clyde Graham, our vice-president of strategy and alliances. He will go through some of the key points in our brief.
Fertilizer is a globally traded group of commodity products. Production locations are based on proximity to raw materials such as natural gas and mineral deposits, access to water and rail transportation and to markets. Fertilizer is the most important crop input. Canadian farmers have access to abundant quality fertilizer made in Canada or imported through many of our 43 member companies. Annually, Canadian farmers spend about $3.2 billion on fertilizer.
Today, global economic growth in the developing countries is driving increased global demand for grains. It is not rising world populations so much as it is the rising expectation for a better diet from an expanding middle class. It takes three to seven pounds of grain to produce a pound of chicken, pork, and/or beef. Alternative uses for grains, such as biofuels, have been given a lot of attention recently, but the real driver in the market is demand for better food diets in developing countries. That in turn is increasing demand for fertilizer to produce that grain. The result is competition among farmers globally for the current supplies of farmers. China and India consume about half of the total global demand for fertilizers. Decisions by farmers in China and India will drive global markets for fertilizer into the future.
The CFI slide presentation that we distributed to the committee is an example of the information that our industry has presented to hundreds of farmers, farm leaders, and government officials over the last year to provide information about global fertilizer markets. This past winter CFI and industry representatives spoke to farmers and farm groups from Wolfville, Nova Scotia, to Edmonton, Alberta. An article from the farm magazine Top Crop Manager featuring one of our industry company's business analysts is an incisive look at how the markets work.
We have had some dislocation in the markets over the last year, as you all know. In spite of current difficult general economic conditions, the outlook for agriculture remains among the most positive of all the industries in Canada.
The Canadian fertilizer industry contributes to the competitiveness of crop producers in a number of ways. It ensures that farmers have reliable access to high-quality fertilizer products. It delivers fertilizer on time from the Peace River district to the Annapolis Valley. It provides the latest scientific advice to allow farmers to get the most from every dollar spent on fertilizer. It manages stewardship programs to protect the environment and to protect the public from accidents or criminal misuse. It improves farmer access to the latest fertilizer and supplements technology through the Canadian Fertilizer Products Forum. It educates the public about the critical role that plant nutrients play in feeding the world.
Fertilizer is the foundation of Canadian agriculture. By applying fertilizer, farmers increase their crop yields and make additional profits that they would not receive had fertilizer not been applied. Throughout this winter it has been clear that some difficult decisions were going to have to be made. The economic meltdown last fall has left higher-cost fertilizer in storage across all of North America. Many farmers delayed making fertilizer purchases, hoping for price reductions. That has put pressure on the fertilizer and the transportation pipeline as inventories continue to back up. Fertilizer remains an essential investment each year. There is no substitute for adequate crop nutrition. That is as true this year as it has been in every year in the past.
CFI would like to draw the committee's attention to an April 17 statement issued by the Canola Council of Canada, which was endorsed by groups representing canola farmers:
Some canola growers may be tempted to cut back on fertilizer rates this spring, but they might want to think twice.
“With canola prices having backed off of last spring’s highs and fertilizer prices remaining relatively high, growers might be tempted to shave fertilizer rates in order to reduce costs,” says Canola Council of Canada senior agronomy specialist John Mayko, “But canola growers who cut fertilizer rates may end up cutting their profits.”
With higher than average canola prices, the opportunity for good returns is solid; however, growers will need to use generous rates of nitrogen to achieve optimum net returns. Nutrients such as phosphorus and sulphur will also need to be at adequate levels to optimize yields.
“Today’s hybrids need adequate nitrogen to optimize the yield potential of the hybrid genetics,” says Mayko. “Although it is important to pencil out the potential profit situation for each farm, consider this: With canola at $9/bu and nitrogen costing approximately sixty cents per pound, for every 10 lbs of nitrogen applied, it will only take a three-quarter bushel gain per acre to recover that cost. Any yield above this gain is profit.”
Canadian farmers are fortunate to have access to not only Canadian fertilizer products but also internationally produced sources of fertilizer. Canada is a free trade nation, and the Canadian fertilizer industry continues to push for more open markets.
For example, in January 2009 the Canadian government made a decision to reduce Libya’s punitive custom tariff of 35%. The Canadian Fertilizer Institute, along with the Government of Alberta, supported this initiative. With the newly amended tariff, the cost of importing urea fertilizer from Libya significantly decreases, providing Canadian farmers with an additional new source of imported fertilizer.
I'd like to note that for farmers, agri-retailers are the best source of information on the fertilizer market, but they need good, timely information from their customers so that they can plan supplies. There is an advantage to both agri-retailers and to farmers to establish a partnership that allows for the effective sourcing and distribution of fertilizer.
I'll skip through a number of the sections because of the time. I would like to highlight a few points, though.
The Canadian fertilizer industry has played a leadership role in developing and promoting the “Right Product @ Right Rate, Right Time, Right Place” nutrient stewardship system. This system is important not only in Canada but around the world in terms of ensuring that there is proper stewardship of fertilizer products and that farmers get the best economic return from their fertilizer dollar.
In terms of the economic impact of fertilizer in Canada, our industry is expected to help lead the economic recovery. The potash industry alone contributes approximately 20% of Saskatchewan’s provincial government revenue. These companies have announced $10 billion in Canadian investment.
In terms of the environment, one of the issues facing our industry, like all industries, is that there are pressures--in many cases justified--for improvements in environmental performance. The federal government needs to remember that the Canadian fertilizer industry faces unique challenges in reducing greenhouse gas emissions.
Environment Canada has stated the following:
The fertilizer sector faces particular challenges related to dependence on natural gas feedstock, considerable international trade competition, limited ability to pass on costs, and high potential for relocation outside of Canada.
In terms of reducing nitrous oxide, or greenhouse gases, our industry has taken a leadership role in developing a nitrous oxide emission reduction protocol to compensate Canadian farmers with GHG offsets for reducing their on-farm nitrous oxide emissions. If farmers meet the criteria outlined in the protocol, which is nearing completion, they should qualify for an offset credit that could lead to a payment of $5 to $10 per acre.
In terms of the safety and security of our products, our industry has also been playing a leadership role. The initiatives that the Fertilizer Safety and Security Council has recently adopted--for Canadians who handle ammonia, one of the major nitrogen fertilizer products--provide uniform safety and security standards for the handling and storage of anhydrous ammonia at agri-retail facilities in Canada.
CFI believes the Canadian government has an obligation to participate in the cost of this upgrade in security measures, as it has in sharing the cost of the implementation of tougher security measures at Canadian seaports. I think the Canadian Association of Agri-Retailers has been before this committee in the past on this point, and we'd just like to emphasize our support.
I'm going to skip to the conclusion.
Our industry generally expects that the strength in agricultural markets will lead to recovering global demand for fertilizers in 2009 in spite of the current global economic uncertainty. Our members are turning that belief into investment decisions, creating skilled high-paying jobs in rural Canada that will ensure a stable supply of fertilizers for the future.
Of course, we're open to your questions.
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One of our industry's long-term concerns has been the lack of new soil scientists coming into the academic community. There has been a decline in the number of PhD soil scientists available to do research on issues like reducing on-farm N
2O.
Much of our industry's focus on research has been on providing science to farmers. We assist them in using fertilizer products in the most efficient way. The efficient use of fertilizer helps farmers to save money and get the best profit possible, while helping to protect the environment. The more efficiently you use fertilizer, the less you lose to the air and water. This is in keeping with our stewardship system—right product, right rate, right time, right place. I think there's a lot more work to be done in this area.
As to new products coming on, we're engaged with some other industry associations in a partnership dedicated to optimizing the regulation of new fertilizer products. We have a project we call the Canadian Fertilizer Products Forum, which was greatly assisted by the ACA program at Agriculture Canada. It allowed for a consensus to be built among farmers and the fertilizer industry on changes to the regulatory system. We want to protect our high standards of product safety and efficacy, ensure that the products do what they say they're going to do, and streamline the entry of innovative products, particularly micronutrients and inoculants.
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Perhaps I could add to that.
The structure of the industry has certainly changed over time. If you look at the plants we have in Canada, those are world-scale manufacturing facilities. They have the efficiencies, the economies of scale, to lower the cost of production and the cost of fertilizer to farmers.
For example, if we were completely reliant just on the Canadian market for potash, we could not justify even half of one single mine and the cost of potash production would probably be uncompetitive. So we are reliant on global markets to create the manufacturing capacities we have.
In terms of the rest of the world, sometimes the flip side is the case. The largest phosphate mines and supply in the world are in Florida, North Carolina, Morocco, and a new mine going into Saudi Arabia. Those are much larger than the phosphate fertilizer plants we would have seen in Canada 20 years ago. They have the economies of scale and they deliver lower-cost products. Farmers around the world benefit from this global marketplace and the free trade in fertilizers, and we're strongly supportive of that.
Nitrogen fertilizers--major producers and exporters in western Canada. The supplies that farmers would buy in eastern Canada are probably brought in by boat from the Arab gulf.
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Have you read the study undertaken by the Federation of Quebec Producers of Cash Crops?
Moreover, this federation was not the first to do this: the committee also undertook a study comparing fertilizer prices in the United States with ours, particularly at the border. The study showed that some fertilizers were much less expensive in the United States, but did not draw a similar conclusion for all products used by farmers.
The Federation of Quebec Producers of Cash Crops recently published—the comparisons were made on March 13, 2009—figures showing that producers in at least four American states pay significantly less for fertilizer than their counterparts in Quebec.
I will give you an example. Urea 4600, which sells on average for $563 per tonne in Kansas, $599 in Ohio and $614 in Minnesota, costs about $900 in Quebec.
Are you aware of the study? Can we attribute the fluctuation in price to the time period when the study was done? Would you agree that, in many cases and for many products, costs are lower in the United States?
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We have seen different spot observations like this in the past. Keystone Agricultural Producers did one a year ago, and it wasn't borne out when you actually did an analysis of same time, same place.
It's an open border. We support an open border--all of our members, our manufacturers, our retailers, our importers. If a farmer can find a better product and service package, then he should use that as part of his negotiations or make that decision to purchase.
But as I said, this year you will find that.... For example, if a retailer brought in fertilizer last July, August, or September, their cost would be dramatically higher than what it would be had they been able to go to the market, let's say, last December and purchase product. As a result, we're hearing comments in the industry that huge writedowns in costs have been taken by some retail members. We've heard of some situations where there may be a lack of support from the banks for some retail companies because of the inventory writedowns. I was told of one company in Alberta, one retailer, that has gone out of business since January, and it was indicated that the inventory situation probably was one of the causes.
Thank you, gentlemen, for your presentations.
I'd like to turn your attention to your statements around carbon charges and cap and trade, and how you see those effects delineating themselves across the price points for fertilizer.
You talk about both carbon charges, it seems to me, in the text on page 7, where you say that any carbon charge would be hurtful as far as competitiveness is concerned. I would take that to mean a more direct carbon charge. That's my emphasis, reading into that. At the bottom of page 7, you go on to say that the U.S. cap and trade proposals would hurt farmers due to increased price volatility. I assume--and I hate to use that word, because we know what it means if we break it up into three components--that you're seeing that as an added cost as well, which is a bit of a carbon charge, if you will, depending on how folks look at it.
Perhaps you could briefly let me know what your sense around that is. It seems to me there's a cap and trade system coming in the United States; I think the President has been pretty clear about that. So saying that it'll cost us more is just stating the obvious. What is the plan to actually deal with the situation? This affects Canadian farmers and American farmers in a global marketplace where others may not be involved in a cap and trade system.
How do you see that impact, whether or not we were to be involved in it? It seems as though it's going to happen in the United States.
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Ultimately, there isn't a no-cost way to reduce greenhouse gases, so an economic burden will have to be borne. Our industry supports reductions in greenhouse gas emissions. We have been undertaking a lot of efforts over the years to increase our energy efficiency because of the high cost of natural gas in the past.
Regardless of what kind of regime is imposed, whether it's the emission intensity system that had been proposed by the Conservative government in the past or a shift to a cap and trade system, or even a pure carbon tax, I think there has to be a way in that system to allow flexibility for industries that are strategic, energy intensive, and also trade dependent, in order for them to remain internationally competitive, particularly during the period of transition when some countries are going to have more aggressive programs than others.
The Europeans have certainly taken steps to reduce the impact of their systems on fertilizer in Europe. As for the Americans, certainly in the United States there's a lot of consideration being given to this. They view fertilizer and the food supply to be a very strategic commodity and almost a national security issue.
Certainly this government, in the “Turning the Corner” document, indicated that there would have to be some special consideration for the fertilizer industry because of its situation in terms of high use of natural gas and also the intense global competition.
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In reading through this, I note that you have a 4R stewardship model: right product, right rate, right time, and right place. From your perspective, are you seeing that being taken up by farmers? Across the board, are farmers saying that's right? For those who may not be saying that, are you engaging with them?
Farmers usually are ahead of the curve when it comes to their own farms and making sure that things work well, that they understand the prices, and that they understand the need to be efficient and do all the right things. I don't think anybody disputes that. The issue becomes, for those who may not be leading--because there are always those who are leading and those who lag--are there opportunities for them? Is there a way for your industry to help them get to that sense, and is it being done by your industry?
In a sense, what do you see as the impact of the four Rs? Clearly, if you talk about the right product, it's obvious, but when you start talking about the right rate, the right time, and the right place, it really is about reducing the amount you use, reducing the amount you put on the field if you don't need it, and it's about doing the right amount at the right time. Do you see that as having an impact on your industry?
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To your point about the right rate, you wouldn't reduce your fertilizer application in all circumstances if you're following that system. There are parts of Saskatchewan, and other provinces as well, where farmers are not applying sufficient fertilizer to meet the needs of the crop. It is based on scientific recommendations. We quoted the Canola Council, and for years the Canola Council has had a concern about under-fertilization of canola in that province, because there are limited acres that can go to canola every year due to the rotation requirements. The canola industry has to supply the crushing plants in foreign markets like Japan. Certainly there's lots of scientific evidence that shows it's not reducing fertilizer that's important; it's getting the right amount of fertilizer to meet the replacement needs of the plant.
In certain cases, yes, there may be too much fertilizer being applied, but in other cases, farmers have not been applying enough. I think that goes for other nutrients as well. For example, with potash, you don't get the immediate reward from applying potash, but over time, if you don't have a proper balance of nutrients, including potash, you don't get the yields you want. So there's probably an under-utilization of potash in certain areas of Canada as well.
Right now, we have a good general level of fertility in Canada. But if you go back to the Dirty Thirties, one of the major contributing causes of the dust bowl was the fact that we had been mining the soil for decades in Canada. When you had a dry spell, there was not the carbon in the soil to hold the dirt, and it all went up into the sky. We're not at that point—far from it—but over time, you can't mine the soil. It's a zero-sum game. You can't just harvest crops without putting back what you've taken out.
:
Thank you very much, Chair.
Thank you to the witnesses for being here today.
There are definitely many challenges facing farmers today, as we all openly acknowledge, and certainly facing your sector as well, as was clear in your presentation to us this morning. Many of these factors are out of government control, but there certainly are some things in which the government definitely has a role to play.
I live in a rural riding, right beside Ottawa. Agriculture is core to the economy of the riding. The people, long-time farmers, are very dedicated to continuing to farm and wanting youth to come into farming as well. They're very worried about input costs, every single input cost, because that is what has an impact on their bottom line.
The matter that concerns me is what I would call an input cost multiplier. I call it a multiplier because it will affect every single input cost—not just one, but all of them. What I'm talking about, of course, is a carbon tax. I just want to put some facts on the table. These are facts regarding a carbon tax.
The first thing is that the carbon tax is the invention of Mr. Ignatieff, who's the leader of the Liberal Party. He is the one who came up with the carbon tax, and if people think I am overplaying my hand, they should just go back and watch the 2006 leadership race. They will see it is Mr. Ignatieff who is pushing forward the carbon tax. It's basically his baby. He's the strongest advocate for it.
The second thing is that we just had the Liberal convention. This is the fact. They just passed a motion of strong support for a carbon tax. This should be a warning bell to all farmers and to industries such as yours.
The third thing is that Mr. Ignatieff said less than a month ago that the Liberals will raise taxes. It wasn't “we may” or “we're considering”, or “it might be necessary in the future”; it was “we will have to raise taxes”.
We have these three things coming together at this point in time. It's a multiplier of input costs because it's going to affect every single input cost going.
I remember reading in the paper a few days ago, when Mr. Ignatieff made his comment about having to raise taxes. The actual headline of the article was “Are Canadians ready for the truth?” The article was not saying Mr. Ignatieff was joking, that he was misquoted, that he really didn't mean what he said. The article was saying he meant exactly what he said: are we, as Canadians, ready to hear this?
One of the points I want to underline is that it doesn't have to be that way. As the Conservative government, we lower taxes. We have lowered taxes, and this approach is helping farmers and helping your industry.
The question I want to ask is this. What would be the impact of a carbon tax on your industry?
Gentlemen, I have to go in a few minutes and I have a couple of things to mention.
As you know, the study we're doing right now is about competitiveness, or the lack thereof in a lot of cases. Industry always has an opportunity--and most of the time it capitalizes on that and then some--to recover their costs. We're here to try to help the grassroots producers and make sure they are viable, that we have a good quantity of good-quality, safe food here in Canada.
I know that up until 2007 the grains industry, which is a large user of fertilizer, had about four or five very bad years in a row where they made no money, and in fact, in some years they lost money. They're very dependent on fertilizer. As I said, I know that finally in 2007 they basically had some record prices, which was good. It was about time. The unfortunate part about that was that fertilizer prices went up probably the same amount as those large increases in commodity prices, maybe even higher. We had some witnesses last year who basically admitted that there was some extra price-taking. Larry Miller calls it price gouging.
I think there's no doubt that went on. What would the figure be, in your estimation, of that price gouging? Was it 10%, 25%?
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I don't agree with your premise at all, Mr. Miller. Our member companies operate in a free market, and like everyone in the market, their job for their shareholders is to do the best they can to run profitable businesses, just as farmers do.
I would say that if you looked at the farm income for crop producers, setting aside livestock, which has had some tough years, even going forward, the net farm income for crop producers in Canada has gone up dramatically in the last few years, and frankly, a large part of that increase in their profitability has been due to the use of fertilizer products.
Historically, fertilizer prices tend to track fairly closely with grain prices, and the reason is simple. When prices of grains are high and there's good demand for grains, farmers around the world tend to use a lot of fertilizer, or they go back to the correct amount of fertilizer, in order to try to take advantage of that market uptick. As more farmers demand the fertilizer, the price of fertilizer tends to go up because production can't react that quickly. It takes about five years to open up a new potash mine, and that's just from when you have the approvals. It takes three to five years to establish a new nitrogen plant. You can't bring new fertilizer production in overnight. So when grain farmers decide that the prices are outstanding for their products and they need to maximize their yields, they're going to put on the recommended rates of fertilizer around the world, and then there will be increased demand for fertilizer and the market will respond.
So what it's really doing at the end of the day, because of the lack of government assistance in Canada, is making our fertilizer sales at the retail sector level uncompetitive.
Now, Clyde, when you first started off, you talked about the drive in market demand, that consumption in China and India is really driving up fertilizer prices. That argument held water a year ago, but I don't think it holds water longer than a year ago, I guess. I don't think it holds water today. In response to a question from the chair, the potash companies said they have in fact been cutting back production. That's even though they're still making profit, as I gather, from the raw potash price coming out of the mines. So we would appreciate getting how much that scale-back to production was.
I think you're probably aware as well of letters that came in from the former Minister of Agriculture, Eugene Whelan, who is basically accusing the three—I think there are three potash companies in the world now—of fostering starvation. The reason I think he's saying that is that there's a great attack on supply management. If we've ever seen supply management, we're seeing it at the potash level, because they're cutting back production because their profits are not huge enough.
As a result, my question is why Canadian producers are paying so much. Right now, in my riding, I have potato producers importing fertilizer, 16-16-16, from Russia. They're bringing it in in containers because of the overpriced fertilizer within Canada. They can save $60,000 on 400 acres of potatoes by importing from Russia.
Do you have any idea why those prices are so high here at the sale point? Was it the speculation in the market previously or what?
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I'll try to give a quick answer.
If I were to talk to the retail companies that imported product and supplied those farmers in eastern Canada, whether it's in P.E.I. or in Quebec, what they would say is, in order to secure supplies for their farmers last year--in July, August, and September--they bought fertilizer from around the world at globally high prices compared to where they are today. That has caused the market dislocation that you're seeing.
In terms of profitability, publicly traded companies like Viterra and Agrium have announced that they have made writedowns in the value of their fertilizer inventories. Yesterday, Agrium came out with a $60 million first quarter loss as a company. So the upheavals in the marketplace are definitely affecting fertilizer companies.
Bill Doyle made a statement to stock analysts last week on the demand for potash and cutbacks in production to meet the demand that was in the marketplace today. He also talked about the need to make something like $10 billion to $12 billion of investment in new mines. He said they needed those prices in order to sustain that investment.
:
Thank you, gentlemen, for coming out again.
Actually, I'm going to continue along the same line as Wayne, because Wayne started some things here that I think really need some answers.
Being a farmer coming from Saskatchewan, I have a love-hate relationship with potash. As a taxpayer, I love the fact that 20% of our revenue is coming from potash. It has paid off a big chunk of our deficit this last year. And I have to give the Saskatchewan Party compliments for creating an environment for the expansion of these new mines. I know the previous government would never allow that environment to happen, and it shows you what happens when you let free enterprise reign.
One concern I really have--and it showed up last spring, and it's going to show up again this spring--is logistics. It's getting the product to the farmer. We had scenarios last spring where farmers were waiting for anhydrous, they were waiting for fertilizer, sulphur, and it seemed like the industry did not anticipate that. That surprised me, because they knew that the previous year's fall usage was down. So they know that there's going to be x amount of product going on, yet you were unable to supply the product in a timely manner.
Can you guarantee to me this year that you're actually going to make sure that all of this fertilizer is delivered and that farmers are going to get the product when they need it?
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We are probably the third largest user of Canada's railways in terms of the tonnage we ship and the dollars we pay to the railways. So we're a huge customer. You have grain, coal, fertilizer, and forest products; those would be the four big users of the railways.
Our companies have developed close partnerships with the railways as part of their business, because in the fertilizer industry, you have to have that kind of partner relationship to keep your costs down and to deliver the product to the farmers.
And there are innovative things being done. For example, if you look at Canpotex, they've invested in a special railcar that is sized just to carry potash. It allows, I think, a 160-car unit train to expand to 210 cars. That's done to reduce the cost of transportation to get the product to Vancouver.
So our member companies are doing that. And yes, railway is the most important mode of transportation for us.
:
Thank you, gentlemen, for coming today. I know you sometimes have a difficult task when you come to this committee.
I would first like to set the record straight about some of Mr. Easter's comments on the U.S. Farm Bill. It was actually a Liberal government that signed the WTO agreement that allowed massive U.S. subsidies in their farm bills--as well as European subsidies--while at the same time selling out our farmers by not allowing us to do the same thing.
But there really must be a problem here when I actually agree with Mr. Easter on a topic. There has to be something going on with you guys. I say “you guys” because when the markets are up farmers lose out, and when the markets are down farmers lose out. You came here last year and testified, and every time it was about increased prices--this is why it has always been driven this way, and farmers know that; they put more on when they're making more money.
Today you're talking about current canola prices and saying they should be putting more product on, but the fact is that farm income is simply not a free market justification. I cannot stress enough how tired am of hearing that as a justification for why prices rise and stay that way. Then you start decreasing the amount of commodity your organizations are putting out.
My farmers in particular have been hit hard by this. Some ships have come over, and Mr. Easter talked about that. A lot of my producers in the Westlock, Bon Accord, and Gibbons areas don't want to go to Russia; they don't want to go overseas. They want to deal with their local guy.
You came to us last year and recommended we give farmers access to credit year round so they can buy in the low points. But there were no low points last year. Some people here have said they've been kept artificially high. Whatever you want to say, the fact is they were kept ridiculously high throughout the entire buying season and only got higher when farmers had no choice but to buy. So access to credit really was not a determining factor in my area, and I can speak only for my area.
My first question is, when are my farmers going to see a reduction in their rates due to the lower natural gas prices we've been experiencing and that you talked about last year?
:
Sure. That's a wonderful answer, and a brief one too.
As I'm here at this committee as a visitor, I want to thank you all for letting me be here and have a lunch and everything.
I was wondering if there would be any legal angles at all to this thing, and it strikes me that there's a huge one.
When I was going through law school, we were just going through the era of enacting the Combines Investigation Act, as it was called then. Lawson Hunter, who was from the University of New Brunswick Law School, was the first commissar of the CIA, which has now turned into the Competition Act.
I know a little bit about the Competition Act's not having enough teeth or claws, whatever you want to call it, to intercede in anything that doesn't relate to the price to the end consumer. I know there's been some litigation up the chain with some of your clients or representative companies. It seems to be woefully inadequate in this case. What I'm hearing...and it almost unites the parties, which we shouldn't let out of this room; people might think we're not at loggerheads, the way we see every day. It seems there is a feeling in this room, without any real proof, that there is price fixing or supply restriction with respect to potash worldwide and in Canada, and it affects Canadian farmers. I don't know how you can deny that, when first of all you say that production has been cut back, jobs have been lost, yet you talk about--maybe worldwide--a lack of demand.
Let's put the cards on the table here. I'm not a farming guy and I don't know much about fertilizer, but the free market, which we've talked about here.... Mr. Hoback said it was great that in Saskatchewan the free market reigned and there was more potash mining coming online. Yet he launched into a whole aspect of it that, to me, cries out for at least an investigation into how the free market is working with respect to the price of potash, which I understand is hurting Canadian farmers.
Is there price fixing? Is there supply restriction being mandated by the three or four companies that control this commodity? Yes or no?
:
Thank you, Mr. Chair. And I thank the witnesses for coming.
The farmers I'm dealing with almost on a daily basis, particularly in my riding.... I have a diverse riding that has not only cash crop, grain, and oilseeds people but a lot of livestock people as well.
When our chair, Mr. Miller, brought the issue up, you said that fertilizer prices tend to follow commodity prices. I don't know how that works, because you didn't explain what the commodities were. Even though there was a small rise in the price of commodities--basically for grains and oilseeds--there was also a tanking of commodities in terms of the livestock industry. The livestock industry also relies on the use of crops to feed the animals.
Saying that it follows the price of commodities actually has no justification in terms of what the need is and in terms of the operational costs of producing. When I look at some prices here from 2004, when corn was a little over two dollars, and from 2005 you see, particularly in ammonia, those prices increasing while commodity prices were decreasing.
Then in 2006, all of a sudden, when everybody was telling us.... Quite honestly, I didn't talk to a marketer who was able to tell me that commodity prices were going to increase. In 2006, when they took off, there was a stabilizing and then there was this escalation, because, holy smokes, look at what the farmers are making; we have to get in on the game.
Now, we have farmers in my area who are actually good farmers, but they cannot afford to be paying the prices because, through your organization, these retailers did bad buying.
Now, there's always the concept within agriculture that the primary producer pays. That has not gone away. You talk about a reduction in profits. I can take you to farm after farm and show you the sheets. Not only in the first quarter did they lose money, but they've lost money for three or four years. There was not the sympathy, quite honestly, for your industry. I say “you” because you're the ones who are here today and you represent the industry. There was not the consideration of that industry for the farmers when the prices were low.
I need to have answers as to why there is still the consideration that it follows the commodity prices. That's not a valid reason.
Second, you talked about educating the public on the benefits of using fertilizer. I didn't hear anything in your presentation, quite honestly, about helping and working with the farmers, who are your customers. They're the ones who write your retailers the cheques. We haven't heard anything about how we should be concerned and working with the farmers in terms of their being profitable so that your end of the equation and your representatives can be profitable. You're spending money on public education to tell us, the consumers, that if the farmers use fertilizer, this is going to be good for us. But I didn't hear anything about what you've done, and I'm looking forward to that, to actually help the farmers in terms of their education. What they've had to do was on their own.
I think the quote is something like the right place, the right time, the right amount. They worked through the industry with that, and it has driven the technology in agriculture to a great extent, not only for the organic use of fertilizer but certainly for the manufactured fertilizer. I need to understand that part of it also in terms of what you are putting in to help the farmers in terms of the benefits to the fertilizer industry in terms of education.
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In terms of the commodities that drive fertilizer prices, the grains and oilseeds complexes—corn, soybeans, wheat, rice, and canola—are the major commodities in Canada. Certainly it has been a difficult time for livestock producers, but the markets are being driven primarily by the demand for grains and oilseeds. There is an increase in animal husbandry in Asia. People are eating more meat in Asia. There's more feed grain demand in Asia than there ever has been before, because people in those areas have higher incomes and want to have better diets with better animal protein. That has been a major driver in the marketplace for fertilizer to meet that demand.
In terms of education, our industry helped establish and bring to Canada the certified crop adviser program, which sets high standards for agronomic advice for farmers. Most of the certified crop advisers in Canada are employed by agri-retail companies. They pay their salaries and make their advice available to farmers. In many cases, it's part of the service they provide when they purchase their farm inputs, their pesticides, and their fertilizers.
The reason our industry did this was to fill a gap. Most provincial governments have been systematically exiting from the extension services that used to be provided routinely for farmers. I'd say Manitoba is one of the few that have maintained a very effective extension program. Our industry filled that gap.
The science that drives that advice is done by the International Plant Nutrition Institute. It's based in Atlanta, but there are three PhD scientists in Canada who help provide that support.
We would say our industry has made a real commitment to providing advice for farmers. It's not just advice to buy more fertilizer; it's advice on how to get the maximum economic yield from crops. It's rigorous and it's peer-reviewed information. A lot of the provincial governments depend on that information as well.
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It's across the spectrum, then.
I hate to add another lecture to the pile of lectures you've received today, but I think I'm going to have to, because certainly when I talk to farmers in my riding, it's much the same as what you've heard many times today.
One of the biggest issues that come up all the time is their input costs and how the price they receive for their grain or the product they produce certainly hasn't increased at anything near the level that input costs have increased over the last number of years. Their input costs in many cases have increased exponentially, and fertilizer is high on the list amongst those.
I have to add my voice on behalf of my farmers, that there's a serious concern here from our farmers. I would tell you that I don't think very many farmers would believe that when prices increase—as an example, when you see increases in the crop prices and then see the corresponding price increases in fertilizer—it's a coincidence or that some outside force is leading the way, or some global force is leading it to happen.
This is something that needs to be addressed for our farmers. I know you've mentioned global forces as an issue, but I'll tell you that a lot of farmers say to me, and I think they're right, that what they're seeing is that prices are often far lower in other countries than they are here in Canada, or that changes come faster in other countries than they do here in Canada.
Mr. Miller's comment earlier that it was his belief there's some gouging going on is exactly what I hear from my farmers. I want you to be aware of that and to know that this is what my farmers are saying. I think you're hearing it from both sides of the room today. You're hearing it from farmers all across the country, through us, and I think it's something you need to address.