EVIDENCE

[Recorded by Electronic Apparatus]

Thursday, May 4, 1995

.1111

[English]

The Chairman: I'd like to call this meeting to order, please.

I'd like to welcome our witness here this morning. We have Les Jacobson, who is president of Keystone Agricultural Producers.

I'll let you introduce the people with you, Les. We welcome you, and we'll listen intensely to your presentation and then go to questions. We will have to hold in abeyance the passing out of your brief, in fairness to the Bloc, because it's not translated.

Mr. Les Jacobson (President, Keystone Agricultural Producers Inc.): Thank you very much, Mr. Chairman.

With me here this morning is Owen MacAuley, the second vice-president of Keystone Agricultural Producers.

I'd like to thank you for giving us the opportunity today to make this presentation to the subcommittee. We have a short presentation that we've been doing basically all last winter with representatives of our organization. Approximately three or four of our committee went out all last winter and made well over 100 presentations. They basically said exactly what we're going to be talking about today in our presentation, which is going to be made by Owen MacAuley.

This presentation has been made to a lot of farming individuals, plus people in finance, bankers, chairmen of chambers of commerce and many others in Manitoba.

With that short introduction, I'd like to ask Owen to do a shortened version of our presentation so we'll have time for questions.

Mr. Owen MacAuley (Second Vice-President, Keystone Agricultural Producers Inc.): If you'll indulge me, I'd like to use a few overheads, if I may.

The Chairman: Okay.

Mr. MacAuley: This is basically, as Les said, what we've been saying to our farmers. We've made this presentation to the Canadian Wheat Board. We've made it to the federal bureaucracy, to the provincial bureaucracy, to the chambers of commerce, credit institutions, and to more meetings than we can probably count, but probably to about 2,000 to 2,200 farmers in Manitoba over the winter. I've done a few presentations in eastern Saskatchewan because it's in proximity to where I live.

Basically, we're trying to deal with the transportation issue and the pooling issue because they're both relevant to the future transportation costs on my farm, and trying to deal with the impacts and making our producers understand what those impacts are. You'll see as we go along what the message is.

Again, we come back to the situation we're currently in. That's how it's paid today. The difficulty that we have in Manitoba today is that as we reform the WGTA, the money was split between Thunder Bay and Vancouver.

.1115

It was split in this fashion: each person from Redford, Saskatchewan, which was the mid-point cost, had a cost of about $29; of that $29 the WGTA paid about 52% of that cost of transporting grain. The producer in Winnipeg had a total cost, if you add these two numbers together on the bottom of the overhead, of about $19 and the WGTA paid 52% of his cost. The producer in Calgary had a cost of $25.26 and the WGTA paid 52% of his cost of transporting grain. That's how the system worked.

The cost of moving grain down the seaway from Thunder Bay to Montreal was paid out of the Canadian Wheat Board pool accounts before the money was distributed. We wound up with a situation at the end of the day that the producer in Manitoba had a total freight cost off the initial price, and the initial price was the same across western Canada set by the Canadian Wheat Board. The producer in Winnipeg had a freight deduction of $9.11 and the producer in Calgary had a freight deduction of $12.25, which, in essence, meant that the producer in Winnipeg received $3 a tonne more for his producer than the producer in Calgary did, even though the producer in Winnipeg was 800 miles further away from port.

We wound up with an anomaly in the situation where the Winnipeg producer believed he was the cheapest place in Canada to grow exportable grains because he had the least freight deduction of anybody in western Canada, and he was probably almost the furthest away from a tidewater port other than Churchill. So we developed our whole infrastructure around that. We bought combines, we developed our grainlands...we developed everything, believing we were the cheapest place to grow and export grain because of the policy in place at the day.

On the bottom-hand corner, you can see the WGTA paid $13.01 of the freight for the producer in Calgary and paid $9.68 of the freight for the producer in Winnipeg, which meant that the Calgary producer, who is 800 miles closer to the saltwater tide port, actually had more compensation in the form of a government subsidy to help transport his grain than the producer in Winnipeg did. So we wound up with a situation where the producer in Winnipeg believed he was the cheapest place in Canada to grow grain and the producer who was closest to the premium export port had more subsidy than the producer in Manitoba because everybody helped share for the $20.

What does that mean to us?

[Translation]

Mr. Chrétien (Frontenac): Mr. Chairman, may I interrupt our witness to ask a few questions or must I wait till the end?

[English]

The Chairman: If you have a specific question for clarification, ask it now.

[Translation]

Mr. Chrétien: He will not be able to understand. It is complicated. I will only ask one question. I want to be sure I understand what is being said. I am from Quebec. You are giving us numbers for once, which makes me happy and I thank you.

I would like to make sure that everything is clear in my mind. Under the WGTA, the government would pay $9.68 a ton for a producer from Winnipeg exporting his grain to Vancouver and the producer in Calgary would receive $13.01 from the government right now. Is that right?

[English]

Mr. MacAuley: Not entirely, and the reason for this is that the mid-point, as I said, for the Canadian Wheat Board grain was Redford, Saskatchewan. It's assumed that everybody who lives east of Redford would ship their grain down the seaway and their WGTA calculation would be based on the movement through the seaway.

If the grain produced in Winnipeg was shipped to Vancouver, that would have been a decision made by the Canadian Wheat Board, and the Canadian Wheat Board would have then paid the difference in freight between what the producer would have been charged basis going to Montreal and what that extra increased cost was going to Vancouver.

Mr. Chrétien: Thank you very much.

.1120

Mr. MacAuley: These are the impacts on a producer in Manitoba, Portage La Prairie, at Regina, and at Bassano, if we reform the WGTA and reform pooling in such a way that we only recognize the two pooling points of Montreal and Vancouver.

I'll go through the first example and you can follow the rest. The producer in Portage La Prairie currently pays $9.56 freight. That's what is deducted off his initial price at Portage La Prairie. The government pays $10.15, because that's the total combination of what the freight was, the addition of those top two numbers. The government paid 52% of the freight. The seaway costs are about $20.42. If the seaway is reformed, recognizing Montreal and Vancouver as the pooling points, the producer in Portage La Prairie winds up paying for his Wheat Board grains at a full cost tomorrow of $40.13; yesterday he paid $9.56.

The Chairman: Owen, I don't want to interrupt you, but on pooling points it is hard for people who haven't been in the system to understand. I wonder if you could go back to your map and point out the difference between using the centre point of Scott, Saskatchewan, or Sintaluta, and come down to where basis pooling is under the possible new system, Canadian Wheat Board 1995, versus the old system. I think that would clear it up for Jean-Guy.

Mr. MacAuley: Under the current system, the Canadian Wheat Board recognizes two pooling points today. Those pooling points are Vancouver and Thunder Bay. There is an initial price paid to everyone in western Canada, the freight deductions are made, Redford being recognized as the high-cost point between Vancouver and Thunder Bay; that cost is $29 today at that point.

I have another overhead that might help explain it a lot better.

Under the current system the WGTA recognizes the pooling points as Vancouver and Thunder Bay. The real cost of moving grain, as we just demonstrated on the previous overhead, is actually Portage La Prairie, or Brandon, which is about $40 a tonne. That's where the actual real cost is of moving grain between Vancouver and Montreal.

If you reform the pooling points based on the Canadian Wheat Board proposal of 1985 - which was simply, we'll do away with the seaway pooling - you would have moved the pooling points between Vancouver and Montreal. This would have left somewhere between Brandon and Portage la Prairie, Manitoba as the high-cost point. Under the current system, the triangle between Thunder Bay, Vancouver and Redford, was paid for by the government through WGTA and by the farmer through his producer share. This remaining box, these other costs, were paid for out of the Canadian Wheat Board pool account and that was the seaway cost of moving the grain, because someone paid those costs but they were in essence paid for out of the Wheat Board pool accounts.

By reforming the line to Sintaluta, which is the new 1995 Wheat Board proposal, we would now draw the point to here, which would be about $35, but the real costs are still Brandon. Those real costs have still not gone away. Someone is going to pay for those real costs of moving that product, because the Sintaluta point is not recognized as being the actual cost point of moving grain; it's the capacity restraint point.

What they're saying is a point from Sintaluta west grows enough grain that if all of that grain is exported, then the ports on the west coast are full to capacity - it's impossible to ship any more through there - therefore, the rest of the grain logistically has to go east. So this line is what's being talked about within the new 1995 Wheat Board proposal for wheat, not durum but for the rest of the wheats, which would be here.

One of the difficulties Manitoba has is if we draw that line there and the real costs are $40, how soon do we get to the $40? Do we get it when we get rid of the maximum set rates under WGTA? Do we get rid of it if someone votes to leave the Canadian Wheat Board and exits, because then we're still faced with that situation since there's nobody to pool these other costs with?

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So what Manitoba is asking and what our producers are asking is that even if we move to the Sintaluta line, ultimately we have to recognize where the real cost is going to be and how soon we move there. Because as the producers in our province - and whether it be my daughter or someone else's daughter, or whether it be Les Jacobson or Owen MacAuley - we ultimately are going to have to look at this cost and make a decision about how we recapitalize our farms today so we're in place to begin a competitive basis tomorrow.

If, indeed, we move to the Sintaluta line and we go to Brandon - I think this number's closer to 30 now that they have the rates out - the rate will then be set in Brandon because your gain on this slope coming down of maybe $30 or $31 in Brandon, and the real costs are $40...we still have that unknown area in there about what's right and where your competitive position lies in relationship to everybody else.

The person who's on this upslope, until you get to Sintaluta, knows exactly what his costs are going to be tomorrow. There are no unknowns for him. The unknown is the cost between what's going to be applied as a cost and what the future costs are going to be. That's what we're saying in terms of the long-term adjustment. We need to know how to make our capital investments and recapitalize our operations today based on what the very best guess can tell us about what the future's going to hold for us.

When we took this to the Wheat Board, and I'll come back to this overhead about the costs, where the producer paid $9.15, the government paid $10.15...the seaway costs of moving the grain from Portage La Prairie through the seaway were about $20.42. The full cost that the producer sees would go from $9.56 to a total of $40.13, basically, once you reform WGTA and reform pooling based on the pooling proposals that were in place before.

If you follow this through, the total cost is $40.13. Because we're no longer going to be taking that $20 for moving the grain through the seaway out of the Canadian Wheat Board pool account, everybody in western Canada would get a bigger final payment. The reason for this is that within the Wheat Board the farmers paid an initial price. The difference between that initial price and what's achieved on the world market is put into a pooled account. From this pooled account they took the money out to pay for the seaway costs, and that was the cost of moving the grain through the seaway, which meant that everybody in western Canada paid a portion of that, including the producer in Alberta.

Over the long term it would be difficult to believe that this would be allowed to continue...where Alberta was asked continually to pay for a portion of that cost yet he never saw a bushel of his grain go down the seaway.

So when we credit back the $6 because everybody is going to get an initial $6 a tonne, it's not only applied to the Manitoba farmer, it's also applied to every farmer in western Canada.

Mrs. Cowling (Dauphin - Swan River): My friend in Quebec understands why I'm so sensitive to this, because Brandon is just above my riding in Dauphin - Swan River, and I'm from Manitoba. Owen sat on the producer payment panel, and one of the things that was never recognized, and I've raised it in every meeting, is about the cross-subsidization of those branch lines in northern Saskatchewan and Alberta. That's a portion of the fairness and equity that I think should happen for the producers in my province, and it's never recognized in these figures. We picked up additional costs because we have a system in Manitoba that is fine-tuned and there need not be any branch-line abandonment, with the exception of only a few.

On the other issue of Prince Rupert, where we picked up and paid out of those pool accounts the additional 140 miles to get to Prince Rupert, we also had the privilege of doing that. So when we talk about adjustments to pooling for Manitoba, in fairness, we want to address those two perspectives. That's an issue for those of us from Manitoba and me as a member from that province.

[Translation]

Mr. Chrétien: It might be difficult to understand that today, but I would like to understand also. In fact, if you add $9.70 to $10.15, you don't quite get $20.42. I guess it is a ballpark figure. Right now, the cost is $20.42. The government pays part of that amount and the producer pays the rest. Once the WGTA has been abolished, the total cost will be $40.13 a ton, if I understant.

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[English]

Mr. MacAuley: That is after the abolition of the WGTA and pooling. What the $20.42 comes from is the cost of moving the product from Thunder Bay to Montreal, or to those terminals in Quebec. The $9.56 and the $10.15 is basically - and this is Winnipeg, and I have Portage La Prairie - the cost of moving the product from Portage La Prairie to Thunder Bay.

These two numbers total the rail cost of moving the grain from Portage La Prairie to Thunder Bay. The farmer pays $9.56, the WGTA pays $10.15, and the Canadian Wheat Board pool account currently pays $20.42. The addition of these three numbers comes to $40.13.

[Translation]

Mr. Chrétien: Now I understand.

[English]

Mr. MacAuley: If we follow this through to the end, we pay $40.13. Everybody is going to get an additional $6 and a final payment from the Wheat Board, or an increase in the initial price. You've got a net producer cost of $34. The producer paid $9.56 last year. That's what he saw as freight. We have a change in the producer cost on a per tonne basis for wheat of $24.57.

The same number flows through for canola at the basis out of Vancouver. We have $20.49 as what the producer would pay to move a tonne of product to Vancouver if he chooses to ship it there. The WGTA would pay $21.76. The addition of those two comes to $42.25.

If you follow it through, he pays $42.25 tomorrow; last year he paid $20.49. His increase in cost is $21.76 a tonne for a product that currently would then go to Vancouver. These are non-board crops.

If you follow this through, you can see that by looking at the first row in each case, that's where probably 60% to 70% of the grain we grow, the Wheat Board grain, moves. The producer has an impact on Manitoba of $24.57 a tonne; Saskatchewan has $15.92; Alberta has $7.72; the total net impact per tonne.

In Manitoba, the government and the Manitoba Agrifood Advisory Council did a study in 1990 or 1991 that showed that the market would probably absorb part of these costs. You would not at the end of the day expect that these costs would be real. The market would absorb part of these costs because the Japanese might pay a little more for the canola to make sure they got it. The reform might pay more.

I'll use a number that obviously makes the point well for Manitoba. Let's imagine that the market were to absorb half the cost in Manitoba of $12 a tonne. If you subtract $12 off Manitoba's impact, we're still left with an impact of $12. To absorb $12 in Saskatchewan, because that would flow through to everybody, Alberta would have an impact of $4, and if it absorbed $12 in Alberta, then Alberta would be plus $4, not minus. These are all minus numbers. This is the change in the cost.

The impacts of changing both in this fashion ultimately would probably leave the producer in Alberta better off than he is today, in terms of net return, and the producer in Manitoba worse off. That was the position that we always took, and this one slide sums up the whole debate around WGTA and how it should be paid.

Some people said it should be paid based on this top number, which reflects historic provincial shares. The shares that the provinces receive today for these numbers on the top is 10, 15, 21 times the volume shipped out of each province that reflected those historic provincial shares.

You can see that Manitoba got paid $10.15 in this year's calculation for every tonne they shipped; Alberta got $13.72 per tonne to reflect their historic provincial share times the tonnes shipped. At the end of the day, the cost that Manitoba had, although we're going to proportionately on a per tonne basis ship it, wound up getting the least amount of money. We face the highest cost tomorrow.

The debate in Manitoba was that we should recognize these highest costs. We should recognize tomorrow's costs in the reform of the transportation policy overall.

Other people are saying you should recognize what the financial impact is going to be tomorrow. Having said that, we recognize that at the end of the day, where it's at, one of the reasons we're here today is to talk about how the $300 million is used in terms of dealing with that.

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I have an overhead here that's not in your package, and I apologize for that, but I want to pursue it with you. It demonstrates the impact. This is my farm in 1993-94. I was hailed out in 1994-95, so I couldn't use it. I see some people in the crowd who can attest to that.

In 1993-94 I grew 45 bushels of Canada prairie spring wheat on my farm. That's about 1.25 tonnes to the acre of product. That year it was about $2.75 a bushel. In fact, I think the final payment was about $2.80, but I was using $2.75 when I did this slide. I just dug this out of my briefcase with my time book. It grossed me $125 an acre on my farm.

I spent about $90 out of my pocket for the variable costs. This is my fuel, my fertilizer, my chemicals, my GRIP premium, and repairs. I had about $45 invested in fixed costs and that included my labour. I'm kind of touchy about the fact that I think that's a fixed cost like my grocery bill, which meant that I lost about $10 an acre on my wheat. GRIP paid me $10, and I netted zero.

This wheat was shipped to Vancouver. I didn't make that choice; the Wheat Board did. In reality, the WGTA that year paid $26 a tonne to move that product, times 1.25 tonnes to the acre, which is $33 an acre.

The Wheat Board pool actually subsidized me because they paid the difference between the producer's freight to Thunder Bay, versus going to Vancouver. The Wheat Board pool actually contributed about $11 an acre to me by paying that difference in freight, but a part of that was mine so I just ratcheted it back to about $8, which came from somebody else.

Somebody subsidized every acre of wheat I grew on my farm that year by $41 a acre, which encouraged me to spend $90 of my own money and have $45 invested in a fixed cost, which netted me zero at the end of the day.

We're not here debating whether the change in WGTA was possibly good or bad. We're saying we're spending this money and is there a better way? The decision was yes. How do we live with that?

I have very little ability at the end of the day to absorb this $41 an acre, and that's the point. If we take WGTA away and change pooling, as a producer in Manitoba, I have very little ability to absorb that $41 out of my net.

These are Statistics Canada's numbers for 1993, the same year for the numbers I just showed you. If you look at Manitoba as a whole, for the grain producers in Manitoba, which is this first column here, you see the net from the market return is about $6,000. That's the average farmer in Manitoba. That's his return from net farm income. This centre portion here is the government subsidies, which include the WGTA. If they go away, the Manitoba farmer on average has little ability to absorb that $41. These are Statistics Canada's statistics.

What are we looking for? We went to the Wheat Board and showed them these numbers, and we made these presentations to everybody. We told the Canadian Wheat Board when we were there that we do not have the ability in Manitoba to absorb that $24 an acre impact on our Wheat Board grains.

We said if we're going to reform pooling, if we're going to reform WGTA, Manitoba will probably have to ask for a portion of the $300 million to be used to help us make those adjustments, to move us from where we are to where we're at. It doesn't always have to be money. We can have some policy and change times where if Manitoba's regional comparative advantage to the markets they can deliver to are recognized in a new pooling proposal, that will offset the requirement for some government dollars. That's part of what we were asking the Wheat Board to do. In the 1995 Wheat Board proposal, which has some aspects of the National Grains Bureau proposal in it, they've done partially that.

Some of the things we have a concern with on the Canadian Wheat Board proposal of 1995 are first of all shown in the centre line.

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Coming back to that triangle about how we ask the producer in Manitoba and how we convince our banker, do we convince our banker that the $30 is right? Do we convince him that the $40 is right?

The first question the bank is going to ask is how quick we think, if it is $40, we're going to be there. We're saying we don't know. We're lobbying governments to tell us, to be honest with us, to show us how we move from where this cost is to where this cost is going to be, so that we can convince our credit institutions when we recapitalize how we do that.

We have to know how much assistance is going to be available, either from dollars from the $300 million or from policy in kind that will let us adjust to there. Those are the kinds of questions that we need answered in Manitoba. It's why we support changing pooling at the same time with WGTA. If I just changed WGTA, we're back here, and we have no idea of how we're going to reform pooling and where we wind up.

We believe there are some huge opportunities in Manitoba to recapitalize and to do things differently. As we receive our portion of the $1.6 billion - $256 million - this fall, we're going to use that money to recapitalize our industry. We need to have the clear signals so that we can make those investments correctly.

I know we're supposed to be talking about WGTA, Mr. Chairman, but the other concern we have about not reforming pooling immediately is that we see pooling as an integral part of the total transportation reform. We are very nervous about the piece of legislation that went through the Alberta House not long ago asking for a referendum on the Canadian Wheat Board and remaining within the Canadian Wheat Board. I shouldn't say ``remaining'', but I mean remaining within the Canadian Wheat Board as it exists today, when we don't know what that question will be.

Today, currently, the pooling is really one of the issues in Alberta, and has been for quite some time. The fact that we asked the Alberta producer to contribute $6 off every time he delivers to help remove the cost of our product down the seaway is a real concern.

Yesterday the producer in Red Deer or Calgary received $13 a tonne, and if he produced 2 tonnes of barley at Red Deer, for example, he received $26 as an indirect benefit from the WGTA. As part of the overall transportation policy, I subtracted $12 from him, at $6 a tonne, but he was still a net beneficiary out of the total policy of about $14 an acre at the end of the day. Although he didn't like it, it was tough to object without reforming both policies.

What if you simply reform WGTA, go back to the Alberta farmer and say you won't continue to subtract $12 from him, and then at the same time ask him if he thinks we should remain in the Canadian Wheat Board? We're nervous about that because we strongly support the Canadian Wheat Board institution as a marketing tool in Manitoba. We would hate to see this cost still borne by the Alberta farmer at the same time we're asking him if he wants to do this again. I think that's another reason why perhaps the reforming of pooling at the same time is a good position.

That's what the position of pretty nearly all the Manitoba elected farm groups have taken, that we should reform them both at once.

We can't take the adjustment immediately from $20 to $40. We're asking that, first of all, if we adopt the Canadian Wheat Board proposal of $95, that we have a phasing in, that we use some of those moneys to help us adjust from here to here. All we want is a plan to tell us how we're going to move, how we're going to be adjusted, and the policy and time changes we can make that will let us do that ourselves without asking for government assistance. We need the plan, and indeed we need to know at the end of the day what kind of compensation we're going to be making.

I think it's very important that if we're going to make a policy change from what was announced on February 27 to the new pooling proposal, we talk about how we phase that down over perhaps the next three years. Most Manitoba farmers are in the field today and they will be expecting probably full compensation in year one. I think that is what our policy is.

One more problem that we have with the current Canadian Wheat Board 1995 proposal is the fact that the CN adjustment used to pay for the extra cost of moving product into Prince Rupert. Marlene touched on this. In the new catchment area that's been designed by the Canadian Wheat Board, there is no catchment area for Prince Rupert designed as such. This means that the additional $23 million approximate cost will now be picked up out of the Canadian Wheat Board pool. As we change pooling and reform pooling so that each person has to be basically responsible for his own freight basis, over time there will have to be some recognition of that catchment area to Prince Rupert.

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It's probably not an issue in the coming year, because there's still going to be a portion, and this portion here - these little triangles at the top, the difference between Sintaluta and Brandon and this triangle here - will still be picked up out of the Canadian Wheat Board pool too. The Alberta farmer and the western Saskatchewan farmer will be asked to contribute to the pool to pay for this portion of the box. The $23 million that used to be picked up out of the WGTA for the CN adjustment - and that's the cost of the extra haul to Prince Rupert - will indeed be picked up by the Wheat Board pool. There will be some offsets there, but, in the long term, we have to talk about how we move to what the real costs are.

[Translation]

Mr. Chrétien: I have a bit of a problem and I'm a little uncomfortable. I must ask for the indulgence of our two witnesses, who took the time to come all the way from Manitoba. It is very interesting, but I must leave you. Fortunately one of my colleagues of the Reform Party will stay. I have to attend a training session about Bill C-86. I apologize, Mr. Chairman.

[English]

The Chairman: Thanks, Jean-Guy.

Mr. MacAuley: Thank you very much for the question.

The Chairman: Les, are there any other comments you want to make before we go to questions?

Mr. Jacobson: I think that's basically a very shortened presentation of what we've been saying out in the country and the kinds of things we've been asking our producers to do. When we present it to any of the groups out there, we ask them what their reaction to it is and if any of the logic is wrong. For the majority - practically 100% of the people out there - once they understand what we're saying, they think it is a logical way of making this presentation. I guess we'd now like to answer some questions.

Mr. Hoeppner (Lisgar - Marquette): Les, we had Mr. Hehn before us yesterday, and we got talking about the Churchill area. He projects we will ship only about 260,000 tonnes through that area. You know as well as I do we have to increase that tonnage to make that thing viable. Are you looking into this gateway north issue or trying to promote trade through that area? We have been given some testimony that there are indications we could have two-way trade if there were some initiative taken. Have you done any study on it or any thinking about it?

Mr. Jacobson: Our position on Churchill is that it's a viable economic port and that it should indeed be used. As far as research is concerned, we're sadly lacking in the ability to have a research department in there. Maybe Owen would comment.

Mr. MacAuley: The comment I would have is that we held a meeting recently in Swan River and one in Hamiota, and we invited the Hudson Bay Route Association to attend our meeting and make its presentation and try to make our members aware of what the possibilities in Churchill are. Our own capability in terms of research work is very limited.

Mr. Hoeppner: The reason I'm asking is that I kind of kept track of Churchill last summer. I wanted to have a good opinion on it when we had to make that decision as a party. I found out we shipped 290,000 tonnes last year, but synchronization of grain getting there is unbelievably poor. We had ships waiting there for two to three weeks to pick up grain, and they tell us there's no incentive to move grain to there. I can see why shipping companies wouldn't want to take ships if there's demurrage to that extent out there. That is something I think we as Manitobans have to start looking at and pushing, because the Wheat Board is not that enthusiastic about shipping through Churchill.

The Chairman: Any comments?

Mr. Jacobson: If there's an economic reality of taking it through Churchill, we're very supportive of doing that, but I think we take our concerns about the amount of grain that's going through there and the fact that the other two ports are where they're at seriously.

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We have a system now that - We've seen the numbers up there - where our bottom line is today - and we have no other ability to have an increased cost system. What we need is a decrease in the system so we'll be exporting grain into the future.

Mrs. Cowling: I first of all want to thank both of you for coming in and making a very good presentation on behalf of Manitoba. I have said from time to time that the massive changes we're making in agriculture have generally been well received in the farm community.

If I might just quote from the Manitoba Focus, it says: ``There's life after Crow croaks says cattle rancher Harry Enns''. Harry Enns is the Minister of Agriculture in the province of Manitoba, and he says the death sentence imposed on the Crow rate is a blessing in disguise for the provincial economy. He goes on to say that the Crow rate's disappearance creates exciting new opportunities for Manitoba's agricultural industry to diversify and that this will rejuvenate the rural economy of Manitoba, as it will lead to an added value approach to farming and development of job-intensive processing industries. I think there is an opportunity for those of us in Manitoba, and I'm more than pleased the Manitoba provincial agricultural minister recognizes that and is looking forward to the incentives there.

I have some questions with respect to the National Transportation Agency provisions. Under a deregulated regime, how much freedom does your organization feel railways should have? Should there be a system that is regulated?

Mr. MacAuley: We have some genuine concerns about moving from the WGTA rate-saving mechanism to the NTA system.

It is known that rates are set at the railway's variable cost, plus 20% return for the fixed cost side of it. With that we end up with a rate in Manitoba of, at the highest, $40.

If we look south of the border where deregulation is, the cost out of Minot for a single car movement is about $65 Canadian in the study that was recently done by Andrew Elliott for the federal government. If you look within Canada and you look at the movement of products like potash, you have variable cost plus 44% return for fixed; sulphur, I think, is plus 78% in the last numbers I saw.

We would be afraid at the end of the day that, if we're looking at moving into a very competitive nature and we were to challenge the rate being charged us, if you want to go back and do a comparison with your neighbour, whether it be to the south on a competitive U.S. line or within Canada based on movement of other products, we probably would see only an upward pressure on our rates, Marlene. Given the ability of especially western Canadian farmers to absorb this impact for now and into the near future, I would be very nervous about allowing wide open rates.

On the other hand - and this is not in defence of the railway so much as in defence of the reality - we cannot force the railways to get into a situation in which they are expected to move grains at a loss or at such a level that it is a detriment to the development of their industry. We went through that in the 1960s. When we did that in the 1960s, we saw the railways simply quit investing in the infrastructure for the movement of grain.

We've seen rail-line abandonment, and we've seen the federal government, the provincial government, and the Wheat Board buy all the railway cars, so I'm a strong believer that we probably need some watchdog - perhaps by regulation, which may be the only way to enforce it. I think there has to be that balance for the reality of our industry into the future. We can't force them to suffer a loss, but, at the same time, I don't think we can compete with those other sectors of our economy right now that are in a better position to pay than we are.

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Mrs. Cowling: Just as a follow-up, Mr. Chairman, do you think the system should be industry-driven or shipper-driven?

My next question is about car allocation. We talked about this yesterday with the Canadian Wheat Board people who were here. Who do you think should own the cars? That's two questions.

Mr. MacAuley: On the first question, Marlene, we do not have any firm standing policy. The transportation committee has met several times to talk about car allocation. There have been thought processes ranging from the idea that we should leave them alone to the idea that maybe we should be accepting a bid system on a portion of the cars to allow for the development of that secondary industry that may have to be developed in Manitoba. Frankly, we have not come to a policy position. The debate is ongoing in Keystone, and I expect, maybe at the next general council meeting, we could have it decided and we could let you know immediately.

On the question of car ownership, we've been led to believe, with the studies we've read, that the loss of the car ownership at this time would immediately add another $5 to the rate. We're facing an average rate of, say, $23 in western Canada; it would add about $5 more to that rate. Considering the cars are currently owned by the Wheat Board - owned within the system - we believe perhaps the cars should maintain the current ownership at least for the time being.

Mrs. Cowling: Should it be industry-driven? That was the other question.

Mr. MacAuley: Do you mean the whole car allocation system, or the whole system of unravelling? I think if by industry you mean the marketplace should have some rationale in the driving of it - again, Keystone is struggling with this in its own policy position today - there is probably a sentiment that it should be industry-driven but should include producers. We've been in a situation at times when industry has perhaps not always considered producers as one of the major players.

The Chairman: Allow me to interrupt, Owen. To be a little more specific, the question relates more to shipper-driven.

Mr. MacAuley: Well, I think it should be. Again, as I go to the record, we don't have any standing policy. We're looking at that. That's probably the right answer.

Mr. Collins (Souris - Moose Mountain): It's certainly a pleasure to have you gentlemen here. I heard some statements today - I'm not sure my friend opposite is from the same province these gentlemen are from. They must be getting some different information. They made some pretty profound statements, like they strongly support the Canadian Wheat Board. I sat in many meetings where I thought all Manitobans were opposed, so I'm glad you clarified that for me. It is a delight, I must say.

I want to commend you for the presentation you've made. I think the points you've taken are certainly very valid in terms of - My riding borders right on Sintaluta as you go to the Manitoba border. I think people have to put it in the proper context of what is going to be the impact once the decisions are made. I think you're right on target when you say let's know all the factors. If we do half of it now and half later, then where are we going to be?

Having said that, I want to ask whether you could just think for a moment and expand on this statement you made: There are some huge opportunities to recapitalize. How do you see those opportunities coming about for you people in Manitoba and parts of southeast Saskatchewan?

Mr. MacAuley: For the record, I actually farm land in your riding; I farm at Moosomin. I live in Marlene's riding, and I farm some land in your riding.

We've spoken to over 2,000 farmers - not myself, but our group of people who have done these presentations - and we always try to end the meeting by saying that, over time, history has always taught us that change usually, if you understand the change you're coming to, results in being more profitable in the end. When we look in southwestern Manitoba or southeastern Saskatchewan - the eastern side of Saskatchewan - obviously there's going to be a move, if we look at the regime in terms of adopting the 1995 Wheat Board proposal, what malt and barley means, what durum means, what even high protein wheats mean in terms of the deduction basis off the regional comparative advantage we have to those markets.

.1200

On the other hand, it also comes to mean that we have to be a much more diversified economy. It means we're probably going to have to be more feeding intensive.

I know in the Reston area, which is just over the border from your area, they're looking at potato production contracts. I think there's probably some potential, especially when you get down in the Weyburn country, for a lot of special crops, if they can find enough water to store in that part of the world.

I think there are probably a lot of opportunities in livestock. At one time there used to be a caption on the Moosomin paper in your riding that said there were more livestock per square section there than anywhere in North America.

We've tended to lose that focus because of the signal the government left us, that we were the cheapest place in Canada, if you like, to grow exportable grains. That may not be fair, but I can't turn my whole operation upside down from what was left here to there, and that's the recapitalization and the time to do it.

Mr. Jacobson: With the $1.6 billion being paid out probably in the early part of 1996, there are only a couple of times in a producer's career when he does recapitalize on his farms. I think the point we're trying to make is that the right signals are in place so that the recapitalization will happen in a proper manner. So you know what the realities are going to be, so you don't buy a John Deere combine or you don't buy the cow...depending on what the freight rates are going to be and what you want to do, so that you can make those choices intelligently and get on with your life.

On the eastern side of that Sintaluta line, it's a fuzzy number yet and we don't know how long it's going to take to get there. On the western side of that line, you know exactly where you're at. You can go to your banker and say, this is what my freight rates are going to be into the future, and we can negotiate on this. The banker is very happy to lend you on those kinds of scenarios. On the eastern side, what does he want to do? Will he make those investments or won't he? I think that's part of the answer.

I was very happy to hear your comments on the fact that we need to know so that our producers have a real future in agriculture.

Mr. Collins: I would like to know, first of all, what your thoughts are on running rights for CN, CP and short line. Secondly, how do you see this catchment area if we move to the south? Do you see yourself falling into that kind of a southern catchment area along with this business of running rights on rail lines?

Mr. MacAuley: I'll answer. Again, I sit on the transportation policy, and one of the things we're right in the middle of talking about is how we'll deal with the railways in terms of this total transportation reforming. We don't have any policy that we could quote for the record in terms of this. I would certainly be willing to talk to you about some of the possibilities of that.

The catchment areas, as the Wheat Board proposed to us, would be redefined each year based on the future sales.

The one difficulty we talked a lot to our producers about is how real it is in the long term that the second largest exporter of grain is going to export to the largest exporter of grain in the world. I think those catchment areas will probably be defined by the shortfall of quality product in the markets you're delivering to. I think there will always be a spatial movement to the south, towards the population, so that we'll always be filling in behind this.

I believe there's a long-term potential market, as do all of the Keystone members we talked to, in a niche basis for the top quality products we deliver there, but in the long term we're probably not going to be producing a lot of low quality grains to ship to the largest exporter in the world. Those catchment areas will probably shrink and expand as market conditions vary.

The Chairman: I'll come to you in a moment, Jake. I just have a couple of questions to follow up on.

I just want to point out that I'm really impressed with your presentation, because it lays out the facts. One of the purposes of this committee is to try to lay out the facts as we see them - the good news, the bad news. If you're going to be hit with a price shock in terms of extra deducted to freight in Winnipeg, then let's have it on the table, let's not put a political spin on it so that people can make their appropriate choices based on that.

.1205

In terms of your own case, Owen - and I assume it's the same for most farmers in Manitoba - you've very little ability to absorb that extra cost. I think that's true when you look at the bottom net. What do you do from your own perspective? What are farmers going to do when they're hit with this price jack? They're practically in a loss position as a result of these changes.

What should be expected? What we want to do at the end of the day is outline to the government a package of what the Government of Canada can do to assist in terms of whether it's movement to diversification or whatever. What should be happening from the government's side, beyond what's happening at the moment, to lessen the impact on producers and to move us down the road to a profitable bottom line? We can't expect farmers out there to produce at a loss, whatever they're producing.

Mr. Jacobson: Quite frankly, they'll just cease to produce those products if they're going to wind up with a negative margin. It just won't happen. If there are going to be grains shipped to export position into the future, what we have to recognize is that basically all the players have to be an integral part of that system and not take any costs out of there that are going to create extra costs into the system, but actually in effect get the costs down so that producers are going to be able to utilize the system.

If you don't have producers growing any export grain, then there won't be a need for the rest of the system to be in place. I think once we find out that's part of the case, then the whole system has to have some efficiencies put in it and they have to translate back so that there's a bottom line.

The Chairman: Before you come in, Owen, I would just like to follow up on that point.

The minister and we are strongly supportive of moving to an export of $23 billion, which is a substantial increase in export. You're insinuating or almost suggesting that with some of these changes these people will not be in the export business. What's that going to do to the government's bottom line of wanting to hit $23 billion?

Mr. Jacobson: I think we may look at putting the value-added spin onto some of our products. In Manitoba that's where a lot of the optimism that Marlene Cowling was referring to is. The livestock industry, for one example, might be an increase and a bright light, if you will, for the agricultural economy in western Canada. So instead of exporting raw material, what we're going to be doing is putting more value added on it and reaching a lot more easily the government goal of $20 billion export.

Mr. MacAuley: I guess part of what Les is coming to is if you look at the total cost from Manitoba as $40 being from Portage La Prairie...we talked to all of the players in the seaway, from the grain companies to the carriers to the unions, and basically identified some numbers for them in that system.

If you look at the property taxes charged by the City of Thunder Bay being $2.20 a tonne last year, if you look on an average farm of 1,000 acres, if he produces 1,000 tonnes he contributes $2,200 in property taxes to the City of Thunder Bay. They recognize that there are some adjustments.

If you look at the elevator tariff charges for moving malting barley in Manitoba, it's $12 per tonne. If you take 1.75 tonnes per acres, that's $21 an acre they charge me to put my grain in their elevator and put it in the car. If you look at other things like the cost of operating the locks and the terminals, they're not quite on a cost-recovery basis, but it converts to almost $5 per tonne for every product moved down the seaway.

.1210

There's a whole series of efficiencies that can be gained in the system that would lower that impact in Manitoba, that has to be picked up and has to be recognized.

Even coming back to the unions, the wages paid and the contracts the unions have on the seaway, and the people who move grain, as long I received that $41, or the average Manitoba farmer received that $24 per tonne as a subsidy, and if some of it flowed through and was captured by other people - it's like the producer in Alberta with the deductions from the Wheat Board versus the WGTA - as long as there was a net benefit to everybody, nobody minded sharing that with everybody else. If everybody was better off at the end of the day, it was good.

The difficulty we have in the system today is that if I no longer receive the subsidy, it can no longer flow through me to service all those people who depended on it before. There is much incentive for all the other people in the industry to recognize that this cost has to be absorbed, and that's what we're talking about, the market absorption of $12. And if some of that can be shared, we probably have a future in exporting grains. But only if some of those costs can be picked up within the system and the efficiencies driven in the system to continue exporting grains.

The future for the $23 billion, I think, is basically coming from the development of more high-value, low-volume crops and from value-added added to what we do produce. I think clearly that's where the tremendous growth that was being projected will come from.

The WGTA will force part of that, because you'll have serious production changes. I think you will no longer see Canada prairie spring wheats as such; not Canada prairie spring wheat exclusively, but those high-volume, low-value crops that have been grown in areas where transportation costs will probably dictate that they cannot afford to be grown. That's what Les was talking about. But you will see the development of low-volume, high-value crops where they can afford to pay that kind of freight.

Mr. Hoeppner: Just for the record, Mr. Collins stated this member was against the Wheat Board, and that is not the case.

I will tell you, gentlemen, very honestly that if we don't bring costs down in the whole grain handling and transportation system, we're doomed. When we're paying 20 times the property taxes at Thunder Bay compared to Duluth, 5 and 6 times at Vancouver compared to Seattle, efficiencies have to be built in. It bothers me when I see politics starting to play into this issue.

We had the NTA recommend no increase in pilotage on the St. Lawrence Seaway. The minister overruled that by Order in Council and gave them another increase of 8.9%. As farmers, we are sitting back and absorbing that. Politicians will have to start realizing that if we don't bring our costs down we're going to be out of business. Farm groups like you have to take that challenge, because if you don't, we're dead.

Mr. MacAuley: May I respond to that? For the record, that is exactly the comment.... It's not even the whole political system; it's the recognition by all those players in the industry that if we can't share these costs and if these costs can't be absorbed, then I'm simply going to go home to my farm, and every Manitoba producer will go home to his farm, and he's going to make some adjustments, saying he can't afford to use this system. The minute he quits using the system, the reality of the change is going to be bigger than asking how we accommodate the situation today, because the minute I quit growing grain for export -

Mr. Hoeppner: Thunder Bay is dead.

Mr. MacAuley: And the seaway. Dead is a bad word.

Mr. Hoeppner: Yes, I know. Those are the facts. They're there.

The Chairman: On that point, though, this committee, and I don't know about anybody else in the government, is not getting the specifics. Jake's point is valid in terms of pilotage fees and other costs, but we're not getting the specifics. At least, I don't see them. Maybe I'm blind. I don't see them, where others in the system are being forced to move to efficiencies, as is the farm community. What I'm hearing from Nick Mulder, Deputy Minister of Transport, and others is the ``mights'', the ``mays'' and the ``we hope this will happen''. Even yourself, Owen, you're saying high-value, low-volume crops. That sounds good, but has anybody produced any market research anywhere to show that it's possible?

.1215

As chair of this committee, I don't mind admitting I'm worried about where this thing is going if we don't find a way of ensuring that others within the system are asked to pull up their socks to somewhat the same extent as producers are.

Mr. Jacobson: How do you get that transfer of those efficiencies so that it does come back to the producers, or to an equalization to bring that freight rate down in total? I looked at it as I would in my barn at home. If I have an efficiency and I have to put an extra few pounds onto our hogs just by something that I do inside that barn, I probably don't want to transfer that to my feed company because I've done an efficiency in my barn. How are we going to transfer from those other entities so it does actually reflect a lower cost in total?

The Chairman: Those are some of the things we need answers to. I think we have to get down to specifics here in terms of recommendations from the farm community on what's required to move us. We're all ears. We're willing to do what we can to see that efficiencies are passed on to the producer level. As an eastern Canadian from Prince Edward Island, I, at the same time, don't want to see myself forced out of business in the livestock industry because Jake now has cheap grain to feed what will eventually be cheap beef. There are problems there.

Mr. Hoeppner: May I interrupt?

The Chairman: Yes.

Mr. Hoeppner: I have to leave. I have to get to the House, so I would like to thank you gentlemen for coming.

The Chairman: Thank you, Jake.

Mr. Hoeppner: If you give me the last comments that are made, I can talk to you later.

The Chairman: Yes.

Those points I want to raise. So I guess I'm suggesting to Keystone Producers that if you have specifics in the future, and when you do determine a policy on the transportation question that was raised on your transportation policy, perhaps you would forward it to us.

Laying it on the table, we need the specifics of what needs to be done, or at the end of the day the railways are going to be in the driver's seat and you're going to be listening to what they say.

Mr. MacAuley: I guess that was the point. We've started to make those presentations to the other people in the community with us in terms of delivering grain from my farm to the port. That was quoting off overheads that we made in the presentation. This is in regard to the costs of loading the product in the country, to the cost of the taxes being charged, to the cost of the piloting fees, to the whole system, even the cost of the average wages paid to people involved in the grain sector and the railway sector versus other competitive modes of industry. We've talked to unions about that. Those are the kinds of things. I'm not sure governments can impose regulation to force that. I think it has to be a recognition of the fact that if I change, everybody behind me is going to be forced to change.

I'm not expecting them to absorb all of this cost, but my farm and the numbers from Manitoba from Stats Canada simply say that the Manitoba grain producer, if we're going to continue to ship grain, is not able to absorb all those costs. We will have to adjust before we come to a point where we're unable to continue.

The Chairman: Marlene, we have to move. One quick question.

Mrs. Cowling: Just a very small question.

Of the $300 million for the adjustment of the pooling costs, do you have a concrete figure from a Manitoba perspective, so that you would feel those people in Manitoba are being treated fairly? Do you have a number that you...?

Mr. MacAuley: We have nothing, basically, that we could say was generated by documented research in that sense. If you look at the adjustment that will be required and the fact that Manitoba last year, and on average in the last few years, has received about $48 million from the pooling issue, and said that we were going to phase it out over three to five years, making the big adjustment, you have to extrapolate that on a phased-down portion. We don't have any direct policy, but obviously if you add up $48 million phased out even over three years, it would be a minimum of $100 million.

The Chairman: Mr. MacAuley, Mr. Jacobson, thank you very much for your presentation. We'll be talking to you in the future.

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Mr. Jacobson: Thank you very much for this opportunity.

The Chairman: The next witness is the Canadian Dehydrators Association.

We will begin by welcoming Garry Benoit here. He is the executive director of the Canadian Dehydrators Association.

Mr. Collins will be back. I apologize for some of the opposition parties not being here. There is a briefing on Bill C-86, relating to the Canadian Dairy Commission, taking place at this time, so it makes it impossible for some to be here.

Garry, go ahead and introduce your people.

Mr. Garry Benoit (Executive Director, Canadian Dehydrators Association): Thank you, Wayne.

It's a pleasure for us to be here this afternoon. What I would like to do is give the important people with this delegation some air time before I go through our presentation in its entirety.

First, though, I want to ask a couple of questions. Our written submission, I understand, has been circulated and you all have a copy. If not, I have some extras here.

I'd like to point out, for the purposes of the actual walk-through I'm going to do today, that there's a new batch of tables, some of which are contained in the complete written submission, but they're in a different sequence. I believe you all have this. So follow the separate set if you're following the presentation.

I have with me two gentlemen who are very important to our industry. Roger Vansevenandt is president of the Alberta Dehydrators Association. He's on the board of directors of the Canadian Dehydrators Association. He is president of two processing plants in the Legal Barrhead area just north of Edmonton. With that, I would like to have Roger make a few comments before I get into my overview.

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Mr. Roger Vansevenandt (President, Alberta Dehydrators Association): Mr. Chairman, ladies and gentlemen, good afternoon. I thank you people for meeting with us on a topic of crucial importance to me and my colleagues and other people of the Dehydrators Association. My name is Roger Vansevenandt, as has been mentioned, and I am the president.... I am not going to go over that.

Twenty years ago, in 1975, my company produced 5,000 tonnes of dehydrated alfalfa. Presently we produce 14 times the amount, or 70,000 tonnes of various alfalfa products. Garry, maybe you would send the samples around so people will know what I am talking about.

We have 35 full-time employees and 60 seasonal. As I am sure you all can appreciate, I feel great about signing cheques for those people. When you have that many people working for you, it feels good that you can contribute to the well-being of some other human beings. When you consider there are 26 other members of the association, that means a substantial amount of jobs are created. Dehy contributes substantially to the rural economy of western Canada.

The outcome of the GATT agreement left no doubt that big changes were forthcoming to the WGTA. Expecting reform, Legal Alfalfa increased production, introduced efficiencies and new products and we now operate almost year-round. I know many other plant owners took similar steps, but what we had not expected was a total elimination of the WGTA, a western birthright, if there ever was one. The tough decision my company faces is an additional $900,000 cost and this cannot be absorbed by our company.

The announcement that the federal government had established a $300 million transitional fund was somewhat reassuring. However, decisions within government have to be made in the very near future in order for the fund to be of any real value to the dehy industry. If time drags on, the damage to our industry, an industry the government has helped to grow over the past 20 years, could be irreversible.

I have already seen seeded acreage fall by more than 40% this year in our area. We know that Mr. Goodale told your committee dehy was an area to which he will dedicate some money. Obviously, we appreciate that position. That being said, we have to remove uncertainties now so we can deal with the banks and with the farmers in order to have adequate seeded acres in the future.

As a businessman and an employer, I do not want to lose ground after so much work and progress has been made to nurture the industry. Knowing the breakdown of the transitional funds would certainly help enormously.

Thank you, Mr. Chairman.

The Chairman: Thank you, Mr. Vansevenandt.

Can we go to your other witnesses and then we will take questions?

Mr. Benoit: Allan Lindsay is here. He is involved in the industry in two locations, in Ontario as well as in southern Alberta. Allan has been a very important and involved person for many years as the dehy industry has grown and developed. He is on the board of Canadian Dehydrators Association and involved in the Eastern Canada Alfalfa Meal Association.

Allan, perhaps you want to give a few words about your operation and any opening comments.

Mr. Allan Lindsay (Owner, Alberta Dehydrating Company; President, Ottawa Valley Grain; former director of Canadian Dehydrators Association): Thank you very much. Our family has been in the alfalfa business since the early 1930s in the Renfrew area. In 1966 we started in western Canada. Our plant is located in southern Alberta on a CPR line that presently gets service once a week.

.1230

Since last October-November we've had a lot of difficulty connecting with the vessels. We sell most of our product FAS Vancouver, and if the railroads or if the system doesn't perform at any point along the line, then we face vessel demurrage, and currently the group I work with is facing somewhere in the middle to high six figures for vessel demurrage.

This isn't a risk we can cover because we load and reload on our once-a-week line or we move north or south to get to other lines. If the railroads don't make it, we can't meet our terms of loading. At the present time we are selling product that is worth about $88 a tonne at our plant - $88 to $120, whether it is sun-cured or dehy.

On August 1 we face an additional $15-a-tonne freight cost from the average plant to the coast, and demurrage is going to be assessed, which probably will cost in the order of $2 or $3. Then, of course, we are facing problems on car shortages and trying to make sales offshore without really knowing how many cars we can get to get the product to the coast. We know what we have in inventory, we know what the plants can put out, but if we can't get the cars, we are in a difficult position.

We've seen a drop in the credibility of our customers, particularly in the Pacific Rim. I think different plants will have to have different ways of meeting the problems. In our case, we have some very definite thoughts and we need to address them fairly quickly, because you can see this is a tremendous reduction in price and it cannot all be passed on, by any means, I don't think, to our growers of alfalfa.

Mr. Benoit: We have a very condensed version that shouldn't take more than ten minutes for sure.

You each have a deck of these separate slides, if you want to follow through on those.

Thank you, Roger and Allan.

I have circulated some samples of our products, and if you have any questions on those, these gentlemen can certainly answer the questions.

The first table simply shows the alfalfa processing regions in Canada, and we're talking western Canada in this situation. The western industry is mainly in Saskatchewan and Alberta, and at present the association represents 26 plants, which produce more than 90% of Canada's processed alfalfa. Production is, as I say, concentrated in western Canada. Alberta and Saskatchewan are the two key provinces, but there are also plants in Manitoba, Ontario and Quebec that are members of our association.

As our second table shows, production for the current crop year is projected at 832,000 tonnes, almost double our output ten years ago. We have had substantial growth, and you can go through province by province. The pellets are listed. Alberta, Saskatchewan, B.C. and Manitoba are grouped because of the limited number of plants and quantities, and eastern Canada is grouped into one batch.

Lower on the page you will see cubes have grown substantially from 1984-85 from 65,000 to 258,000 tonnes. Cubes initially were almost mainly in Alberta, so in collecting the statistics they chose not to segregate them by province. But at this point in time there are also some cubes produced in Saskatchewan, Manitoba and Ontario.

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The third table shows that in 1994 exports totalled 650,000 tonnes with a value of more than $100 million, so we are a substantial value-added processing export industry.

Mr. Chairman, we are here, as I say, as a value-added success story of the WGTA. We have enjoyed steady growth and exports have doubled in tonnage and in value over the last decade.

The next table shows that we were the only beneficiary to get the WGTA payments on processed products and not on the raw material that goes into processing. This table comes out of the producer payment panel work and it is actually the only time that I am aware of that the NTA tabulated the actual dollars being spent on each item shipped under the WGTA. You will see that for alfalfa dehydrated, in 1992-93, the figure was $14.1 million, which is the largest single processed product moved under the WGTA.

I think it is really important to focus on the uniqueness that is important to our industry. We're the only item on that processed product, as I mentioned, for which the raw material is not being moved out. Therefore, for others on that list, they are not as concerned about the change because the whole theory was that by removing the discrimination against subsidizing the export of the raw material, the processing plants would get a benefit. This is not going to work for us because the raw material never was shipped under WGTA.

Our plants in western Canada add value estimated at $90 million per year. The rural economy in areas where our plants are located benefit from job creation and spin-off economic activity. We provide about 1,200 full- and part-time jobs. Millions of dollars are pumped into communities by way of servicing and maintenance work. An estimated $34 million is generated in retail sales.

Our plants have not enjoyed large profits. There has already been considerable rationalization as well as the adaptation that Roger mentioned that occurred to prepare for the future, and today our industry is in crisis. We are faced with a range of uncertainties arising from federal policy changes. By far the most critical one, of course, is the cancellation of the Western Grain Transportation Act.

Our industry is transportation sensitive, and this is partly due to the price relationships. The transportation benefit under the present system is nearly 15% of the value of our products, so it is a very substantial hit all at one time.

Many of our American competitors are much closer to ports than our prairie plants. Many benefit from the U.S.-subsidized irrigation, and other American operations use the government-financed Mississippi and other inland waterways to move their products. For a decade, to deal with the transportation disadvantage we have benefited from the WGTA. Now that will be gone on August 1, 1995.

The producer payment panel concluded that removal of the WGTA would have a devastating impact on our plants. For example, in 1989 a net income per tonne of pellets of $11.63 would be transformed into a loss of $10.74 per tonne. For cubes, an income of $11.71 would be turned into a loss of $10.66. That is mentioned on the next table.

.1240

The producer payment panel used work done by the International Trade Commission. In 1989 the WGTA benefit was $22.37. So things have changed since then. That has been reduced, obviously, and we were receiving a smaller benefit as the years progressed.

I think that tells the story. These were the most up-to-date figures we had from an independent investigation.

These independent estimates are in line with conclusions of detailed work completed by the University of Saskatchewan in 1990. We have some very detailed work available on that.

So while I mentioned these are a few years out of date, the basic factors on which they are calculated have not changed very much. The per-acre WGTA benefit for alfalfa is two to four times that of other crops due to the difference in yield. Therefore, the loss of the WGTA will have a much greater impact on our industry - an industry that has not been supported, for example, like wheat.

On the next table - it's called table 8.1, and again it's out of the producer payment panel work - you'll see the situation where basically the only program we had is the WGTA, whereas wheat, barley, canola have had GRIP, NISA, crop insurance and other programs. So the government contribution per acre to those crops have been substantially higher than for our industry. There are three important producing locations covered in that table.

Despite our best efforts over the years, we have not been eligible for the gross revenue insurance plan, and members in Alberta, a major producing province, are still not eligible for the net income stabilization account. Members in other provinces are eligible for the 1994 crop year. In Saskatchewan, another major producing province, second to Alberta, they are eligible in NISA, but only on terms less favourable than the other crops formerly covered under GRIP. So we have all these discriminations that have worked against us over the years.

Our detailed submission refers to the University of Saskatchewan study. It concluded that an acreage-based buy-out scenario would be bad news for us. The study pointed to the eventual closure of several plants, reduced capital investment and a host of problems that would be created by a sudden end to the WGTA.

As Roger said, our plants have been preparing for change through improved efficiency and diversification - that's new products. We note, Mr. Chairman, that the government is offering an adjustment program to facilitate the transition to a more efficient transportation system. The problem for us is not so simple. We are also forced to compete in world markets with other products. Because our exports fill only a small part of market demand, we are a price-taker in the market, forced to follow trends. Canadian dehy prices have always been influenced by the price of U.S. corn, other feed ingredients, including things such as wheat bran.

.1245

I just want to point out that with the American programs, it's more an indirect effect. For example, if the U.S. uses EEP on wheat flour, it creates a mountain of wheat bran that is then dumped into our markets in Japan. It makes it very difficult for us to get our prices up where they should be. We're constantly facing that sort of global situation.

Allan Lindsay just brought the updated figures to me this morning on what's going on in Europe. In my briefs I've been saying that over a five-year period, the average subsidy on every tonne processed in the European Community has been $125. I can never believe these figures, but I check them over and over. The low point we've been able to find has been $90 for every tonne processed. That pales in comparison to the measly $15- to $17-per-tonne subsidy we were getting, and we lost it all in one fell swoop.

The latest figures show that the European dehy people, with the use of those subsidies, have tripled their industry over the last six or seven years. They've just worked out a new program for the coming year, and Allan calculated that it's $163 a tonne. They're putting limits at 4 million metric tonnes or so of production, so they're capping their subsidy. The number of tonnes that will get the subsidy in the future will not grow, apparently. But that's a very high figure on dehy.

Sun-cured products will be about half of that, which is still approaching $90; it's over $80. Very substantial subsidies are still out there in the world, and here we're being left to try to compete with that.

As I mentioned, the loss of the WGTA is only the most drastic of several negative developments arising out of changing federal transportation policies. Two of our plants in the Tisdale area were on the same light steel rail line designated for immediate abandonment under the recently announced efficiency recommendations.

One plant has moved to a new location that offers secure rail and world connections. The cost has been enormous. A severe set-back to the plant has of course occurred as a result of these huge costs. The other plant remains on the line, but there is no doubt it too faces enormous costs. At present it is attempting to negotiate a solution with CN.

The adjustment program will be critical to these plants, as it will to all of our plants. They will use their share of the adjustment program in any of the ways listed in our next table. The goal - adaptation for survival - will be the same.

The Chairman: Could I interrupt you for a second, Garry?

There's a problem in the House. There's no quorum in the House, so anybody who's on House duty will likely have to go. Jake had to leave.

Go ahead, Garry. Sorry.

Mr. Benoit: If you want to flip on through your tables, the next one is table 1 of EC dried production.

Take, for example, the Spanish situation. When they started getting this enormous subsidy in 1986, when they came into the common market, they were producing only 50,000 tonnes, which is less than what Roger's plant produces. With the use of that subsidy, they built to the point that they're now producing 1.436 million tonnes - nearly double the Canadian production. This is Spain alone. The story prevails throughout Europe. There's been dramatic growth based on huge subsidies there.

Now I'll get into the adjustment program, our share of the $300 million and the kinds of things that our plants would use the funds for to truly make the adjustments that would take them into the future in a way that could make them competitive. Of course we're hoping at the same time that our trade negotiators will be able to start to get some decent reductions in those subsidy programs that are hurting us. The present GATT deal hasn't made very many yards, unfortunately.

.1250

There's a list of the uses for our share of the $300 million. I'll just flip back to the page before that. The share we're expecting out of the $300 million works out to $70.5 million. I'll explain in more detail to you just exactly how we come to that figure. We think it's a modest request.

Something that's crucially important is the next point on that table. Details of the programs must be announced soon, no later than June. It's already creating problems, as Roger mentioned. In order to plan to do these things on the list that have to get done to take advantage of the efficiencies, we have to get started now.

It's just not acceptable to wait and follow Mr. Goodale's schedule, which has announcing those details on the division of the $300 million in possibly January, because the money will not be there until April 1996. You're going to do enormous damage to the Canadian alfalfa processing industry, an industry that can be the best in the world given anywhere near a level playing field.

We have the ingredients to really do a job here. We want to get started on those adjustment measures that are going to keep us alive and help move us into the future. That's absolutely crucial, and we ask that you do anything you can to move the timeframe up, even if the dollars won't be there until April 1996.

We're suggesting that it be a flexible program covering a variety of investments, which are on that other list. We're also suggesting that plants not in operation in 1995 would not be eligible.

The Canadian industry grew in the 1980s, by the foresight and hard work of the industry leaders, such as Roger and Allan and many others; by quality products and new products being developed; and by being able to get some reasonable prices at times prior to the U.S.-European Community trade war. What we're doing here is still being affected by the U.S.-European trade war.

The growth was also due to diligent market development efforts on the part of our marketing companies and the Canadian Dehydrators Association; to the industry moving to larger, more efficient plants; and of course to the stability and assistance we got from the Western Grain Transportation Act.

They did it right in 1984. They put the subsidy on the processed products and not on the raw materials. It was a system that was working well for our industry. There was no reason to dismantle it, other than the government's broad approach. Because it was creating problems in other areas related to value-added, they're changing the whole thing. All we're asking here is that the change be done with care and that we get a fair adjustment package.

I think the rest I'll just leave with you. In the attached notes I've walked through in point form a number of other challenges facing the industry. I'll just leave those with you as part of the package. If you have any questions, we'd be glad to answer them.

The Chairman: Thank you, gentlemen.

Mrs. Cowling: You mentioned you're one of the only processing groups that receives subsidies for moving your product.

Mr. Benoit: The list of all the others is there in the table. We are the only group for which the raw material for processing is not moved on the WGTA.

.1255

Mrs. Cowling: The Reform Party or the third party in the House says that government and politicians should get out of the business of subsidizing farmers. I want to know what your views are on that, whether government should get out of the business of subsidizing farmers or processing plants like yourselves.

As a federal government, we have a vision for agriculture and we think there are some positive moves we can make on behalf of the farm community. I'm wondering what your vision for the future of your industry is, if in fact we move away from a system that is fully subsidized and that is market driven.

Mr. Benoit: I'm sure our industry players would like to see nothing more than governments all over the world getting out of subsidizing agriculture. We certainly endorse that kind of direction. It's only that we can't race miles ahead of our competitors unless we want to shut down an industry that rightfully belongs here in Canada. I think that's the issue.

We have one program that's working for us and you're taking it away completely overnight. We're doing everything the government vision talks about, value-added processing, jobs in rural communities. It's entirely in line with what you're talking about. We would like to see nothing more than getting out of this whole subsidy situation, but you can't be the only country in the world that's doing it, or we can't be as far ahead of what the European Community and the United States are doing as we are. They're not giving up their export subsidies; they're not giving up their domestic subsidies in this GATT round.

Mrs. Cowling: One more question, Mr. Chairman.

What is your view on short-line railroads?

Mr. Vansevenandt: Maybe I can answer since I'm closely involved in that. I would say that short-line railroads have a role to play and I do think there would be some cost savings. I'm not what you would call an expert, but short-line railroads, if run for short distances, whether they be bought by a local contractor or not, I think would be more efficient than tearing it all out and doing the damage on highways that you then have to pay for to repair. I think they have a place. It's been proven. There is one line in Alberta, one line in Saskatchewan that is operating that way. I think the experts would have to do a cost analysis to see how cost effective they are.

Mr. Benoit: My opinion would be perhaps different from Roger's, coming from southern Alberta where there's a well-developed trucking industry. There is and it's growing very quickly. I don't know the exact figures on how quickly it's growing but our experience has been utilizing the largest bulk units you can move with. I think it's quite practical to move 20 to 40 miles to a siding on a big line. But there, most of us have to invest in getting the line built.

In our industry we normally have 2,000-tonne to 4,000-tonne hits, which is about 22 to 35 cars. So you need a pretty good siding. One of the very first things we would do would be to get sidings a little more distant and get to the main line, because in the long pull the railroads have to pay, too. When you start paying demurrage at the rates that are at least proposed, and getting service once a week to try to hit a ship that will charge you demurrage if you're out a few days, it's probably better, in our case, to truck it and get it to a main line where you can get service every day and you can ship out larger numbers of cars at the same time. In our case, we can go clean through to the Burlington Northern, too, a distance of some 120 miles.

Mrs. Cowling: One of the questions I've raised with groups that we meet, with the witnesses.... I'm from Manitoba and we have a dehydrating pellet plant in my riding in Dauphin. We're looking at some massive changes within the system, particularly with the adjustment of the pooling of the seaway costs. One of the things that wasn't picked up with the producer panel payment committee was the cross-subsidization of all those branch lines in northern Alberta and northern Saskatchewan.

.1300

Is it your view that branch lines should be abandoned fairly quickly? You mentioned going to trucking. It's working really well, because a lot of those branch lines will likely have to be abandoned, I would think, in northern Alberta and northern Saskatchewan. What's your view on this?

Mr. Lindsay: I think that, as Roger said, we should get the money up front. We should make the changes quickly because we know August 1 is rolling around very quickly, and if we go through a long, prolonged discussion about abandonment of rail lines, the railroad's costs are going to stay up there.

If the Burlington Northern have the same number of mileage a track as CNR...they have about the same sales, I believe, as the CNR, but their trackage is down considerably, and the cost per running mile is down considerably.

I would personally favour getting some assistance so we can get to the branch lines, do it fairly quickly before this $15 subsidy and demurrage charges kill a number of plants. The most subject plants would be the ones that are a far piece away and are a little smaller.

Mr. Benoit: I would really like to interject. There's one particular Canadian dehy member plant that's about a 50,000-tonne plant located on light steel at Arborfield. They load all of their tanks directly now, just like a canola crushing plant or whatever. The plant is right there on the line. There is currently no trucking. They invested to load directly into cars. I think they're about 19 kilometres from a more main line.

There has to be some way of leaving that piece of track there. Call it a siding. Call it what you want. But if there was only more flexibility...they can slow down, load the cars, take it to 20 kilometre to a more major line and get the job done. I would hate to see ripping up those kinds of lines and causing that plant to incur massive relocation costs - that might not even be a possibility for them - because they're all set up to do that.

Call them what you want, short lines or plant-operated lines or whatever, but if CN runs them, perhaps they're going to be high cost, but if they're run by farmers and by plant operators or whatever just to take the product to the major lines, I think there are ways of having low-cost usage of those lines.

The Chairman: Garry, on this particular 19-mile line, what's the location of that one?

Mr. Benoit: The plant is at Arborfield.

The Chairman: Does the line connect with CN or CP?

Mr. Benoit: It's a CN line up in northeastern Saskatchewan where a very large chunk of our industry is located. I should mention a few years ago there were two alfalfa plants on that line. I mentioned one. It was slated to be abandoned or they were going to lift the prohibition orders in the year 2000.

One plant made the decision to move on to a better line and has incurred the enormous costs I talked about. The other one remained on the line. So that's the situation there.

Mr. Lindsay: There are two plants in the Falher area in northern Alberta on the CNR, and I was discussing with them the other day the fact that they have a line that they can only go 10 miles an hour on, but they do. That's a viable option for the railroads sometimes to move a little more slowly and utilize those lines.

The Chairman: Than to completely shut them down?

Mr. Lindsay: I think so.

Mr. Benoit: I have to mention the very major difference between a farmer loading his truck on the farm. He has to load it anyway. It doesn't make much difference to him whether he drives an extra 20 minutes once he gets that loaded versus products that are now being loaded directly from the processing plant onto the rail line, and the cost that would be incurred if they're required to completely rearrange their set-up by moving their storage somewhere else and trucking a product that should be handled to the minimum amount.

.1305

The Chairman: Sorry, Roger. Go ahead.

Mr. Vansevenandt: When I talked about short lines having a place, I did not specifically think about Legal Alfalfa or the alfalfa industry only. In our area, for instance, we were on light rail, and about 2 years ago the first 10 miles that was on the Athabasca line...and the whole line was light rail. They upgraded the first 10 miles to our plant, which also has some grain elevators. In a 10-mile line there's at least over 100,000 tonnes of private....

From our plant on further to Athabasca, that has been abandoned and taken out...although I don't think there's quite as much light rail in Alberta, to my knowledge, as there is in Saskatchewan or maybe even in Manitoba. When we worked in our area trying to get the heavy rail in, we had some numbers, which are vaguely in my mind, but any time there were 50,000, 60,000, or 70,000 tonnes of a product moved, the financial feasibility or the economics was there. It depends on the amount of tonnage that is there, and they did upgrade our line, but the rest was removed.

The Chairman: I'll come back to you, Marlene. Allan, you mentioned trucking. First of all, is trucking an option, and if so, in what areas and over what maximum distance?

Mr. Lindsay: In Ontario, we're trucking it now as far south into the states...maybe about 350 miles where you can get maybe 40 metric tonnes of payload on and costs run around about $50 Canadian every mile. That's getting further all the time. As the roads get better and the trucks get bigger...we're doing it in a 350-mile radius in the east now, but I think our plant's something like 750 miles from Vancouver. When you get there, I don't know whether the port has the facilities to handle large numbers of trucks moving in. I don't know if it's a good option there.

The Chairman: From my own perspective, it may look nice if you're looking at a map here in Ottawa in terms of trucking to Vancouver, but go up to Peace River and truck down the beaten hill up there or truck through the mountains. It's a little different situation.

Mr. Lindsay: It amazes me, though, the amount of trucking I see into P.E.I. We would send product to P.E.I. from -

The Chairman: We have no other options.

There's another scenario that I don't think we have the ability to look at. It's the whole issue of other infrastructure costs when you move from steel on steel, and the energy efficiencies there and everything that goes with it. When you start moving to bigger and bigger trucks, what we're finding is that our roads are just not standing up. We don't have as good a construction base as you do in other areas of the country, but, just the same, the roads can't stand it, and somebody has to pay for that. We have to find some way of getting an analysis of the cost from the farm gate, whether it's over road, rail or whatever to export position.

.1310

Mr. Vansevenandt: The other thing you have to look at is you have two types of products there, and I don't know whether you have passed them in front of you. You can handle pellets two or three times, but if you have cubes, you had better not handle them more than once. If you were to put them in the truck, reload them and unload them again into a car, I would say you would have a substantial problem in the marketplace. The minute you start running 10% or 15%...they dock you for it or they complain about it.

Some products lend themselves to dual-handling; others don't, especially the cubing. There are larger cubes also. I don't know if there are some samples around.

The Chairman: I've seen them. In fact, I've been through your plant in the Westlock and Barrhead area.

Mrs. Cowling: Were you through the one in Dauphin?

The Chairman: No. I try to avoid Dauphin when I can.

I've got a half dozen questions here before I come back to Marlene.

You talked, Mr. Vansevenandt, about the transitional fund and that we had to remove the uncertainties. Could you elaborate a little bit more on what those uncertainties are?

Mr. Vansevenandt: Number one is that farmers are reluctant to seed because they don't know.... We have a number of people asking how much they are going to get paid for it. Especially in the dehy industry, the farmer gets around $28 or $30 a tonne. There's no room for us to take anything out of his pocket because he won't grow it. In fact, farmers were already looking to have an increase this year because of the high prices on granola.

The other thing is we've already talked to our banker, because as of August 1 the thing is going to be gone and I'm going to be on your doorstep. I'm going to need money, and those guys just don't work overnight, turn the switch on, and say here is some money. I told them we'd need an extra half a million dollars for this part of this production year because from August on we would be paying the full rate. He said to give him some proof that there is going to be a program. We need a certainty there and a knowledge of what it is going to be.

The other part of it is, at the plant level I have put on hold any movement towards spending money on anything because there is no way I can allow them to spend money on equipment or anything. There's the uncertainty of what we're going to get. I won't say if we're going to get it, because it's been mentioned often enough that we are going to be included, but we don't know how much.

There are many things there. We have very good people working for us and they wonder if there's going to be a job left. I'm confident that our industry, with a good sound transitional package, can survive and will survive.

We have employees who say they have offers for jobs. They're certain they're going to be there, so we're sitting there and people are looking over our shoulders. That's why it's important that we know what is really going on.

We talk about the subsidies. I would love to see subsidies removed and be on a level playing field, because I remember the good old days. In the late 1940s and 1950s, I started hog production and was a large producer. Now my boys have to open that all over. It was fantastic. One year the prices would be down to $30 a hog, and the wise person who handled his business properly got into that deep valley, but the year after it was up to $60 a head and you were making money left and right. It was market-responsive, but now with all those subsidies, it's not market-responsive any more.

.1315

The Chairman: You mentioned the seeded acreage has fallen 40%. That's pretty extensive. I'd like to know if maybe Garry could give us, at a future date, the job impact that might have in terms of total economic factors.

As well, I guess it was Allan who talked about not being able to hitch or ship and therefore paying demurrage. What about penalties and sanctions on the railways? Did they take any responsibility?

I think you have to understand, Allan, that there is a move to further deregulate the industry. Should there be penalties and sanctions? Should they have to accept some of the responsibility?

Mr. Lindsay: Of course we're looking at the same question of whether there's recourse to the railroad. If we have to pay demurrage on any kind of equitable basis, then I think the railroads should be tied to some sort of commitment to perform.

I think Garry covers that in his talks on demurrage. We feel we've lost out in demurrage because we don't have a poolable product. It's a product that's differentiated by colour.

The Chairman: On this 19-mile line and with the lifting of the branch-line freeze on abandonment, do you think there's a good enough process set up in terms of whether or not those branch lines can be shut down? I can see how an argument can be made for keeping that 19-mile line open on some basis, but the system has certainly moved away from public input and leaves the greatest authority over shutting it down, it seems to me, with the railways. What are your thoughts on that?

Mr. Vansevenandt: I don't think those people are really qualified to make the big decisions. I'll bring it back to another local scenario regarding how they operate. The right hand doesn't know what the left hand is doing.

I've mentioned that they abandoned the rail beyond our plant. When the crew pulled in, our people noticed they were going to pull up that track, so they went out there and asked ``Why not leave another half a mile of that line?'' We recognized it would be beneficial to us and even to the train crew.

We phoned the engineering department, but it was a different department, and the engineering department said ``No, it's all in the plan. We can't leave that extra half a mile. It's slated for cut.'' So they cut it off.

The next day we had a train come in and bring cars for the pool, for the UGG and for ourselves. They spent two and a half hours juggling cars. The train men said if they'd had half a mile of extra line, they'd have gotten out of there in fifteen or twenty minutes.

So, as I say, if you're going to get the rail lines to make decisions on all those things, one department doesn't know how it fits with this and the whole deal. I think they're a poor....

The Chairman: I wouldn't argue at all with your point.

Mr. Vansevenandt: Okay.

The Chairman: But I think that's the difference. You're looking at it from a local perspective and seeing it on the ground, whereas not everyone looks at it from that perspective.

Mr. Benoit: Arborfield, I'm sure, would have some comments here, because they're on that line. Up until not too long ago they had assurance that it was going to be there until the year 2000. Now the rules have completely changed and obviously they're concerned that the process...it's between them and CN, basically, to work out some sort of an arrangement. They're very concerned that all of a sudden the ground rules have shifted so dramatically that it could pose a very large problem for them.

.1320

To be fair to the railways, surely they can see it's advantageous for them to keep some of the production out there so they've got product to move.

In our situation, if those acres around Arborfield are replaced with canola, they're moving per acre much less - less than half the tonnage. We're a high tonnage product that gets moved. We're 90% export out of western Canada. Plus, on dry land we're moving an average of two tonnes and on irrigation an average of four tonnes per acre. So there's going to be less volume for the railways to move. They're going to be shooting themselves in the foot if they start destroying an industry such as ours.

The Chairman: I recall vividly the president of CN saying at one point that they would like to go as one main line. That may still be their objective, because they're of the belief that those goods will come into that main line somehow. I think industry has to be worried about that kind of a stance.

Will the pooling point change affect your industry in any way? If that pooling point changes this year versus next, will that actually help you? Secondly, are there other policy initiatives beyond the $300 million adjustment that the government should be looking at in terms of your industry as a result of the WGTA change?

A witness: The main aspect on the pooling point is that we do not think government should be waiting on what they're going to do with our industry. Ours was the only crop that didn't get part of the $1.6 billion to start with and, even had we got that, we had all the same reasons for an adjustment program that we're talking about here today. We get very nervous when we hear people in government talking about wanting to make all the decisions concerning the $300 million at one time. I would suggest the pooling issue and the road impacts are not time critical to the extent ours is.

I know there's a big debate on whether they move the pooling point changes up a year or leave them the way they were in the budget. What we don't want is for them to be stalling on carving out our share of the $300 million so we can get on with business and not destroy a good value-added processing industry. So the main implication of whether it has changed or not is not a big deal to us.

The Chairman: Roger, one last comment.

Mr. Vansevenandt: Yes. What year were you up at Legal, Mr. Chairman?

The Chairman: I've been there two or three times. I just forget, but I know I've been there.

Mr. Vansevenandt: You mentioned about other programs. Our plant does a lot of what you call research. We try different deals and last year or the year before we spent a couple of hundred thousand dollars on research, on equipment, and when it came we applied for funding under the research. When it was approved we had people looking at it from the tax department. I would call it little short of harassment; we lost two-thirds of what we thought was a valid claim. It was the way they handled it, because the employees we used, they said you can't use them because they're dead anyway.

A witness: Personally, I can't see that the pooling issue is very important to us. I do think the government has certain initiatives that the minister mentioned this morning we could tie into, particularly the research relating to the use of longer fibre products. I've had a few discussions on that. I think their HACCP program could be expanded to include this ISO. A number of programs were mentioned by Minister Goodale today that our industry could work with.

.1325

Our experience with R and D was maybe a little different from Roger's. We found them fairly helpful, but it takes time. You have to discuss it ahead of time and know the ground rules.

The Chairman: What I'd suggest in that area is if you have any other suggestions, drop them in a note to us and we'll certainly have a look at them.

With that, we are running over time and running behind time at the same time.

I'd like to thank you, gentlemen, for coming. We'll seriously take your points under consideration. Thank you.

This meeting is adjourned.