[Recorded by Electronic Apparatus]
Monday, March 17, 1997
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[English]
The Chairman (Mr. Lyle Vanclief (Prince Edward - Hastings, Lib.)): I welcome everyone here to the meeting today. I'm Lyle Vanclief, chair of the Standing Committee on Agriculture and Agri-food of the House of Commons.
To outline the purpose and the format of the meeting, as you know, we are here to hear and discuss views on Bill C-72, an act to amend the Canadian Wheat Board Act. The committee is travelling through western Canada this week, to hear views in five locations - to hear the views, the contribution that stakeholders in the grain industry in western Canada wish to put forward to the committee as we go through the parliamentary process of reviewing Bill C-72.
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On this trip a number of witnesses will appear before us. It appears at the present time that we will be hearing from somewhere between 45 and 50 groups and between 45 and 50 individuals over the course of the next five days.
The format of the meetings will be that group presentations will be limited to 15 minutes, and I'm going to do all within my power to make sure that it is 15 minutes. I will in some way signal to the presenters when they have about two minutes left. I would suggest to them when they get that signal, if they haven't yet made their point they had better get to it quickly, or they won't have the opportunity to make it. In fairness, we have to do that, because we do have a lot of presentations.
After three or four presentations we are going to have 45 to 60 minutes - as time allows - for the members of Parliament to raise points of clarification and ask questions of the presenters. At that time we will ask, if there have been four presentations, spokespersons for those four groups to be at the table to allow the members to put their questions or comments to them, and then we will move on to the next group of three or four.
When we hear from individuals, the time line for presentations will be five minutes, and we will hear from as many of those as we can before we again break for a period of question or comment.
The first group that was to be before us today have changed where they are going to make their presentation. For those of you have seen the list and the agenda, the United Grain Growers had indicated that they wished to be here in Winnipeg to present, but they have a very busy schedule these days and have asked to be moved to Regina, so we will hear them there tomorrow.
I have not yet seen Mr. Peter Holle from the Prairie Center. He was to be here this morning; I assume that he is still coming.
We do have with us Dr. Daryl Kraft and Ed Tyrchniewicz from the University of Manitoba. Gentlemen, welcome to the committee. We look forward to your comments.
Dr. Daryl Kraft (University of Manitoba): Thank you, Mr. Chairman.
I will be making the brief presentation and then my colleague will be fielding the questions, as I have an engagement shortly, back at the university. I hope that is okay with you.
Our observations on the proposed amendments to the Canadian Wheat Board Act are going to be confined to the administrative structure and the contingency fund.
We endorse the attempt to increase farmer involvement in decision-making, and the improved accountability of the CWB to farmers while at the same time maintaining the critical ties to government.
When farmers as a group have believed that a single agent marketing their wheat or barley is in their best interests, it requires the intervention of government. The CWB is an institution of public policy. As such, the governance requires that the CWB be accountable to both farmers and to government.
The partnership between the Government of Canada and western farmers involves joint financial and operational responsibilities. The financial commitments involve risk-taking. Both the government and farmers are providing a form of equity capital to the CWB. The Government of Canada's guarantee of the initial payment paid to farmers when they deliver their grain to the CWB is a form of equity.
In the past these borrowings have cost the federal government money, when the final sales revenues were below the initial payments. While the shortfall has not been frequent - on one or two occasions sizeable - the losses are not repaid through revenues from sales in subsequent pool accounts. In effect, then, the federal government is putting up some risk capital at the beginning of every year, and bears the shortfall if that happens to occur.
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The credit guarantee is not a loan; it's a form of equity. The federal government also provides export credit guarantees to the Canadian Wheat Board and other financial institutions when an importer is deemed to be a worthy borrower. Once again, this commitment represents a form of risk-taking and equity capital.
Farmers, most years, provide equity capital to the Canadian Wheat Board through accepting partial payment when they deliver their grain to an elevator. The pool of funds represented by the difference between the revenue realized from sales and the initial payments is at risk. The size of the final payment depends on the price volatility in the wheat and barley markets throughout the pooling year, and the costs incurred in merchandising that grain. Farmers bear this risk.
In a private corporation, shareholders who hold the risk-bearing capital require the organization to be accountable to them. The shareholders elect a board of directors to represent their interests and evaluate management's decisions.
Since farmers and the government of Canada bear the risk of the financial decisions of the Canadian Wheat Board, they are entitled to representation on the board of directors. Because of the nature of their respective risk-bearing commitments, they are not readily converted to a common factor such as a share in a corporation.
The exact composition of the members of the board is therefore not easily determined, because in a corporate structure, who is involved with determining the composition of the board normally relates to who has the most shares. It is not readily apparent for the CWB who bears the most risk.
The operational aspects of the CWB involves the government of Canada designating the CWB as a sole agent for the export of wheat and barley. Canadian industrial users of wheat and barley are also obligated to buy from the CWB when purchasing wheat and barley grown in western Canada. Legislatively limiting the choices of prairie farmers as well as Canadian businesses processing wheat and barley obligates the federal government to review how the CWB uses this authority.
Farmers are also directly affected by the administrative procedures invoked by the CWB. The determination of access to sales through quotas and contracts, the valuation of types and grades of wheat and barley, and the dissemination of market information are all critical in the planning and operating of farm business. Therefore the governance of the CWB must be shared between farmers and the Government of Canada.
The Minister of Agriculture already has suggested that the majority of the board of directors be elected farmers. The election of farmer representation could be regionally based, or at large from the designated area. We recommend that the election be from a slate of candidates from the Canadian Wheat Board area, with the top seven to nine of the vote recipients being the successful nominees. If they were designated on a regional basis or district basis, constituency representatives who received the most votes might not provide a representative cross-section of farmers' opinions on how the CWB should operate. Our assumption is that the views and opinions of farmers are geographically independent, and there is a better chance of getting divergent views represented on a board through a slate of candidates than there is through winner-take-all regional elections.
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As for how many of this board should be elected farmers and what the size of the board should be, we have no prior or committed views on whether it should be a fifteen-person board or an eleven-person board. Whether that majority happens to be nine farmers or seven farmers, I think you need some further direction from the other constituencies on that matter.
With respect to the selection of the chairman of the board, we recommend that the minister pick the chairman of the board from the elected representatives and the appointed representatives that the minister designates. The appointed representatives will represent, of course, the government's interest in this corporation in terms of its risk management responsibilities and in terms of its operation.
We further recommend that the president be appointed by and be responsible to the board of directors. In this manner, the accountability for both the operations and financing of that organization is seen to be to the elected rather than to, as the bill currently suggests, those appointed by the minister.
On the issue of the contingency fund, it is recommended that it be a risk-bearing instrument in order to take account of the uncertainty of CWB engagements in cash transactions and risk-bearing forward contracts. Subsequently, it doesn't have the equity base to account for that variability now. We endorse the contingency fund; however, we recognize that as this fund accumulates a risk-bearing residual amount, it will at the same time reduce the risk that the Government of Canada must assume. At some point in time, if the risk that the Government of Canada must assume is substantially less in terms of the financial operations of this organization, that greater responsibility is returned to the farmers, who effectively have accumulated that reserve through the operations of the board.
We also have some suggestions that risk-bearing, with respect to this contingency fund, is a critical aspect in the future operations of the CWB. We also recognize that marketing in the 21st century is going to involve some critical strategic alliances with further processors in the world in the export market. I think consideration should be given to allowing the use of those accumulated contingency reserve funds for the purposes of taking an equity position, or for taking a direct interest in market development on behalf of the Canadian Wheat Board in order to facilitate sales into the world market. I think restricting the contingency fund to just being a buffer equity source is selling short the potential of that fund to facilitate greater revenues or sales for this organization. We would confine these to recommendations of equity participation in exports, not within the domestic side of the industry.
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We therefore endorse the nature of the changes within the bill in terms of increasing both its accountability and the appearance that farmers have greater participation in the evaluation of the organization and in terms of the establishment of risk bearing, which would then allow the organization to be more independent from year to year. The changes would also allow the organization to be seen as an agency of farmers rather than that of the Government of Canada.
Thank you.
The Chairman: Thank you very much for your presentation, Dr. Kraft.
Is Mr. Holle from the Prairie Center in the room? No? It's disappointing that people ask to come forward and aren't able to make it, but maybe he will be along a little later but. For now, though, we will go right to questions and comments from the members.
Mrs. Cowling, and then Mr. Hermanson.
Dr. Kraft, you had said earlier that you had to get back to the campus, and that Mr. Tyrchniewicz was going to answer the questions. Now you may get stuck with answering questions on your own presentation.
Go ahead, Marlene.
Mrs. Marlene Cowling (Dauphin - Swan River, Lib.): Thank you, Mr. Chairman, and thank you for your presentation, Dr. Kraft.
Do you support the concept of the single-desk selling of the Canadian Wheat Board?
Dr. Kraft: Yes, and I would think that if it was not part of this act, there wouldn't be any reason for having a Canadian Wheat Board Act.
Mrs. Marlene Cowling: I believe you raised a number of areas of concern. For the record, could you specifically outline the main concerns you may have with respect to Bill C-72?
Dr. Kraft: I think the primary concerns are getting the clientele - that being the farm group, which has a major interest in the operation of this organization - to view it as accountable, to feel that they have a direct input into the evaluation of decisions that it makes, and getting the organization to see that the farmers are in fact their primary clientele, besides the federal government. It's a joint partnership.
In the past we've expressed concerns that the organization has tended to be more bureaucratic and responsive to the minister than to the farmers for whom it is the agent in merchandising and selling grain. To that extent, in the revision of this act, the most important aspect will be to elevate the clientele, to elevate farmers, as the most important people in terms of its operation.
Mrs. Marlene Cowling: I have one more question.
The Chairman: We have a follow-up, a difference of opinion.
Dr. Edward W. Tyrchniewicz (Senior Fellow, International Institute for Sustainable Development): It's not a difference of opinion, but it is perhaps a specific focus on the appointment of the president.
Our concern is that if both the chair of the board and the president or CEO are appointed by the minister, there's a... Perhaps it's a perceptual issue, but I think it's important that the president be accountable to the board rather than to the minister. I think that would be a very fundamental concern on the accountability front.
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Mrs. Marlene Cowling: Mr. Chairman, another issue that we hear about across the prairies, particularly in the province of Manitoba, is the role of expanding the board, of revitalizing, building, and strengthening the board, by adding other commodities onto its list of responsibilities. I wonder what the witnesses' thoughts are on that.
Dr. Kraft: I think it depends on what's meant by ``expanding''. If it means expanding the single desk found within the current act - under which the board is the sole agent for farmers in let's say the export market - then my understanding is that you must have the concurrence of the provinces in order for that to occur. They have to change their marketing acts in order to delegate other things to the Canadian Wheat Board. So if it became the wish of the farmers to change the list, they could certainly communicate such a wish to their provincial marketing boards, which then could ask that the Canadian Wheat Board Act be modified to account for the changes. But I would be reluctant to recommend change on a top-down basis. I would prefer to see the grass roots come forward and suggest it.
Mrs. Marlene Cowling: Good. Thank you.
The Chairman: Mr. Hermanson.
Mr. Elwin Hermanson (Kindersley - Lloydminster, Ref.): Thank you, Mr. Chairman.
Welcome, gentlemen, and thank you for your presentation.
I want to ask a few short questions. One thing the act doesn't state is how these elected directors would be selected. You've made a couple of brief comments suggesting that a slate would be preferable to district elections. How would you select a slate, or how should it be determined?
Dr. Kraft: I would recommend that it be a nomination from permit holders or farmers who had the Wheat Board as their agent. How many farmers would have to sign a nomination would have to be determined, but I would think nominations would be the same as they are with corporations, where they get nominated by shareholders.
Mr. Elwin Hermanson: In other words, there could be a hundred names on the list, and if they each got a hundred signatures from Wheat Board permit holders, something like that would qualify them to be on that slate. There would then be a long ballot with perhaps a hundred names, and the top whatever number was determined would be the elected representatives to the board. Is that what you're suggesting?
Dr. Kraft: I'm suggesting that they come from a slate rather than from a district.
Mr. Elwin Hermanson: Okay, because we are looking for input on that.
Dr. Tyrchniewicz: I don't think Daryl and I necessarily disagree on this, but we may on this whole regional issue. Under the concept of a slate, we may have a requirement that there be a minimum number from say each province. If you had seven elected farmers, there should be at least one from each of the prairie provinces. If there are nine, perhaps there could be two from each of the provinces, again going down the slate to ensure that.
Mr. Elwin Hermanson: Secondly, with regard to the board, you suggested that the chair of the board should be selected by the minister. I disagree with you on that point, and I think a number of presenters will disagree with that conclusion. However, you didn't suggest your opinion on the fact that under the act as it's now proposed the minister could actually discontinue the directorship of any elected or appointed director. In fact, at his pleasure the minister can overrule any decision made by the board.
Let's just use this as probably the best illustration: It would be a bit like a board of governors of a university having every one of its decisions overruled by a minister of education if that minister so desired. Do you think that's going to bring the farm sector confidence in the new administrative arrangement?
Dr. Kraft: I would suggest that they serve the full term for which they are elected or appointed.
Mr. Elwin Hermanson: They shouldn't be removed at the pleasure of the minister.
Dr. Kraft: No.
Dr. Tyrchniewicz: I agree with that. As with any board of directors, I think there have to be some checks and balances for the appointment and removal of directors, but certainly it should not be at the pleasure of the minister.
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Your analogy to the university could take us off in a very interesting direction, because in most jurisdictions the minister of education can indeed overrule decisions of boards of governors of universities. I wouldn't advocate that.
Voices: Oh, oh!
Mr. Elwin Hermanson: Okay. That's good to hear.
With regard to the contingency fund, I gather from what you said that you think the contingency fund is not a bad idea. Correct me if I'm wrong.
It appears - and I'd like your opinions on this because you're experts in the whole area of international trade and the way that business is done - that global trade is moving away somewhat from state trading enterprises to private trade. That seems to be happening around the world, even in the former Soviet bloc, where the enterprises were entirely state trading enterprises. They did the buying and the selling.
Do you think that under the act as proposed by Mr. Goodale that there is enough flexibility for the Canadian Wheat Board to be able to take full advantage of the new trading realities of less government-to-government trade and more entrepreneur-to-entrepreneur trade?
Dr. Kraft: Certainly the single-desk buying agencies are declining, and whether that trend continues... I think it is a good guess that will likely be the circumstance.
In terms of the Wheat Board's flexibility and its merchandising to more than one buyer within a nation or to a buying group within a nation, I have studied their adjustments to the Brazilian situation when Brazil went from having a single-desk buyer to delegating their responsibilities to all their flour mills. The board was were able to cope quite well with that.
However, I think opportunities may present themselves for the board to consolidate their customers through strategic alliances that may be more than just longer-term contracts. It may require some participation in those businesses that could involve some equity capital. That's why I'm suggesting that if those events do present themselves and as an agency they are disadvantaged in procuring those sales because they haven't been able to put forward some equity capital, consideration should be given to the contingency fund as one avenue - besides risk-bearing - to facilitate those transactions.
Mr. Elwin Hermanson: There's a bit of disagreement as to whether the guaranteed initial price or the contingency fund is the most WTO-friendly. Do you have an opinion about that? I know this act just talks about contingency fund for adjustments in initial price, but overall, in the broad picture, in your opinion which is the most WTO-friendly?
Dr. Kraft: The initial payment becomes a trade issue if the support level established within that initial payment... If the federal government takes on more risk than what was deemed to be reasonable given the volatility in the market and the price they establish, the initial payment, becomes a support price and has a higher probability of a shortfall, I think the trading customers may view this as an agricultural policy rather than an advance payment that is likely to be exceeded by sales revenue.
So there is a probability of selling your grain for more than the initial payment guarantee. That then reduces it from being seen as a subsidy or support price. I suggest to you that a good rule of thumb within the current GATT agreement would suggest that 70% of the previous five years' prices would probably provide some assurance that it would not be viewed within a trade tribunal as being distorting if the initial payment was set no higher than that.
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As it starts to get higher than that, then there's probably greater risk being accepted by the federal government to the extent that on an occasion it may be viewed as a support price and then it could trigger some concern with our trading partners.
Mr. Elwin Hermanson: I have a final question, Mr. Chairman, on this round.
There is, as you know, speculation that we may be facing an election soon, and there's some concern that this bill may never receive royal assent. Supposing it did have the potential to get that far and you were sitting in my chair and had to vote on this bill. As the bill stands now, would you support it or would you vote against it? If you wanted to change it, what would be the two changes that would be the highest priority on your list?
Dr. Kraft: I would think the most important aspect of the bill is that it should be seen as well as a potential coming about that the organization is more accountable to farmers. In its present form, it moves in that direction; however, I think it could be strengthened in that area with respect to the board of directors and the appointment of the president or the CEO. It should be viewed as responding to farmers predominantly, rather than the minister.
Mr. Elwin Hermanson: Dr. Tyrchniewicz, do you have a comment?
Dr. Tyrchniewicz: You make an assumption there that even an academic probably wouldn't make - namely, that we might be sitting in your chair.
Mr. Elwin Hermanson: I know you're not, but if you were.
Dr. Tyrchniewicz: I'm being facetious.
Mr. Elwin Hermanson: I'm being hypothetical.
Dr. Tyrchniewicz: Okay.
I would agree with the concerns regarding accountability that Daryl has mentioned. I would go so far as to vote reluctantly for it, because it's still an improvement over what we have now, though I certainly wouldn't be happy if it stayed the way it is.
Mr. Elwin Hermanson: Thank you.
The Chairman: Mr. Easter.
Mr. Wayne Easter (Malpeque, Lib.): Thank you, Mr. Chairman.
I want to get to the balanced question in terms of credit guarantees, and so on, but before I do, on the question of the minister, the act basically providing for the president holding office during pleasure seems to be an area - and I think Elwin alluded to it - where there are some fear tactics being played in terms that big bad government will use that for its wishes.
From the government's perspective, I think there are two possibilities. It could be interpreted that the minister wants to use that provision to control the board in his or her interest. The second one is probably more likely: that the minister would want to protect the integrity of the board and the country, and indeed the interests of farmers, if you have a chief executive officer who is failing in doing their job. If you don't have that provision in there and you have a chief executive officer who is failing in doing the job, how do you remove him or her?
Dr. Tyrchniewicz: Presumably, that's what the board of directors' job is. In fact if one looks at governance of any organization, the main responsibility of a board of directors is to ensure that they select competent management. Although we indicated that the board of directors should not be removed at the pleasure of the minister, we'd certainly agree with the notion that the chief executive officer or president be removed, if necessary, by the board of directors.
Mr. Wayne Easter: In terms of the joint responsibility, though, could one logically look at the government removing a chief executive officer on the basis of a recommendation by the board and be tied to that? Would that deal with it?
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Dr. Tyrchniewicz: I'd have some reluctance on that particular one. Again, using the analogy of the university, it would be like looking at the University of Manitoba, where approximately just over half of the board of directors is appointed by government and the other half is elected. That group is responsible for picking the president. If the president turns out to be incompetent or perhaps worse, it isn't the government's responsibility; it's the board of directors' responsibility.
It's not a question of being afraid of government. It's just that to the extent we are creating a more autonomous institution and moving away from crown agency status, more autonomy has to rest in the hands of the board of directors. In this legislation there are some very important government perks, if you want to call them that, that are being lost with the election of directors - namely, the credit guarantees.
Mr. Wayne Easter: That leads to my next question, which is really one of balance. There really are under the legislation basically three credit guarantees, and I think you alluded to those: the credit guarantee itself, the initial payment on the initial initial and the guarantee in terms of borrowing. I think the reason the legislation is drafted as it is, whereby the government appoints both the president and the chairman of the board, is in part related to that risk factor the government has in terms of all those guarantees.
I want to be sure of what you're recommending in terms of appointments by the board. Are you saying that the CEO would be appointed by the board?
Dr. Tyrchniewicz: Yes.
Mr. Wayne Easter: Are you saying from the board or from outside the board?
Dr. Tyrchniewicz: Presumably it would be from outside of the board. It wouldn't be one of the board of directors that would be CEO. It would be someone chosen by and responsible to the board of directors.
Mr. Wayne Easter: And the chair of the board would be appointed by the government from the elected board. Is that what you're saying?
Dr. Tyrchniewicz: No, it would be from the elected or appointed board. Suppose there are fifteen members of the board, just for the sake of argument, of which nine were elected and six were appointed by the government. The minister then should have the prerogative to choose the chair of the board from those fifteen who were either elected or appointed.
Mr. Wayne Easter: One of the concerns from the government's perspective and right up to the Minister of Finance basically is going to be the amount of risk the government has in terms of these credit guarantees. Is there enough communication and protection on the part of the people of Canada in terms of what they're willing to do under the new Canadian Wheat Board Act, which is not being done for any other crown corporation in total, balanced against the risks we have? In your view, is there enough protection there for the Government of Canada in terms of that risk if they are just appointing the chair of the board from the elected and appointed board? I don't think there is. I think you ought to move it up to the CEO.
Dr. Tyrchniewicz: I think we disagree.
Mr. Wayne Easter: It wouldn't be the first time, Ed.
Dr. Tyrchniewicz: No, that's for sure, Wayne.
Maybe Daryl might wish to be more conciliatory.
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Dr. Kraft: In terms of the members appointed by the Government of Canada, I think it would be absolutely critical for the members they select to have expertise in finance and to demand from the CEO detailed circumstances in terms of the risk their capital is being subjected to from the initial business plan that's put forward, but as you progress throughout the year, also demand to know how the corporation is meeting that particular business plan and if there are any uncertainties that have arisen that would raise doubts as to the initial plan filed under this act with the government and through its board of directors.
Yes, I believe that the government is at risk, but in terms of the balance, in most years and in most circumstances farmers have more money out there at risk in terms of that final payment the Canadian Wheat Board operates on throughout its crop year.
I think both groups must have adequate reporting and evaluation in terms of the operations. I don't view one as more or less important than the other. It's very difficult to ascertain which one has the greatest amount of risk capital up front, in terms of who should be on the board of directors. But clearly, in regard to his appointees, the minister should choose lots of expertise in risk management and finance.
The Chairman: Wayne, you have one more brief question.
Mr. Wayne Easter: In your performance evaluation of the Canadian Wheat Board, you indicate that the Canadian Wheat Board has done exceptionally well in terms of selling wheat. At least that's my conclusion, and I think it's yours.
One concern I have - and I think a lot of people have - is the cash purchase option in the bill. Do you see any serious implication on that cash purchase option decreasing the ability? We already know the contingency fund is there because of that risk. That tells us that if you're playing the market there's a big risk. Do you see any implications in terms of the Canadian Wheat Board being able to do as well as it was able to do over the 1980-94 period that you studied?
Second, you said a number of times in your presentation that the board must be seen to be representing farmers. What you're talking about there is perception. The reality is that the board has done darn well in terms of representing farmers' interests up to now. Let's not get into a game of just perception. Let's look at the reality.
Dr. Kraft: If I may, I will respond first to the observation about our report saying that the board had performed exceptionally well. We didn't make a judgment as to how well they performed.
The comparison was this: if there had been a number of agents merchandising Canadian wheat, how did the board perform in comparison? We did not go in and do an assessment asking if they could have done a better job with respect to those sales, and then analysing it and asking if they could have actually sold for more than they did. We just made the assessment that the revenues realized by prairie farmers, in our judgment, were greater than if there had been a number of grain companies selling wheat at the ports of Vancouver, Thunder Bay and Montreal.
Now with respect to the cash, the issue here is really the nature of the contract with which the Canadian Wheat Board acquires grain from farmers and whether that is a price pooling contract or a cash transaction with no further obligation for any future revenues.
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The more frequently the Canadian Wheat Board enters into the market to acquire its wheat or barley through a cash transaction and the greater the disparity is between the pool price account and the cash account, this will reduce the attractiveness of that pool contract over time.
Barley is a classic case where the Wheat Board is a relatively minor buyer in the western Canadian barley market. If it finds itself having to meet its contracts with a greater number of cash acquisitions, rather than deliveries under a pool arrangement, and those cash contracts turn out to be a higher price than the price pool contract, then you won't be able to have those two contracts operating side by side, year in and year out. The organization will have to make a choice.
The Chairman: Mr. Hoeppner, we'll go to you. We're going to have to shorten the time. I'll remind you to try to be brief, please.
Mr. Jake E. Hoeppner (Lisgar - Marquette, Ref.): Thank you, Mr. Chairman. Welcome, gentlemen.
As you know, Mr. Easter now has to represent government as well as farmers, so you can see why he's sitting on the fence a bit with some of these issues.
I want to start with the first question of auditing the books. As you know, the auditors of the Wheat Board came out with a very critical report in 1992. How do you feel about the Auditor General taking over the books of the Canadian Wheat Board?
Dr. Kraft: As a corporation, I think the board of directors can appoint the auditor to validate. The auditors are accredited within the accounting profession in Canada. I have sufficient comfort that if they meet those criteria, they will do a respectable job. If they don't, they are also liable for any misleading assessments of an organization.
Mr. Jake Hoeppner: As you go further into the act, it becomes a liability on the farmers if they do not do a good job. That's the way I read the act. You're damned if you do and damned if you don't. You would agree that the board of directors should have the right to appoint the auditors, not the minister.
Dr. Kraft: Right.
Mr. Jake Hoeppner: Thank you.
I want to get a little further on to the cash purchase of wheat. You were saying that you support he single-desk system. I can see the recommendation of the Western Grain Marketing Panel designating a certain amount of your wheat for going into the cash market, but when I look at proposed section 39.1 in Bill C-72, I see that the Wheat Board has the right to buy from farmers or from any other person or entity. That means they could go outside the farming community to buy wheat on a cash basis to supplement their system.
I cannot, as a farmer, see that being an incentive for me to support the single desk or the pooling system. If you want me to support the pooling system, then I think that clause has to go.
Dr. Kraft: Again, let's take a look at the Canadian Wheat Board. The single desk is quite independent of the contract with which the Canadian Wheat Board acquires its grain from farmers or the industry. They've often been one and the same. The single desk and price pooling came as a combination.
In fact, they can be quite independent. The Canadian Wheat Board can act as a single-desk agent and acquire grain only through a cash basis. They do not have to purchase through a pool contract. The pool contract is used for risk management on the part of farmers, as well as the board, and it has certain attributes from managing the risk associated with grain transactions to which the cash makes them more vulnerable.
The agency, in terms of its ability to secure sales and merchandise abroad, could be just as effective with a pool or cash contract. I do not consider them as one and the same. They are quite independent.
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Mr. Jake Hoeppner: In your opinion, Professor Kraft, does the Canadian Wheat Board Act, because it is a monopoly, ensure that the pecuniary benefits are to be divided or retained for the pool account?
Dr. Kraft: In the cash transaction you have both possibilities and in the pool contract you have both possibilities, profits or losses. But a cash sale or or a cash purchase increases the risk of the agency engaging in that, and to the extent that there were profits I think the contingency fund is a logical place to put those, because the next transaction could be a loss, and you want to be able to have some source of being able to handle those buffers.
And if over time they're successful in their cash transactions, there's no reason those moneys should go to those people who sold in the pool account. In fact the contingency fund is a good place to build up those reserves and to utilize those particular finances for buffering unforeseen financial events. So I think that if you're allowed to keep those as retained earnings within the organization, the cash activity is a logical place for those to be. The pool contracts should be separate and independent of the cash transactions.
Mr. Jake Hoeppner: So it should not be in the final payment, then. It should be withheld.
Dr. Kraft: They should be withheld. And it's up to the board of directors, then, to make the decision regarding any disbursements from that contingency fund. They may be disbursements to cover certain operational costs. But I would leave it to the board of directors to make that decision regarding those retained earnings.
Mr. Jake Hoeppner: The other question, and this is my last one, is that you mentioned that you didn't really say in your study that the Wheat Board had done a super job of selling wheat. How do you feel about the private industry that has developed, the canola industry and the lentil industry, without any government regulations or very minor ones to a point where they're getting very close to the benefits of wheat in western Canada?
Dr. Kraft: I think the market development and the production capabilities of these crops have been well received by farmers. You can tell in terms of their voting by the seeded area, and subsequently they also have been a key crop in the revenues for western Canadian farmers.
Mr. Jake Hoeppner: So you would say that farmers know how to market their own grain.
Dr. Kraft: Yes, farmers know how to market their grain. We didn't make any allegations that they did not. We just suggested in our study that in fact the multiple agents, because of the nature of competition among each other in merchandising that product, would have realized lower revenues in a single-desk agent.
Mr. Jake Hoeppner: Is it your opinion that has happened with the canola industry?
Dr. Kraft: I could not express that opinion. You'd have to try to develop what the market would be with a single desk and go through those transactions.
Mr. Jake Hoeppner: Thank you very much, Mr. Kraft.
The Chairman: We'll go to Mr. McKinnon for a brief question or comments. You have about two minutes in total for your question and your response.
Mr. Glen McKinnon (Brandon - Souris, Lib.): Good morning, gentlemen.
First of all, I too share Mr. Easter's view of the importance of your report that you submitted some time ago. My interest was tweaked on the process you articulated in terms of the selection of the board members. From what I gathered, you suggest that there be a finite number of nominees from whom farmers would then cast their ballot, but not on a regional basis.
Following your recommendation, or what I believe your recommendation was, could there be a preponderance of membership from a given jurisdiction that maybe has different interests from other jurisdictions? That is to say, should we have some broad regions and select within each region to get some geographical representation on the board of directors?
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Dr. Tyrchniewicz: I don't think we suggested that there should be a finite number of nominees. I think the observation was made that you could end up with a slate of 100 nominees. Presumably, as in any organization, there have to be some criteria for being nominated and being eligible to serve on a board. In a democracy, that usually provides some finite number. To legislate that number, I'd be a little concerned.
With respect to the geographic distribution, my suggestion was that one might have a slate, but one of the requirements would be that there be at least one or two selected from each province. Whether one wants to get into a more finite geographic distinction is another matter.
I think I sense where your question may be coming from. Would we want all of the board of directors to be from Saskatchewan, for example, or Alberta, or Manitoba? There needs to be some breadth of representation, but that can be done in ways other than saying that the people of such and such a district of southwestern Manitoba are the only ones voting on that person. The board and the board of directors really represents all of the prairie-designated area, rather than just a collection of geographic regions.
The Chairman: Gentlemen, I thank you very much for your presentation, your comments and your thoughts to the committee this morning on this bill. Enjoy the rest of St. Paddy's Day.
The next group of presenters begins with the Manitoba Cattle Producers Association. Is there a representative of that group in the room? Everybody must have had a hard job getting started this morning at minus 19 degrees Celsius.
Okay, from the Manitoba Department of Agriculture... I don't see Minister Enns here either. That group was to start at 10 a.m. My apologies; it's at 9 a.m. I'm still on Ontario time.
Okay, let's back up then. Is Mr. Peter Holle from the Prairie Center here?
Mr. Elwin Hermanson: I made a call to find out what the problem was, and they said they had tried to reach the committee in Ottawa on Friday and were unable to do so. They want to meet with the committee in Alberta rather than in Manitoba, and they had tried to make that contact. I expressed my views, hopefully on behalf of the committee, that they should have contacted us here at the hotel this morning to let us know what their intentions were.
The Chairman: Thank you for that. So we'll have to try to work them in. I'm not exactly sure right offhand what the schedule is for Calgary. So their desire is to come to Calgary?
Mr. Elwin Hermanson: Yes, that's their wish.
The Chairman: Okay.
Mr. Elwin Hermanson: Calgary or Grand Prairie. They were somewhat flexible.
The Chairman: All right.
Would any of the individuals who are on the list for this afternoon like to make their five-minute presentations now, since we have some time?
Dave, would you like your five minutes now? All right, that will help us out this afternoon.
So we'll call Mr. Dave Lewicki and Mr. Tom LaBelle to the table. You're aware that, as I said earlier, in fairness to everyone - I'm not saying you've asked, because you haven't - if we start bending the rules now, if we get cramped tighter for time we might be criticized, so I'd ask you, Dave, to go to your five-minute presentation now, and I appreciate the fact that you're willing to do it this morning.
Mr. Dave Lewicki (Individual Presentation): Thank you, Mr. Chairman and everybody, for having me here again today. It's a pleasure to be here. I'm here with my colleague, Tom LaBelle. We are grain inspectors of the Canadian Grain Commission. We're here as individuals, and we have concerns.
Specifically, on the amendment itself, we are not really going to address that. We have the other side of the coin here for a few minutes.
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There are some developing indications that, through the regulatory review, the Western Grain Elevator Association has made requests to the Canadian Grain Commission to change some services they provide to uphold their reputation for quality. It's a door of deregulation that is open. I think it needs to be closed. What they have asked for is the elimination of inward weighing, and for optional grading.
The problem that lies here is that Canada survives by quality control. The Wheat Board mandate is mainly supported by some of the CGC market development stuff we do in the grading. If there are changes made to this area - and there's not much room to do so - I fear that our quality reputation will be in jeopardy, and the protection that is provided in grain transactions through the system will no longer be there.
We're all team players in this and the system is built to benefit everybody. People in some positions are trying to do what's best for them in pulling away, and I think that's where the problem lies. If we don't keep the system together, Canada's in trouble.
My fear here is about Canada, because if our reputation is tarnished we don't have to sit here and worry about what the Wheat Board is going to do, because we won't be selling any grain.
On that note, I think we have to address those specific situations. It's in the early stage, but I wanted to bring the warning to you now that this is very serious.
I don't understand why we're headed in this direction. The producer will no longer be protected in his transactions, and if that grain doesn't get to market properly, then he won't be growing it, and we'll all be out of the picture. This could cost Canada thousands of jobs, if we're not moving grain.
I think we'd better get on top of this and find out which direction we're going in, and take care of it rather quickly.
Thank you.
The Chairman: Any questions or comments? Mr. Easter, and then Mr. Hoeppner.
Mr. Wayne Easter: I think you said, Dave, that there's a request from the Western Grain Elevator Association to move in this direction. Can you be a little bit more specific in the direction? Basically you're talking about deregulation.
First of all, do you have the proposal the Western Grain Elevator Association has put forward? I'd like to see that. And maybe you'd better explain the inward weighing a little further, at least for myself - the changes in inward weighing or the elimination of inward weighing, and the implications for the system.
I agree with you 100% in terms of quality control. There's no question that worldwide, Canada's name in terms of quality is superior to anyone else's. It's quality that sells, and we can't jeopardize that in any way.
Could you explain a little bit more specifically what you believe to be on the table, and give us a little further background on the implications of eliminating inward weighing?
Mr. Lewicki: I'll answer the first part of the question, and I'll get Tom to answer the part about weighing.
What this came out of was the regulatory review, the Grain Commission...with these people. The Western Grain Elevator Association is made up of CEOs of different grain companies. Their recommendation was basically to eliminate inward weighing and have optional inspection. The Wheat Board has suggested they want their grain graded, and what they want is just to choose whether to have the grain inspected or not. That's where the danger lies.
Mr. Wayne Easter: Just to clarify it, are you talking about an option on inspection or are you talking about spot inspections?
With some of the other commodities, what the system has moved to is spot inspection. Instead of inspecting everything, you may inspect one in ten, one in five, one in twenty, whatever. If you're going to run the risk of shipping a bad-quality product, there's also the chance you could be one of the ones who gets nabbed for inspection. There's a belief that you can keep control on the system that way.
Specifically, are we talking about eliminating optional inspections, that it's an option, or are you talking about spot inspection?
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Mr. Lewicki: I'm talking optional. They would have the choice as to whether or not to have the grain coming into a terminal elevator that company owned to be graded.
The Chairman: Do you have anything more, Wayne?
Mr. Wayne Easter: Tom was going to answer.
The Chairman: Oh, I'm sorry, Tom, my apologies.
Mr. Tom LaBelle (Individual Presentation): The weighing function is harder to connect to the outward quality system, but they do provide an important service to the producer in the sense that when a carload comes into the elevator, they make sure the weights are right. There are all sorts of little things that can happen with equipment in the elevator or with leaks in the car, which they catch right on the spot.
The danger is that if they're not there to catch these problems, there are going to be a lot of disputes arising from this, and it seems to me that you have to have a viable alternative for settling these disputes. It's almost like somebody deciding to play a game without officiating because we're all going to be honest, so that if I'm offside I'll admit it, or if I kick the puck in the net, I'll admit it. I think it's a cheap insurance policy, and the farmer is protected very well right on the site with inward weighing.
Mr. Wayne Easter: I'd like to come back to my other question in a minute, because I want to conceptualize it.
The Chairman: Okay. Jake.
Mr. Jake Hoeppner: Thank you, Mr. Chairman.
Thanks, gentlemen, for coming. I remember you from the time you appeared before the standing committee in Ottawa, and I'd like to get to some of the points you raised at that time. I was astounded by one of the points you made, which was that out of 13,000 cars that were coming into Thunder Bay, about 1,100 had the wrong grain designated in it or were partially loaded or had mixed grain. By inward weighing and grading, how would you deal with this problem?
Mr. Lewicki: With that kind of problem where the documents coming from out west are wrong, we are the impartial party, so we're basically telling you the truth regarding what the weight of that car is and what that grade is. So you're getting an absolutely impartial decision, like a referee, as to what's in there. There's a belief in the industry that those I-90 tags are true, and a lot of times the dockages and the grades are wrong. So we're there to settle any kind of dispute that could arise from who shipped the grain, what's missing and what information is not there.
Mr. LaBelle: We do investigations immediately on the spot. When there's any kind of discrepancy, we're right there to investigate as to what the problem might be and to make sure we have the right car. Something as simple as that can happen. The weigh staff are our eyes out in the elevator. We're in an office getting samples. But if you get a sample of grain and it doesn't match the I-90, they're right there to check to make sure that the right car was unloaded, that the sequence of cars that were unloading is correct. It seems simple, but you can imagine the problems that could arise out of simple mistakes being made in that area.
Mr. Jake Hoeppner: So would you say that you're a dispute-settling mechanism between the farmer and the grain companies or the Wheat Board, whoever it is, that has the final word in this type of situation?
Mr. LaBelle: Our investigations on the site will provide much clarity into what might have happened and will allow whoever's settling the dispute to reach an easier settlement. It will be obvious what happened, because we've done the investigation right at the moment it happened, not the next day.
Mr. Jake Hoeppner: So are you a branch of the Canadian Grain Commission, then?
Mr. LaBelle: Yes.
Mr. Jake Hoeppner: That's what I was wondering.
My next question is that we see that in government downsizing in a lot of areas we downsize the blue-collar workers and the bureaucrats still have their jobs and are probably overstaffed. I get the impression from information you provided at a number of appearances before the standing committee that this is happening also in your industry, that the bureaucracy could be downsized and that some of those funds could be directed more to the jobs you are providing in the dispute-settling mechanism or whatever you do to control the grain industry so that it's not a whole mesh of different grains going in the wrong direction.
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Mr. LaBelle: I think that's something that's more for you people to decide. We're just front-line grain inspectors. As for what goes on in the boardrooms, we're not privy to that. We're here to warn you of anything with our experience that we can see might occur that perhaps the people in the boardrooms cannot see. As far as your question goes, I'm not prepared to answer that.
Mr. Jake Hoeppner: It's kind of a political one.
Mr. LaBelle: It seems to be.
Mrs. Marlene Cowling: My question is with respect to the quality control you've mentioned. I'm wondering when this started. Was this an issue that started with the previous government? If it was, are there legislative changes within Bill C-72 that will help correct the situation you've brought to us this morning?
Mr. Lewicki: I believe this started with the previous government. We started heading in that direction. When I was here three years ago, I explained to the standing committee that this stuff was beginning to unfold, and it looks like it has. There is nothing in the bill itself that addressed the quality issue.
My main message is that, in the bill itself, if the mandate of the Canadian Wheat Board is to remain the same, it can't function without CGC grading. Market analysis is done. Then they use the information we provide between each car to help sell grain.
We are moving more and more into a world market where people want specific commodities outside of what we have as a standard, so we're making special exceptions and providing special handling for these customers. We should be moving into a more tightly regulated quality control, yet we're going the other way. I don't understand where the problem lies.
It's very delicate to have that reputation. There's no room for changes here to provide the same quality control we have. Either you grade grain or you don't grade grain, and you do it on the spot. One mistake and our dependability doesn't start going.
Say you don't grade the grain coming in. So we check it going on the boat, but it's not making the grade because you didn't know what you had. It's kind of like building a car and checking the parts later. That buyer is waiting for that grain. We already have a problem with the railroad getting the grain, and now you want to put the seed of doubt into the international marketplace that we're going to do something with quality. If we start doing that, then we're going to lose customers. And if we lose customers, Canada is in trouble and we're all in trouble.
This is not a costly service. We sell $5 billion worth of grain for a $50-million revenue that the Grain Commission needs to operate on both ends. That's a 1% insurance policy to make this work.
It is working. The Wheat Board does a fantastic job, and so does the Grain Commission, from the front lines. We have something going on here that needs to be stopped, and I don't understand it. I don't understand it.
The Chairman: On a point of clarification, Mr. Lewicki, the point you're raising is that there has been a request from the industry, not from the Wheat Board, to have inland weighing and grading made optional. Your concern is that if this type of action starts to happen, partly or completely, what would this do to the quality of Canadian grain that's shipped from Canada. Have I summed it up?
Mr. Lewicki: That's correct.
The Chairman: Can I go to Mr. Hermanson for a brief question?
Mr. Elwin Hermanson: Very quickly, there's nothing in the Canadian Wheat Board Act now that directly relates to the problem you're suggesting. There's nothing in the new act we're looking at that I believe would impact on this issue. I don't think - correct me if I'm wrong - you're suggesting that something should be put into Bill C-72 to address this issue, which really falls under the Canada Grain Commission rather than the Canadian Wheat Board. Am I correct in that?
Mr. Lewicki: Yes, you are.
Mr. Elwin Hermanson: Having said that, are you suggesting, and this does relate to the Canadian Wheat Board, that under the current regulations - I guess this is under the Canadian Grain Commission - the grain companies can do things at port that will reduce the return to farmers when the pool accounts are finally determined? Are those pool accounts less because of things that the grain companies can do at the terminal position to reduce returns to the farmer? Are you suggesting that this is happening now and will increase if this situation you're talking about is not corrected?
Mr. Lewicki: Yes, totally.
Mr. Elwin Hermanson: Thank you.
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The Chairman: Thank you, Elwin
Wayne, did you have a brief comment? Make it very brief, please, and then we'll move on.
Mr. Wayne Easter: Basically, the bottom line in terms of your role in the system with an inward weighing for checking cars and so on is that you basically document the evidence so that a dispute can be settled in fairness to the farmer. You're basically saying that if you're not there, if you're not doing that inward weighing, then it puts the farmers at a greater risk in terms of getting his fair return. Am I understanding you correctly on that?
Mr. LaBelle: I think that would be a correct assumption.
Mr. Wayne Easter: Okay. Thanks.
The Chairman: Okay. Thank you very much, Mr. Lewicki and Mr. LaBelle, for bringing your concerns before the committee.
I'm told that Mr. Barry Bromley is in the room. Barry, would you like to have your five minutes before the committee now?
Mr. Barry Bromley (Individual Presentation): Yes.
The Chairman: Okay, please come forward, Barry. Welcome to the committee.
Mr. Bromley: Thank you, Mr. Chairman. I appreciate this opportunity to make a presentation before the committee with regard to Bill C-72. I'm not exclusively on my own here; I did roll my thoughts past a couple of my neighbours and a half-dozen other fellows, in total. In fact, one fellow came over for an evening and he spent some time helping me with the English and so forth.
The Canadian Wheat Board functions on three major pillars: single-desk selling, price pooling, and what is termed the government guarantee. Without any of these three pillars, the Canadian Wheat Board would be reduced to just another grain-dealing organization. Single-desk selling is necessary to prevent producers from competing against themselves and to provide the board with enough volume to facilitate pooling, which to me is one of the greatest advances in farming in this century.
The Canadian grain industry has been studied to death. There are two areas that have not been studied, to my knowledge. One is just what it costs us to monitor the open market the way the experts tell us we should.
At a display within the last couple of years, I was given a quote of close to $1,000 a year for a global-link computer hook-up. I received letters offering me a terrific introductory special offer to subscribe to market newsletters. As a rule, it's between $50 and $100 for three months. Add to this the value of our time as we analyse all this material that comes, or even when we stop what we're doing twice a day to get a radio broadcast. Any costs associated with the Wheat Board to me are a very good deal.
The other area that hasn't been studied is the grain handling industry from the standpoint of the sciences of human behaviour. Has the debate on grain marketing in the last ten years been grain markets or does it represent a shift in human values from a value of working together - that's peace, order, and good government - to the worship of competition and the ``me'' generation? Are we prairie people as unique as we like to think we are?
The story of shirtsleeves to shirtsleeves in three generations comes to mind. One generation worked very hard and built up the business. The next generation enjoyed and prospered from their work. The third generation lost it. We've seen this happen with many family businesses. I'm afraid of this happening here. I'm the third generation. I know in our house that the fourth generation wants it and needs it in a bad way.
Getting to the specifics of Bill C-72, it is very unbalanced in the section allowing for the easy removal of any classes of wheat from the board and it makes no provision for the addition of other commodities.
I would like to see that section deleted or at least tightened up, and provisions should be made for the addition of other crops. Having some provisions allowing the board to acquire grain outside the pool accounts in an emergency situation is acceptable. Any significant amount of cash purchases, however, would put the whole concept of pooling in jeopardy.
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Cash purchasing should only be permitted to fill contracts. Cash purchasing and shorter pooling periods would increase complexity and costs, reducing farm income in the long run. For those who feel, however, that they must have total crop revenue as soon as they can, I feel tradable certificates would serve this purpose.
Personally, I don't think I would ever use them. I'm a little concerned that it might lead to a pawnshop type of business development, costing some people some money, the very people who need all they can get out of the pool.
An elected board of directors is a fine theory. My concern is that with something of that high a profile and that large a constituency, all the negative aspects of politics would become involved.
I also believe that one of the reasons the Wheat Board has performed so well is that decisions are made on a businesslike basis, rather than what will get commissioners re-elected.
For an elected board to be effective, the chairman should be elected by the board of directors from among themselves. The CEO should be accountable to the board of directors, but not a member of the board. With a government guarantee, there's justification for some federal representation on the board. To respond to the calls for producer control, the majority of the board members would have to be made up of elected members.
The government guarantee of initial payments has cost the federal treasury very little over the years compared to the volume of grain handled. No matter how it is accumulated or used, a contingency fund would be subject to a lot of criticism and debate, not to mention the extra cost to producers. Therefore, it would be better to leave this section out of the act and keep the board operations clear and simple, and along the lines of the tried and proven.
In conclusion, the Canadian Wheat Board is not a government monster denying producers rights and freedoms. It is an instrument allowing us to do our own marketing as a group set up by the only institution that could set it up, our federal government, in the same way that it has set up countless other institutions that make us a nation.
Thank you.
The Chairman: Thank you very much, Mr. Bromley.
We'll go to a short round of questions, beginning with Mr. Calder, and then we'll go to Mr. Hermanson.
Mr. Murray Calder (Wellington - Grey - Dufferin - Simcoe, Lib.): Thank you, Mr. Chairman.
Barry, I really enjoyed listening to your presentation. I'm a poultry farmer from Ontario, so I know marketing. I agree with you on your analogy of the three generations. My family started with poultry farming when they were out in the fields. Now we're at the point at which a generation that's never experienced low prices is starting to take a look at our own board the same way you look at the Canada Wheat Board.
Cash trading is the thing I want to talk about here. It's obviously a quick cashflow for young farmers who need a quick return at harvest time, but it has some marketing hazards as I see it.
You're in the industry, so what I would like you to comment on is what hazards you see this has for marketing. What commodities should be cash traded and who should decide on cash trading?
Mr. Bromley: I guess I just like the pooled price so much that... You put in your pool, I'll get my share of it, and I don't have to hang onto it today or tomorrow and all this. I guess the call for cash trading is from people who think they need all their money from that produce now.
You mentioned something that has concerned me: the young farmer getting started. Once you get started though, your income over a ten-year period is the same, whether the income in this one year includes the final payment from... Say 1997 would include the final payment from the 1995 crop, some the 1996 crop and a bit of the 1997 crop. You spread that system all over a ten-year period, for example, and the income is just there.
Now for the fellow getting started, it's difficult until that sequence gets rolling. They usually start in a small way with other income and with family too.
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The cash purchasing to me is contrary to the whole concept of pooling price. In our own case, with the board's wheat, he can contract it and gets his share of it. Dad can haul it out when he happens to be driving the truck in the wintertime, whereas with the canola issue, what do you do with it?
Mr. Murray Calder: I think I know where you're heading here. Are you trying to tell me that you feel cash trading would undermine single-desk selling? You've already said you agree with the three pillars.
Mr. Bromley: Yes, sure.
Mr. Murray Calder: Okay. Thank you, Mr. Chairman.
The Chairman: Elwin.
Mr. Elwin Hermanson: Thank you for your presentation, Mr. Bromley. First of all, do you only grow board crops on your farms, wheat and barley, or do you grow other crops?
Mr. Bromley: I have some canola.
Mr. Elwin Hermanson: You have canola. I know that in Saskatchewan - I'm not sure about Manitoba, I think it's similar here - in the 1980s farmers had to grow off-board crops to survive. I think that's when a lot of farmers realized that while the board might do a fine job of selling wheat and barley, they don't somehow magically get higher prices. In fact a lot of farmers had to go to off-board crops just to survive. That's why a lot of them have asked for more flexibility in their marketing. I wonder if you might agree with that.
I know you've called in your presentation for more crops to be brought under the jurisdiction of the board. Do you think as a trade-off for allowing more crops to come under the board it might also be fair to allow those farmers who didn't want to market through the board to be able to opt out of the board? In other words, should it be more voluntary? You can market through the board with your wheat and maybe other crops, but for those farmers who don't want to market through the board they could opt out of the board and not market through it.
Mr. Bromley: There are two or three things that happen there. The Wheat Board grain would be competing with the grain sold the other way and would tend to ratchet the price down. When the Wheat Board has control of all the grain it can blend it or pick all over the west to get those specific qualities it wants. If there's a terrible flood in the Red River Valley and a frost this fall, it can get number one from some place else. It could be the other way as well. That's why we need to be able to draw from areas and blend it to maintain our quality control.
Mr. Elwin Hermanson: When you sell your canola, do you sell it to whoever pays you the least for it or whoever pays you the most for it?
Mr. Bromley: I have a pretty good relationship with the people in the elevator I see out through the kitchen window every morning.
The Chairman: You have a first-up, best-dressed arrangement with the elevator. You can get there quick so you can get the market.
Mr. Bromley: I caught the dickens from a neighbour in the elevator for the overalls I was wearing last weekend.
Mr. Elwin Hermanson: I mentioned in regard to opting out that the Canadian Wheat Board is spending a lot of money and the Government of Canada is spending a lot of money fighting court cases. There's a charter challenge in Alberta right now. We have all the hassle with Farmers for Justice taking grain across and legal case after legal case. There's a lot of division in the farm community. You have farmer pitted against farmer. Sometimes within the same family there are disagreements. It is very unhealthy.
Don't you think that to save the expense to the farmers and the taxpayers, some deal could be worked out where farmers could opt out of the board? Perhaps they wouldn't get to come back and market under the board for a while, but that would alleviate some of the rancour this has developed in the industry and everybody would be a lot happier.
Mr. Bromley: This is the area I was talking about when I mentioned the sciences of human behaviour. I can see in two or three generations though -
The Chairman: I thought you may want to comment on that.
Mr. Bromley: - and do we have to go through this sad experience to revitalize it, to bring it back?
As this gentleman said here, I've had conversations with my grandfather and his colleagues and I know what it was like without that. And looking at the canola and the other things makes me appreciate the board more. What does it cost you to put your foot on the clutch on the tractor and out with...? It's bad enough to try to remember the canola price, but if you add the other commodities too, to me it becomes very burdensome.
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The Chairman: Mr. Easter, you had a brief comment?
Mr. Wayne Easter: I think one of the key points you made is that the single-desk selling prevents people from competing against themselves. We've a prime example of that in the potato industry in Prince Edward Island, where people basically compete against themselves and bring prices down. The lowest seller sets the price.
In fact the previous witness in their study - although it wasn't mentioned, I'll put it on the record, Mr. Chairman - their figures show that between 1985 and 1994 the average additional revenue the Canadian Wheat Board was able to maximize back to producers was $34.47 a tonne versus what multiple sellers would do. So that's pretty good evidence on the importance of the Canadian Wheat Board.
The only point I wanted to make, Mr. Chairman, is to agree with Mr. Bromley that single-desk selling is extremely important and to put that in the record in terms of how good the performance of the Canadian Wheat Board has been, and maybe to point out to Mr. Hermanson that when he talks flexibility it's one thing to have flexibility in terms of shipping a different crop, but if you enter that flexibility in the form of a dual market all you're going to do is to destroy the good benefits the Canadian Wheat Board has shown it's been able to give and maximize back to producers throughout history.
The Chairman: Do you have any brief closing comments, Mr. Bromley?
Mr. Bromley: I don't think we need to apologize for not wanting to compete with ourselves. A few years ago, Tenneco was said to be the eighteenth company in the United States. They owned Case and they took over International. The first thing they said was some of these dealers have to go because we can't compete against ourselves.
I think the Canadian Wheat Board is very important to me. It's part of being a Canadian. We were part of the international host family association, and that's when we had these European people with us. That was the part of Canada I informed them of: our Wheat Board, our Grain Commission, and our crofters and things like that. I sure am so afraid that it's a ratcheting down when it should be going the other way and give us the same unique exclusive dealer for our product that other manufacturers enjoy.
Thank you.
The Chairman: Thank you very much for your presentation.
Committee members, I don't have any indication of any other individuals, so we'll take a break for coffee and as soon as some of the next group of witnesses appears we will begin the next round of presentations.
The meeting is adjourned.