EVIDENCE

[Recorded by Electronic Apparatus]

Thursday, March 20, 1997

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[English]

The Chairman (Mr. Lyle Vanclief (Prince Edward - Hastings, Lib.): Good morning, everyone. Welcome, everyone, to the committee meeting here in Calgary today.

I guess we're about one day late for the real spring weather, but it must still be spring, because I just saw one of Calgary's finest riding his bicycle down the street, with his colleague wearing shorts. So spring must be here. Someone told me it's minus seven in Ottawa this morning, so if that officer were in Ottawa, he certainly wouldn't be wearing his shorts. But maybe that's a good sign for the rest of us that spring is on the way.

I do welcome everyone here this morning. The committee does have a very busy schedule, and we have had an excellent three days of hearings, one in Winnipeg, one in Regina, and one in Saskatoon. Tomorrow we'll be in Grande Prairie, and we look forward to that as well.

Just so the presenters are fully aware, you have all been informed that you have a maximum of fifteen minutes for your presentation. I will, in some way, shape, or form indicate to you when you have a couple of minutes left. We are going to keep you to that fifteen minutes. If you haven't made your main points when you get the warning, please go to them immediately. We have twelve groups presenting today, so we wish to be fair to everyone.

After we hear the four presentations before us now, we will have fifty to sixty minutes of dialogue between the presenters and the committee members. We find that very worth while, because it allows individuals to make other points or to clarify any points that are there.

With that in mind, we will begin our continued hearings on Bill C-72, an act to amend the Canadian Wheat Board.

The four groups before us are: The Alberta Cattle Commission; the Canadian Cattlemen's Association; the Alberta Department of Agriculture; and the Western Stock Growers' Association.

We will begin with the Alberta Cattle Commission. Perhaps the presenter would introduce himself and any colleagues with him at the table.

Please proceed.

Mr. Dale Wilson (Vice-Chairman, Alberta Cattle Commission): Thank you,Mr. Chairman.

My name is Dale Wilson. I am a grain and cattle producer and a member of the Alberta Cattle Commission, on whose behalf I would like to make a submission in regard to our organization's concerns over parts of Bill C-72.

First, Mr. Chairman, I would like to thank you and the rest of the committee for giving us this opportunity to speak to you in Calgary.

The Alberta Cattle Commission represents approximately 30,000 beef cattle producers in the province of Alberta. Beef cattle production is the largest sector of the Alberta agricultural economy, representing 38% of total farm cash income in the province.

In 1995 Alberta beef and live cattle exports were worth $1.1 billion. By comparison, the Alberta wheat exports in that year were worth $0.9 billion and exports of barley were worth approximately $20 million. Beef production and processing also have a much higher domestic multiplier effect and beneficial impact on rural communities than grain production for export.

The cattle-feeding industry is by far the largest market for Canadian barley. On the prairies, 70% of the barley produced is fed to livestock. The Alberta cattle-feeding industry now accesses its supplies from all across the prairies. Exclusive of feeder-cattle purchase costs, feed grains are the most important cost factor in cattle feeding, and it is essential that Canadian feed lots be able to access the secure supplies of barley, at prices that are competitive with those of cattle feeders in the United States.

It is our view that some of the amendments proposed in Bill C-72 will be detrimental to the competitive position of the Alberta beef cattle industry, and in the long term to the interests of prairie barley producers.

As already mentioned, the Canadian Wheat Board plays a relatively minor role in the Canadian barley market, normally purchasing less than 30% of the total crop. However, its activities impact on the stability of the market and on supplies and prices.

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Over the last ten years the board's activity has had a destabilizing effect on the market because barley producers have no secure knowledge of what price the board is eventually going to pay nor how much barley they're likely to take.

Despite its impact, the board has no responsibilities to the domestic feed grain market and tends to ignore the detrimental impacts that its activities create in the market. For example, the board frequently accesses its export supplies from where the domestic needs are greatest.

In our view, the general impact of amendments proposed in Bill C-72 will further destabilize and disadvantage the domestic feed market. The board is being given the authority to act as both regulatory authority and a cash buyer in the market. Because the board has both monopoly and regulatory powers, this puts feedlot operators and other buyers at a very serious disadvantage in trying to compete.

In general, we believe these amendments will create further instability in the market and they will seriously jeopardize the domestic industry's ability to access supplies. In the worst-case scenario the board activities could create a serious shortage of barley on the prairies.

The Alberta Cattle Commission has three specific concerns with Bill C-72.

Firstly, we believe that the repeal of paragraph 46(b) could remove the authority for the domestic market to function in its present form. We accept that the minister has given his commitment that the government has no intention of interfering with the free movement of barley within the Wheat Board areas.

However, we have sought legal advice on this issue and have been advised that if the matter ever came to court, there's a strong possibility the courts would rule that the authority to move barley interprovincially has been removed.

We've been given no other reason for the repeal of paragraph 46(b). We ask that the committee do everything possible to ensure that any amendment to the bill ensure that open domestic market for feed grain is retained. Any interference with this right would have serious economic implications.

Secondly, the cattle feeding industry is extremely concerned about the proposed change to proposed section 39.1. That would allow the board to enter the cash market when it is unable to secure sufficient supplies through its regulatory activities through the pooling system.

If the board is going to be able to access the cash barley market at will to obtain supplies, then it is reasonable to suggest that the domestic user be given access to board supplies on the same basis. If the board moves in and out of the cash market with large volume purchases without the offsetting opportunity for the domestic industry to access the supplies that the board has already tied up, we could see very serious price instability in the market and the real possibility of regional and seasonal shortage in the domestic market.

We suggest that if the board wants to be part of the cash market they abandon their regulatory activities through the pooling system and compete on an equal basis with other Canadian buyers. If, on the other hand, they wish to continue to operate using the pooling and initial price system, then they should not be permitted to enter the cash market.

Thirdly, a major problem with the Wheat Board is that it was designed to meet the needs of the prairie agricultural economy when the only major market export commodity was wheat and to a lesser extent barley. The prairie agricultural economy is now much more diverse and wheat is only one of a large number of export commodities. However, the significant monopoly and regulatory powers given to the board mean it can have a considerable influence on the prairie agricultural economy, especially livestock feeding sectors.

For that reason, if the board wishes to continue to operate with its existing regulatory powers, especially in the feed grain market, we would suggest that it is essential that the makeup of the board be expanded to include representation from these other sectors. In that way the board can be made aware and forced to recognize the impact its activities are having on other prairie producers.

Thank you, Mr. Chairman, for your attention and the committee's attention.

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The Chairman: Thank you, Mr. Wilson, for being clear and concise.

The next group to present is the Canadian Cattlemen's Association. We have John Prentice with us today.

Mr. John Prentice (Director, Canadian Cattlemen's Association): Thank you,Mr. Chairman. I have been delegated to present this brief to you.

In this submission the Canadian Cattlemen's Association wishes to make the following points. First, the domestic livestock industry is a dominant market for barley grown in the Canadian Wheat Board area.

Secondly, the livestock feeding industry is a vital component of the western Canadian agricultural economy, accounting for 37% of all farm cash income in the prairie provinces and in Alberta alone, 52%.

The beef cattle industry alone contributes 22% of all farm cash income on the prairies and 35% in Alberta.

The Canadian beef industry currently exports 54% of the total production to a range of markets primarily in the United States. The ability of the industry to compete in the global beef market depends, to a large extent, on our ability to access feed grains at prices equivalent to those being paid by our competitors, and especially in the United States.

Fourthly, the activities of the Canadian Wheat Board can significantly impact the price of feed grain in Canada, especially if they become active in the domestic market. The powers and role of the board were designed to deal with a totally different agricultural economy where wheat and other grains were the only significant agricultural commodities exported from the prairies. The board should now be structured so that its operations encourage the growth of domestic as well as export grain markets.

Fifthly, the amendments being proposed by the government in Bill C-72 will erode the competitive position of livestock producers in western Canada. They will destabilize the domestic feed grain market and in the long run will increase the dependence of prairie grain producers on the highly erratic and high-cost export market.

I'd like to refer to the supply and demand table that we have listed on the second page. If you will note, exports in 1992-93 were $3 million; the next year, $4.2 million; and this year they're projected to be $4 million. In other words, they're looking at a flat export situation. Yet over the same period of time domestic usage has gone from $7.36 million to $10.5 million, about a 50% increase.

Now that impediments to value-added have been removed - feed grain assistance, Crow, those kinds of things - and with inflation making transportation costs higher, the prairies are absolutely flowering. Every day we hear of new hog operations, new feedlots going in. This domestic usage can go only one way, and that's up to the point where we can become very concerned about the availability of feed grain in a tight crop year in the case of a drought or a low carrying...or whatever. Manitoba is a prime example of that.

Another thing that really bothers us is the move from a government-appointed board of commissioners to where a majority are elected and accountable to producers. Then you go from a mandate that is probably to operate in the public interest or the public good to one where you get into profit maximization. At the same time, you give the Canadian Wheat Board tools that they've never had before - which they need, I agree.

They have the ability to contract now - one-way contracts - where there's an obligation to deliver, but not an obligation to take. On top of this you pile the right, overnight, basically, to increase the initial...to truncate a pool, to start a new pool off as many times as you want. These are all tools to make the Canadian Wheat Board more able to access grain off the market from the farmer.

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We're very concerned about the power to buy on the cash market, together with the contingency fund, because this new board with a mandate to maximize price could abuse that power. We feel it is much better to give that decision to the individual producers. Will I go the export route or will I go the domestic route?

I would say, after having read the Canadian Wheat Board brief, that their arguments in favour of this, such as the ability to forward price and everything like that, are all tools that are available in the marketplace today; they're not adding anything. To me it's a question of control.

Every bushel that's exported actually is a job lost on the prairies. It's counter to the provincial policy of the three prairie governments. It certainly doesn't add value. We are much more in favour of having an open market where the producer makes a decision, the product is walked off or piped off through the fuel added to the pipeline down to California.

These remarks are not in the brief but basically that's it in a nutshell. The repeal of paragraph 46(b), that goes without saying. I think everyone else will speak very eloquently towards that one.

The ability of the Canadian Wheat Board to manipulate the contracting and pooling systems and to purchase grain on a cash market is basically what I'm talking about. They changed the mandate and the excessive power given to them to the point where they could abuse it.

Certainly, the responsibility of the board to domestic users - Dale has alluded to a lot of this already. A major problem with the board is that it was established in a period when grain exports were the dominant agricultural activity on the prairies. As already mentioned, the statutory powers are designed to allow it to maximize grain exports. However, grain production for export is now one of a number of significant agricultural activities, some of which are in direct competition with the board for grain. Livestock producers have no difficulty in competing in a fair and equitable market with export demands for grain.

As far as barley is concerned, because of factors already mentioned, domestic feeding is by far the most economic use. However, the domestic market cannot compete fairly with a board given statutory monopoly powers to access supplies and set prices regardless of what impact that has on the domestic market.

We suggest that if the government wishes to maintain an active role for the board in export markets for barley without destroying the domestic market, they must restrict the activities of the board to its historical use of the pooling and initial price system and their proposal that it be strengthened, leaving the domestic industry to operate unimpeded on a cash market.

We also suggest the board be structured to ensure that the interests of domestic users, specifically livestock producers, are represented on it.

Thank you.

The Chairman: Thanks very much, Mr. Prentice, for a concise presentation.

We will now go to the Alberta Department of Agriculture, Food and Rural Development. We welcome the Hon. Walter Paszkowski, the minister, to the committee this morning.

Welcome, Walter.

Hon. Walter Paszkowski (Minister of Agriculture, Food and Rural Development, Province of Alberta): Thank you, Mr. Chairman. I welcome the committee to Alberta. We very much appreciate the opportunity for stakeholders to be able to make a presentation first-hand to the committee.

Mr. Chairman, the Government of Alberta appreciates the opportunity to speak on the proposed changes to the Canadian Wheat Board. As you know, Mr. Chairman, an election has just been held in this province and our government's policies, including our policies on agriculture and grain marketing, have been under scrutiny and have received the approval of the electorate. In fact, 100% of the rural ridings in this province were returned. This result is both a vindication of and proof of the approval of our position on subjects such as grain marketing.

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Our policies are based on objective analysis and extensive consultation with farmers and agribusiness. These consultations have included a plebiscite on marketing choice in which two out of every three farmers voting asked for choice on how they should market their wheat or their barley.

With this as a background, the Government of Alberta has reviewed the stated intent of the federal government regarding the grain marketing and how that is reflected in Bill C-72, an act to amend the Canadian Wheat Board Act. Our comprehensive analysis of Bill C-72 is contained in the appendices to this presentation to the standing committee.

In the time available to me today I can only summarize these conclusions. To be blunt,Mr. Chairman, it is our view that Bill C-72 is fundamentally flawed and can't be fixed. It should be withdrawn and rewritten to reflect changes that farmers want and farmers have asked for: more alternatives for marketing their wheat and barley, accountability of the Canadian Wheat Board to farmers and thus more flexibility in the Canadian Wheat Board operations.

This bill does not give farmers what they want because it is built on three flawed assumptions. The first assumption is that a voluntary pooling organization cannot work in an open market environment and that the continued use of the compulsion and single-desk system is both in the public and farmers' best interests.

The second assumption is that the federal government needs to control the western Canadian grain industry through a single-desk system because it has financial obligations for initial payments and borrowing. The third assumption is that the federal government needs a single-desk selling system to manage and provide solutions for cross-border trade of grain.

I reject these assumptions and I'd like to tell you why. First of all, successful pooling organizations do exist in many segments of agriculture and they are widespread. Voluntary pooling organizations demonstrate benefits to their members in the capacity of flourishing open-market and competitive environments. In that regard, I hereby table copies of this initial report, which I released yesterday.

This report offers seven real-life examples of how voluntary pooling organizations can and do compete successfully in the global marketplace. These examples prove that the arguments that prevented the federal government from offering dual marketing to producers are invalid and unfounded. In fact, those arguments are self-serving, designed to protect an institution rather than serve farmers. This report proves a single-desk system is not the only way wheat and barley can be sold.

Secondly, it's clear from a public interest perspective that the use of legislated compulsion and the retention of a single-desk selling system for grain trading are of questionable validity and benefit and are completely unnecessary. The compulsory participation of all farmers in a single-desk selling system is not a necessary condition for providing initial payment guarantees, nor for providing guarantees on borrowing.

There are other mechanisms that can be used in a manner similar to those used for the Ontario Wheat Producers' Marketing Board. Guarantees can be provided though the Agricultural Products Cooperative Marketing Act, the Export Development Corporation could be used to undertake export credit sales, or the Canadian Wheat Board could use commercial banks for operating loans just as other grain companies do.

The use of the single-desk system will not solve any border trade problems. In fact, it will perpetuate border problems. It is clear now that the state trading agency will be a major issue in the next round of the WTO discussions. I urge the committee to look at this bill from the farmers' point of view.

I suggest to you that there is nothing in it for the farmer. I think this is really the key element. There is nothing in this for the farmer. It puts no more money in the farmer's jeans, and it allows all the risks to be passed on to the farmer. Surely this is not the result we are looking for or asking for, and certainly not the result farmers want.

In terms of the Canadian Wheat Board's operations, we find nothing to benefit the farmers and there are many new dangers. With cash buying, farmers cannot manage marketing and cashflow risks under Bill C-72 if prices paid, contracts, and pools are not fixed for set periods and can be abandoned or altered at any time by the Canadian Wheat Board.

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Under Bill C-72 farmers carry all financial risks apart from those associated with guarantees of initial payments. Today, the financial risks associated with single-desk grain selling are shared between farmers and the federal government. No financial risks arising from the buying and selling of grain are carried by the grain companies, by the railroads, or by the Canadian Wheat Board.

Bill C-72 effectively reduces the financial risks of the federal government, shifts further financial risk onto the farmer, and mandates compulsory deductions to cover financial shortfalls arising from the Canadian Wheat Board's operation. This is done with no practical accountability of the Canadian Wheat Board to farmers.

Under Bill C-72, industry relationships could be radically altered. The Canadian Wheat Board can operate like a grain company. The Canadian Wheat Board will be able to cash buy at the farm gate. It will be able to direct grain to the company of its choice. It will become a competitor with the grain companies and through its single-desk status be a regulator of the grain trade through its ability to assign rail cars. The relationship will no longer be symbiotic and could become discriminatory and predatory. The grain companies would be unable to manage the use of their assets in their own best interests.

Under Bill C-72, the Canadian Wheat Board becomes, for grain companies, both a regulator and a competitor at the same time. This, quite simply, is an intolerable conflict of interest.

Mr. Chairman, this is a bad piece of proposed legislation, built on bad policy. The bill focuses the industry on a single-desk selling system that downloads all additional costing to the farmer. The very viability of the grain farming industry is then put at risk.

The single-desk selling system is a major constraint in accessing value-added processing and the development of domestic, prairie-based value-adding.

The industry will remain focused on the export of raw grains and on the utilization of a costly and uncompetitive logistics system. Farmers have no ability to influence this costly system. It does not give control of the Canadian Wheat Board to farmers.

Others have or will speak to the ill-conceived attempts to make the legislation appear to make the board more accountable to farmers. I'll not repeat these points except to say that this bill only serves to make the board more accountable to federal politicians and bureaucrats. This is not what farmers are asking for.

In summary, Bill C-72 provides no solutions to the issues and the problems that face the grain industry today. Bill C-72, by entrenching the existing single-desk system, puts the future viability of the grain industry at some risk.

Mr. Chairman, I call upon the standing committee to seek more viable solutions. Even under single-desk marketing, there are ways to free up the system and allow farmers and the grain industry to seek out efficiencies and promote competition at the farm level. For example, many have suggested requiring the board to take ownership of the grain at the spout instead of in the country.

Other alternatives of a transitional nature were suggested by the federal government's own grain marketing panel. Unfortunately, the federal government has rejected these types of transitional measures.

Thus, the only alternative available to this committee is to take the legislation back to Ottawa, rewrite it, and give farmers the choice they are asking for. If Ottawa cannot or will not provide all farmers with a choice, then amend the legislation to allow farmers in this province to opt out of a designated area following a provincial plebiscite.

Ultimately, the only viable solution for all is for the federal government to relinquish the use of the single-desk system and the accompanying compulsion and to work toward the reform of the Canadian Wheat Board into a voluntary pooling organization under the effective control of farmers. The volunteer organization should not be constrained by its ability to trade in grain.

With NAFTA, the WTO, and globalization, we must expand our horizons in the way we think about institutions and government to compete in commercial trade. There are alternatives to the single desk that will work if we have the creative vision and the competent management to break out of the time warp.

Mr. Chairman, the committee should always ask itself whether the end result will allow the institution to better serve the farmers or whether it will require the farmers to serve the institution.

Thank you for the opportunity to talk to this very important issue.

The Chairman: Thank you very much, Mr. Minister.

I'm sure we'll continue our discussion with all as we complete one more presentation. Then we're going to have a nice time for dialogue.

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The next presenter is from the Western Stock Growers' Association, Mr. Norm Ward.

Welcome, Norm.

Mr. Norm Ward (President, Western Stock Growers' Association): Thank you very much. A beautiful spring good morning to everyone here. And it is spring, by about two hours.

The Chairman: Oh, thank you.

Mr. Ward: I'm Norman Ward, president of Western Stock Growers' Association. We thank the committee for the opportunity to present our views here this morning. I have with me our executive committee of David Foat and Gary McMorris. They will be presenting our brief this morning.

Mr. David Foat (Past President, Western Stock Growers' Association): Thank you.

The Western Stock Growers' Association appreciates the opportunity to appear before this committee to comment on Bill C-72, an act to amend the Canadian Wheat Board Act and to make consequential amendments to other acts.

The Western Stock Growers' Association is the oldest producer group in western Canada, having represented stock growers since 1896. Today our members own or manage about 500,000 head of cattle, a significant portion of western Canada's herd. Our efforts make a significant contribution to the cattle economy of Alberta, now the largest single agricultural sector in this province.

Firstly, we are most disappointed that the minister did not implement the report of the Western Grain Marketing Panel, as he continually assured farmers he would. The panel was hand-picked by the minister to represent a broad spectrum of producer and trade interests. Its consultations were extensive. Its conclusions were unanimous to allow a dual market for feed grains and other selected types, to privatize the board by making it a corporation and putting its governance into the hands of farmers, and to give the new corporation the tools it will need to compete in the real world. These recommendations went a long way toward creating a grain marketing system that livestock producers could be happy with.

Second, responding to the unrest on the prairie, the minister called for a vote on the future of barley marketing by the Canadian Wheat Board. The vote only allows two choices: board or no board. It does not allow farmers to deal with the true issue of a dual market. The minister said he would abide by the results of the vote. If that's so, then why did the minister proceed with this legislation three months before the vote was taken?

The grain policies do hurt livestock producers. Cattle production was not always the largest agricultural sector in Alberta. In 1943 the Canadian Wheat Board was made compulsory by the federal government and wheat trading was discontinued on the Winnipeg Grain Exchange in an effort to limit the liability of the federal government on rebates to domestic millers and to restrict the costs of foreign aid programs.

The next step was to extend the board's monopoly from wheat to barley and oats in 1949. Since that time government has chosen to promote and support the production and export of grain rather than the domestic value-added industries such as livestock production.

The conflict between the interests of the grain producers and those of domestic grain users is an issue that has never been properly addressed by the government. By the 1970s two issues became increasingly serious problems for western livestock agriculture: statutory freight rates on grain transportation - as we know, the Crow rate - which artificially raised domestic feed grain prices, making livestock production uncompetitive; and the Canadian Wheat Board control of domestic feed grain pricing and marketing.

With respect to Canadian Wheat Board domestic feed pricing policies, livestock producers had no confidence that the prices they were paying were reasonable and based on competitive world prices. The Wheat Board's domestic selling price had no visible relationship to world feed grain prices and had a floor price consisting of the initial price plus freight and expected Canadian Wheat Board handling costs. Feed grain users complained they were being ripped off.

Rather than change Wheat Board pricing policy, the government's answer to this issue was to institute a corn-competitive pricing system, where feed prices on the prairie related to the price of American corn landed in Montreal and backed off by the freight and handling. This was still unsatisfactory, as the freight rates were artificially low thanks to the Crow rate. Thus the price of feed grains on the prairie remained artificially high and livestock producers continued to complain.

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The next attempt to deal with the issue occurred with the 1974-75 crop year, when government introduced a new domestic feed grain policy, which had domestic market sales carried out by the private trade or direct sales from farm to feed lot. Removal of provincial boundaries allowed interprovincial movement of feed grains effective for the 1974-75 crop year. The Wheat Board was involved only in export sales of feed grains.

Unfortunately, domestic feed grain pricing was still being affected by the board's pricing structure. Feed grain users still had to compete with a subsidized export grain system, which kept domestic prices artificially high. At least a step in the right direction was taken when next an attempt to deal with the freight rate problem was begun in earnest in the early 1980s.

Unfortunately, the government ignored the Gilson report on reform of the Crow rates and instituted its own concept of Crow reform in 1985. That is a benefit paid to the railways to compensate them for continued low freight rates on grain. Unfortunately, the new policy also continued the disadvantage it had visited upon the livestock sector.

In 1989 the federal government removed oats from the control of the Wheat Board amid dire predictions that oat production and marketing would collapse into chaos. In fact, oat production has not only survived, it has also flourished. Oat production from 1979 to 1988 averaged 2.9 million tonnes; from 1992 to 1996 average production was 3.37 million tonnes, while marketings have averaged 3.5 million tonnes.

Unfortunately, an attempt to remove barley from board control was aborted by a lower court ruling that the current federal government declined to appeal, thus confirming the status quo. Meanwhile, the Government of Alberta took notice of the hurt being caused by the continuation of federal grain-centred policies and correctly perceived that opportunities for economic growth were being squandered by ill-considered federal policies.

Alberta began a Crow offset program to compensate grain producers for the loss in revenue caused by levelling the playing field in this province - a provincial subsidy to offset the negative effects of federal subsidies and policies. The Crow offset led to a growth in all sectors that added value to grains in Alberta. Now, for example, of the total value of cattle produced in Canada, $4.2 billion, Alberta's production totals $2.2 billion, or 52.4%.

The tremendous growth in Alberta's sector, the envy of all the other provinces in Canada, can be directly attributed to the correction of some of the negative effects of federal grain policies and subsidies since the mid-1980s. These cattle are also processed in Alberta, where there now exists world-class livestock processing facilities, providing jobs for thousands throughout the economy. In fact, much of Canada's cattle finishing and processing have moved to this province in response to the levelling of the playing field.

The Alberta experience stands as solid proof that when government gets out of the way, farmers can and do prosper.

Mr. Gary McMorris (Director, Western Stock Growers' Association): Good morning. Make the Canadian Wheat Board voluntary again.

It should come as no surprise, therefore, that our best counsel to government on the matter of the Canadian Wheat Board is to return the board to its original condition, a voluntary board existing in competition with other players in the market. That way, those who choose to use the board services may do so voluntarily and those who choose not to may use other services provided in a free and open market. In this way, the pricing of the board becomes transparent and fair to all, since a free market has no mechanism to systematically overcharge the domestic users of feed grain.

One point must be made. If the Canadian Wheat Board is supported so strongly by prairie farmers, why must they be forced to use its services by weight of law? Surely, if the board support is so strong and its operations are so beneficial, coercion by the law is not needed. If, on the other hand, a law continuing the board's monopoly is deemed absolutely necessary, it can only be that the government and those farmers will not support the government's mandated board voluntarily - a confidential poll commissioned by Ag Canada, the federal agricultural department, and leaked to the Toronto press in September, found that 55% of prairie farmers supported ending the Canadian Wheat Board's monopoly on barley - or farmers are too unsophisticated to see the benefits for themselves and the decisions must be made for them by bureaucrats, or wheat and barley farmers uniquely cannot deal with a free market environment in which most other farmers - oats, canola, flax, soybeans, corn, peas, lentils, potatoes, vegetables, other special crops, nursery crops, flowers, fruit, honey, cattle, sheep, hogs, etc. - already thrive.

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If the board does indeed provide farmers with the type of service and returns it claims to, it will far out-perform all other players in the market and farmers will voluntarily choose to put their trust in it. If, on the other hand, the board cannot deliver on its promise, farmers will look elsewhere to market their grain.

Even that doesn't mean the end of the Canadian Wheat Board. It simply means that the board must respond to the market signals it is receiving and improve its performance to regain its market share, exactly as all other grain marketers will have to do. Alternatively, does the government believe the Canadian Wheat Board by its very nature cannot respond to market pressures?

It seems to us that many aspects of Bill C-72 are actually aimed at an eventual dual market, because they will allow a partly modernized Wheat Board to overcome some of the difficulties it will encounter in the market.

Adopting some of the recommendations of the Western Grain Marketing Panel, the minister proposes a number of changes to increase the Wheat Board's operational flexibility, allowing it to purchase grain and remunerate farmers for grain in varying ways.

These changes include permitting the Wheat Board to make cash purchases of wheat and barley and permitting the Wheat Board to pay carrying costs and make other delivery-related payments to farmers for grain. The changes allow for deliveries to condo storage facilities, without regard to delivery quotas or contracts. They also permit the Wheat Board to purchase grain from other than an elevator or rail car; this includes on-farm purchases. They also permit the Wheat Board to terminate pool accounts at any time and to disburse funds at any time following closure of the pool, as well as to issue negotiable producer certificates. Finally, the changes clarify the Wheat Board's ability to utilize risk management tools.

The government has adopted some liberating policies that would allow the Wheat Board to respond more freely to competition, and that holds out promise for future change. In fact, in its précis of the bill the government states it is providing the authority through Order in Council to exclude specific types, classes, or varieties of wheat or barley from exclusive Wheat Board jurisdiction in the domestic and export market.

Unfortunately, the bill also takes that promise away by limiting the power to those cases in which the action is recommended by the Canadian Wheat Board's board of directors, the necessary quality control measures approved by the Canadian Grain Commission are in place, and a producer plebiscite is held on the change. Even then the minister is under no obligation to make these changes that make it through these hoops.

With respect to domestic feed sales, since August 1, 1975, trade in feed grains by the private trade, direct sales from farm to feed lot or processor, and interprovincial movement of domestic feeds without requiring a Wheat Board permit have been allowed. Authorization for this rests in paragraph 46(b) of the current act. Clause 23 of Bill C-72 repeals 46(b), which gave the minister the power to exclude any kind of wheat or any grade thereof or wheat produced in any area in Canada from the provisions of this part either in whole or in part, or generally, or for any period.

Although that same wording is used in clause 22 of Bill C-72, subsequent paragraphs subject the power to a number of restrictions, including that the exclusion be recommended by the board of the corporation and that the identity of the grain excluded can be identified.

Since feed grain for domestic use and feed grain for export cannot be visibly identified as such and separated, the minister may not have the power to continue the domestic feed market under the new act.

Further to this, if the exclusion is significant, and 65% to 70% of feed barley consumed on the prairie is certainly significant, the legislation requires that a vote of producers be taken.

In other words, the restrictions placed on the replacement for paragraph 46(b) would seem to us tantamount to a re-regulation of the domestic feed market. The minister has assured farmers that it is not his intention to change domestic feed sales. Unfortunately, the intentions of the minister don't count in court, as the government learned during the short-lived 1993 dual barley market. Only the words of Parliament count, and they are expressed in statute.

The answer to this dilemma is to remove the restrictions placed on the new relevant clauses and revert to the more simple language of paragraph 46(b).

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In conclusion, third-generation farmer and former Liberal politician John Hyde made the following comments to a society conference on deregulation:

A slave is a person who is forced to devote his life to the service of another. Slaves are no less slaves if they are rewarded with lives of gilded luxury which they could not hope to obtain for themselves - a not uncommon circumstance in the days when slavery was widespread. A slave is one who does not own his own labour. The right to dispose of his labour as he chooses affects even those people who have nothing else to exchange but their own labour.

The Canadian Wheat Board Act enslaves farmers in that it takes away their right to dispose of the fruits of their own labour. There is no place in modern society for the kind of patronizing attitude of those who say, ``I know what's good for you, so do what I say''.

It is clear to us that Bill C-72 must be redrawn and rewritten. In reframing the law, the government must make the Wheat Board voluntary and eliminate its monopoly powers, privatize the Wheat Board by turning it over to farmers and removing government from its governance, follow the excellent advice contained in the Western Grain Marketing Panel report, and allow wheat and barley farmers the same freedoms and opportunities enjoyed by other producers in Canada.

The Chairman: Thank you very much, Mr. McMorris, for your presentation. We will now go to questions and comments from the members, beginning with Mr. Hermanson.

Mr. Elwin Hermanson (Kindersley - Lloydminster, Ref.): Thank you, Mr. Chairman.

Good morning, Ms Jewison and gentlemen. It's good to be in Alberta and to hear your presentations.

I understand, Mr. Wilson, you are speaking on behalf of 30,000 livestock producers. Is that all the livestock producers in Alberta or are there more?

Mr. Wilson: Anybody who has sold cattle in Alberta is a member of the Alberta Cattle Commission's check-off system, and that's where we get the figure of approximately 30,000.

Mr. Elwin Hermanson: We've asked this of several groups. We had the NFU appear before us yesterday in Saskatoon, and they said they were speaking on behalf of 10,000 people Canada-wide. Then several other groups and subsidiaries of groups had as few as 6 or 10 or maybe 30 members. So it's good to recognize that you come from such a large sector and in fact probably speak for the largest agricultural industry in Alberta.

We've heard some interesting things from some of these individuals over the past two or three days. The Alberta plebiscite was roundly criticized. Some compared it to the referendum in Quebec as if it were some kind of evil, sinister thing perpetrated on the farmers of Alberta. We heard farmers and groups say the oat market was devastated when it was taken off the board, and we didn't hear that evidence from you in Alberta.

In light of all that, being an MP from Saskatchewan, I'm appalled to see that we are so export-oriented without value-added. In fact we've exported 200,000 of our residents to Alberta, and that really concerns me. I sense that you're promoting value-added, and I think that's where our jobs have gone. So that's quite impressive.

You've probably heard that Saskatchewan is diametrically opposed to ending the single-desk selling of the Canadian Wheat Board. The Government of Saskatchewan did a survey of 800 producers, and while a good 80% of those producers supported the Canadian Wheat Board - and I think the numbers are pretty high in Alberta, too, for general supporters of the board - 58% of those 800 producers said participation in the Canadian Wheat Board should be voluntary.

That's been pretty well kept under wraps by the provincial government, but I have a copy of the survey here. They said the board has significant market power, but they're not sure the board even gets them the best price for their grain. That has not come through in a lot of the presentations we've heard from groups to this point, but it is a fact nevertheless.

As for this Senechal paper, I'm looking forward to reading it, because we've been challenged and I've been challenging other groups to show how dual marketing in our voluntary system can work. If you have evidence to that effect, I appreciate that. You've done a good service.

Mr. Paszkowski, you said in your brief that this bill is no good and it should be withdrawn. The way our calendar is looking and with the potential election coming in June - we don't know for sure, but that may become a reality - we may not get this bill passed, given its many flaws, before it can be corrected. In fact, we may be stuck with the status quo, which again means we have the problems of the past going with us into the future.

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We have great division in the prairies, not just between Saskatchewan and Alberta, but within your province, my province, and the Province of Alberta. You've suggested that if this isn't fixed and the government isn't prepared to fix it, you'd like to see the provision that Alberta could opt out of the Canadian Wheat Board's designated area. That's something I have suggested might happen even in the House of Commons, but I haven't suggested that would be the best option. In that case, some of your farmers who want to market under the Canadian Wheat Board would not have that option. Also, farmers in my province and in Manitoba who want to opt out of the board and not market through the board still wouldn't have that option. They'd still be under the single-desk umbrella.

Would you expand a little bit as to how serious you are about demanding this right to opt out, in light of the ongoing division in the prairies over this issue and the fact that this bill may not be passed?

Mr. Paszkowski: Certainly we're serious. We feel that whatever the intent of the bill is, it has to be something to improve the lot of the producer. Ultimately, at the end of the day, I ask the question whether the institution is there to serve the farmers or the farmers are there to serve the institution. If the institution is there to serve the farmers, then all the goals and objectives should be for the benefit of the farmers so that the final cash return in the pockets of the jeans of the producers are greater than they are under the present system.

We think that can be achieved through proper structural changes to Bill C-72. We don't see that in this present legislation the way it's written.

Ultimately, at the end of the day, we've made some recommendations as to rewrite. We don't even suggest this has to be done immediately. We think that can be done through a transition process. I alluded to the fact that indeed we could do this a step at a time.

Ultimately, we feel producers want the options. They want to be able to have market alternatives, and that's very difficult to deny in a democratic system and a democratic process. It's very difficult to deny the fact that you are compelled to market through a structured process.

What we have to design are a structure and a process that are going to put the maximum number of dollars in the producer's pocket. That can only be done by developing a competitive, efficiency-driven system. Until we have an efficiency-driven system, we won't be able to get the maximum return to the producer. The fact that we're obtaining gross value doesn't really matter; it's what's net in the producer's pocket at the end of the day.

Mr. Elwin Hermanson: Clause 2 of this bill indicates more clearly than in the current legislation that this act is binding upon the provinces. Whenever a province shows interest in federal legislation or is in fact mentioned in the legislation, I believe it's appropriate for a fair bit of consultation to have taken place.

When the Minister of Agriculture for Manitoba appeared before our committee, I asked if this consultation had taken place with the drafters of Bill C-72 prior to our coming to Winnipeg. He indicated to us that consultation had not taken place.

So I would ask you, as the Minister of Agriculture for Alberta, have you had extensive consultations with Mr. Goodale and his people about the drafting of this legislation? Obviously, if there was consultation, your viewpoint wasn't taken very seriously, given your critique of the bill.

Mr. Paszkowski: We certainly took every opportunity to present our views and the views of the producers in this province, and have done that in many cases as to the wishes of the province. We even went through the process of a plebiscite, through the consultative process, which consisted of round tables throughout the province. This consisted ultimately of a plebiscite to hear the views of the producers of this province. As I've pointed out, 66% of the producers indicated they wanted choice. We don't see choice in this present form of the legislation.

As far as clause 2 is concerned, the federal government did not consult with us. We feel it's important that at the end of the day we have a piece of legislation that is going to work toward the maximum benefit of the producers of this province.

Mr. Elwin Hermanson: So what are you going to do? Under the current legislation there are arguments that say you can't opt out. Certainly, under this bill, this is binding upon you. What authority do you have? Are you just making a request of the federal government to let you opt out, or do you think there are some tools or mechanisms whereby if you don't get a voluntary system you could be more forceful in removing Alberta from the jurisdiction of the Canadian Wheat Board?

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Mr. Paszkowski: It becomes very difficult to be part of a group when your views aren't heard. Consequently, I would expect this group will take the views of the majority of Alberta producers - although not all. We certainly accept the fact that not all Albertans agree with our position, but the vast majority do. In a democratic process, majority does rule.

It is our hope that indeed this group will take our views back to the minister and see that there is a rewrite in the whole process. The opting out should be an amendment that's included in this legislation.

Certainly, with this initial report, we've shown conclusively that voluntary pooling does work successfully, co-existing with other competitive types of business in a particular commodity. If necessary, we could certainly provide voluntary pooling to Alberta producers on a voluntary basis. I don't see that as the end of the world, if indeed Alberta had to go it alone.

I think we could quite effectively develop one of the pillars that was identified in the three major pillars of the structure of the Wheat Board in order for it to exist. One of them was identified as pooling. We could establish a volunteer pooling basis quite effectively within the province of Alberta.

Mr. Elwin Hermanson: Before I go on to the cattle people with a question, a comment I would make to you, Mr. Minister, is that in fact if Alberta opted out and we had the ability to move our grains interprovincially, you may have another value-added industry of carrying grains out of Manitoba and Saskatchewan. They could be accepted into Alberta and then marketed through the open market on behalf of producers who didn't want to market through the board. That would further complicate this whole issue.

The cattle association people who are represented here talked about their concern if the board entered the barley market on a cash basis, as it would have an undue influence on price and supply. You didn't really say whether that concern is simply based on the fact that the board has a monopoly on barley exports.

If in fact the board had this power, but price-setting was perhaps more transparent because of a dual market, would your concerns be as great? I guess what I'm saying is if the board was only one player in the selling of barley for export, would you have that same fear that they would be able to influence supply and price if they were able to buy on a cash basis, or is that irrelevant to the situation? Are they such a big player that even in a voluntary situation, if they had that ability, they would be able to distort things?

Mr. Wilson: Our attitude is that if it's a dual market, we have no problem. It would work fine.

Mr. Elwin Hermanson: Is that the same position as your organization, the Western Stock Growers' Association?

Mr. Foat: I would like to suggest that if the Canadian Wheat Board is going to be an item in the cash market to access the cash barley market, then the producers should also be able to access Wheat Board stocks on a cash basis.

Mr. Elwin Hermanson: Do I have a minute or two left? I'll give the remainder of my time to Mr. Benoit.

The Chairman: Welcome, Mr. Benoit.

Mr. Leon E. Benoit (Vegreville, Ref.): Thank you, Lyle.

Good morning, ladies and gentlemen. I have one brief question.

I would like to get to the legislation itself. What I found in the legislation is that in several areas what the legislation provides for is quite different from what the Minister of Agriculture has been saying is in there. For example, there is no requirement in the legislation that a majority of electors be elected. It says they may be elected.

Of great concern is that when I was questioning Mr. Migie, the deputy minister responsible for this legislation, on that issue, he said it was just enabling legislation. In other words, I guess he was saying that it doesn't require that a majority be elected.

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That's a concern to me. It would have been very simple to put in the legislation that a majority would be elected and leave some flexibility in regard to numbers.

When you go through the legislation and look at the issue of accountability, of course you have an appointed chair of the board of directors, you have appointed directors, and you have an appointed CEO. Any decisions made by the board, even if they do choose to have a majority elected, have to go through a screening process by a government body, such as the Canada Grain Commission. You have the minister having the power to kick out any director, be it an appointed or elected director, without cause. You have all these things. So the stated intent of making the Wheat Board more accountable really isn't there in the legislation when you look at it.

I could go on because there are other changes.

The Chairman: We don't have the time.

Mr. Leon E. Benoit: I understand that, Lyle, and that's why I'm trying to get through here.

The Chairman: If you want a comment, you had better soon ask for it.

Mr. Leon E. Benoit: I'd like you to comment on this legislation, specifically on what is and isn't here, from your examination of the legislation, as compared to even what the Minister of Agriculture has been saying is there. Of course, what the Minister of Agriculture has been saying is very little like what the panel recommended.

Mr. McMorris: I'll comment on that. The board is most certainly going to have a lack of farmer input, and it's a very great concern. The minister said that in the transition period the board could probably be elected by the year 1998, but not necessarily so.

For clarification, as a producer I am with the Western Stock Growers' Association, but my prime source of income is from the sale of export grain, so it is of great concern to lose this kind of power. We didn't have it too much before, but this is definitely going the other way. It's centralizing control and to me entrenching more the monopoly from which I think we should be moving away.

The Chairman: John, do you have a brief comment?

Mr. Prentice: What bothers us in the whole question of governance is presently the commissioners of the Canadian Wheat Board are appointed and they operate under a broad government mandate to look after the public good. You get the farmers electing the majority of the board, as is proposed, and these people are accountable to the farmers. Sure, Mr. Migie says they still operate under a broad government mandate, but I would suggest they are accountable to the people who elect them. I don't see any minister unseating them for trying to do the best job in terms of maximizing price.

Where we have the problem is that you've changed the governance and the focus and all the problems the Canadian Wheat Board has identified in terms of accessing grains for export. Like the pooling system in a rising market, you can't access the grain because no one is going to sell. So you give them the power to truncate the pools and the power to increase the price overnight, but on top of that you give them another tool to access cash grain. It alters the whole supply and demand dynamics, raises the price, and gives them a contingency fund to do it. Who is to say that vindictiveness or something doesn't come into this thing just to get the price up?

Let's not forget that our price is quite often above the United States or equivalent markets that we compete in and it's quite often below. If you're only going to drive the price up when we're below but not cause it to go down when we're above by allowing us to access Canadian Wheat Board stocks, that's no good either.

We operate on a continental basis and we need to have a free flow of all our raw materials, feeders, and grains, just like we have with that.

The Chairman: Thank you, Mr. Prentice.

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Just before I go to Mr. Easter, I wonder if you could clarify something, Mr. Wilson, from the cattle commission. You said there's a check-off for cattle people who market cattle in Alberta?

Mr. Wilson: It's true.

The Chairman: Is that a voluntary or compulsory check-off?

Mr. Wilson: That is a compulsory check-off, but we've had a plebiscite on it, and the majority of the producers were in favour of it.

The Chairman: Okay, thank you.

Mr. Easter.

Mr. Wayne Easter (Malpeque, Lib.): Thank you, Mr. Chairman. In fact, I had the same question. I was wondering if it was voluntary. I assume, then, it's under provincial legislation?

Mr. Wilson: Yes, it is.

Mr. Wayne Easter: Thank you.

I just want to come to another point that Mr. Hermanson raised with the minister on the plebiscite. Producers basically said they wanted a choice, and I know there was criticism raised by some people here in terms of the barley vote. One of the criticisms I heard of your plebiscite from people in Alberta and from people elsewhere in terms of its implications on the whole system was that it was one of those votes where it looked like you could have your cake and eat it to. You could have the single-desk selling system and you could also have the dual-marketing system, and they can't work hand in hand. The consequences of going to a dual system were not very well spelled out. What's your view on that criticism?

Mr. Paszkowski: I don't agree with that criticism. Alberta farmers are intelligent enough to understand the options. The options were understood by Alberta producers, and I'm surprised to hear there would be any suggestion that Alberta producers do not understand the results of a marketing structure. As a matter of fact, Alberta producers are more advanced than anywhere else as far as understanding markets and the market opportunities are concerned, and that's why they're asking for these opportunities.

So I don't believe there's a legitimate criticism there. There is a clear understanding of what those options were and what the intent would be of that particular plebiscite.

Mr. Wayne Easter: All of the witnesses in the hearings have been interesting thus far in that there's certainly lots of different opinions coming forward. Most of the witnesses here this morning raised concerns on the bill in total, I'll admit, but in particular on the bill's proposal to allow cash purchases.

There was a study done by Schmitz on the Canadian Wheat Board and barley marketing. From their point of view, and there are studies on both sides that recognize this as well, they said that their study clearly establishes that the single-desk selling of barley creates more sales revenue for western Canadian farmers than would be created if there were multiple sellers due to the ability of the Canadian Wheat Board to exercise market power on behalf of western Canadian farmers.

That's from a barley seller. From your point of view, in terms of opposing cash purchases, is it from the point of view of being a seller of barley, a buyer of barley, or both? Directly to the cattle producers...I'm assuming that you believe that the impact of the Wheat Board to cash purchase could have a disastrous effect on your supply or on your price. Could you just comment on those points.

Mr. Paszkowski: First of all, you've quoted an interesting study, because two years prior, that same gentleman had done a study that indicated that indeed the domestic price of barley was higher than the export market price. So he's really on both sides of the issue with the two studies that were only two years apart.

The farmer can't manage his cashflow, and really that's part of the...if he doesn't know when the Wheat Board is going to have its cut-off, he doesn't know what the Wheat Board's going to do. So ultimately, at the end of the day, the farmer has to have some insight into what the structure and the policy of the Wheat Board decisions are going to be in order for him to manage his operations. That really creates a problem.

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The other is that as long as we don't have an option and we only have this single selling desk, this becomes a direct competitor to the grain companies. So we actually have internal competition with somebody who has a leg up on the rest of the system. Ultimately, the competitor aspect of this could work under a compulsory marketing system, if there was a choice. Under the circumstances, you can't have a compulsory system dictating policy that indeed can have ramifications on the grain companies.

Mr. Wayne Easter: In terms of the rest of the witnesses...John?

Mr. Prentice: I read the Canadian Wheat Board brief, and their rationale for purchasing on the cash market was to give farmers improved cashflow. We have an open market that will do that right now.

The other point they made was to give a fuller pricing option to the farmer. That's being done right now. We have the Winnipeg Commodity Exchange. There's lots of base contracts being done with grain companies at seeding time with feedlots and what not. The tools are there to give the Canadian Wheat Board an in-hand stability to serve the export and domestic customers, and this point was made in relation to the rising market. If they can truncate a pool, you can get all the old stuff out of the way and the new price can be reflected immediately.

So the only thing I can conclude with them wanting this power is that it's all about control. I've pointed out how it affects the supply and demand dynamics by removing supply from the domestic market. It drives the price up. Basically, we'll end up exporting jobs.

Elwin raised this point earlier about Alberta opting out of the system and whether it would serve as a conduit for Saskatchewan and Manitoba grain to get to the United States. That's happening today, gentlemen. Alberta is buying lots of Saskatchewan grain and, presumably, Manitoba grain, and it's being exported in the form of cattle and hogs, and it will be in the form of gas additives and that sort of thing. This is all about control.

I just want to put this in context too. In the 1995-96 crop year in the United States they had late seeding. They had a drought. They had an early frost. They had grey leaf mould. They had corn borer. They had a heck of a situation. They were barging corn back up the Mississippi, and they were feeding 300 million bushels of wheat.

We didn't do that, and that's thanks to the Canadian Wheat Board. In November the Canadian Wheat Board planned with the farmers. They said you can get $4.43 net a bushel back at Lacombe and the open market is only paying $3.35.

What they didn't look at is that at this time, we were 55¢ over the United States. They could have taken all that grain out, and we could have been in the same situation the United States was and had $5.50 corn. I don't know why the Canadian Wheat Board didn't export then. What gets the farmers really mad is when they see $5.50 corn and we have $3.50 barley and we can't export it.

That's part of the mandate of the Canadian Wheat Board as it exists today: to operate for the public good; a gentlemen's agreement with the United States that they only service certain market areas in the northwest. Also, they're running a de facto national feed grain policy, which means a two million tonne carry-out, and if those things go by the board, that's what scares us more than anything.

Getting back to the cash market, Wayne, it's a sledgehammer to swat a fly. All the other tools will do it. They don't need that additional tool.

Mr. Wayne Easter: Any of the other gentlemen?

Mr. Foat: I would have to respond that for cattle producers it would be another liability in the marketplace they couldn't handle when you have a central desk or, I should say, a monopolistic company with a contingency fund to enter the cash market. The same rules don't apply to the other feed grain companies.

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Mr. Wayne Easter: In the minister's presentation - page 3, Minister, the second bullet down - you mention that under Bill C-72 farmers carry all the financial risk, apart from those associated with the guarantees of initial payments.

I have to ask you how you see that. I don't see that the way you have it here.

Currently there are the three guarantees. Either your brief or one of the others has pointed out that two of those guarantees could be covered in other ways. There's the guarantee on the initial, the guarantee on the export credit, and the guarantee on borrowings.

The reason the contingency fund is put in the bill is as a result of the adjustment on initials, which in theory is in the bill to try to allow the Canadian Wheat Board to respond quicker to changes, to provide quicker adjustments to initial price. The second reason the contingency fund is in there is the risk on the cash purchase.

I think it should be understood as well that it's in the Wheat Board report that the interest earnings, I believe, on borrowings for last year are in the range of $61 million, which is a substantial return that assists the Wheat Board and comes back to producers.

My question on your point there is, if the cash purchase was withdrawn from the bill, could there be a trade-off that the cash purchase be withdrawn, and the contingency fund as well?

Mr. Paszkowski: First of all, let's make it very clear that under Bill C-72 the contingency fund is going to be paid for by the farmers. They're the ones who are going to put the money in.

Mr. Wayne Easter: Yes.

Mr. Paszkowski: Again, what we're doing is exposing the farmers to additional risk. I appreciate you bringing this forward, because it is a point we're making throughout the presentation, that all Bill C-72 does is expose the farmers to more risk. That's exactly what will be happening here. It's expanding the risk horizon for the producers. That's our concern, because what we're really trying to do is see that the producers can continue operating. But they have to have the flexibility to be able to do that.

Under these conditions they can't access flexibility, yet they're responsible for an additional burden of risk. All we're going to end up doing is burying these producers at the end of the day unless we allow for some flexibility, unless we build a process that indeed shares risk, that is efficiency driven. The only way we can do that is through a competitive process. Competition drives efficiencies. Without that system, what we're doing with Bill C-72 is simply burying the farmer deeper with risk. That's the concern I have with this whole proposal. It's fundamentally flawed. We want to take it back and start from scratch and rewrite it.

Mr. Wayne Easter: The interesting point about the cash purchase is that many of those who are longstanding supporters of the Wheat Board are opposed to the cash purchase. Those, like others who are not exactly strong supporters of the Canadian Wheat Board, seem to be opposed to cash purchase. The reason the contingency fund is there is in fact to cover the risk of that cash purchase.

So if they were both removed, would that change your opinion on this bill, or do you still feel it has to go back to the drawing board?

Mr. Paszkowski: I think it should go back to the drawing board. I feel very strongly that what we really want to do is build a system that indeed will allow for efficiencies and transparency.

With the existing legislation in the way it is proposed and the way it's coming forward, neither of those two elements are present. Certainly, at the end of the day what we have to have is the sharing of risk. We have to incorporate that, and we have to incorporate it throughout the system. If we don't, at the end of the day we're going to lose the strongest link in the chain, and that's the primary producer.

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Mr. Wayne Easter: John, did you want -

Mr. Prentice: In the cattle industry we've had a policy, to my dismay, that grain matters for the grain producer. Yet our industry is built on feed grain, and we have a vested interest. We're the largest user. Removing the cash purchase from the bill would make it a lot more palatable, I must say.

I'm wondering if it isn't a straw man, the way you're speaking, Wayne.

Mr. Easter: I don't think it is. I think people see it as giving the board greater flexibility.

The last question I have - and we'll see if we get some time for Glen - is on the oat issue. One of the gentlemen on the other side, I believe Mr. McMorris, mentioned that oat production has increased. Do you have anything in terms of the figures? What we've been told by previous witnesses - let's see if we can clear this up - is that when oats were removed from the board, it was a disaster. The price tumbled. I just can't remember what the figures were off the top of my head. The price tumbled and as a result there was a net loss to the farm community. Can you clarify that?

Mr. McMorris: The only thing I can go to is that our source was Statistics Canada. I have the thing here and that was our source.

Mr. Wayne Easter: Murray passed me the figures. We were told that they dropped from $2.95 a bushel to $1.75 in terms of price.

A voice: Was that in Canada or...?

Mr. Wayne Easter: I can't answer that. If we could get clarification on the figures, Walter...

Mr. Paszkowski: Yes, Wayne. If you turn to page 4 of appendix I in our report, we deal with oats there.

Mr. McMorris: We're not talking price; we're talking production.

Mr. Paszkowski: We're talking both price and production.

Mr. Wayne Easter: Okay.

The Chairman: That's in the appendices, Mr. Minister.

Mr. Paszkowski: Page 4 of appendix I.

The Chairman: All right. It's there for the committee to observe.

Glen McKinnon.

Mr. Glen McKinnon (Brandon - Souris, Lib.): How much time is there?

The Chairman: You have time for a question, and if we need to we'll get back to you. I'll go over to Cliff after you.

Mr. Glen McKinnon: I would waive my time at this time and I'll get in the second round, Mr. Chairman.

Mr. Wayne Easter: I'd never have given up my time if I had known that.

The Chairman: Welcome, Mr. Breitkreuz.

Mr. Cliff Breitkreuz (Yellowhead, Ref.): Thank you, Mr. Chairman.

Glen, your generosity is overwhelming.

Mr. Glen McKinnon: When I get started, I want a long time.

The Chairman: He's certainly generous this morning.

Mr. Cliff Breitkreuz: Good morning, lady and gentlemen.

Thank you for your presentation, and I certainly commend you on your presentations.

Mr. Minister, congratulations on your re-election. Your government mandate, of course, has been greatly increased, and we hope that after the next federal election our mandate in this province will greatly increase as well. It doesn't have to increase that much, and we'll do it.

The Chairman: Why don't we talk about Bill C-72?

Mr. Cliff Breitkreuz: I agree, Mr. Chairman. Here it is right now.

I agree, Mr. Paszkowski, that Bill C-72 is a very bad piece of legislation. What it does do is concentrate more power in the hands of the minister and executive council, and there's no provision to change the single-desk selling component of the Wheat Board the way it operates now.

For a number of years, Alberta has led the country in beef and barley production. One complements the other. Given the dominance in the Canadian agricultural sector of beef and barley in this province, it's interesting to note that the beef can be exported across the line but that barley producers do not have that option under the current legislation or under the proposed. Of course, it perpetuates it.

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The government has controlled this for a long time, and Bill C-72 perpetuates this stranglehold it has on producers. We need options in this province, not strangleholds, Mr. Chairman. We need options in the way we market our grains, and that may be an option.

Mr. Paszkowski, are there other options you are pursuing, other than those my colleague mentioned? Something perhaps along the lines of the Ontario Wheat Producers' Marketing Board? Alberta has been a leader in a number of sectors in this country, and I think there's room for us to be a leader in this sector as well.

Mr. Paszkowski: Thank you. First of all, I'm impressed by the spirit of generosity that seems to exist around this table. I don't often see that around the tables I have -

The Chairman: Mr. Minister, we're from the government.

Mr. Paszkowski: Nevertheless, I have to compliment you for the spirit of generosity that seems to prevail here. It must be the Alberta climate that created this.

We're looking at all options, and certainly I've laid out a couple in the presentation that may indeed be intermittent steps. We could perhaps move the Wheat Board buying at the spout rather than buying inland. I think that would be a constructive first step, which would allow us to add value without any imposition or intrusion by a regulatory agency. It would allow competition to exist up to the spout, and from my perspective I'd say that's a valid first step.

As you know, we're actually challenging some of the restrictions that exist today in the courts as far as the existing Wheat Board legislation is concerned, because we feel it's important that producers have options.

Interestingly enough, these are the only two commodities that we produce as an agriculture community in all of Canada that are restricted. From my perspective, at least - and I'd like to hear committee members share their views on why we would choose two commodities from those we produce in the agricultural community in Canada, and choose those two commodities only, and put restrictions on them so that they can only be marketed in a certain way. To me it just doesn't make sense, and certainly it doesn't make sense to the Alberta producers. We've heard this loud and clear.

As far as options are concerned, we feel it's critical. We feel the only way you can create an efficiency-driven system is through the competitive process. We'll continue to strive to develop a structure that will indeed allow competition, which will drive efficiencies. The way the structure is today, any additional cost throughout the system is downloaded to farmers. That is not right, it's not fair, and it's one that has to be changed. This is a good first step and a good opportunity to start the process of change.

Mr. Wayne Easter: As a point of information, Mr. Chair, this is not restricted to two commodities. We have dairy, chicken, eggs, turkey. From our point of view we're talking marketing versus selling.

Mr. Paszkowski: That's not quite the case. With dairy and with chicken alternatives are being developed, whereby you can market to the export market and market to the domestic market. So that is falling apart; it's breaking up. We've already warned our industries that with the next round of GATT to start preparing for change, because everyone realizes change will be coming forward. We're in a global market now. What Canada produces in the agricultural community is not just for domestic market, and to structure for just a domestic market is not going to achieve...in the long term. Ultimately, at the end of the day, we have to realize what we do best. We produce high-quality product that is accepted around the world.

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Mr. Cliff Breitkreuz: Thank you, Mr. Chairman. I'm not given to verbosity, but it's refreshing to hear the presentations here - I just got back from Ottawa a week ago - from what we hear over there.

It's interesting to note these two commodities are only restricted in one part of the country, that is the prairies. That's it, Mr. Chairman.

The Chairman: Mr. McKinnon.

Mr. Glen McKinnon: I would like Mr. Paszkowski to comment on where he sees the Ontario wheat board vis-à-vis the Canadian Wheat Board and its relationship. Does he have information on that?

Mr. Paszkowski: Obviously we have two different modes of operation here. It seems rather interesting, as Mr. Breitkreuz has just indicated, that we do have two separate ways within the country of marketing those particular commodities.

From our perspective, I would like to see Bill C-72 taken back to the drawing board and specifically meet the needs of western Canadian farmers. If indeed the intent would be to incorporate the Ontario marketing board, I'm not in a position to comment on that. But I would like to see some form of legislation that specifically meets the needs of the western Canadian farmers.

Mr. Glen McKinnon: I've just pointed out that my information is that it does operate under similar regulations to the Canadian Wheat Board in terms of exports.

Mr. Paszkowski: Western Canada, of course, operates out of the Canadian Wheat Board and Ontario is under the Ontario wheat board. The board of directors is elected in Ontario, not appointed.

Mr. Glen McKinnon: Yes. In terms of exports...

Mr. Paszkowski: Yes. There are some fundamental differences.

Mr. Glen McKinnon: Yes. Let's come back to governance side. I'm asking all of you. In terms of the current position where we've got an advisory committee with commissioners who are running the entity, Bill C-72 does in fact put some farmer representation... Perhaps the current proposals are not to the degree of representation that some would like.

My question is, do you feel it's a start in the right direction? How do you feel, if C-72 does come forward, about the CEO being appointed by the government and the president coming from the board of directors, in terms of positioning? I'm talking here about the structure of the board itself. I'd be interested in your views.

Mr. Paszkowski: Do you want me to start?

Mr. Glen McKinnon: Anybody, sure.

Mr. Paszkowski: I have problems with an appointed CEO. If it's going to be appointed, it has to come from the board, and certainly the board should be the one to appoint the CEO, from my perspective. I think the key element is -

Mr. Glen McKinnon: Could I interject? Would that be from within the board or anybody?

Mr. Paszkowski: Not necessarily from within the board because the board should be the one that appoints the CEO, from my perspective at least. This is a $6 billion industry. We have to make sure it's in competent hands and is responsible to the producers as well.

Nevertheless, it's critical that we have the best people to serve the job. It seems to me the board, if they're going to be working in a proper manner with the CEO, should be the ones who are responsible for the appointment of the CEO.

Mr. Glen McKinnon: Does anybody else wish to comment?

Mr. Wilson: Our organization has a bit of concern with this new director system if they have the intent of exporting grain as their priority. We feel they may not look at the other sectors of the industry that are trying to establish value-added industries within this country.

Mr. Glen McKinnon: Could you expand on that point, Mr. Wilson? In what sense do you feel that? Do you have any selected cases you're aware of or scenarios that could occur?

Mr. Wilson: There's the situation where they can command the off-board purchasing of grain for exporting. This could hurt the feeding industry, in which we are making great advances in Alberta. If the intent of this board is just to get the best price from time to time and export grain, we have some concern about it.

Mr. Paszkowski: Could I just make a clarification of my proposition too? We're making the assumption on the basis that there will be choice, that the board would not be a monopoly.

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Mr. Glen McKinnon: Okay.

Mr. Foat: A good portion of the discontentment with the Canadian Wheat Board has been accountability. How would you define accountability? Is this accountability to the federal government or accountability to the producers? I would suggest the accountability to the producers is seriously compromised when they have no control over the board of directors or over the CEO. So our opinion would be that the producers should elect the board and the board should appoint the CEO.

Mr. Glen McKinnon: Okay. I come back to the cattle industry, which is well represented today with this group. My province of Manitoba used to have a fairly strong meat processing component in its economy. I would suggest that over the last ten years, or perhaps less than that, we've had a significant reduction in our ability to process the fat cattle that are ready to go to market. Most of them are shipped out here and most of them are processed in Alberta. In other words, we have exported some jobs.

My question - and I'm trying to be as polite as I possibly can be here - is, have there been some factors here in Alberta that have attracted the industry to be centralized in this province and, if you will, have been significantly reduced in my home province, as far as the processing is concerned?

The Chairman: Not a subsidy or something. No.

Mr. Foat: I'd like to suggest that Manitoba is probably going to be, if we deregulate the movement of feed grains, Alberta's toughest competitor in the feeding industry.

Mr. Glen McKinnon: Both cattle...or for that matter any product?

Mr. Foat: Cattle or hogs. The livestock feeding industry, because of its natural advantages to Manitoba, if you deregulate the movement of feed grains, will be in a prime position for not only the finishing of those animals but also for processors to move in there and be centrally located for export to the United States. They will be our toughest competitor.

Mr. Glen McKinnon: That's good news. We haven't seen that happening yet, of course.

Mr. Prentice: If you look back in history to 1944, just after the feed freight assistance was introduced, you'll find Alberta produced 35% of the hogs and the prairies produced 67%. That's just one example. It was the same in cattle and supply-managed products, too, believe it or not. We produced a heck of a pile of turkeys and milk in Canada.

A lot of water has gone under the bridge, a lot of deterrents, feed freight assistance and the Crow; these things have gone.

So value-adding is going to occur on the prairies. What we don't seem to realize is that when seaway pricing was addressed, it was just as important as the Crow, because that determined where on the prairies the activity was going to take place.

We find that Manitoba last year was the only significant province that increased their cow numbers by 4.5%. So it's going to come. We see vitality in Manitoba that's second to none.

Your question addressed why Alberta was ahead. A lot of that goes to actions our government took to offset some of the federal incentives, to export back the Crow offset. More particularly, and I've got to say this, I've been responsible personally for quite a few immigrants coming to Alberta over, for instance, Manitoba because of the so-called Alberta advantage. I was preaching that 20 years ago. We've still got it, and we're going to get it more in spades in the future, I think.

Mr. Glen McKinnon: I guess that's my time.

The Chairman: Elwin, and then to Murray. Elwin promised to be short.

Mr. Elwin Hermanson: Thank you, Mr. Chairman.

Mr. Minister, over the last two or three years there have been several comments from some farm organizations, from some members in the House of Commons, that somehow you and your department are the head of almost a conspiracy financed by the Alberta government through the plebiscite and through fundings of the Western Canadian Wheat Growers to try to destroy the board. I think you should have the opportunity to address this committee and respond.

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Is the Alberta government funding the Western Canadian Wheat Growers, and were you manipulating and funding and sort of behind the scenes directing the outcome of the Alberta plebiscite on marketing choice?

Mr. Paszkowski: We certainly aren't providing any funding to the Wheat Growers. We're not. We're categorically not providing funding to the Wheat Growers.

All farm organizations in Alberta at the present time are self-sustaining. We're not supporting financially any farm organization. We're working with all farm organizations and we'll continue to do that, because we feel that agriculture is the pillar of our economy in this province, and certainly our future and not our past.

We look at agriculture as one of the true strengths we can build on, and we'll continue to do that. Our role has been a facilitative role, and a facilitative role only. We have no conspiracy. We're simply working with the producers to see that at the end of the day they can pocket the maximum amount of dollars with the process that is in place.

We feel very strongly that government intervention has a tendency of really becoming discriminatory, because as soon as you have government intervention, you start imposing. I've always said, you can spend your dollar better than having me spend your dollar for you. That's the context I work with and will continue to work with, as far as the department is concerned.

So, no, we don't have any conspiracy. I know the last funding the Alberta government gave to the Wheat Growers was in 1992-93, which is before my time. Since I've been there, there has been no funding whatsoever.

Mr. Elwin Hermanson: And you didn't manipulate the question in the plebiscite?

Mr. Paszkowski: The question was really the one that I would like to have seen in the federal question, because it was the true question. It was, what do you as a producer want? It was not the two extremes. The way the question has come down now, it's either all or nothing. What we had asked the farmers was, what did they want? It seems to me that's the fairest question that could have been asked.

The Chairman: Thank you, Mr. Minister.

Mr. Murray Calder.

Mr. Murray Calder (Wellington - Grey - Dufferin - Simcoe, Lib.): Minister, I just wanted to clarify your statement about the export policy being established by the Chicken Farmers of Canada. I am a chicken farmer from Ontario. The export policy currently being established by the Chicken Farmers of Canada is one that will work underneath the national board's jurisdiction. The reason we want that is that everybody exporting chicken out of Canada will do it underneath the same rules, and those rules will be GATT green. That's just to clarify that point.

Regarding dual marketing and single-desk selling, one of the presenters yesterday threw out a very interesting option, which I'd like your comment on. He said he would be willing, underneath a dual system, to basically sign an agreement that he wouldn't market grain under the Canada Wheat Board. For ten years, if he was going to be on the open market, he would sell it that way, instead of having the option of jumping back and forth. What's your comment on that?

Mr. Paszkowski: I think there are many options that can be developed. What we really want to do is sit down with a vision and an open mind and develop a structure and a process that's accountable and transparent and meets the rules of the WTO. Ultimately, there are a lot of options that can be developed that will be a lot more beneficial than what the producers are using today. The option that I threw out of having the Wheat Board buy at the spout rather than buying inland is another option that could be useful as well, as a transition.

That certainly is something that should be considered, and if a producer feels that way, then it could be workable. I don't see any reason why it has to be ten years, because there are indeed weather variances that allow for production distortions of up to 50%. Certainly when the Wheat Board is marketing at this time of year, they don't know what the end result is going to be next fall. So ultimately, with variance of up to almost 50% in some commodities as far as production is concerned, I don't think it would have to be ten years. I think there could be a process, perhaps year by year or whatever, whereby you commit your grain to the Wheat Board or whatever.

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I think the important element we're really looking for is choice, so that you can sit down and make your own determination as to how you are going to handle your grain and how you are going to market the barley and the wheat.

The Chairman: Thank you.

I'll go to Mr. Wilson.

Mr. Wilson: Mr. Chairman, can I answer that personally?

The Chairman: You can answer it whatever way you want to, or you can get one of us to answer it for you if you want. It's up to you. Go ahead.

Mr. Wilson: This is not the Cattle Commission's stand.

The largest portion of my income comes from grain. To answer your question, I grow peas, canola, lentils, canary seed, cattle - and I market all of them without the board. A lot of people in our area - myself included - are growing crops they don't have to put through the board, because they would rather not use the board. I would be very comfortable signing an agreement for ten years to not market through the board.

The Chairman: Gary.

Mr. McMorris: Mr. Calder, I'm also going to get into a personal opinion. I would sign that same document. You made a statement earlier on the dual system to eliminate jumping back and forth. I think on the dual system the only way it could work is that you have to be locked in on a yearly basis. You either go board or you do dual. You cannot jump back and forth because that's not the fair system. But when you can be locked in a year at a time, that is a fair system because it gives the board a chance to make its plans, and then you have already made yours on the open market.

Mr. Murray Calder: Is a year long enough?

Mr. McMorris: It should be. Let's face it, when you first start out you have to experiment with this dual system. There will be a lot of experimentation by a lot of people. So I think the yearly thing would help them rather than locking them into a two- or three-year thing. That way they could feel it out; they could go on the board one year and go on the dual. It gives the board a chance to make plans. I can't see that you could jump back and forth. That would not be feasible at all.

Mr. Murray Calder: I have one short question.

The Chairman: Make it very short. We have benefited from brief presentations and we have taken a little extra time. I'd like to take the time to grab a cup of coffee and then come back.

Mr. Murray Calder: Are any of you aware of an example of dual marketing that exists today?

Mr. Paszkowski: It's in the report.

The Chairman: That was pretty brief.

To Ms Jewison and all the presenters this morning, gentlemen, I want to thank you very much for your cooperation. You were very brief and to the point in your presentations. We thank you for taking the time to come before the committee to express your views and thoughts on this issue. We look forward to your continued input.

Mr. Elwin Hermanson: Can I make a comment, Mr. Chairman, just as a thank you?

The Chairman: I thought I just did.

Mr. Elwin Hermanson: I just wanted to note that the Canadian cattle associations have come to Ottawa, and I'd like you to come back as often as you can. You're the only group that comes to Ottawa, serves us a good beef dinner, and tells us, please don't give us any money - and I appreciate that.

The Chairman: What Mr. Hermanson just said is he'll take a free meal any time you'll give him one.

We'll take a five-minute break.

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