EVIDENCE

[Recorded by Electronic Apparatus]

Tuesday, December 12, 1995

.0834

[English]

The Chairman: Ladies and gentlemen, we are ready to go.

Later today there will be a vote in the House, so the time period we had slotted is going to be cut back by approximately a half hour. I would ask every person who will be asking questions to try their best to limit the dialogue and to be precise and quick about the questions. I think we can get all the testimony and questioning completed, but it's a matter of the cooperation of all members of the committee to try to keep the questions as succinct as possible without a lot of rhetoric and dialogue with them. So I would ask for that this morning, if we could do it. We'll try to expedite everything so that all witnesses have a fair opportunity to present their case and answer questions as much as possible.

Thank you very much.

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At this time we have as our first witnesses, from the Western Barley Growers Association, Wayne Kriz, and from the Western Canadian Wheat Growers Association, Pat Durnin. So Wayne and Pat, we'll let you go ahead.

Mr. Wayne Kriz (President, Western Barley Growers Association): Good morning. Thank you, Mr. Chairman. I'm glad to be here this morning.

I think the issue really is the plebiscite that has recently been held in Alberta. I myself am from Rimbey. I am the current president of the Western Barley Growers Association, which is a farmer membership funded group. This past summer, though, I've also had the dubious distinction of acting as chairman of the Steering Committee on Wheat and Barley Marketing. That has been an ongoing process up to the vote we had here in November.

This came into being last February in the Alberta legislature when a motion was passed unanimously, motion 501, calling for a plebiscite on wheat and barley marketing.

Last spring, the agriculture minister in Alberta set up a steering committee to set criteria for the plebiscite and to develop the question. The people who sat on that committee really were the wheat and barley groups in the province. They consisted of 10 farm leaders and representatives from the wheat growers; the barley growers; the Alberta Winter Wheat Producers Commission; the Alberta Barley Commission; the general farm organization, Unifarm; the Alberta Grain Commission; and the CWB advisory committee. So there was quite a broad representation.

We worked over the summer to develop criteria and then eventually to come up with the question. We wanted to publish the question relatively early in order to give people lots of time to discuss it and be aware of it before we actually called the vote. So that's a little bit of the background on how we developed this thing. Everything we did as a committee was done by consensus, so we were in agreement with the final development.

I would like to turn it over to Pat now and let him give you a bit more background chronology. We'll be brief, because we know you have questions for us.

Mr. Pat Durnin (Chairman, Western Canadian Wheat Growers Association): Thank you, Wayne, and thank you, Mr. Chairman. My home base is Kathryn, Alberta, which is 20 miles northeast of Calgary, where I manage a straight grain farming operation with my wife and children.

As Wayne has said, we won't take long, because we know you have questions for us. I'll just try to give you some brief background as to the impetus for the plebiscite, why we conducted a plebiscite in Alberta, some of the criteria that were developed and our interpretation of the results.

The impetus for the plebiscite, I suppose, was due to the evolution that has occurred in agriculture over the past number of years in which marketing regulation has not really kept pace with the farmer. The farmers' learning curve and expertise in marketing seem to have far surpassed the regulatory system for grain marketing within the Canadian Wheat Board jurisdiction.

There's also the reality of new global trade agreements. There is also a thirst for value-added activity as traditional economies in western Canada erode. Those are due, of course, to changes in grain transportation regulation and a number of other issues as well.

The information age and the access to education have also created a need for farmers to diversify and a willingness to try new crops and new marketing systems, and farmers simply want to extend this to wheat and barley.

All the surveys in the past indicated that a change was supported in Alberta. In fact, on the prairies the Canadian Wheat Board did its own survey during the plebiscite, and the results of that survey were consistent with the results of the Alberta plebiscite.

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Farmers in fact have indicated support for change in various polls. Angus Reid polls have been conducted. United Grain Growers had polls they conducted; so did the Canadian Federation of Independent Business and the Dunvegan group. All those surveys and polls were consistent with the results of the Alberta plebiscite.

We initially developed criteria - that was our initial role as a committee - for conducting the plebiscite. We felt a voters' list was too limiting. We were afraid of missing people with a concrete voters list. So we chose to go the declaration route, which is a proven procedure in municipal elections and in which eligible voters simply declare their eligibility, sign their declaration, and obtain a ballot.

We wanted to pick a system of voting that would minimize abuse. You can't totally eliminate abuse in voting procedures of this nature, but we wanted to minimize the abuse and maximize the turnout for the vote. We suggested the appointment of a neutral returning officer to conduct the vote, to maintain integrity and neutrality in the process, and that was done.

Question development, as Wayne has said, was by consensus. We also tested the question by using an independent marketing firm, for fairness, bias, and ease of understanding. This test came back - it used a random sample of Alberta farmers - saying 72% of respondents felt the question was unbiased and fair; 24% had no opinion. We felt these results were adequate in the final analysis. They reflected the sentiments of the survey respondents on the question chosen.

The steering committee, which Wayne and I sat on, by the way, was composed of the ones who recommended that commercial concerns in the Canadian Wheat Board should exclude themselves from the debate. We felt there was too much vested interest in these groups. They had too much to gain or lose by the results of this vote. We felt farmers and their producer groups and organizations should be the ones who conducted the debate.

To move on to the campaign and the votes...for the most part these commercial organizations did refrain from debate. The one exception was the Canadian Wheat Board, which actively conducted a campaign. We felt, in observing this campaign, the Wheat Board's campaign reflected scare tactics. Slogans such as ``Freedom is anarchy and chaos'' were used. Of course they were questioning the word ``freedom'' in the plebiscite question. This is the type of campaign that was launched by the board.

Commercial grain companies, for the most part, did stay out of the debate.

There has been a lot of criticism over the question. The main criticism, of course, has been over the use of the word ``freedom''. We looked at a lot of nouns when we developed that question. ``Freedom'' won the day simply on its definition. Freedom is simply a condition of being unrestricted, and that's the question we wanted to ask farmers: are you in favour of being unrestricted in the marketing of your wheat and barley?

There was also criticism over the question from the Canadian Wheat Board, with their claim that they could not participate in an open-market scenario, given a yes vote to the question. That's pure speculation, we feel. There are many cases in history...in fact, there's the continental barley market experiment, in which the Canadian Wheat Board worked side by side with the open market and worked very well with it. We feel a lot of these representations are irresponsible, in fact, and we felt the manner in which they were used in the campaign did not truly reflect what may transpire, given a yes vote.

No boycott was ever suggested. We feel we should note that. If the question was so biased and unfair, we're wondering why the opponents to change in the system, the status quo supporters, did not suggest a boycott.

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Moving on to the results, the returning officer conducted the vote and the count and we feel that his conduct was beyond reproach. He did an excellent job.

There were 16,000 votes cast.

Let's remember that in this plebiscite farmers had to make an effort to obtain a ballot. I guess the last vote that was held of any significance regarding marketing could be construed as having been the Canadian Wheat Board Advisory Committee elections. In that case, ballots are sent to every permit book holder. No effort has to be taken on the part of the individual to obtain a ballot and to vote; you simply put a stamp on the envelope, mark your ballot, and send it in. The last Canadian Wheat Board Advisory Committee election drew between 10,000 and 11,000 votes out of Alberta. So our count in this plebiscite was substantially higher.

The provincial distribution was quite even. The northwest, northeast, southwest, and southeast portions of the province each received approximately 25% of the vote.

There were only 13 spoiled ballots in this plebiscite, which we thought was amazing. Out of the 13 spoiled ballots, there was only one comment written on a ballot, which we also found to be quite unusual. If this question was so biased and unfair, then we would have expected a lot more spoiled ballots and a lot more comments written on these ballots. Farmers obviously understood the question.

The 16,000 ballots cast have been criticized as being a low number. It has been suggested that there are 40,000 - some people have even suggested 50,000 - eligible voters in Alberta. However, the 1991 Alberta census of agriculture in Alberta shows us that 20,158 farms grew 193 acres or more of wheat and barley. This represents 83% of Alberta production. Therefore, approximately 20,000 farmers grew approximately 90% of the wheat and barley in Alberta. We suggest that commercial farmers, farmers who grow the larger acreage, more than likely voted in this plebiscite. So this plebiscite probably represented the vast majority of Alberta production of wheat and barley.

With that, I'll close and open it to questions. We certainly will take questions as well on our interpretation of the results and the action that we perhaps would foresee coming.

The Chairman: Thank you.

Mr. Chrétien.

[Translation]

Mr. Chrétien (Frontenac): I will be brief but, before asking my question, I would like to have some clarification about what was at stake in the plebiscite. Could you repeat the question that was on the ballots, and tell us as well the number of registered voters, the results of the vote and the percentage of votes cast? Then, I will ask my other question.

[English]

Mr. Durnin: Actually, there were two questions on the ballot, one relating to wheat and one relating to barley.

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The question relating to barley was, are you in favour of having the freedom to sell your barley to any buyer, including the Canadian Wheat Board, into domestic and export markets?

The second question on the ballot was, are you in favour of having the freedom to sell your wheat to any buyer, including the Canadian Wheat Board, into domestic and export markets? The number of votes cast in the plebiscite was approximately 16,000. In fact, I have the exact number here. For barley, 15,847 ballots were cast. For the wheat question, 15,591 ballots were cast. Those voting yes to the barley question were 10,452, which represented 66% of the ballots cast for barley. The votes in favour for wheat were 9,701, which represented 62% of the ballots cast.

In terms of a voters list, it's estimated that there was approximately 40,000 farmers in Alberta. In fact, I should turn this over to Wayne, who I notice has the statistics from the census I referred to.

Mr. Kriz: According to the 1991 census, we're showing that there were in fact 29,158 farmers in Alberta who indicated that they grew wheat or barley in 1991. Then, as Pat had mentioned earlier, there were approximately 20,000 who grew more than 193 acres of wheat and/or barley. Did we cover all of your questions?

[Translation]

Mr. Chrétien: Here is my other question. Since my election to the House of Commons, a bit more than two years ago, I have seen that the members of the Reform Party - and their number here this morning is testimony to their interest about farm issues, especially in Alberta - would often stand up to ask for major changes to the Canadian Wheat Board, whereas members of the governing party would defend the Board with a lot of determination.

Obviously, I am aware that the Canadian Wheat Board could do with some changes in order to renew itself since it has been in existence for many years and that we are closing in on the year 2000.

A clear majority of your farmers voted yes in the plebiscite, a result which I had been hoping for on October 30 in Quebec, of course.

Some hon. members: Oh, oh!

Mr. Chrétien: You have read to me the questions that were put to wheat producers and to barley producers. Even though I am not directly involved, I can tell you that I too would have voted yes to these questions because they meant that the farmers could get nearly everything they wanted. They were offered the moon: they could keep the Canadian Wheat Board while enjoying complete freedom to sell their crops directly. So, I too would have voted yes, unless someone had come up with very strong arguments for me to vote no. But my first inclination would have been to vote yes.

So, you voted for changes. Could you tell me what are some of the major changes that you would want to be made to the marketing system for wheat and barley?

[English]

Mr. Kriz: Basically the change we want has to do with the voluntary nature of the Wheat Board, and that's what we'd like to see. If you're suggesting that you would have voted yes on the basis of the question, are you suggesting that it was designed simply for that yes vote? I'm wondering what you're getting at with that comment or with that question.

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[Translation]

Mr. Chrétien: Let me clarify. The question was as follows: are you in favour of having the freedom to sell your crop as you wish, including to the Canadian Wheat Board? In other words, any producer wanting to continue dealing with the Canadian Wheat Board could have done so, and any producer wanting to sell directly would also have had that possibility by voting yes. Was that the meaning of the question?

[English]

Mr. Kriz: That's correct. I guess the question then is, can the two co-exist? We believe very strongly that in fact they can.

It was only two summers ago that I discussed this very thing with a commissioner of the Wheat Board who attended our summer barbecue in Alberta; this was when the continental barley market came into existence. We sat down together and tried to develop the sorts of things that needed to be developed to create a situation that would allow the board to co-exist and operate in a manner that worked for farmers in that situation. So, yes.

The Chairman: Mr. Hermanson.

Mr. Hermanson (Kindersley - Lloydminster): Thank you, gentlemen, for coming before our committee.

I think I have a couple of very important questions. First of all, you said there was consensus among 10 farm organizations over the question. That's certainly not the story we have. We have been told by opponents of the question that somehow a couple of interest group farm organizations cooked up this question and hatched a plot to try to destroy the Canadian Wheat Board. That's not what you're telling us here at this committee. Can you tell us whether the Canadian Wheat Board advisory board and Unifarm were involved in developing the question and consented to this question?

Mr. Kriz: Yes, we had one CWB Advisory Committee member sitting on the steering committee as well.

We thought it gave good representation. Who else would you have sit on the steering committee but people who belong to wheat and barley organizations; for instance, the general farm organization, and the Alberta Grain Commission. Those are the people who should have been involved and were involved.

Mr. Hermanson: The other question is on funding. There have been a lot of allegations that this plebiscite was funded by the Alberta government or that the organizations that supported the yes campaign were somehow funded by the Alberta government and that the no side was underfunded. You said, if I understand correctly, that the Alberta government did not fund the yes side or the organizations that were in the yes side, but that the Canadian Wheat Board actually actively participated on the no side, even though it was a critical player in this whole question?

Mr. Durnin: The funding for the steering committee's work, for the chief returning officer's work, and of course the balloting, the collection and counting of ballots was funded by the Alberta government. There was no funding at all for what you would call the yes side or the committee for a yes vote. All of the funding for any campaigning for the groups that Wayne and I represent and the groups that were involved with us came from individual producers, farmers, and contributions. There was no Alberta government funding at all.

In terms of the Canadian Wheat Board, yes, the Canadian Wheat Board did send staff to participate in meetings and to present its case for the status quo.

Mr. Hermanson: I know that when the Wheat Board advisory elections were held, there was some concern with the mail-in ballots, and that in fact if producers didn't want to participate in the vote they could throw their ballots in the wastebasket at the post office and someone else could come along, collect those ballots, and vote 10 or 15 times. Was that possible with your mail-in ballot, and was there any abuse that you've identified with regard to Alberta farmers voting twice, once in one district and once in another district, or once by going to an office and also through the mail? Do you want to elaborate on that at all?

Mr. Kriz: No, because basically you had to take the initiative to request a ballot, and you'd do that by calling a 1-800 number. You also had the option of going to the district agricultural office and casting your ballot in person.

Out of the 16,000 that were cast, 13,000 chose to go to the office and vote in person and 3,000 voted by mail. They had to call, get the ballot, and then they had to fill out an application or do the declaration forms so that they were eligible. And then, if there was any duplication in voting, the ballot would be spoiled.

Mr. Hermanson: I also heard an allegation that your name was on the ballot or was associated with the ballot. Do you want to elaborate on that?

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Mr. Kriz: Obviously when they sent you the package, through a declaration process, you had to sign the form that you grew wheat or barley. That was the only attachment. But when it came to the actual vote and the balloting, of course there were no names. It was like any election.

Mr. Hermanson: On this poll that was commissioned by the Canadian Wheat Board, which was done by Western Opinion Research, they are claiming the results of this poll were different from the results of the Alberta plebiscite because they changed the question.

Actually, when they asked a question similar to yours, I believe 68% of Alberta farmers responded yes, but then when they changed the question to ``Would you still vote yes if this meant the elimination of the Canadian Wheat Board?'', I was shocked to find that still 29% of wheat growers would vote yes and there was even a higher 36% of barley growers.

That tells me the mindset in Alberta has certainly changed. There has to be an awful lot of concern about the performance of the Canadian Wheat Board if that many farmers would vote yes even if it meant its elimination, and you're talking about a dual marketing or a companion wheat board and marketing outside the board.

Do you want to comment on the changing attitude towards the Wheat Board or on whether or not these figures from the Wheat Board poll are accurate, in your opinion?

Mr. Durnin: The figures that reflect the attitude of farmers who were polled actually are very consistent with the results of the plebiscite itself. I think they're a little stronger. However, we have to remember that poll was conducted before the campaigning began and before the Canadian Wheat Board was presenting their case in the country.

While in the results of the plebiscite itself the numbers are a little lower, they're fairly consistent. In fact the 30% who reject the Canadian Wheat Board totally we found to be quite interesting as well; 30% of farmers in the Wheat Board's own poll have suggested they can get by completely without the Wheat Board.

That was not suggested at all in our plebiscite question. This is why we included the words ``including the Canadian Wheat Board''. Our question was designed to ask the farmer whether or not he was in favour of choice, not elimination of the board.

The Chairman: Mr. Breitkreuz.

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

First of all, I certainly commend you on your presentations. Like Albertans, you're brief and to the point; you shoot right from the hip. I also commend you on your involvement in your respective grower organizations and also on your role in the Alberta plebiscite.

You mentioned there was some Canadian Wheat Board involvement during the time leading up to the actual vote. How do you see that falling out? What kind of effect did their active involvement have on the results of the vote itself?

Mr. Durnin: We can probably only give you our personal opinions on that.

My personal opinion is it had very little effect. Farmers knew what they were voting for. They understood the question.

The results of the plebiscite, given the low number of spoiled ballots and the excellent turnout, suggest there was very little effect, perhaps a few percentage points, but farmers know the issue and farmers know what they want.

Mr. Kriz: I would agree. I don't think there's any great wave of change in Alberta. This has been a consistent thing over the last number of years, and the polling we did years ago indicated the same thing.

You could simply not have held any type of campaign and just put the question out, and I suspect you'd have gotten the same result.

Mr. Breitkreuz (Yellowhead): In your opinion, what would the majority of members in your respective organizations think about what the federal Minister of Agriculture had to say about the plebiscite in our province - basically that he won't respect the results and that it's just one window of what producers are thinking?

Mr. Kriz: From my perspective anyway, the most disappointing aspect of his comments was his comment that the plebiscite really was an academic exercise and wasn't valid. He questioned the process, etc.

Obviously it was an exercise in democracy. The question was clear. The turnout validated that.

That was the most disappointing aspect of his comments to me.

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The Chairman: Thank you very much.

Mrs. Cowling, very briefly, then Mr. Easter, very briefly. If we can get all of that done in a couple of minutes, then I'll go to Mr. Benoit, very briefly. I'm trying to keep this to 35 minutes. That means every group will have approximately the same time.

Marlene.

Mrs. Cowling (Dauphin - Swan River): Thank you, Mr. Chairman.

I would like to have a clarification on the record for what Mr. Hermanson indicated about producers throwing their ballots in the waste-paper basket. Most farmers I know have far more credibility than that. In fact, I don't think that argument holds any water.

Mr. Hermanson: There were 40,000 ballots....

Mrs. Cowling: Mr. Chairman, I've had a number of questions come to my office from farmers in my area and from grain producers who are very concerned about the vote and about the ballots that were cast in Alberta. They felt that it did not reflect the attitude of farmers toward the Canadian Wheat Board.

My question is very clear and very concise. All I need is a yes or a no. If the question had been posed and had been very clear, and if in fact the question had been, ``Do you support the Canadian Wheat Board, yes or no?'', what do you think the response would have been?

Mr. Durnin: That question is entirely suggestive of the elimination of the board. We did not want to pose that question. We posed this question: ``Are you in favour of choice?''

I suppose my answer is no.

The Chairman: Thank you very much.

Mr. Easter.

Mr. Easter (Malpeque): Thank you, Mr. Chairman.

You stated that the Canadian Wheat Board Advisory Committee had a representative on the committee. I believe the individual was Mr. Cutforth -

Mr. Durnin: That's right.

Mr. Easter: - who was the only one elected in the last election who was not pro-board. Was he sitting on that committee with the authorization of the advisory committee?

Mr. Durnin: I would have to say no. Mr. Cutforth was asked to sit on that committee by the minister.

Mr. Easter: So then really he wasn't sitting on the committee as a representative of the advisory committee.

Mr. Durnin: He was sitting there as an individual who I guess wore two hats. One was for the Alberta Grain Commission and the other was for the advisory committee to the Canadian Wheat Board.

Mr. Easter: The question.... To me there are little similarities between it and the Quebec question.

Some hon. members: Oh, oh!

Mr. Easter: It seems to be a question that would be hard to vote against, even for somebody like me. It seems to be a question that has something and everything for all people. Was the question market-tested prior to being officially released?

Mr. Kriz: Yes.

Mr. Easter: Was the question market-tested in such a way as to come up with the answer you wanted, which was yes?

Mr. Kriz: No.

Mr. Easter: No?

Mr. Kriz: It was tested for bias, for understanding and for fairness. The sample was 25 people. It was statistically insignificant. It was just a matter of doing some testing to make sure that if you put the question out there people weren't going to say they didn't understand what we meant. That was the simple basis of the test. That's it.

Mr. Easter: Who did the testing?

Mr. Kriz: It was a communications firm.

Mr. Durnin: It's called the Aspen group.

Mr. Easter: Was it FWJ?

Mr. Kriz: Yes, it was FWJ.

Mr. Easter: Did they also advise you about these three points? In order to win the vote, did you have to employ a strategy of three points: first, discredit the Canadian Wheat Board; second, discredit federal politicians who might be involved in the process; third, attack the board but don't give alternatives of what you'd replace it with? Did they also recommend that strategy?

Mr. Durnin: No.

Mr. Easter: No? Okay, I have just one last -

A voice: [Inaudible - Editor]

Mr. Easter: No. In fact, that information came from a fairly good source.

In terms of moneys being spent on the campaign, I have here the Pro-Farm publication put out by the Western Canadian Wheat Growers. When you read this information in terms of.... I wouldn't want to call it propaganda, but it is fairly certainly leaning toward the ``yes'' vote. I understand that this publication was sent out to all barley producers.

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I want to make two points here. One, in terms of the statistics you gave us on the number of farms, on the argument of the low vote, you gave us the statistics on the number of farms. Correct? Could only one producer vote per farm?

Mr. Kriz: No, anyone who had a financial interest could vote.

Mr. Easter: So it's like comparing apples and oranges. The farm statistics you gave us don't compare with the actual number of producers who could have voted?

Mr. Kriz: I think they reflect.... I don't think many more individuals would vote than the number of farms.

Mr. Easter: I ask the question because I understand that this publication went out to - and I could be wrong on this figure - something like 40,000. I forget the number.

I understand that the distribution of this publication was funded by the Alberta Barley Commission.

Mr. Kriz: The Barley Commission certainly spent money on the campaign.

Mr. Easter: So money was spent by organizations.

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

Mr. Landry.

[Translation]

M. Landry (Lotbinière): There are certainly very serious concerns if 29% of producers want the Canadian Wheat Board to disappear. Could you explain some of those concerns?

How can you claim that the Canadian Wheat Board could survive in a system offering also complete freedom to sell?

[English]

Mr. Kriz: I think the reason is that generally farmers in Alberta recognize that the Wheat Board simply isn't equipped to do all of the things that we need it to do and they need the private trade to do some of the things that are necessary. Many markets are being missed. The Wheat Board has problems with sourcing, particularly in barley. That's really the nature of the desire, on behalf of many, simply to eliminate the board.

The Chairman: Mr. Benoit.

Mr. Benoit (Vegreville): I attended one of these meetings and there was a Canadian Wheat Board employee there.

I was asked by a group to attend several of the meetings in northeastern Alberta. I refused. I said, ``I think it should be farmers who present the case on both sides; they can present the case very well. Why on earth should I get involved? Even though I still farm, I'm a politician.'' I understood that the Wheat Board wouldn't be involved. I got to the meeting and there was a farmer on the yes side and the Wheat Board on the no side. I believe that gentleman's name was Harvey Brooks, and 90% of what he presented really wasn't relevant to the issue being discussed. I believe that scare tactics were being used by this presenter, and I was quite upset.

Some of the comments I heard at the meeting were that farmers weren't happy -

The Chairman: Mr. Benoit, would you ask a question, please.

Mr. Benoit: - with the Canadian Wheat Board spending their money to argue one side of the case. Did you hear that comment at meetings you were at? This Wheat Board representative is paid for by all farmers who market grain.

Mr. Durnin: We heard the same comment being made by farmers. They were disappointed that their dollars were being spent to fund employees from the board to travel and present, I guess, the status quo case to farmers. They felt it was an issue that farmers should be debating among themselves.

As for the information, there's nothing new; we have been there and have done that. The information has been out there for years. We've debated this issue for years, and we thought it was time for farmers to engage in dialogue among themselves to determine where they wanted to go.

The Chairman: Thank you very much, Pat and Wayne. We really appreciate your coming forward, because it was a long trip. Your testimony was helpful to the committee.

The next witness is from the Western Grain Marketing Panel: Tom Molloy.

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Tom, when you're ready, we're ready. Go ahead.

Mr. Tom Molloy (Chief Panellist, Western Grain Marketing Panel): Thank you very much for providing me the opportunity to meet with your committee this morning to talk about the process the Western Grain Marketing Panel will be following in the months ahead.

As you know, our panel was appointed in July of this year. Our mandate was to lead a comprehensive examination of western grain marketing issues, built around an open prairie-wide discussion with farmers and farm organizations. We took our mission to be to propose options to the Minister of Agriculture and Agri-Food for a dynamic, efficient, effective, and responsive marketing system that best serves farmers and other stakeholders.

The overall purpose of the panel as the panellists see it is to provide analysis and information that will allow the grain industry to have an open and informed discussion about western grain marketing issues; and through analysis, consultation and public hearings, to develop options for the western grain marketing system that will allow the Canadian grains industry to attain its vision.

Specifically, we intend to address the following objectives: to determine our customers' assessment of our products and services compared with their needs; to assess Canada's current and future competitive position in each grain market; to determine what the value-added industries need for the grain marketing system and what the industry contributes to the Canadian economy; to evaluate the current western grain marketing infrastructure; and to assess the financing implications of various marketing systems in terms of attracting investment, providing credit, and encouraging sound risk management.

The panel has been asked to report to the minister by June 1996. It's our intention to have the report describe the results of the panel's consultation process. In areas where there is not a high degree of consensus, we will outline options, including their pros and cons, for a grain marketing system that will meet western Canada's needs as it enters the 21st century.

We have established our secretariat based in Winnipeg. The executive director is Dr. Murray Cormack, from Winnipeg. Murray has held a number of senior positions in the agriculture industry, including deputy minister, Manitoba agriculture department; chief executive officer of Manitoba Pool Elevators; and president and chief executive officer of Agro Company of Canada, a subsidiary of CanAgro.

After establishing our offices, the first task of the panel was to begin to identify the issues that needed to be addressed. We have recently published a sixteen-page tabloid, of which I had hoped to have copies for the panellists. I will see that you receive copies.

The tabloid is the beginning of our public phase. We have produced 250,000 copies. Last week they were distributed through Grain News, Western Producer, and The Manitoba Co-Operator. In addition, copies will be made available through members of the Western Grain Elevator Association.

This next stage, then, is the beginning of consultation. We will offer several avenues of consultation with farmers, farm organizations, businesses, and other stakeholders during the course of our review. We've planned a series of town hall meetings in fifteen locations in Manitoba, Saskatchewan, and Alberta between January 8 and January 26. We hope these meetings will offer a two-way exchange of information between panel representatives and participants and they will allow the participants an opportunity to discuss their views on important issues and to provide feedback to the panel. We have invited representatives from the Canadian Wheat Board, the Winnipeg Commodity Exchange, the Canadian Grain Commission, and representatives of the shippers and exporters to be present at each of the hearings, to provide answers to any technical questions that might arise during the discussion.

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The second phase will be public hearings. More formal hearings will be held in March of next year. These hearings will welcome farm and business organizations and other stakeholders to present their views on grain marketing in a formal manner to the full panel. This will provide farmers and organizations with an opportunity to advance their arguments and supporting evidence for or against different marketing methodologies, all of which will be subject to thorough examination and some form of cross-examination and questioning by those affected.

There will be a number of individuals and organizations who choose not to attend our town hall meetings or our public hearings but who would like to make their views known. There will be an invitation to anyone wanting to use this avenue to submit their views directly to the panel in a written submission.

The panel will have some modest capacity to commission research and studies on important areas related to our marketing system where it appears that further information is required to assist us in our review. These needs will be identified by the panel as it proceeds with its work. To act as our director of research we have Dr. John Heads, who until the end of this month is the director of the Transportation Institute and a professor of agricultural economics at the University of Manitoba in Winnipeg.

I would like to stress that the panel does want to hear any and all views on grain marketing issues in western Canada. The panel will advertise its locations for both the town hall meetings and its hearings, and the review does include marketing systems for grain, oilseeds, and specialty crops. We hope this exercise will enhance the level of awareness and understanding across the prairies and will ultimately strengthen Canada's success in marketing grain.

Thank you.

The Chairman: Thank you, Mr. Molloy.

Mr. Chrétien.

[Translation]

Mr. Chrétien: Mr. Molloy, you chair a panel that is supposed to table in June 1996 a report that will, I suppose, aim at reconciling the various positions. Even though you still have seven months before drafting your report, you will probably have to take into account the results of the plebiscite that was recently held in Alberta. I presume also that you will take into account the results of the survey that my colleague referred to a while ago, where 29% of producers were in favour of the elimination of the Canadian Wheat Board.

How could a double marketing system be effective, and how could the Canadian Wheat Board keep playing its role in such a system? The previous witness stated that the Canadian Wheat Board did not have all the tools required to be effective from beginning to end. How can you reconcile the granting of some freedom to the producers - and I believe it would be absolutely normal that producers have, up to a point, the freedom to sell their crop as they wish - while maintaining the degree of control exercised by the Canadian Wheat Board?

[English]

Mr. Molloy: First of all, as I indicated, in the absence of a clear consensus on the issues - and that's something I'm not going to make any comment on until we begin our work - the role of the panel is to outline the options that are presented to it as well as the pros and cons for those various options. Then ultimately it would be the minister and the government who would make the decision as to what course of action they would follow.

The Chairman: Mrs. Cowling.

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Mrs. Cowling: Thank you, Mr. Chairman.

I note you will have town hall meetings right across the country, and in fact will have one in my home town of Grandview. My question relates to the participants and the people who will be at those particular meetings. What is the procedure for the consultation process to ensure that all people are at those particular meetings?

Mr. Molloy: The meetings will be advertised and will be open to the public for participation. There will be two panellists attending each of the meetings, along with facilitators. We are still finalizing the actual way in which the meetings will be conducted, but it's anticipated there would only be a short presentation and that the meeting would be divided up into discussion groups focusing on certain issues that the panellists would like to have addressed. The participants would also be allowed to identify issues that they would like to discuss in their groups.

Mrs. Cowling: My next question is about whether or not the Alberta plebiscite will have any impact on the consultation process.

Mr. Molloy: I guess it's something that has occurred, but again I don't want to make any judgment as to what role that will play in the panellists' minds. It's not something we have yet had an opportunity to discuss. We've been spending most of our time focused on establishing the process rather than discussing issues, except to the extent that we produced our tabloid.

Mrs. Cowling: Being a farm woman myself, I'm hoping the process involves farm women from across the country as well. Is there any process by which farm women's organizations, women who are interested in agriculture, and women who are actually producers themselves can come to those meetings?

Mr. Molloy: As I indicated, we will be advertising the meetings across the prairies. Certainly we're encouraging everyone to attend the meetings and to participate, particularly if they have a point of view.

The Chairman: Mr. Hoeppner.

Mr. Hoeppner (Lisgar - Marquette): Thank you, Mr. Chairman.

Mr. Molloy, I was interested in your comment about value-added industries. That's something we need. Have you done any research or are you going to give us some guidelines as to why we have gone from being an exporter of flour to being almost a non-existent exporter that way? Also, the pasta producers are more or less complaining that they are being discriminated against. Do you have any facts or figures on why this is happening or on what the causes are?

Mr. Molloy: Not at the moment. We are in the process of identifying the issues and we are looking at what information is available, but certainly the value-added question is something that the panellists will be addressing.

Mr. Hoeppner: Mr. Whelan, as a witness before this committee, told us that when he was agriculture minister we were exporting a million tonnes of flour. We're down to about 60,000 or 70,000 tonnes now. Finding out that this is what has happened came as a shocking realization for me.

Mr. Molloy: It's certainly one of the things that will be looked at.

Mr. Hoeppner: Those are all the questions I have, Mr. Chairman.

The Chairman: Thank you, Mr. Hoeppner.

Mr. Easter.

Mr. Easter: Thank you, Mr. Chairman.

I guess the big question is how you get the information out there in a balanced way so that producers can make a decision based on the facts. You already heard the discussion we had in terms of the vote in Alberta, and there's always a feeling on both sides about whether or not the facts are correct.

In beginning, I might just say I went through the pamphlet or brochure that goes out. I guess in part because I am pro-Canadian Wheat Board, I'm disappointed that the board is not profiled more than it is in there. It is the major marketing institution and is tied into the transportation side, but it's not really profiled in this at all. So I have a problem there.

In terms of your meetings, town halls, etc., were you involved, were you aware, or have you been informed of how the transportation talks, hearings, etc., took place some six years ago?

Mr. Molloy: Yes, we received some information with respect to those hearings.

Mr. Easter: Having been involved fairly extensively in those hearings, I'm worried that this process may be designed in the same way. The key question here, I guess, is how you make decisions based on what you've heard. There was a lot of dissatisfaction with how the transportation talks decisions were made. Basically, I think a consultant reviewed them and made decisions accordingly.

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What's the process going to be in determining what producers really want out of these meetings that you hold?

Mr. Molloy: That's one of the issues we're actually going to be addressing this weekend at the panel meeting. I've given you just a general outline as to the discussion, but in terms of the final formatting of the meetings, we haven't concluded that, but hope to do so this weekend.

Mr. Easter: In terms of trying to get the information out there, will the various people who are at the country meetings - the Wheat Board, the Winnipeg Commodity Exchange, etc. - be making a formal presentation or will they just be responding to technical questions?

Mr. Molloy: They'll be responding to technical questions. It's not intended that they make formal presentations.

Mr. Easter: The reason I ask is that I question whether that's the right avenue to take. I think at some point in time, given the misinformation that's out there, it would be useful to have those on both sides of the argument present in a formal way how they operate, because I really think there are some misconceptions.

Mr. Molloy: Presumably that will occur at the formal public hearings. One of the difficulties that we faced in looking at the town hall meetings was how do we ensure an opportunity for farmers to have a role in participating? In looking at having formal presentations by the various people who have different ideas, it's a question of then sacrificing the opportunity for farmers to be able to directly participate in a meaningful way. You only have so many hours in a day or an afternoon where people are available to participate, and it was felt that the participation was more important at these meetings than to have sides presented.

Mr. Easter: I have a last comment, Mr. Chairman.

I'm 100% with you in terms of producers being able to participate - that's been my life. But I think the first step before that should be to ensure that the facts surrounding the various current or proposed marketing agencies are laid out in an understandable and clear-cut fashion. I don't see that yet, and I think that opportunity has to be given somehow.

The Chairman: Mr. Hermanson.

Mr. Hermanson: Thank you Mr. Chairman, and thank you for coming before us, Mr. Molloy.

This first question is hard to ask, and I certainly want to make it clear that I don't ask it with any malice or bad will; nor is it a challenge in any way to your character or to your ability, but it is something that farmers are concerned about.

There are concerns, Mr. Molloy, that you have fairly strong Liberal connections - contributions perhaps, party membership, I'm not sure; that you are a confidant and a friend of the minister. In light of that, how can I as a farmer have confidence that there will not be ministerial manipulation in the outcome of your proceedings? I understand that your panel is not making recommendations - and maybe this is wrong - but will rather be outlining options that are available to the minister rather than specific recommendations that are agreed upon or voted by the whole group.

I understand your group is quite diverse, but I just question, if there are no specific recommendations from your group, after your work is concluded the minister can say, ``The chair, Mr. Molloy, said this and that'', and then almost indicate that the weight of the whole panel is behind it and that your words are carrying the judgment of the whole group - which may not always be the case, given your apparent connections with the Liberal Party and the minister.

Mr. Molloy: I guess the only way to judge the independence will probably have to be ex post facto. I suppose I can say I'm independent, but that's something you can judge afterwards.

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I'm not alone; I have eight other panellists who are involved in every decision that has been taken so far. The whole panel has agreed to and approved the contents of this document that we produced and the panel will be actively involved in the preparation of the document that will be part of our final report. Presumably if there is disagreement it would be indicated in the report.

I'm only one person of a 9-person board, and you can be assured that the people on my panel have an ability to express their views very well.

Mr. Hermanson: Is it true that you expect not to come to agreement or consensus and that there won't be recommendations, but that only the options will be outlined? I think a lot of us already know what the options are.

Mr. Molloy: The documents that established us and our mandate indicated that in the absence of a clear consensus on issues we were to identify the options and the pros and cons surrounding them.

Mr. Hermanson: We've had these travelling road shows before and they can be useful, but they can also be hijacked by interest groups in the industry. How are you going to prevent a meeting held in Rosetown, Saskatchewan, from being somehow hijacked by, say, the NFU or the Canadian wheat growers, who were here, or the grain companies or the Canadian Wheat Board Advisory board? How are we going to make sure there's a balance?

Mr. Calder (Wellington - Grey - Dufferin - Simcoe): Or the Reform Party.

Some hon. members: Oh, oh!

Mr. Hermanson: When we have a plebiscite, at least we know that everybody has to vote and there's not intimidation. When you have these public meetings and you get a very local group that may want to intimidate and take over the meeting - we've had such problems in the past - what steps are you taking to prevent intimidation factors?

Mr. Molloy: Well, I've indicated that one of the mechanisms we're looking at is to divide the meetings up into smaller groups. As well, we're looking at some different methods of identifying how people go into the groups. We are concerned about that as well. But we feel that by breaking up into small little work groups, it makes it impossible to hijack the meeting, because it gives everyone an opportunity to participate. A lot of people are reluctant to stand up in front of a large town hall full of people, whereas at a table or in a smaller group they're much freer in exercising their opinion. We're concerned about that, and we're going to take steps to make sure it doesn't occur.

Mr. Hermanson: And the last question is really short: what's your budget? How much is this going to cost?

Mr. Molloy: The estimate at the moment is about $1.5 million to $1.6 million.

The Chairman: Mr. Benoit.

Mr. Benoit: Thank you, Mr. Chairman.

Welcome, Mr. Molloy. You have an extremely important job to do here. If your panel works well, and if it really does hear what the various groups involved in the grain industry have to say, and if the minister listens to what you find, then I think your panel will serve an extremely useful role.

I would just like to start by asking a question about how the plebiscite in Alberta might affect how your panel looks at the grain marketing issue. Alberta farmers have decided that they will market under a dual marketing system - that's been decided - so you're working with a different reality than you were when your panel was struck.

We have part of the prairies at least - Alberta's farmers - who have decided that they're operating under this system, but Saskatchewan, Manitoba and the Peace River block of B.C. really haven't been given a chance to say yet. How will you work this into your panel hearings?

Mr. Molloy: Again we will be looking at what is occurring and what the options are, but in terms specifically of the impact of the plebiscite in Alberta, that's a decision for the panel to make, and not me as an individual.

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Mr. Benoit: Yes, but the panel will recognize that we have a different marketing system in Alberta, or we will have one as soon as it can be put in place. A decision has been made to operate in dual marketing. Farmers have a choice to ship either through the board or directly.

Mr. Molloy: I guess when the changes are made, that's a reality we will have to come to grips with then.

Mr. Benoit: To me, the decision has been made.

You mentioned that you do have some money you can spend on research. I think one of the questions that has to be dealt with here is just how well the Wheat Board might operate when this dual marketing system is expanded right across the prairies. Are you planning on doing any work in that area or is that really important to what your panel is trying to do?

Mr. Molloy: That's one of the questions we're looking at. Again, as I indicated, we have made no decisions in terms of to what extent we will be doing research. What John Heads is doing at the moment is looking to see what information is available, what studies have been carried out by whom, and so on, because we don't want to get into a situation where we're trying to reinvent the wheel. If the information is there and it appears to be from a credible source, then we would be using that.

Again, I'm trying to avoid answering questions. It's just that decisions haven't been made in the area of research. The question you raise is obviously one that's very important.

Mr. Benoit: Regarding the way the panel will work, you say you haven't really decided yet exactly how the hearings will work or how the panel will operate. You've indicated that two panellists will be at each meeting, but you're not quite sure of the format of the meetings yet.

Mr. Molloy: That's right. We hope to finalize that this weekend.

Mr. Benoit: I'm not saying this is the only possibility, but have you looked at the way Alberta operated their panels over the past few years when they held consultations with farmers?

Mr. Molloy: I can't say we've looked at that one specifically. We've looked at a variety of options and I'm not sure whether one of them was the Alberta panel, but I'll find out.

Mr. Benoit: I think it would be worth checking into at least, to see if there are parts of that you can take to use in your panel.

Thank you.

The Chairman: Mr. McKinnon.

Mr. McKinnon (Brandon - Souris): Good morning, Mr. Molloy.

Mr. Molloy: Good morning.

Mr. McKinnon: I'm from Manitoba, and as a person who has been observing the intricacies of agriculture for a few years, I'm concerned about a couple of points.

Is the panel able to project the implications of the nuances in the transportation system as it in fact applies to marketing? We're sensing that there are some concerns in the area of transportation about car allocation in particular. I'm wondering whether your panel is able to look at that, before you go into the actual town hall meetings, with some researching as to what some of the possibilities are for car allocation.

Mr. Molloy: It has been identified as one of the issues that need to be looked at. Whether we will be able to do any specific research before the town hall meetings is difficult to know, given the timeframe we're working with.

Mr. McKinnon: You do agree, however, that it's very, very basic.

Mr. Molloy: As I said, it has been identified as an issue that needs to be looked at.

Mr. McKinnon: The area of dual marketing has been quite contentious in various sectors of the prairies, particularly as you move further and further away from the U.S. border. In my view, there seems to be a greater reluctance to get into that kind of circumstance in my province. The Alberta plebiscite, however, certainly indicates that there is a transparent will to look at that as a viable opportunity. But the panel needs to be very careful, in my view, with the degree of credibility of any vote and the language thereof.

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I'm concerned also about the communications strategy. I'm sensing a really good effort has gone into the document that has been circulated. Will further brochures be available leading up to the cross-prairie town hall meetings?

Mr. Molloy: Not before the meetings. There is a possibility that there might be some further, more limited distribution in the public hearings, but we don't have anything planned for further distribution prairie-wide before the hearings start.

The Chairman: Thank you very much. I very much appreciate your coming forward today.

Mr. Molloy, your testimony certainly will help us look at where you're going in the near future and help us watch the direction by which you go forward with your hearings. Thank you for your efforts.

Mr. Hehn is our next witness. Mr. Hehn is the chief commissioner for the Wheat Board.

Mr. Hehn, go ahead.

Mr. Lorne Hehn (Chief Commissioner, Canadian Wheat Board): Thank you, Mr. Chairman. I would like first of all to introduce my colleague, Mr. Robert Roehle. Bob is head of the corporate communications component of our corporation.

Thank you for the opportunity to be with you today. There are many things we could discuss, and perhaps many things we should discuss.

This year, as most of you know, the Wheat Board is celebrating its sixtieth year in business. I guess anniversaries are a time for taking stock and a time to look back at accomplishments - perhaps also a time to look ahead at the challenges and opportunities. No doubt we'll be doing that in just a moment or two.

It's not my intention this morning to dwell at length on the Canadian Wheat Board's accomplishments since 1935, other than to mention that the cumulative wheat sales in the last sixty years amount to well over $100 billion in overall revenue and the barley sales exceed $15 billion.

Today the Wheat Board is the world's largest exporter of wheat and barley. In the 1994-95 crop year, the crop year we've just completed, we exported wheat to 63 countries, we exported durum wheat to 25 countries, and we exported barley to 11 countries. Our share of world trade in wheat - you might be interested in that - in the year just completed was 21%, our share of world trade in malting barley was 48%, and our share of world trade in durum wheat was 71%.

On the domestic front it's difficult to measure progress, but if you look at the flour mills, they're now running at over 90% capacity. That compares with running at about 75% capacity in 1990. If you look at flour exports, they've gone up from 15,000 tonnes in 1990 to over 175,000 tonnes this past year.

On the malting barley front, in 1990 the malt houses in Canada had a capacity of 810,000 tonnes. This has expanded to a capacity of 1,019,000 tonnes in 1994-95. That's a 34% increase. We're told the malt houses are running at close to 100% capacity, and much of that capacity has been taken up with exports of barley malt.

Looking ahead, our analysts are projecting world wheat imports will reach 125 million tonnes by the year 2005. That compares with around 93 million tonnes in the last two years.

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We're forecasting barley trade to increase from 16 million tonnes to about 17.5 million tonnes. Looking at the components of this growth, we foresee a near doubling of world trade in malt barley, with a slight decline in feed barley. Therefore, from a marketing perspective, our industry and the future look quite promising.

Clearly, from many other perspectives we are in a transition period, a period of change. Many of our businesses in Canada are facing this. Ideas, information, technology, capital, and increasing goods and services no longer recognize national borders. Virtually everything we do in Canada today is being examined and re-examined in the light of this new reality.

As you know, the prairie grain industry is also under intense scrutiny, and it has been for some time. Critical questioning is going on at virtually every level of our business. Can we be more efficient? Can we be more cost effective? Can we service our farmer stakeholders better? How can we further decrease costs, increase revenues, and become more competitive in the global marketplace in which we operate?

Quite rightly, farmers are also questioning the efficiency and the effectiveness of their marketing agencies. As your previous witness stated, they will have an opportunity to express their views to the recently established marketing panel in this regard.

I guess unlike most other countries, we in Canada hold the view very strongly that farmers should decide themselves how their crops are to be marketed and they should decide through a democratic process. Of course that's healthy, and I think none of us in our industry would have it any other way. My concern, however, as a commissioner and as chief commissioner of the Wheat Board, as a former farmer and one who still owns a farm, and, I guess more importantly, as a proud Canadian, is that the grain marketing debate of the 1990s should be based on economics, rather than ideology and emotion. Quite frankly, in the last few weeks it has been more ideology and emotion than economics.

At the conclusion of this debate and process, it's important that farmers make their decisions thoughtfully, with their eyes wide open, regarding all of the alternatives in front of them. With or without the Canadian Wheat Board, the prairies will grow large quantities of cereal grains for export. Our small population and our harsh climate and our vast land base dictate this.

So, for me, the issue is a fairly simple one: which system of marketing can give those 25 million to 30 million tonnes of production of wheat and that some 12 million tonnes of production of barley the most value? Is it farmers marketing as individuals on an open market in the tough global environment or farmers marketing in partnership with each other under the disciplines and the cooperation of a single-desk pooling system? It's an economic question; it's not a philosophical one.

Our vision at the Wheat Board is to be the world's leader in marketing grains. Our mission is to market quality products, along with a quality service package, in order to maximize returns for the farmers we serve. To maximize returns, our goal is to maximize revenues and of course minimize costs. To maximize revenues, there are certain tools in our toolbox that every marketer and every commercial marketing organization would like to have. My question to you is, if everyone is striving for these tools, why would farmers want to give them up?

The first tool is the single desk. It's a major competitive advantage to be the only seller in the world marketplace of Canadian product. Most international companies would say - and I've heard this - that it is an enviable position to be in.

To date, the only other companies that have dominated the international grain trade are the huge transnationals. Let me tell you that they're a lot bigger than the Canadian companies that you and I know, including the pools. The German Toepfer, the French Dreyfus, the U.S. Cargill - that's the competition. It's very concentrated, and there are only a handful of them out there that are competing. They've been extremely successful in their own right. But their mission is quite different in that they have grain of multiple origins and they're selling to maximize margin. We have only Canadian grain in our selling basket and we're selling to maximize revenue. So there's a decided difference.

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Believe me, it is an advantage to have exclusivity. But perhaps we have emphasized this too much, because our American friends have sensed that Canadian farmers may have an advantage just because of the way we're structured, how we're organized in terms of marketing.

The second tool in our tool box is the high-quality product that we have, and it is a very distinct tool. The only other country that comes close to us is Australia. The Canadian system does have a quality edge. This allows Canada to have and to differentiate products to distinguish ourselves in that highly competitive world marketplace. And again, the Americans know we have an edge here as well. Let me quote from the October 23 issue of AgWeek, a farm paper out of North Dakota:

Experts at the USDA and from the northern Plains have closely examined the global wheat market and concluded that America has sacrificed a lot of the world's top-quality markets to competitors willing to play the quality game. While the USDA focused on EEP markets that are mostly buying based on price, Canada focused on top-end markets.

Dr. Richard Hahn, head of the Kansas State University Department of Grain Sciences, said in the October 26 Kansas Wheat Scoop:

Overseas buyers of our wheat are becoming more sophisticated in their knowledge of wheat quality and more demanding on what and how they buy. Canada, Australia and Europe have become customer-oriented in their international wheat marketing. We have not and are being beaten out in some of the best wheat export markets.

The third tool in our tool box is dependability and delivery of the product. I don't have to say very much more about that other than the fact that ``dependability and delivery'' simply means ``when needed and where needed''. Our exclusivity of supply, our single desk, is a key factor and therefore a key asset.

The fourth tool in our tool box is the government partnership. The federal government underwrites the financial operations of the board, as you know, and this allows the board and our finance department to borrow money at significantly lower rates than, say, a Cargill International. As a matter of fact, if you compare our average rate of borrowing to Cargill International's, based on our aggregate borrowings last year, the annual savings were nearly $40 million. Of course, Cargill borrows at below the normal commercial rate because of its size, so if you compare our average rate to a normal commercial rate, the savings were closer to $60 million last year.

Our total administrative costs in 1994-95 were approximately $43 million. In other words, this federal connection, this tool in our tool box, together with the way we're structured in terms of our financing, pays for all of our operating costs - our salary, our travel, our heating, our lights, our telephone, everything.

The dual market people, the choice people, say they aren't against the Wheat Board. I have heard Mr. Paszkowski say, ``We're not against the wheat board. Farmers should have choice.'' They support the board, but I simply remind you that if you take away any of these tools, it's like taking away one of the wings of the dragonfly - if I can use an analogy - while suggesting it can fly just as effectively. You can't take away any one of these tools and expect us to be effective and competitive in that tough, highly concentrated marketplace outside of Canada's borders.

If we are to be effective in the future, we cannot be just like another trading company. We have to be more than that. Farmers want us and need us because we are different. Why in the world would they want us and need us if we didn't have those tools and if we weren't different, if we didn't have that and couldn't give them that competitive edge?

In closing, Mr. Chairman, much has been said about structure, accountability and corporate governance in recent weeks. I'd like to table a paper with you - I'll leave it with your secretariat - that I put together for the marketing panel. It covers corporate governance issues at the Wheat Board, along with some of the changes that we've implemented since 1991 in terms of managing the business from a governance and a fiduciary perspective.

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A major component of that paper was a comprehensive operational review conducted by outside senior business consultants from Toronto; a formal corporate and operating planning process that was put in place, again quarterbacked by consultants in the business out of Toronto; and the ongoing comprehensive audit program we do department by department, where we continually audit and examine our departments for efficiency and effectiveness and benchmark against the best business practices of other Canadian corporations.

The corporate control structure is, of course, an issue for farmers and government to discuss and agree on, and the marketing panel does provide a vehicle for this kind of dialogue to take place. I can tell you openly that the commissioner is welcomed.

Discussions, direction and ideas on the future corporate structure should give consideration to the following items: firstly, the farmer as a shareholder and stakeholder of our organization; secondly, the government as a partner, especially in terms of those financial guarantees; and thirdly, the complexity of our business, in particular those customers we deal with in some 70 countries in the world. It's truly a transnational business. It's very complex and involves a lot of finance, and one has to consider that in setting up any new structure or making any change to the structure.

That is the conclusion of my opening comments, Mr. Chairman. I welcome questions on any aspect of our operation.

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

Because of the limited time we have, I'm going to restrict the amount of time and ask people to cooperate. I'll try to give a balanced time to everybody who wishes to ask questions.

Mr. Chrétien.

[Translation]

Mr. Chrétien: I can tell you, Mr. Hehn, that the Standing Committee on Agriculture and Agri-food has certainly become very important since we had 14 MPs here a while ago, which is about 5% of the total membership of the House.

As Chief Commissioner, you gave us a very positive account of the work done by the Canadian Wheat Board on the verge of its 60th anniversary, which gives me lots of satisfaction, even though I have no direct interests in the Board.

However, one has to recognize that there are serious problems. Less than an hour ago, a witness was telling us that the Canadian Wheat Board does not have the tools required to satisfy all the producers of wheat and barley. This was said in this very room.

As Chief Commissioner, would be willing to use all the tools at your disposal, within your operating budgets, in order to try and satisfy them?

Each week, I receive letters from Western Canada, and not only from organizations but also, very often, from producers asking me to take the floor in order to try and improve the work of the Canadian Wheat Board.

If we had to accept the results of the Alberta plebiscite, how far would you be willing to go in the setting up of a dual marketing system?

[English]

Mr. Hehn: Those are very good questions, and they are very timely.

On your first question, I want to clarify that we don't have what is known as an operating budget. We are not a department of government. Farmers cover all of our costs, so we operate quite differently from a department of government. The only time the government is involved in terms of our cost is if we happen to incur a deficit in any one of our pools, and that's a very rare occurrence, as you know. With the changes recently, it will not be a very likely occurrence in the future.

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We operate, if I can use this expression, much like a company that begins business on August 1, goes about providing services for its stakeholders, selling their product, accruing the revenue. At the end of the twelve-to-fourteen month selling period, in late August, we wind that company up and we return all the revenue, after the expenses have been deducted, back to the farmers by way of a final payment. That's the way the corporation operates.

About farmers' concerns and the additional tools, I want to relate to you that we take those very seriously. We did a customer survey two years ago. That customer survey, and producer survey - we did a survey of our international customers and also a survey of farmers - that survey gave us a lot of ideas for new initiatives, but it also gave us a good feeling for some of the concerns we perhaps weren't as aware of as we should have been.

After that survey, we held around seventeen focus sessions with farmers last fall. At these focus sessions anything was on the table. There was no agenda. The farmers were selected randomly. We did not select them. In fact, we went to the trade and they helped us with that selection. We held seventeen of those. Farmers came into those sessions. We had approximately twenty farmers at each of those sessions. We held them across the region. We learned a great deal from those sessions.

The number one issue coming out of those sessions was cashflow: Can you get my money to me quicker? Can you speed up the adjustment payment process? Can you speed up the interim payment process? Can you speed up the final payment process?

Other issues came up, certainly transportation, certainly on the handling side. We can get into those as well. They are a little remote from the Canadian Wheat Board, but we are involved in them, although we don't have total control over them. They are things such as car allocation.

We've put a package of amendments in front of the minister. It takes into account some of these concerns. First of all, in that package of amendments we've asked for the ability to facilitate off-farm sales. That's because we now have a situation where mobile elevators are starting to come into play. Truck movement is becoming a bigger factor. At the moment we can only take delivery of grain at a country elevator or in a rail car.

The ability to pay storage and related payments out of relative pool accounts - again, it's something we're looking at. We would prefer in our contracting program to use the carrot rather than the stick. This would give us the authority, I think, to pay storage and some portion of the carrying cost to the farmer for those people holding grain on their farms as a result of a lack of transportation or some other issue.

The authority is implied in the current legislation, but I think it would be useful to -

[Translation]

Mr. Chrétien: Could you shorten your answer, Mr. Commissioner? I see that my Reform colleagues also want to ask you some questions.

[English]

The Chairman: At this point I'd like to remind everybody we're trying to be as succinct as possible and sometimes longer explanations will limit everybody's ability to ask questions.

Mr. Hehn: I'll get on to the second question, then, Mr. Chairman, about the results of the Alberta plebiscite.

Alberta farmers have clearly voiced their opinion on the question that was asked. I think the problem I'm having is that the question was leading. The two words ``freedom'' and ``choice'' are very leading words. I think the question should have been designed along the lines of ``Do you want an open market or do you want a Canadian Wheat Board market?'' I don't think the two are compatible. Our former assistant chief commissioner used to say they're like mixing oil and water.

In the dual market we would have no monopoly status. The pooling would be voluntary. I wonder about the government partnership and the finance guarantees over time. I've already elaborated on that.

However, I don't take that Alberta vote lightly. Alberta interests now have a chance to take their findings to the marketing panel and present their case before that panel. The agriculture minister,Mr. Goodale, has put that process in place. It's a very objective process, and I would hope that's the direction they would take.

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The Chairman: Thank you very much.

I allotted about eight minutes to that. The Reform Party will have eight minutes to share among members, however they wish to use it. Then I'll come back to the Liberals for eight minutes.

Mr. Hermanson.

Mr. Hermanson: Thank you, Mr. Chairman.

I can ask the questions quickly. I just hope Mr. Hehn will answer them fairly quickly.

The Chairman: Ask them all at one time and he can answer them after that.

Mr. Hermanson: The Wheat Board participated in the plebiscite. You increased initial prices during the plebiscite. You introduced new, unscheduled PROs during the plebiscite, which seemed to be taking a very participatory role in trying to influence the outcome of the vote.

You're saying you can't have dual marketing and an effective Canadian Wheat Board, and yet two to three years ago the Wheat Board said they could do just fine in a continental market because it was a fait accompli. You certainly weren't going to roll up your tent and pack it in. Why the sudden change of heart?

Mr. Hehn: Let me deal with your last question first. There's quite a significant difference between a continental market and a dual market, as you very well know, Mr. Hermanson.

If we want to talk about a continental market, I guess I can give you my views there as well, but with a dual market, we're talking about anybody being able to go into the export market and compete. So it's quite a different situation. Also, in the continental market we're talking about specifically one product, so again, it's a different situation.

With respect to your comment on PROs and payments, there was not an unscheduled PRO. That's not a correct statement. The PROs came out on schedule. We also had payments, because our business warranted that those payments go out. We'd just come back from a series of focus sessions in which, as I just mentioned, farmers had indicated to us we should get payments out as quickly as possible.

We were doing things that relate to our business. Just because there was a vote going on, I don't think our business processes should have stopped, nor would I have allowed them to stop.

Mr. Hermanson: Well, I think you'd have to agree that a continental market is a limited world market. There certainly is a relationship.

You participated in and supported the conclusions of the SEO group. We had the advisory committee to the Wheat Board here the other day and they said you're wrong, that you've changed your position and you shouldn't have agreed with the SEO findings. I wonder if you still support the SEO proposal that's been presented to the minister.

Mr. Hehn: That's a question that's going to take a little time to answer -

Mr. Hermanson: It shouldn't.

Mr. Hehn: - in terms of our involvement. I can tell you we continue to support the SEO group findings, but we do have a great deal of concern in that area of car ownership.

Those who participated in the SEO group and the May 16 group will understand that the issues that have broad implications were to go back to the May 16 group for further discussion. They went back to the May 16 group in November.

Several, or at least one major but others since, have suggested they have concerns, and that major organization was the Saskatchewan Association of Rural Municipalities. In fact, I met with them yesterday to talk about their concerns. They have major concerns and our advisory committee has major concerns.

On the issue of car ownership, at the moment we're remaining neutral until we have these concerns resolved, because they're farmers' concerns and they need to be taken into account.

Mr. Hermanson: So I would take that as you are moving towards withdrawing your support.

Mr. Hehn: No, we're not moving toward withdrawing our support. There could perhaps be a compromise solution here. Perhaps the industry could own the cars. There are various options. I don't think you have to throw the baby out with the bath water in this case.

It's very important, whatever direction we take in transportation, that we not move to a fully commercial environment, because this industry is far too complex to operate on just commercial signals. The mix we got out of that SEO group report was a mix of a commercial environment, an administered environment and a coordinated environment.

I think it was a good mix and one we could live with. There are elements of that agreement that are worth preserving. I think we should work towards that.

Mr. Hermanson: A market analyst says consistently feed barley prices on the open market are $30 a tonne higher for people around the Red Deer area than through the Canadian Wheat Board. This is consistent, year after year, on average - $30 a tonne more through the open market than through the Wheat Board. How do you respond to that?

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Mr. Hehn: I don't think I should apologize for the open market being more attractive than the export market. I think that says something for the domestic market.

You have to realize that in order to get the prices up for the board side, we've got to have deliveries.

The Japanese market at the moment gives a far better return to the pool, if I'm going to back it off to a country station, than the open market does in Alberta right now.

In order for the pool to reflect those better returns, we've simply got to have the delivery so that we can bring that pool return up.

Mr. Hermanson: One of my constituents recently visited the United States, and he said that an American maltster put in an order for 4 million bushels of Manly barley to the Canadian Wheat Board, but the latter said that it couldn't fulfil that request because it couldn't segregate 4 million bushels of Manly barley. Would that be true or false?

Mr. Hehn: I don't know. I'd have to check that out. I don't have that kind of information in front of me. I don't think we turn down requests of that nature. We would talk with the industry, and if, in fact, that was a decision, then it would have been an industry decision, not a board decision.

Mr. Hermanson: I met with a couple of your commissioners earlier this year and they suggested to me that they were very open to being audited by the Auditor General. Of course the Auditor General is not mandated to audit the Canadian Wheat Board, but the Canadian Wheat Board can request an audit from the Auditor General. Will you be requesting an audit of the Canadian Wheat Board by the Auditor General?

Mr. Hehn: We are not a government department. Our outside auditors are Deloitte & Touche, a very reputable outside auditing firm -

Mr. Hermanson: I know that.

Mr. Hehn: - with international status. If we were a department of government, then the Auditor General would in fact be auditing us.

I have no problem with the Auditor General coming into the Wheat Board.

Mr. Hermanson: Will you request it?

Mr. Hehn: Why would I request it? We report to the auditor -

Mr. Hermanson: Because he has no authority to go in unless you request him to come in. That's why.

Mr. Hehn: Why would I request him to come in?

You should talk to our external auditors. Perhaps if they felt something untoward was happening they would request that he come in.

Mr. Hoeppner: I've said for two years that if the Wheat Board aren't going to become more open and accountable, then they'll destroy themselves. In the last week or so we've found out that the Wheat Board commissioners get severance packages of up to $290,000.

I want to read a statement to you out of Agri-Week, and then I'd like you to respond to that,Mr. Hehn. I'll ask you if we should trust you with our grain. It says:

Sitting commissioners are still eligible for severance pay up to $290,000, regardless of the reason they leave, including retirement. Actually, the Free Press reporter missed more juicy bits than he reported.

In addition to six-figure salaries, Wheat Board commissioners are eligible for performance bonuses payable out of the Wheat Board funds at the discretion of the then Agri Minister. Commissioners drive free luxury cars, have private club memberships and few-questions-asked expense accounts.

Is that accountability?

Mr. Hehn: Yes, I think it is, Mr. Hoeppner. Let me explain why.

The origin of the two-year severance and vacation package has to do with Ottawa's conflict of interest and post-employment code for public officers dating back to the early 1980s.

Mr. Hoeppner: After retirement?

Mr. Hehn: That restricted commissioners from taking a job in the industry or a related industry for two years after leaving office. The severance package recognizes that loss of income during that period.

These were the terms and conditions provided to me by the government prior to my accepting an appointment with the Wheat Board.

Now let me turn to my personal situation. I want to take a minute on this one, Mr. Chairman, because it is personal and I have a very serious question to answer.

Currently, the Toronto Stock Exchange reports the salary of the president of United Grain Growers at $204,000. The top of the range of the chief commissioner of the Wheat Board is $144,000. I can assure you that my salary is within that range.

Mr. Hoeppner, I just happen to be in the unique position of having held both of those offices. In fact, when I was president of the United Grain Growers, I was also CEO and I was also chairman of the board. So I had a little bit more responsibility than the current president does.

Having held both positions, I can tell you, unequivocally and without hesitation or reservation, that my current job is far more complex, far more demanding, and far more accountable in every respect.

You can believe that or take it for what it's worth, but I want to assure you that that's the way I feel.

The Chairman: That's fine. The questioning is done there.

Mrs. Cowling.

Mrs. Cowling: We just had the Western Barley Growers and the Western Canadian Wheat Growers before our committee, and there seems to be a perception from that group that you can have a dual marketing system or single-desk selling.

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Mr. Hehn, I'm getting phone calls from farmers in my constituency who are telling me that either you have single-desk selling or you have dual marketing. They're telling me you can't have both. What is your response to that based on the facts of economics and not based on emotion or ideology?

Mr. Hehn: You can't have both. I think I'd have to go back to a voice of experience.Mr. Hetland was the assistant chief commissioner and was probably one of the world's best grain salesmen. He spent a lifetime in marketing, which began at his farm with his seed operation. He was the person who said that the two systems mix like oil and water. Open market and single desk mix about as good as oil and water do. ``A dual market offers the worst of both systems'' - that's a quote taken from a speech that Mr. Hetland gave in the early 1980s.

He often talked to me, Mrs. Cowling, about the tremendous concentration in buying power in the global grain market and he often mentioned that you could fit all of the buyers into a small room. He would go on to say to me that the roles of the buyer and the seller are very different. A buyer wants a lot of sellers. That's simple economics. A seller wants a lot of buyers. The ideal situation is to be the lone seller with a room full of buyers and that's what we have in the Canadian Wheat Board system.

The Canadian Wheat Board is not a buyer; it's a seller. So I think we're in the unique position of maximizing the most revenue out of the marketplace. I think the single desk gives us another distinct advantage in that our goal is to maximize the revenue from the entire pile of grain. So once the harvest is known and the amount of the crop and the quality are known, we can then differentiate that crop and that quality across the markets with a emphasis on the markets that have the greatest return for the pool.

We also have longer-term considerations for some customers who may be sensitive to volume and price.

The Chairman: I want to make sure that everybody knows I will adjourn ten minutes before the vote so that we do have time to get there.

Mr. Easter.

Mr. Easter: And the vote.... Okay. We may need more time too.

I do appreciate your short and concise presentation, Lorne, because I'm one who feels the board has basically been doing a poor job of selling itself out there. I think that has to be improved.

On the dual market, from a nation's perspective would it be correct to say that when you have many sellers, which would happen under a dual market, the lowest seller sets the price? I think we've had an example already in terms of the Wheat Board losing one of its tools in doing an effective job of gaining maximum price and that's the Japanese example. I wonder if you would expand on that a little bit.

And I have one more point.

Mr. Hehn: The Japanese example is a typical example. We've had a great deal of difficulty originating barley to satisfy the Japanese market. Normally we sign an agreement, a memorandum of understanding, with the Japanese guaranteeing a volume of both wheat and barley for the calendar year. We weren't able to do that.

I've just returned from Japan. We weren't able to sign a volume agreement with the Japanese for the 1996 calendar year on our last trip. We hope that the situation will be a little clearer by January of this coming year. We intend to return to Japan if the situation does get a little clearer.

Indeed, it is clearing up now. The board's pooled return outlook is beginning to approach the off-board market price, so we're starting to see barley come in and we're starting to see barley contracted. The more we see the more we're able to sell and the more we're able to sell the sooner those two markets will arbitrage, and eventually the board return will likely exceed the domestic return.

In any event, I think the situation is correcting itself and I hope we'll be in a position to supply the Japanese with at least a portion of their export barley.

It's not likely that we're going to be able to supply them with the 800,000 tonnes they were interested in for the calendar year 1996, but perhaps we can get as high as 400,000 or 500,000. We'll have to wait and see. But we are missing out on a very important customer who has been buying barley with us since 1970, who expects to be serviced and who is prepared to pay the premium price for that service. In that respect, Canada is the big loser.

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If sufficient barley stocks weren't produced to satisfy the domestic market, then I would have a different attitude to this, because I think the domestic market always has to take priority. We have to ensure the domestic market has supplies before we begin to move into the offshore. Even if the offshore is more attractive, I think we have an obligation domestically. But all our statistics indicate there's sufficient quantity to service the domestic market...plus being able to serve the Japanese.

Mr. Easter: My point is that in our not being able to ensure supply, there's a loss to the Canadian producers as a whole, and the economy as a whole, in terms of maximizing top prices.

My second question is on the SEO report. I know in a letter to Minister Goodale on July 21 you recommended farmers should own the rail cars and you said an effective mechanism of ownership would be the Canadian Wheat Board. You also know there's a lot of concern over the SEO report. I wonder if you might relate to me the implications of car allocation going to the railways for the farmer and the Wheat Board, in terms of it being an effective marketing agent.

Mr. Hehn: It's perhaps easier to talk about whether we move to a full commercial environment or whether we continue with some sort of coordinated and administered environment. The ideal system for the future is probably a combination of the two. But I don't think our system can move to a fully commercial environment. If in fact you move car allocation, car ownership, and car coordination to the railroads, you have what would be known as a ``fully commercial environment''.

With 120,000 farms; with 7 kinds of grain, with several classes within each kind, with several grades within each class, and also quality parameters within each grade, such as protein and moisture; with 1,300 elevators, 900 stations; with limited capacity in the country, 5 million tonnes front-end capacity; with 25,000 cars; with a 1,000 mile haul; with 6 terminals on the west coast, 10 at Thunder Bay; with a laker fleet; with transfer houses on the St. Lawrence; with 1,000 ships a year to load, about 3 vessels per day - you can't rely on normal commercial signals to get that job done. You have to have some coordination, some administration. That was our concern on going into those discussions, that we have some sort of administered system with some good coordination, to promote the Team Canada approach, because that's what's giving us the efficiencies in the industry.

I can name one we have in particular, which is the car pooling arrangement. That, the railroads admit openly, has generated an efficiency factor of somewhere in the order of 15% to 25% in the transportation sector; that provision alone. We have the car exchange agreement. We have a number of industry agreements that are not regulatory. They're agreements by the industry that create and promote efficiencies. As long as we have an administered and coordinated approach, it forces us to work together to look at those efficiencies and work towards improving them.

Mr. Easter: If car allocation goes to the railways, is that system put in jeopardy?

Mr. Hehn: If the total car allocation moved to the railways, into a commercial environment, yes, we would lose some of those efficiencies, and car pooling likely would be the first to go.

Mr. Chairman: Mr. Hehn, we really appreciate your coming forward today. Your testimony is of value.

All committee members, thank you very much for your cooperation. I'm sorry we had to be shorter today, but I think everybody cooperated very well. I want to thank you personally.

The meeting is adjourned.