[Recorded by Electronic Apparatus]
Thursday, June 8, 1995
[English]
The Chairman: I call this meeting to order.
With us from the Canadian Wheat Board Advisory Committee are Wilf Harder, who's the chairperson, and John Clair.
Welcome. I believe you have a presentation and then we'll go to questions.
Mr. Wilf Harder (Chairman, Canadian Wheat Board Advisory Committee): Thank you very much, Mr. Chairman. We are certainly pleased to be here.
I put together a paper that we wish to present to you, and we're looking forward to the question period. You did send a series of questions to us; we have not addressed all of them in our presentation, but certainly we'd be quite prepared to talk about them.
First of all, perhaps some introductions are in order. With me today is John Clair. He's a farmer from Radisson, Saskatchewan and is the vice-chair of the Wheat Board Advisory Committee.
I am chairperson of the Wheat Board Advisory Committee. I live about 50 miles south of Winnipeg, in a small town called Lowe Farm, Manitoba. Usually when I say ``Lowe Farm'', people think it's the name of my farm, but it ain't, Wayne. It took Wayne about ten years to catch on to that. The farm is big, but not so big that we would give it a name.
I should also mention that the Canadian Wheat Board Advisory Committee has representatives across western Canada. We are elected by some 125,000 producers. We have 11 districts, all the way from the Peace River region to the Ontario border. In an advisory capacity, we hold annual meetings with the commissioners and staff of the Wheat Board.
Today we are here representing farmers and talking about transportation, regulation and all those things associated with the change of the WGTA.
I want to thank you, as I did in the opening, for the opportunity to appear. When Marc Toupin phoned me about appearing here, it was in the middle of seeding. The middle of seeding this year was anywhere from the middle of April to the middle of May. At the time we made these arrangements, John and I had a crop to put in, so it was certainly under some stress that we got anything written down and prepared. But we have hastily put together some points, and I'll just go through them.
For the record, I think it might be useful to go back into recent history and look at all the different reasons that have been conjured up to change the Western Grain Transportation Act and the method of payment. I want to review that for a moment, because there's been this ongoing push from Ottawa to change it. The different reasons that were floated are most interesting.
The first one - and we tend to forget it - was in the 1970s or 1980s. When the Western Grain Transportation Act was changed, it was thought that by 1990 wheat would be $9 a bushel, so it was naturally thought that farmers could pay more for hauling grain. Of course we all know that didn't happen.
Then the word ``diversification'' crept into the picture. There's a notion out there that we need lower barley prices to make a viable livestock industry, so that's why we had to change the method of payment to increase transportation costs. Nobody really seemed to give a damn about what that would do to barley prices and barley producers.
Saskatchewan Wheat Pool did an analysis of the impact of doubling and tripling livestock production in the prairies. They found this would increase grain consumption modestly - and we have some of the numbers with us if you care to hear them - but even if we did that, there would still be a mountain of grain to export.
When the Ottawa bureaucrats saw that, they got on to the other favourite theme: we must change the method of payment to have a more efficient grain handling and transportation system. Efficiency meaning, of course, fewer grain elevators. The fact of the matter is elevator numbers and storage capacity are decreasing at an alarming rate on the prairies, so much so that if we decrease that storage capacity any more, we will find it difficult to meet the surge in export demand.
This is not in your text, but one company I'm quite familiar with, Manitoba Pool, in 1983 put3.1 million tonnes through their system with 187 elevators and 1,176 employees, an average of 16,800 tonnes per station. In 1991 the same company handled 3.5 million tonnes with 135 elevators and 798 employees. That's an average of 26,000 tonnes per station. I'm sure any other grain company could report the same kind of increase in efficiencies.
Then another reason for changing the method of payment was GATT. There's no doubt in our minds the WGTA was brought to the GATT table not by other countries but by our own Canadian negotiators, who used this as a devious tactic to get the changes to the WGTA they wanted and they could not achieve at home. This of course would absolve them from any blame.
Some seem to have fallen for this. Farmers are hoodwinked into believing it was GATT that made us change the method of payment and our government had no way of getting out of it. That's quite a line.
It's mind-boggling that we would give up the WGTA and not even attempt to trade off the Mississippi Corps of Engineers transportation subsidy. It is incredibly stupid. It makes you really wonder why we send anyone to negotiate.
This, of course, leads us to another reason we fabricated to get rid of the WGTA: pressure from the United States. Somehow in their distorted view of international trade they believed the WGTA gave prairie farmers an unfair trade advantage over them, even though we told them removing the WGTA would put more pressure on grain moving south. And it already has. In fact, the ink wasn't dry on the announced changes to the method of payment when one of the blue-ribbon commissioner members was saying in Winnipeg, you know, the Americans are really starting to take a hard look at this transportation subsidy.
It's pretty obvious what that double-speak kind of statement means. It wasn't long after the WGTA changes were announced that the United States said, that's fine, now let's get rid of the Wheat Board as well.
I would suggest to this committee that any bureaucrat who believes we will gain market strength by giving away our time-tested marketing system to please the Americans should be asked to seek employment elsewhere. In my original text I had written here ``fired on the spot'', but it was not considered good English, so we changed it.
How long will it take for us to realize the U.S. wants to change our system because it can't compete against it. Instead of cleaning up their own nest, they appear bent on fouling ours.
Then, of course, the other reason for getting rid of the WGTA and the method of payment was the budget excuse. We must get rid of the WGTA because of budget constraints. It's hard to imagine anyone would really fall for this kind of thinking.
Ron Gleim, chairman of the recently formed Transportation and Planning Council in Saskatchewan, which includes the City of Swift Current, talks of how roads such as Highway42 have been completely destroyed by heavy truck traffic when branch lines with little upgrading could last up to fifty years. He says a road that used to handle five or six one-tonne trucks a day is now handling ten ``B'' trains and the roads just aren't standing up.
Friends, this is just the tip of the iceberg. These roads will be paid for by taxpayer dollars through the provinces and municipalities. What all this federal budget restraint nonsense is all about is the off-loading of transportation costs on the provinces. Really, what kind of saving is that?
Recently another reason has come up for scrapping the WGTA. That of course is the privatization of the CNR. If it can be sold to whomever, even American interests, then watch the farmers capture the benefit of high freight rates.
If I were somewhat cynical, I would really think the WGTA was changed simply because it was there. To me that is about as logical as any other reason that has been given.
I would like to quote to you from an Alberta Pool policy and research paper dated January5, 1995. We will have copies of that available. I picked this up very recently. It's called a ``backgrounder''. I'd like to quote from that paper, which was written in Alberta:
- The WGTA creates the conditions of a competitive market. Price reflects actual costs plus a
generous contribution margin. Sanctions are only invoked when there is a performance failure.
In a competitive marketplace, performance failure leads to lost business and economic hurt.
The WGTA in no way restricts the railways from operating an efficient, competitive, reliable
and profitable grain transportation business.
The paper goes on to say:
- In marked contrast, the NTA does not create a competitive market environment. It allows a
railway to fully exploit the captive nature of grain and the market power it commands over
shippers. Prices to farmers will increase to reflect this captivity. Performance requirements are
far weaker than the WGTA and there is no indication that a massive performance failure, like
that experienced in 1993-94, will not reoccur.
- There appear to be only two possible motivations for a move from a modified WGTA to an
NTA environment, and both of them are inappropriate. The first is a desire to minimize
government cost. This is an important goal, but there is a clear difference between creating
efficiencies and eliminating required functions. Most would agree that eliminating police
forces to save money is an inappropriate motivation. The second possible motivation is merely
to increase the revenues of the railways.
- It should not be the policy or the economic function of grain to cross-subsidize other traffic. In
other words, we should recognize who the customer is. The railway works for the grain farmer,
not the other way around.
- In conclusion, the onus is clearly on the government to demonstrate what incremental benefits
are generated for the farmer, the grain companies, and the entire grain industry in going from a
modified WGTA to an NTA environment. Specifically, how do farmers and industry benefit
from the removal of the rate ceiling, the elimination of costing reviews, and the withdrawal of
performance and sanctions provisions? How does this help achieve the industry vision that has
been agreed to by all participants in the grain industry?
I want to quote to you from the minutes of the proceedings and evidence of the Sub-Committee on the St. Lawrence Seaway of the Standing Committee on Transport, held May 4, 1994, which I attended. It was a question Mr. Easter put to Rick Sallee, vice-president of marketing and sales of heavy haul for CP Rail. Mr. Easter said:
- Really, in the Western Grain Transportation Act, what we have for the railways is a cost of
production plus, paid to the railways on a cost-shared basis between farmers and the
government, with the farmers picking up an ever-increasing share of that cost. Would that be
correct, sir?
- Yes, that's correct.
What this really tells us is that the railways want to compete with potash and other large, bulk commodities for access to rail transportation. The problem farmers are faced with in this kind of a system is that we are unable to pass our costs on, as do other industries. With the exception of supply management, we are price takers.
What all this really illustrates is that the railways are much more profit-oriented than they are efficiency-minded. It is almost a cruel joke that, on one hand, the government wants to deregulate the railways and, on the other hand, it wants to regulate gun ownership.
The government wants new regulations for the eastern fishing industry and virtually no regulations for the railways. Is it possible that grain farmers will soon be faced with the same plight as eastern fishermen if this type of nonsense is allowed to continue?
Just recently, on June 1 - it is not in the text - there was a press release from the Montana Farmers Union. They have the kind of a system in the United States that we appear to be going to. I'll just read a part of this release.
- ...to ship wheat from Alliance, Nebraska, to Portland - and the Nebraska train would come
right through Billings anyway....
- It is actually more expensive to ship wheat from Billings to Portland, Oregon than it is from
Alliance, Nebraska.
- It's only 992 miles from Billings to Portland, whereas it's 1,471 miles from Alliance to
Portland. It's $278 more per car from Billings as part of a 52-car unit train....
It goes on to say:
- ...BN is cheerfully gouging the helpless, it is wrong and our federal government should step in
with anti-trust action instead of allowing this kind of monopolistic [thing to continue]....
Your subcommittee paper asks a lot of important questions. One of them is, who should own the government hopper cars? It's not terribly complicated. Clearly, if the government wants out, it should be the Wheat Board that should own and control them. That seems to be a very simple solution and would make the most logical sense.
I would like to talk briefly about this whole notion of distance-related freight rates and what should be the grain freight rate from Winnipeg versus Saskatoon or Calgary.
I have on different occasions asked the National Grains Bureau to give the numbers for what the freight rate for grain would be if every farmer paid the same, whether they farm in the Peace River region or in Brandon, Manitoba. It's not all that much different from mailing a letter from Churchill or from Ottawa.
The kind of answer I got, if I got any answer at all, was this: well, sir, that kind of situation would not allow the proper price signals for grain in the various regions to occur and it would create distortions in the marketplace not reflective of the actual relationship to the true price of grain in a given location at a given time. I think what that really means is, we ain't gonna look at it.
The new WGTA regime and proposed freight structure also send some signals we should take a look at before we proceed. The signal the new freight structure sends is that Morris, Manitoba - I live ten miles from there - will have the lowest freight rate for malt barley and durum, neither of which grade very well and hence are hardly grown.
The new freight rate structure in effect says feedlots should be located in Manitoba and all feed barley should be exported out of Alberta. It's a sure bet Alberta will go for that one.
I think that as Canadians and Canadian farmers, we must seriously question whether such massive industry restructuring is worth the expense of destroying existing structures and creating new ones.
We hear a lot about the new economic spin-off resulting from the diversification that will take place from changing the WGTA. However, we hear little mention of the loss of economic activity resulting from the change, and this could happen in many small towns.
It is not hard to calculate the revenue loss of a small or medium-sized elevator with a throughput of some 25,000 tonnes a year, and that's getting to be the minimum for which a company will keep an elevator. If you multiply 25,000 tonnes by a $20-per-tonne increase in freight rate, that gives a $500,000 loss to the community. I had to multiply that out several times to make sure the number was that high. That's a lot of money in a small community. If you accelerate that number to a $30- or $40-a-tonne increase, it's even more dramatic.
This of course begs the question: where are the impact studies to show the effect of losing the WGTA as it relates to less revenue to grain farmers, increased road costs and energy and environmental concerns? It's unthinkable that we would make such a major change without a proper impact study.
Peter Thomson, recently retired administrator of the GTA, said in Winnipeg last November:
- This year the west coast is breaking every record on the book for unloads and shipments and you
name it. Thunder Bay is shipping its best volume in years and had the best first quarter in seven
years.
It is noteworthy that in spite of heavy U.S. subsidies, Canada has maintained its world market share. The U.S. produces approximately 11% of the world's wheat and accounts for about one-third of world exports. Canada has 5% of the world wheat production and accounts for about 20% of world exports. What is even more interesting is that their rail rates on average are $20 per tonne higher than our full compensatory WGTA rates, even though they have less fuel tax.
It's also interesting to note that our port facilities are running at full capacity, compared to the U.S. at 50%. The average cycle time to all ports in the U.S. is 18.2 days for all grains, compared to 17.5 days in Canada. And we ship many more varieties and classes of grain.
Our record of movement is even more impressive when we take into account that commercial storage in Canada is less than half of our total exports. Commercial storage in the U.S. is almost double their annual exports.
That's not bad for a country that is farther from tidewater than any of its competitors. Only in Canada, after having achieved such a success, would we say we must change so we can be more American.
Thank you, Mr. Chairman.
The Chairman: Thank you, Mr. Harder. That's certainly a direct presentation; there's not much confusion there. I like that, myself.
[Translation]
Mr. St-Laurent (Manicouagan): Yes, it is very clear.
You mentioned a moment ago that the average cycle time is approximately 17 to 18 days. I see in my notes that it was 20 days in 1908. Out West, the cycle was 20 days. Is it that the system was very efficient in 1908 or rather that it is less so today? I would like to hear your views on that. Could some improvements be made in the cycle? It seems that cars are often used as warehouses as a savings measure. Might there be some easy solution in that area?
[English]
Mr. Harder: That information sounds like something that came from the United Grain Growers or the Western Canadian Wheat Growers; you have to keep in mind where it comes from, sir.
I don't know that anybody has ever verified where those numbers come from. It's pretty clear that in those days - and I can imagine all kinds of things - we had much less grain to haul, much less other traffic, many fewer varieties, fewer labour laws to contend with and a whole bunch of other things. It's the kind of rhetoric that some groups have been pushing just to discredit our own system; I would regard it as that.
I would like to see someone give me a detailed analysis of why and how that happened. At that time I'm sure we weren't exporting any canola. I'm not sure we would have exported any peas or canary seed. So I don't know that that is a logical comparison.
I think to compare our system with what's taking place in the United States at this time is a much more logical way, but certainly you have that information as it has been presented here by some groups - groups some of us don't give much credibility to.
Mr. John Clair (Vice-President, Canadian Wheat Board Advisory Committee): One of the things we want to make very clear is we're not opposed to looking at car cycle times and the need for improvement, because every time you improve that cycle by one day, there are 700 fewer cars needed in the system. If we can take two or three days off our cycle times....
There are abusers of the system who are using cars for storage. I've had a chance to check into it and have found they were in fact doing that out in Prince Rupert. When we were there, one of the smaller terminals at Rupert was using 200 or 300 cars to store a commodity for shipment whenever the ship came, and at that particular time the ship had been delayed for either two weeks or a month.
That's only one instance, and it's not the whole system, but there are abuses of the system, and I think we need some kind of performance guarantee. If you use the car and abuse it, you need to pay a penalty.
Mr. Harder: I think it's also noteworthy that Wheat Board grains enjoy much faster cycle times because they can be pooled. Moving grain through the Wheat Board certainly adds to the efficiency of the system.
[Translation]
Mr. St-Laurent: Thank you. That's all for me.
[English]
The Chairman: On that last point, Mr. Harder, do you have the different turn-around times for Canadian Wheat Board versus open market grains, or can you find them at some point? That's good information for us to have.
Mr. Harder: Sure.
The Chairman: We can come back to that when you find it.
Mrs. Cowling (Dauphin - Swan River): I would like to thank the individuals for coming to this committee and for their presentation.
As someone who's been involved with the grain business for many years and as someone from Manitoba - my riding is Dauphin - Swan River - I have always been and will continue to be a strong supporter of the Canadian Wheat Board. One of the things that's happening in my riding is that Swan River will be picking up the highest costs of moving grain out of this country.
I have a question that I've raised with many of the other witnesses we have had before this committee, and it's with respect to cost subsidization. One of the things that never was identified, to my knowledge, is the fact that Manitoba has cross-subsidized a number of branch lines in northern Alberta and Saskatchewan.
When you take a look at a regime that is deregulated and see that a portion of the $300 million has been set aside for the adjustment of the pooling of the seaway costs, what kind of number do you think is fair to those Manitoba producers, who will be picking up the additional costs?
Mr. Harder: I think the number that has been put out is a $50 million hit to Manitoba, as a province. The $300 million is a paltry sum. How many roads do you build for $300 million? I bet you don't build more than 600 miles, and I'm not a Minister of Transport. I think we have someone with the provincial government who's going to make a presentation and would know that.
I think it's just a paltry sum. As I said in our presentation, I don't want to get into the numbers issue, but if someone thinks $300 million is going to solve the hurt.... Everybody wants some of this, and I had it in here, but it didn't fit. It's not going to do anything for us; it's nothing.
The municipalities are the the interesting part of this. I really think the municipalities have been far too slow. We used to want to get them interested in this WGTA stuff, and they said no, that was for others. They didn't realize it would impact on them dramatically.
Tremendous road costs are going to be coming down the pike, and who's going to pay for it? I think the $300 million is just a drop in the bucket.
Mrs. Cowling: One of the things we've been hearing from witnesses - and we hear both sides on this issue - is that we should have an open and free market and just let the forces come as they should.
I think it's important to farmers in my riding and right across the west that we not leave them at the mercy of the railways to charge whatever they might choose. The cap on the maximum freight rates is an issue. Do you think we should continue that cap after the NTA?
Also, because we're not quite sure what we might be moving into with a deregulated regime, would you support the concept of a supervisory body - a watchdog - to watch the system as it unfolds?
Mr. Harder: Naturally. We already have that, and I don't know why we'd want to move away from it. We have the Grain Transportation Agency. Of course we need a watchdog.
Mr. Clair: Under the WGTA right now there are teeth that could effectively be used to not leave us trapped with a rail system that is not competitive.
I have here a very small map of the train runs in western Canada; I'm sorry it's not an enlarged version.
Mrs. Cowling: I've seen it.
Mr. Clair: There is no way that is a competitive environment. I can't truck my grain 40, 100 or 200 miles to another rail line and then say I have a competitive environment to work in.
So for sure we need a body there keeping it at a cost, plus a reasonable margin. The WGTA was doing that quite effectively, I think. The Senior Grain Transportation Committee had a committee that looked at costing, and we had a chance, as farmers, to be represented there and have some input. We're losing that in a month and a half.
A supervisory body is already in place, and I'm sure in favour of keeping it rather than disposing of it. What the name is doesn't bother me, but we need it there for our protection.
Also, for sure we need a cap. There is no question in my mind that if we let it go to what I see in the States - and I understand that's more the environment we're moving to - I'll be trapped. I'm already a price-taker in the world, and if I have to take, take, take from the railroads, or, for that matter, from anyone else, there's less and less for me, and I'm having a rough time existing now.
Mr. Harder: I think, Marlene, there's this idea out there that once you set the railways free they will tell you they will be this....
A year ago we met a shortage of rail cars. I attended some American meetings. There was a professor from A & M in Texas who was a railway expert, and he said railways don't provide stock for peak performance periods. That doesn't make money for them. They provide for the average. It's no different from a farmer who doesn't buy two or three combines because he simply can't afford them. Railways, even in a deregulated system, do not have stock for the peak periods. They carry an average stock so they can keep their system going full out.
Mr. Clair: If anyone feels we can move a volume of grain through the States and still capture the same markets we do today, which rely on our quality....
That's our niche in the market. Our quality system is second to none. We're the only country that guarantees our product at unloading. We had one instance of going through Seattle with barley. I don't want to ever go through an American system again, because we lose control, and as soon as we lose those controls, we lose our customer or else we drop our price so low that what's the point?
Mrs. Cowling: You have your map of the lines right across the country. The other issue we're looking at is rail-line abandonment. We've also had a group of people here outlining short lines and giving us a different perspective on that.
What are your views on rail-line abandonment? How many of the lines do you think we need? What's your concept of moving into short lines?
Mr. Harder: First of all, there was this idea out there that rail-line abandonment could not take place under the existing structure. Let's get that out of the way first. A rationalization was taking place and elevator numbers were diminishing; we did not have to change the present structure to have more rail-line abandonment.
I don't have a number for how many miles should be abandoned, but when we abandon rail lines, I think we should look at the whole picture. If you abandon a rail line, what are the increased road costs, community concerns and all those things? I really think we should consider them.
The department of highways in North Dakota is now paying the railways to maintain the roadbeds because they are finding it's too costly to build the roads.
I don't have a number, but I think a proper impact study should be done. Are we really saving money by transferring it from the railways to more truck traffic? I live on Highway 23, which goes through one of the southern parts of the province, and those roads are deteriorating very quickly.
I think we should take all that into consideration before we abandon the branch lines.
If the government feels the railways can make an accurate case that they can't operate a line profitably, then the government has to make a choice. Do they want to spend money on rail lines or do they want to build more roads? That's the choice.
Mr. Clair: About two and a half years ago I worked with the provincial Government of Saskatchewan to take a look at what kind of road system paralleled what kind of rail system. Almost mile for mile, the poor, supposedly high-cost branch lines paralleled the poorest highways we had in Saskatchewan.
I can't speak for Manitoba or Alberta, but we're in a situation where the roads in poorest condition are going to get the highest truck traffic. It is going to be an extremely costly thing to me, as a person.
If the people really are government, then we should be in a controlled situation where we can say ``Whoa! The railroad is the cheapest way. If it isn't, I'm not opposed to abandoning the line, but if it is the cheapest way for me to move my product to market, then that railroad should stay there.''
Even if the cost gets higher than it is today, it's still cheaper than moving to road transportation.
Mrs. Cowling: I have one more question on rail lines.
We have a line of steel that goes from one end of the country to the other. I've been told that a good portion of the revenue comes from western Canada. If in fact there are inefficiencies in the system, do you think we should continue to have that line of steel right from east to west?
Mr. Harder: I sometimes wonder whether we've really tried to make the rail system as efficient as we can.
Some years ago I travelled to a meeting in Edmonton on CN Rail. There was an American tourist on the railway who said he was really disappointed. He'd seen all the brochures of the railways going through the mountains, and he said ``Do you know what? The train goes through the mountains at night.''
I had the same experience when I phoned; they did not even want to promote. They said things like ``You may get breakfast on the train or you may not.'' That was the only time I ever travelled by rail, and actually I was pleasantly surprised; I thought it was just great. We really haven't tried to promote that, and I'm wondering whether we've tried to make the rail system as efficient as possible under any system.
I guess there will come a point when, if it becomes too costly, we'll have to change it, Marlene. But I sometimes wonder if we've really tried to make it work.
Mr. Hoeppner (Lisgar - Marquette): Welcome, gentlemen.
I know Mr. Harder is a farmer and I imagine John is also a farmer.
Mr. Clair: Yes.
Mr. Hoeppner: I'm sorry you didn't include those first figures you quoted on the abandonment of elevators. What is the percentage on that?
Mr. Harder: Regarding Manitoba Pool?
Mr. Hoeppner: Yes.
Mr. Harder: I don't know that I can relate it to a percentage. I have those numbers with me.
Mr. Hoeppner: It would be interesting to see. I was wondering if it could become more efficient.
Mr. Harder: There's actually a very good paper put out by the Grain Transportation Agency. I have this in notes of some years ago. We could have included it, but I didn't know how much time I wanted to use.
This public paper says:
- Since 1970 the ten-year average of production has increased 19% and exports have climbed by
32%. At the same time there are 52% fewer primary elevators that have 19% less capacity.
Exports are now moving through three fewer terminal elevators with approximately the same
total licence capacity as before. This has the effect of keeping transportation costs lower.
Mr. Hoeppner: That's what I was getting at. You've rationalized your elevator system.
Mr. Harder: And you ain't seen nothin' yet.
Mr. Hoeppner: I was just wondering why my elevation charges and costs have not come down. I see they're going up every year. When I improve efficiency on a farm, my costs go down.
Mr. Harder: All I can say is -
Mr. Hoeppner: You can probably explain it later on. I have a lot of questions. If you can give us a written explanation for that -
Mr. Harder: Your costs are not going down, but they would be going up a lot more if certain things hadn't been done. If you look at the financial statements of most grain companies you will find very little money is made in the country operations.
Mr. Hoeppner: We'll get to that a little later on.
You're a farmer. What is your return on investment? What does your operation cost?
Mr. Clair: If I can run 2%....
Mr. Hoeppner: You do pretty well. So how can you then say the WGTA, which is guaranteed a 20% return on investment and operation, is what we should keep?
Mr. Harder: I would ask it the other way? Tell me, if that's so good for the railways, why do they want to change it?
You're quite right, Jake. They have a good deal on it now. But the question you should really ask is why they want something that is even more lucrative for them.
Mr. Hoeppner: I don't think they really want to change it.
Mr. Harder: You have to be kidding.
Mr. Hoeppner: You said in one of your statements they didn't really care about changing it.
Mr. Harder: I didn't say that. I didn't say that at all.
Mr. Hoeppner: That was the inference.
Mr. Harder: We know they want the ceilings lifted. They are already getting that. We could have made those modifications. But you tell me why the railways want to get rid of the WGTA.
Mr. Hoeppner: I'm asking you.
Mr. Harder: I told you they want to get rid of it so they can charge us more. You think they're doing well now -
The Chairman: So they put all you Manitobans together. I think that's the problem.
Mr. Hoeppner: I'm just getting to philosophy here. I don't know what Mr. Harder's philosophy is, but he says the railways should definitely not have a monopoly.
Mr. Harder: They will always have a monopoly. We have to control it.
Mr. Clair: It is the only practical way to move heavy products such as wheat or barley out of the province.
Mr. Hoeppner: You just said they shouldn't have a monopoly, we should regulate against it.
Mr. Harder: No, we should regulate pricing. We'll always have a monopoly. If we have two railways, it is foolish to think... It doesn't matter who buys the CNR. Do you think they're not going to cooperate?
Mr. Hoeppner: So you don't like competition.
Mr. Harder: We don't have it.
Mr. Hoeppner: On your farm, do you like competition?
Mr. Harder: We have it.
Mr. Hoeppner: You have it. Would you say your fertilizer company should become monopolistic?
Mr. Harder: They are right now.
Mr. Hoeppner: They are? And you don't like it.
Mr. Harder: I don't know what your point is, Jake.
Mr. Hoeppner: I'm getting to it. I just want that answer.
Mr. Harder: I think a monopoly can be very profitable if you have the monopoly. That's why the Wheat Board -
Mr. Hoeppner: So you can have different monopolies, can you?
Mr. Harder: You can have different monopolies. A monopoly certainly enables you to extract the most out of the marketplace. So we can understand that advantage and it's all right if you have the monopoly.
Mr. Hoeppner: How can you justify this, Mr. Harder? You say the railways shouldn't have a monopoly, then in the next breath you say the Wheat Board should have the allocation of all the cars; they should have a monopoly. For goodness' sake, let's have -
Mr. Harder: I acknowledge that the railways always will have a monopoly. Whether they should or should not is not what I said. That is just a fact of life; they will have a monopoly.
Mr. Hoeppner: Do you like competition?
Mr. Harder: It depends on whether it works on my behalf or it doesn't.
Mr. Hoeppner: So you're saying that as far as grain handling is concerned, as far as marketing is concerned, it should all be a monopoly.
Mr. Clair: Let's look at it from the point of view of buying a car. If you're a car salesman, isn't it really nice to be the only one selling the car? If you're the car buyer, what do you want?
Mr. Hoeppner: You want competition.
Mr. Clair: In the case of my being the seller of grain, I want one board selling on my behalf. If I want to buy something, I want it the other way.
Mr. Hoeppner: Can I get a price out of you? Can I get different quotes? You tell me exactly what I'll get, don't you?
Mr. Clair: I'm not following you.
Mr. Hoeppner: You set an initial price. You set it low enough that everybody knows exactly what that price will be at the end.
Mr. Clair: As a board...something called a ``pro'' is issued, such that I can get an indication of what I'm going to get as a final payment, but not a guarantee, if that's what you're getting at. I do have an initial -
Mr. Hoeppner: I would just like to have those statements on record.
I would also like some kind of explanation...and you can write it to me. I was going through the Wheat Board accounts and I saw that storage costs for 1991-92 to 1992-93 have gone up on average from about 23% to 53% in elevators and terminals in the country. What is the explanation for that?
Mr. Harder: On what page in the report did you see that? Point it out to me.
Mr. Hoeppner: It's in the 1992-93 report.
Mr. Harder: I don't have the 1992-93 report with me.
Mr. Hoeppner: I haven't been able to get the 1993-94 report. I've asked for it for quite a length of time and I haven't been able to get it.
Mr. Clair: It's here for you.
Mr. Hoeppner: Thank you very much. That will help a lot.
I would like to ask you another question. We're talking about efficiencies. I think in your grain matters I've seen somewhere that you have been cutting back on staff somewhat in the Wheat Board, if I'm right. Is that correct?
Mr. Harder: Yes.
Mr. Clair: I can't give you a number, but the place where I see the increase is in the sales department.
Mr. Harder: I want Jake to continue with us.
Mr. Clair: Yes.
Mr. Hoeppner: I was just wondering if that is the case. I was called to a vote today so I couldn't pick up all the information I wanted to get. In the next breath, we see that you have $2 million extra in costs of salaries and benefits.
Mr. Harder: When was this?
Mr. Hoeppner: This was in this year's report. It wasn't grain matters. It's in this report. I didn't get the report, but I have the grain matters issue.
Mr. Harder: Actually, it could be an increase in staff.
Mr. Hoeppner: I thought we were decreasing staff in the sales department.
Mr. Clair: Just a minute.
Mr. Harder: It could be an increase in the sales department. Also, there's a program on; as in other companies, when certain people retire, you give them early retirement and that costs you some initially.
The salaries that we put have actually been frozen since 1991-92.
The Chairman: It would be possible, though, Mr. Harder, to get the specifics so that we're not dealing in generalities.
Mr. Harder: Sure, it would be.
Jake, I think it's a mistake. I really think one of the problems we've had at the Wheat Board is we've had a lot of good staff leaving because we're not paying enough. We have lost two good people to CNR.
Mr. Hoeppner: Did you hear that, Mr. Easter?
The Chairman: I agree with it.
Mr. Harder: People go on the total operating costs of the Wheat Board. The total operating costs of the Wheat Board were 4.7¢ a bushel last year. If you got rid of all the staff at the Wheat Board, you might save 1c. a bushel. I really think that when we get into that kind of stuff, it's not looking at the forest for the trees.
I've never been as concerned about staff costs, and that's a different attitude from that of other people. I look more at what we're doing. I really think we should be expanding our staff to do more things and to do things better.
I know when it comes to getting something typed for me or prepared for me, we're awfully short on staff at the Wheat Board. I just think that's a red herring that some people use.
Mr. Hoeppner: I don't want to dispute that; I just wanted that on record.
There is another thing I'd like on record.
The Chairman: This is the last question, Jake.
Mr. Hoeppner: Thank you, Mr. Chairman.
You've been shipping unit trains of barley from Thunder Bay to California. What is the cost of freight on that?
Mr. Harder: I don't know. That is from Thunder Bay to California?
Mr. Hoeppner: From Thunder Bay. I've been informed that there's been a number of unit trains going from Thunder Bay to California.
Mr. Harder: Most of our barley, from my understanding, goes to the Pacific northwest and not through Thunder Bay.
Mr. Hoeppner: That may be the malt barley.
Mr. Harder: It could be the malt barley.
Mr. Hoeppner: I don't know what barley, but I was informed by the trade that there's a number of them that have happened.
I also see in a news release today that Japan, which is one of the largest grain buyers in the world, is to increase barley imports from the United States and not out of Canada, ``after being troubled by delayed shipments from Canada, a local trader said''.
Mr. Harder: Yes, it's possible.
The Chairman: Mr. Clair, do you want to get in there with an answer?
Mr. Clair: One thing I wanted to touch on is when you're dwelling on marketing with Wheat Board costs, marketing costs for Canadian grain runs about $1.66, compared to about $4.11 for American grain. This isn't board only; this is offboard and onboard, the whole gamut in Canadian dollars. So when you compare one system, take a look at the other one.
Mr. Hoeppner: Can you provide those figures for us?
Mr. Clair: I've got a Canada-U.S. logistics slide, if you want to take a look at it, sir.
Mr. Hoeppner: I wouldn't mind having that, if we could.
Mr. Clair: The other thing I've dug up is the GTA analysis of cycle times. Is there time, Mr. Chair, to just give this?
The Chairman: Yes, sure.
Mr. Clair: This is through GTA numbers: Canadian Wheat Board grains through Vancouver, 17.9-day turn around for oats and canola; Vancouver again, 20.7 days; and for non-administered flax, rye, and special crops, 29.9 days. Moving to Thunder Bay: Canadian Wheat Board grains,18.4 days; oats and canola, 24.9 days; and again, non-administered cars, 27.9 days.
Mr. Hoeppner: That's not in this information.
Mr. Clair: No, it isn't.
Mr. Hoeppner: If you brought it for us, it would be nice to help to write the report.
The Chairman: We can get a copy of that, I think, can't we?
Mr. Clair: Yes.
The Chairman: That's the most concrete information we've got on car turn-arounds since we started. It's good to have.
Mr. Hoeppner: Thank you, Mr. Chair.
Mr. Harder: I'm a little surprised, and I think some of us should take some time to visit the board sometime. That stuff has been floating around all year. This is not new stuff. We've been having this all year at the meetings.
The Chairman: I guess what I'm saying, Wilf, is that we're getting all different kinds of figures, in terms of car turn-arounds, based on the various philosophies that people have coming forward.
Mr. Harder: No!
The Chairman: In your presentation on page 4, you talk about the Alberta Pool policy and business research paper. I have at this committee used that statement a number of times in our questioning of the NTA, which was here before, and previously the GTA.
The statement is made in the paper that the NTA does not create a competitive market environment. What this committee wants to come up with at the end of the day is what we see as required in the future so that the impact of the WGTA changes and other transportation changes that are put in place can in fact be handled and the interest of the industry and the producer are protected.
I know you've said earlier that the WGTA could effectively be used. That's not in the cards. The legislation is going through. That not being in the cards, what else can be done to address some of the role that maybe the WGTA previously had?
Mr. Harder: You're asking us to solve a problem that you have created yourselves.
The Chairman: That's why you're here.
An hon. member: The Liberals did it.
Mr. Harder: You created the problem, or someone has created the problem. To be fair to you politicians, I think it's a bureaucracy gone out of hand, but that's another story. Anyway, that doesn't apply to any political party.
I don't know. I guess you'll have to call it something else.
The Chairman: Let me be more specific. Are we talking about an ombudsman role? Are we talking about a monitoring role? There are some changes in Bill C-76 that members of this committee have pushed for. One is in terms of monitoring price cap, and so on. Are there areas there that need to go on in the future beyond the year 1999, when we basically move into the system that we're in now? John?
Mr. Clair: Mr. Chairman, the way I look at it, whether we're talking now or on into the future, I think we need the same type of regulation. I look at it in three different ways. In terms of costing, we need some protection as farmers. In terms of abandonment, we need some kind of a board or an ombudsman or someone we can come before as farmers and show, if we have to, that the rail is the way to go, or maybe the trucking people would want to come before it and show that trucking is cheaper, or whatever.
I think there has to be that form of regulation in place so that there is some party to go to that isn't biased.
I also think we need a performance regulation with teeth in it so that there are some dollars taken away or some penalties implied. It used to be under WGTA, or maybe it still is, that the government could restrict the amount of money going to a railroad if it didn't comply with good business procedure, moving grain at a decent rate. It was never used, but at least it was there.
Now, under NTA, I haven't seen anything with teeth in it. Maybe I've misread, but I can't find where I, as a farmer, can appeal to anyone to do something about the poor movement of grain if it happens. It's not there.
The Chairman: Some other people have made recommendations along the same line. I think you probably are aware that there are going to be amendments coming forward in the NTA as well with potential legislation in the fall. It's something that you should keep your eye on too in terms of the interest to your industry.
Mr. Harder?
Mr. Harder: I'm told - and just from what I hear from the grain companies - that under the new legislation the only way you can really raise a concern with the railway is to take them to court and do a court challenge. Now, this is just something that I've heard or picked up and it seems to me that is a terribly foolish way to go, if that's in the cards.
The Chairman: I don't know.
Mr. Harder: I'm not here to specifically speak for the grain companies -
The Chairman: I've been through a few of those in the past. It's an expensive option.
Mr. Harder: Well, it really doesn't make any sense.
The Chairman: Just so I get your three points right, you're talking about needing some kind of regulation in terms of costing, abandonment and performance.
On the performance question, I guess one of the things that we've been concerned about as a committee is how do you ensure that these new efficiencies that are supposedly going to happen as a result of the changes are shared equally throughout the system or get passed down the line? Any ideas?
Mr. Clair: One of my big concerns is -
The Chairman: Wilf's saying it won't happen; I can see him.
Mr. Clair: One of my big concerns - I phoned one of the other advisers, because he sits on a branch line that will likely be abandoned, and I said ``From your perspective, where should some of the savings go?'' His direct answer was ``Straight to the RMs''. They're the ones who are going to have to rebuild the road, and I do mean rebuild and rebuild and rebuild, because it's a continuing problem. In some of those areas it's going to cost massive dollars to local government. That local government cost comes back to me as a farmer no matter which way we go.
The Chairman: On that point, we've had a number of presentations on short lines, some by current short-line operators and some by Rail Tex in the U.S. Certainly one of the points raised by Rail Tex was that if the line gets shut down to the point that the elevators are not on it, then you can't really make an effective short line out of it.
One suggestion to the committee was that maybe there should be a committee look at where the potential short lines could go to try to limit that possibility of the elevators being gone. I really do, at least personally, believe there's conflict within the elevator companies themselves - and I know Wilf is a director of Manitoba Pool - in terms of their company's interest in moving to high throughput elevators and the farmer's interest of maybe having a short haul through a less efficient small elevator on a potential short line.
What are your comments on that? How do we ensure that the branch lines don't get all torn up, or the elevator is gone and you can't make a short line out of it?
Mr. Clair: Mr. Chairman, I'd be very much in favour of a committee that does not have a bias that could take a look at just what you're saying, whether the short line is a workable or feasible second choice, if you like. Sure, there's a bias. If the railroad will get the grain anyway and not move to the competing line, there's no need for them to be concerned. The grain elevators have to be concerned about their own bottom line, first of all, and I'm not pointing at any particular colour or any particular province. They look at their bottom line. They're going to collect that grain in their system and away it goes to market, so they'll get their handling charge.
I look at it from basically the combine right through the whole system because I pay the bill. By paying the bill I get less for my grain, and I look at that as paying the bill.
So it would be a good idea, Mr. Chairman, to have a committee look at each line prior to the elevators being destroyed, because once they're gone, you're right, it's over. I think that should be taken and carried further, and I think I can speak for the advisers. I think we'd like to be part of that.
Mr. Harder: This whole deregulation atmosphere creates so many things that are almost unworkable. If you have a deregulated industry - and if I can speak for a moment from a grain company's point of view, not necessarily from a cooperative's or any other one - you don't want any guarantees. Guarantees are out. You're always supposed to flow with the market.
For a grain company, the best place to locate an elevator is on the main line, as you suggested. It runs right through central Canada, and that's it. Game over, guys. All farmers haul to that and that's where they make the most money. If you really want to just look at the market, that's where they would make the most money. But is that good for the rural communities, for the road system, etc.?
Right now, with the flexible rates that we've sort of gone into, incentives for 18-car spots and 50-car spots, you have a self-fulfilling prophecy. What can happen is they can offer a bonus on a main line, a preferred rate. Farmers then will haul through that main line, and then pretty soon the elevator on their branch line loses handle and the company, be it a cooperative or another one, closes it down. Then the railways and the companies will say we didn't do it, your farmers did it, you chose to haul over there. You chose to haul over there because we created an incentive for you to do that. Of course, we know what will happen when the branch lines close down; then the incentive rates will be gone.
If we look at the United States, where they first of all gave incentives for 25-car spots and then 50-car spots, once the spots had been built by the grain companies, the incentives were taken off. Somebody wants to get into a deregulated environment, so I don't know where you stop it. From a grain company's point of view, they want to be assured that a line will be there so many years and then they will invest capital. It's as simple as that.
Mr. Clair: Maybe just from a farmer's perspective, my view is that the loss of regulation will be more significant to my farm bottom line than the loss of WGTA. There's a greater loss potential in the loss of regulation than the loss of WGTA. That's my bottom line.
The Chairman: Marlene, you had a question, I believe.
Mrs. Cowling: Yes, I do. Just a brief question because we haven't talked about this very much. We would like to have some direction with respect to diversification and value-added. Do you see a shift in some of the grain-producing areas of this country? Do you see a shift of what we might actually be doing in my riding of Dauphin - Swan River as compared with what we've been doing over the past number of years? Do you foresee this happening in the scenario we're looking at?
Mr. Harder: I'm just looking at the freight rates that will be in Dauphin. To be truthful, your freight rates aren't going to change as dramatically as they will in a lot of other areas.
Mrs. Cowling: Swan River?
Mr. Harder: Yes, feed barley right now is $37 a tonne, will be $37 a tonne freight and it was $23 before. More dramatically, I can even add that in Arborg, Manitoba, the feed barley will be $43 a tonne freight where in the past the farmer's share was about $10. Maybe that's the way it should go. What I do see is a shift out of feed barley production.
To be fair, there will be farmers who will produce and the domestic market may pick that up. If I have to speak for a moment, it certainly won't go through the Wheat Board. It will be the domestic market that will have to be satisfied. That may well happen.
As I said in my remarks, the sort of contradiction in this whole thing is that it will make malt barley and durum in southern Manitoba one of the more economical things to grow, and really we can't grow them very well. If I'm going to go by market signal, I should be growing durum. But you can't grow durum in southern Manitoba; you shouldn't grow it because normally you get number4 and number 5. Now, the odd time you get a number 2. So that's not for us. But it happens to go east and so that's why the lower freight rates.
Yes, I see a shift out of barley. I see people selling just to the domestic market.
I think the other question was, what diversification? We will certainly have more diversification, but at what cost? That's all I'm asking.
In my community, there are hog barns going up. If I want to invest $70,000, I can be part of a $1.4 million hog barn. We are already getting into the area of municipalities, environmental concerns, etc. We are moving to these big factories. It doesn't do much for the small, family farmer. Of course, that's old fashioned so we don't want to talk about that.
In all this diversification, we seem to want to get out of supply management. Who is to guarantee me how many pigs we can produce and at what price? I'd like some guarantees. Railways want guarantees. Railways want to charge what the hell they want, but as a farmer, I get no guarantees. They're in free enterprise, which is what I am supposed to be, too, but I can't charge what the market will bear. I am a price taker.
The Chairman: In fairness to the railways, we haven't heard them yet. I have never heard them say they want to charge whatever they want, Wilf. There are others out there in the community who say the price cap should be removed.
Mr. Harder: Okay.
The Chairman: I just have a question on your recommendation in terms of the allocation of cars. You say the Wheat Board should own and control them.
Mr. Harder: Yes.
The Chairman: Would you give us the reasons why?
Mr. Harder: For instance, two years ago, when all the special crops came in, we had a real problem because everybody was clamouring for cars - I know Jake won't like that - and everybody wanted their share.
The Wheat Board, along with the industry and everybody, knew before this last crop year started what the percentage was - it was worked out fairly - of special crops. It was said one should not market because there were so many cars, which were shared equally.
Go into history. In the past, when the Wheat Board was administering all the cars, you would find that they were allocating more than a fair share to the non-boards. Of course, we went away from that and went to the WGTA.
I know some people are concerned about the government owning the hopper cars in terms of how would that be done fairly, because the Wheat Board handles Wheat Board grains? I can tell you that on the advisory committee we have 11 producers, who don't all grow wheat. We grow canola and so on. On my farm this year we'll be planting 1,500 acres of canola. So we also have a concern.
I really don't think the Wheat Board could get away with treating people unfairly. I think they bend over more than backward to give everybody their fair share of the market.
Here's the other thing we have to add. How can you market if you don't have control over transportation? Would any other business market if they had no control over transportation? There's this notion here that the railways and the grain companies will say how many cars should be in the business. If you think we have trouble now with the Wheat Board making commitments, you can't make a sale if you can't get it to where you want it to go. You have to have control over that. That's only good marketing.
Mr. Clair: We took a look at Vancouver and the way the port is used by the Wheat Board and by non-Wheat-Board grains. Just to give you a little indication, the Wheat Board uses 61.7% for storage. This is August to the end of February of this year. The Wheat Board is using 61.7% of the space and shipping 75.4% of the volume. On the non-Wheat-Board side, 38.3% of the space is shipping 24.6% of the grain.
There are some efficiencies by volume, but there are a lot of different grades, kinds, and specifications of grain that the Wheat Board moves. So this Wheat Board is a regulation that makes very good sense to me because they can coordinate.
Mr. Hoeppner: I got to know Mr. Harder at board meetings of Co-op Vegetable Oils years ago. He was a strong -
The Chairman: Is this related to this committee -
Mr. Hoeppner: Yes, very much so. It's transportation. We were strong supporters of Co-op Vegetable Oils. We know today it's Canamara Foods, which is very beneficial to southern Manitoba.
Mr. Harder: It's 50% American owned.
Mr. Hoeppner: Why has that happened? We'll argue about that. Farmers in the Altona area are going to build a pasta plant by the sound of it.
Mr. Harder: Maybe.
Mr. Hoeppner: Would you agree farmers should be able to own that pasta plant and sell their own durum to that pasta plant?
Mr. Harder: They are able to do that, yes, through an accredited agency such as the board, sure.
Mr. Hoeppner: No, no; directly, as we did with Co-op Vegetable Oils.
Mr. Harder: That was a different matter, because Co-op Vegetable Oils was not handling wheat. It's not an adequate comparison, because they were handling non-board grains.
Are you suggesting, in other words, that any domestic miller should be able to buy directly from producers? Is that what you're saying?
Mr. Hoeppner: I am asking what your philosophy is, because I know we're competing with American millers right across the board. If I could deliver my durum right to them, they're farmer-owned....
Do we want to compete or don't we want to compete?
Mr. Harder: Yes, and we are.
Mr. Hoeppner: Do we want our transportation system to be alleviated of some of the load?
Mr. Harder: Jake, I'll read to you from an American paper, AgWeek. It talks about the transportation system in the United States, the one we're proposing here.
- Dunning also says that railroad deregulation has put the Mill at a disadvantage to the big Eastern
processors.
If the system is so bad, Jake, ask yourself, why do American processors prefer to buy the products of the Wheat Board? Why does Conagra want to buy grain from the Wheat Board? I'll tell you why. You should know why. It's because of quality, quality, consistency, consistency.
Mr. Hoeppner: No argument. But on the other side of the coin, you don't just control the market of durum, you also control the imports, and it makes me damn mad when I see all that pasta coming into this country...that you are allowing to subsidize pasta.
Mr. Harder: I am?
Mr. Hoeppner: Sure you are. You have control over the imports.
Mr. Harder: Who has control over the imports?
The Chairman: It's technically government.
Mr. Hoeppner: No, it's the Wheat Board.
The Chairman: They recommend.
Mr. Hoeppner: The Wheat Board has control of the import of any bread product.
Mr. Harder: So we should not allow any bread products from the States to come in?
Mr. Hoeppner: No, not if you're not going to allow farmers to sell directly to the mill. We can't have it both ways. We have to support the farmer. That's what you've said and that's what I -
Mr. Harder: We are. Our mills are buying from Canadian farmers through the Wheat Board. They are.
Mr. Hoeppner: Let's not get into an argument, because arguing is so useless.
The Chairman: I can't imagine you people getting into an argument.
Mr. Hoeppner: We've been at enough Co-op Vegetable Oil meetings. We get along very well.
The Chairman: One last question. I've heard a lot both from the minister and from the department and other witnesses about the industry committee a lot of these recommendations are coming out of, the May 18, I believe it was, industry committee, and its meeting on May 16, not of this year but of last year, I believe. What's your view of that committee? Are you on it? You are an elected body representing producers.
Mr. Harder: We are not on it.
The Chairman: Do you mean to tell me the Canadian Wheat Board Advisory Committee is not on it?
Mr. Harder: That's right, sir, and it really makes you wonder. I heard just yesterday in Calgary that another committee or group is invited to some of these industry meetings, people such as Buck Spencer. Who do they represent?
The Chairman: They represent 350 barley producers.
Mr. Harder: And the Wheat Board Advisory Committee really has not been invited. We were invited to participate at one meeting of the blue-ribbon panel, which is fine.
No, we are not on any of these industry committees. We have not been involved with any of the conference calls the minister's had.
Mr. Clair: Both of us have offered to make someone or ourselves available on very short notice, and it hasn't happened.
Mr. Harder: So it's not for us to say. You're the government, not us.
The Chairman: I'll tell you as chair of this committee I find that unacceptable. You are an elected body and we'll be talking about this committee.
Mrs. Cowling: I believe the commissioner, Lorne Hehn, is on that committee.
Mr. Harder: That's fair enough.
Mrs. Cowling: Yes.
Mr. Harder: To be fair, there is a difference between being an elected body, such as itself, and the commissioner.
Mr. Hoeppner: Is that on the record?
The Chairman: Yes.
Thank you very much, Wilf and John. We'll take your views into consideration. Thank you for coming in.
Mr. Harder: Thank you very much, Mr. Chairman.
The Chairman: We will call, from the Manitoba Department of Agriculture, the Honourable Harry Enns, Minister.
Welcome, Mr. Minister. This must be Manitoba's day.
You may begin. As you very well know about parliamentary rules and parliaments, we're going to be out of here no later than probably 1:55, so we'll be under a little pressure with respect to time. Go ahead. Go through your presentation, and we'll go to questions. Thank you.
Hon. Harry J. Enns (Minister of Agriculture, Province of Manitoba): Thank you very much, Mr. Chairman. That's ample time, and we'll probably not need that kind of time.
I very much enjoyed having a productive meeting with Minister Goodale this morning. I also took a few minutes off to watch you folks conduct a few votes in the House of Commons, and it wasn't lost on me that the government of the day wins them easily. So rather than find tight time of your committee, I think our time will be more productively spent by dealing with the fact that the changes we are discussing are going to become law. My responsibility back home in Manitoba is to determine how I can best, through the agency of my department, equip Manitoba farmers and producers to live with the new reality, and it is a new reality.
There's no question that August 1, 1995, will be remembered in Manitoba and on the prairies as a very significant day in agriculture. That is the day that the longest standing - since 1897 - agricultural support program comes to an end.
I think how I would choose to use my time - and I appreciate very much appearing before this committee - is to ensure what I think we have a right to expect, which is fairness in the treatment of any compensatory funds that have been made available, as spelled out in the February budget, and to place before this committee in particular the fact that Manitoba, as the Manitoba members on this committee are aware of, simply by virtue of its geography, is suffering the greatest hurt from the removal of the WGTA and, even more important, the St. Lawrence pooling formula. So those are a few comments, Mr. Chairman.
I have a brief statement to lead in. While I represent the Government of Manitoba, in Manitoba we've been very fortunate to have worked very cooperatively with the coalition of farm leaders representing virtually all the farm organizations in the province.
They have been working together and meeting together. So it is with considerable confidence that I feel I can speak on behalf of the farm organizations on the kind of positions we present and put before you.
The Government of Manitoba has long recognized the need for transportation reform. The Western Grain Transportation Act and the financial benefits provided have had a negative impact on the development of the livestock industry in Manitoba. This, combined with our international trade obligations and the fiscal realities facing governments today, make changing the WGTA imperative.
Manitoba's approach has been to manage the required change in a manner that would result in a strong, diversified agricultural industry in the future. The focus has not been on specific sectors of the industry, but on the entire industry in order to provide the greatest benefit to the province.
To this end, my predecessor, the Hon. Glen Findlay, established the Manitoba Agri-Food Advisory Council. The council was comprised of representatives of the major commodity groups and agricultural organizations in the province. It was chaired by Dr. James Elliot, Dean of the Faculty of Agriculture of the University of Manitoba. The council undertook extensive research and analysis on options for transportation reform and consulted widely on the results.
In early January of this year, my department retained Mr. Earl Geddes, former president of the Keystone Agricultural Producers and respected Manitoba farm leader, to coordinate Manitoba's response on transportation reform. The Manitoba Coalition on Transportation Reform was comprised of the leaders of 15 agricultural organizations. It released three statements on transportation reform recommendations. I have copies attached at the end of my brief.
Elimination of the WGTA benefit. On February 27, 1995, the federal budget announced the elimination of the historic WGTA benefit. The members of the Manitoba coalition were shocked that a budget of only $1.6 billion was to be provided as compensation for the adjustments that must be made by western grain producers.
At conferences that were held between the western ministers in particular and the federal government, including Minister Goodale, positions were being put forward such that a five-year, perhaps even a seven-year, phase-out should be considered.
I just interject that. We accepted the fact and the reality that the WGTA was going to be eliminated, but it was a very sudden and significant shift of benefit that farmers in Manitoba, in our opinion, needed a bit more time to adjust to.
This amount of compensation is insufficient to meet the adjustment assistance needs of farmers, and it represents only a fraction of the amount of assistance provided under the WGTA.
The members of the coalition felt that the WGTA buy-out should be directed to the actual producers of crops, rather than the landowners. Is is producers who face the greatest impact from the loss of the WGTA and charges in the Canadian Wheat Board pooling with average increases over $20 per tonne for Manitoba producers.
Also, while landowners in Manitoba can expect a significant loss in land values, their counterparts in Alberta and British Columbia face virtually nil to minimal losses. In effect, the compensation is being provided to Alberta and B.C. landowners for suffering minimal losses at most. On the other hand, Manitoba producers with rented land will have to negotiate with their landlords for the means to address the increase in freight costs.
Again, as an aside, in Manitoba, about 40% of our agricultural land is rented or leased. In many instances, people owning agricultural land don't reside in Manitoba or in the country; they reside in France, England, or Germany. I have some problems with what has long been a benefit to western agriculture ending up not in western agricultural farmers' hands or even in this country, but somewhere in Germany or Italy.
While I appreciate the mechanism that Minister Goodale is talking about inserting into it, there has to be some agreement between the landowner and the renter before the money will be paid out. My understanding is it will be put in trust. He says they will put up an arbitration program.
I have a problem with that; I find that resolution regrettably even worse. With the greatest respect to lawyers in the room, I believe it means lawyers will end up getting the biggest part of the WGTA pay-out intended for farmers.
The coalition believes that the use of improved acreage, which includes forage and forage seed, is the most equitable base for pay-out of the WGTA compensation. The use of improved acreage and the inclusion of dehydrated alfalfa shipments in determining provincial allocations reflect the normal place of forage in rotation of many grain producers. Improved acreage more accurately reflects those acres that will see a reduction in land values.
A strong position has been taken by both the Manitoba Agri-Food Advisory Council and the Manitoba Coalition on Transportation Reform that the WGTA reform and the changes in the Canadian Wheat Board pooling of St. Lawrence Seaway costs should be implemented simultaneously.
The delay in announcing the Canadian Wheat Board pooling changes until May 12, 1995 means that Manitoba farmers are not able to make any adjustments for the current crop year. Consequently, in my opinion, Manitoba farmers must receive 100% compensation for the income reduction resulting from this change.
It is not acceptable to offset a significant portion of farmers' increased domestic freight costs in the eastern part of the prairies, as stated in the announcement. This compensation must not be drawn from the $300 million adjustment fund. Furthermore, Manitoba producers need at least a three-year period to adjust to the major changes resulting from the Canadian Wheat Board pooling change.
I make the case more effectively when I say that even though we are not particularly happy with the amount, we recognize that $1.6 billion as the buy-out for the WGTA benefit in effect represents a three-year phasing out of the last total amount of that benefit paid, some $560 million.
Precisely the same situation, the same argument and the same principles should stand for the St. Lawrence Seaway pooling benefit. It should be equal to or phased out in that same period of three years.
The May 12 announcement also failed to provide details on the freight costs to be faced by Manitoba producers in future years. It is imperative that this uncertainty be removed and the details on future freight costs be made available to Manitoba farmers. The combined changes resulting from the WGTA reform and Canadian Wheat Board pooling change are much greater for Manitoba farmers than they are for other western Canadian farmers. The need for information and adjustment assistance is thus greater in Manitoba than elsewhere.
The $300 million adjustment fund announced in the February 28 budget is probably inadequate for the issues it is expected to address. Therefore adjustment assistance to the Manitoba farmers for the change in the Canadian Wheat Board pooling must have first priority in the use of these funds.
In addition to full compensation for the income reduction in the 1995-96 crop year, as outlined above, Manitoba farmers require an estimated $120 million of adjustment assistance for the 1996-97, 1997-98 and 1998-99 crop years. That would be a three-year phase-out for those very significant freight increase costs that the Manitoba farmers are going to bear. It would be in keeping with the same period and same kind of phase-out that your government, the government of Minister Goodale, has talked about regarding the WGTA benefit, i.e., in effect a three-year phase-out.
The Chairman: A point of clarification, Mr. Enns. Is that $120 million per each of those years or over the total years?
Mr. Enns: That's over the total. That's our estimation for the total draw on that fund for that three years. This adjustment assistance should be based upon the long-term impacts of change in Canadian Wheat Board pooling and should be paid out to all producers, not just shippers of Canadian Wheat Board grains.
The basic principle behind the Canadian Wheat Board pooling change is that the price received by grain producers should reflect their location advantage or disadvantages. A simple shift of the eastern pooling point from Thunder Bay to the lower St. Lawrence will not accurately reflect this principle.
The markets for western Canadian grains vary widely by area, type and class. Furthermore these markets will change over time. The federal government must make a clear and comprehensive statement on how this principle will be applied in order that Manitoba farmers can make the required production and marketing decisions.
For example, Manitoba farmers have a location advantage for some types and classes of grain in the United States. How will this advantage be reflected in the price they receive? The combination of the WGTA reform and the change in the Canadian Wheat Board pooling will result in the lowest grain and oilseed prices in Manitoba. This means that Manitoba farmers have the greatest adjustment to make. The adjustment assistance provided must enable Manitoba farmers to diversify their production and produce higher-value commodities that are impacted less by transportation costs.
This really says that the move and the pressures to diversification will be far greater on Manitoba than on Alberta or western Saskatchewan, because we now face these much greater freight costs for all time.
Significant growth can be expected in livestock production as a result of the relative decline in feed costs. This growth should not be restricted to cattle and hog production. The production cost advantage will also be reflected in dairy and poultry industries. The artificial restrictions on production in Manitoba will require revision to permit Manitoba producers to realize on their economic advantage and to minimize the negative impact of these changes.
The proximity of Manitobans to large population areas in the United States in comparison with the distances to ocean ports means that the United States will be an increasingly important market for Manitoba producers.
The North American Free Trade Agreement provides the basis for expanded exports to the United States and Mexico. However, access to the United States market has been subject to unwarranted restrictions. Canada must use every avenue available to get these restrictions removed. Specifically the current cap on western grain moving into the United States that ends in September ought not to be renewed.
The tariff quotas on wheat exports must not be extended beyond the expiry of the current agreement on September 12, 1995. There must be no new restrictions put in place for either wheat or barley. The quotas imposed on exports of white sugar of Canadian origin must be removed. There's no justification for the United States restrictions on the import of Canadian beet sugar.
Allow me to digress from my text again for a moment. Sugar is not a major crop in Manitoba, but we in Alberta and Manitoba have significant farmers growing beet sugar. It should not be a problem with our trade relations with the United States; we only produce 8% or 9% of our domestic requirements of sugar.
I applaud the federal government - and I let the federal minister know that - on the most recent action that is looking into the dumping practices of other countries. Their products come into Canada and this is often used as a back-door entry into the lucrative American market. That's why the Americans are mad at us and that's why the Americans have put a cap on us. We may be losing a plant in Manitoba, in Fort Garry, and we may be losing 30,300 sugar beet producers as a result of that action.
I believe that kind of thing can be corrected, not by any great largesse out of the public purse, but by simply and wilfully doing it through our customs and duly exercising or offering some kind of protection for this kind of industry. That would remove that from the table as a major trade irritant between us and the Americans.
Furthermore, the fact should not be lost on this committee that it is part of the diversified agriculture we speak of. When we are only producing 8% of our own domestic requirements, surely those 30,000 acres could be 60,000, 80,000 or 90,000 acres. Just across the line, in the same Red River Valley - in the same land base - there are 400,000 acres in South and North Dakota supplying sugar for the American processors.
In summary, Manitoba's grains producers will be impacted more than producers in other provinces by the WGTA reform and the change to the Canadian Wheat Board pooling. It is imperative that concerns expressed by the Manitoba Coalition on Transportation Reform are acted upon. If a positive response by the federal government is not forthcoming, the adjustment problems faced by Manitoba grain producers will be greatly compounded.
I ask for your support for Manitoba's position on transportation reform. I invite you to avail yourselves of the attached positions that I've referred to throughout this short presentation. They are representative of the different farm organizations in the province of Manitoba.
Thank you very kindly for the opportunity to make this presentation. I look forward to trying to answer any questions you may have. If I can't, my assistant deputy minister of policy, Mr. Craig Lee, will be able to help.
The Chairman: Mr. Hoeppner, do you want to go first?
Mr. Hoeppner: Sure. Thank you, Mr. Chairman.
Welcome, Mr. Enns and Mr. Lee. It's a pleasure to hear somebody say something I agree with. Sometimes that is a problem with some -
Mr. Enns: Mr. Chairman, should I be worried now?
The Chairman: Yes, you should.
Mr. Enns: But I will still try to get -
The Chairman: He talks to himself in the mirror in the morning, and he can't agree with himself even then.
Some hon. members: Oh, oh!
Mr. Hoeppner: I'd still like to put you on the hot seat for a bit. Regarding transportation, the problem we may experience in Manitoba is short lines.
We're looking at Churchill. There is some interest in that line. We find out that short lines cannot run on federal lines because of some kind of legislation. Now, how much support would you give us on the federal scene to give running rights to short lines on federal lines?
Mr. Enns: I'm advised by senior staff that it has been a long-standing Manitoba government position to support sharing running rights on these -
Mr. Hoeppner: So it wouldn't be a provincial problem?
Mr. Enns: It would present no provincial problem. I think you would get pretty enthusiastic support from this government.
Mr. Hoeppner: I appreciate that, because I know that's something we will have to look at. I know there is some interest in that line to Churchill not just as far as grain transportation is concerned, but also with respect to tourism. There is a tremendous potential.
I think Mr. Enns knows my position on Churchill. I've always been a very strong supporter of Churchill.
Mr. Enns: I'm pleased to hear that.
Mr. Hoeppner: I felt that it had to become more efficient, but that's the name of the game today.
Mr. Enns, I'd like to get back to infrastructure. For the few minutes we did meet this morning I mentioned roads to you. My constituents are very upset that after we had the WGTA implemented in 1983, we were promised better infrastructure in our rural communities, because we lost our elevators and our lines. It has never happened.
Are you going to take a serious look at this? The north-south traffic is going to improve, and when I look at Saskatchewan north-south roads compared to the Manitoba ones, there's a tremendous difference. So would you be willing to take a look at the north-south infrastructure as far as the provincial government is concerned?
Mr. Enns: Mr. Hoeppner, let me answer you in this way: over the years there have always been joint federal-provincial programs of one description or another, to our mutual benefit.
Among the issues I wanted to discuss with Minister Goodale this morning was the fact that if we are moving into more specialized and diversified crops because of the removal of the WGTA - as you're well aware, potatoes have been one of those alternatives in Manitoba. You're also aware that the need for expanded potato production calls for more water. They want irrigated potatoes. There has been a long-standing relationship with an organization like the PFRA to help source and find additional water supplies.
These kinds of initiatives often end up in three-, four- or five-year programs calling for 60:40 or 50:50 sharing to help a jurisdiction move and create some basic improvements to their infrastructure by this means.
I believe the elimination of the Crow will bring about precisely the same kind of need for that kind of cooperation between federal and provincial jurisdictions in road infrastructure improvements.
I'm hearing from our municipalities about their concerns. I'm not the highways minister in the Province of Manitoba, but if Mr. Findlay were with me, he would be arguing very strongly on those same lines.
I am a little troubled and I don't know how the committee will look at it. I have a very strong kind of focus that the moneys we are talking about in the $1.6 billion and the WGTA, even the moneys that are related to this issue, are inadequate as they are, but should in the main be directed back to the primary producer, to the farmer.
I'm not fully privileged to know what the federal government's intentions are. We speak of additional $60 million in adaptation funds and the $300 million adjustment fund. My farmers have made it very plain that we only agreed to moving the St. Lawrence pooling issue up a year on the basis that.... And the full hurt is really compounding for Manitoba producers; it's all coming August 1, in one and a half months' time.
My farmers are saying, but at least give us pretty well full compensation for that hurt this coming year. That's the $120 million I refer to in the brief. Now, if we're going to slice that down for road construction and other things, then I can't do justice to my farmers -
Mr. Hoeppner: Alfalfa dehydrators.
Mr. Enns: My alfalfa dehydrators.
I think you're going to see that if we're asking for $120 million for that St. Lawrence pooling, I understand Alberta may be asking for $40 million or $50 million for the alfalfa people - I don't know what Saskatchewan is asking for - and we run out of money pretty quickly.
Mr. Hoeppner: I appreciate that stand, Mr. Minister.
There is another thing I wanted to touch on. It has been pointed out to me what you said is exactly my concern, that foreign landowners are now shopping around for different rental agreements. They know they have $20 an acre or roughly that coming, and it's becoming a problem in some areas because we have quite a bit of foreign-owned land. It has been pointed out to the committee in Saskatchewan that there's also that problem. Isn't that right? So I'm glad you brought that up, because it is a concern to me.
I've expressed another concern quite vocally, that I think the payment should go to producers rather than landowners and also be on forage. We do have quite a bit of diversified acres. The phone calls I get are at least 100:1 saying it should go to the producer instead of the landowners.
So I appreciate that. I hope you can persuade Mr. Goodale to do some changing on that stand.
I think I'll leave it at that, Mr. Chairman.
Mrs. Cowling: Mr. Minister, welcome to Ottawa. I have several questions.
I want to say I'm more than pleased that you support the elimination of the WGTA. I have a couple of documents I've read, a couple of articles that state there's life after the Crow croaks and -
Mr. Enns: That's not always a popular position to take in western Canada, but it's a realistic position to take, and our job is to get on with life after the Crow.
Mrs. Cowling: Great. Let me turn to the issue of short lines and branch-line abandonment. You've said in your articles and you've said here today that you're prepared to help farmers and to work along with the federal government to be sure that the industry is alive and well.
The Saskatchewan premier has indicated that he will set up a crown corporation to purchase and oversee short lines in that province. What role does your Manitoba government see for itself in purchasing and operating those short lines?
Mr. Enns: Mrs. Cowling, I fully respond to that. After meeting with my colleagues, Mr. Darrel Cunningham and Mr. Walter Paszkowski from Saskatchewan and Alberta respectively, I'm well aware that, particularly in Saskatchewan, the issue of short lines is a fairly major issue when we're talking about this post-WGTA era.
It hasn't been the case in Manitoba. We have talked specifically about the ongoing problems or some resolution of the Churchill, the Bay line. That has many more other complications added to it than the kind of straight, short-line function that is tied strictly to the movement of grain between points.
I'd ask Mr. Lee to feel free to comment on it because I'm just possibly reflecting.... We just have not had that kind of pressure or representations made to us with respect to short lines.
The Chairman: Short lines are not a problem though in Manitoba as they are elsewhere.
Mr. Enns: It's not the same problem it is in Saskatchewan.
Mrs. Cowling: Coming from the province of Manitoba I know there is an issue with some of the branch lines. All I'm asking, Mr. Chairman, is whether the provincial government is prepared to set up a crown corporation, whereby it can help those farmers adjust in Manitoba.
There are going to be some lines in my riding. A good portion of those lines may come out of my riding, and all I'm asking is whether the provincial government is prepared to set up a provision so that farmers can at least adapt.
Mr. Enns: I think we would be more than prepared to, first of all, utilize those kinds of economic development tools that we have at hand - our growth bond issues or the Department of Rural Development helping a cooperative group of users or farmers who might want to take advantage of running a short line. I don't see any reason why we wouldn't want to do that. I repeat, it's just an issue that hasn't been forcefully brought to our attention.
Mr. Craig Lee (Assistant Deputy Minister, Policy Branch, Department of Agriculture, Province of Manitoba): I would just add, and I'm sure Mrs. Cowling is probably aware because one of the longer lines that is likely to be abandoned shortly, the Rossburn sub, is in the southern part of her constituency, that somewhat over a year ago CN called for proposals to operate that as a short line. They got no takers.
In fact, because it was in the protected network CN found it was costing them so much more money to operate it even as it was, and they couldn't abandon it. Since they felt they had to find some means of moving that grain at a lower cost that would save them money, they had actually entered into a trucking agreement to have all the grain hauled from that line on a highway parallel to the line down to Neepawa.
There's another CP line that parallels it 15 to 20 miles to the south; it is a much shorter distance to move the grain from there to that particular line. Mr. Harder's company has all the elevators on that line, and the deal fell apart as a result of the question of who's going to control the flow of the grain.
Mrs. Cowling: I have another question with respect to diversification. On page 6 of your report you indicated that significant growth can be expected in the livestock production area. I'm wondering if you have a model that you could share with us, some supporting documentation from Manitoba's perspective, and what you've used to determine that type of criteria.
Mr. Enns: When I use the term ``diversification'', I use it in a very inclusive manner. I'm speaking about when our producers move to different types of specialty crops, buckwheat to forage seeds. In my judgment we have tremendous opportunities to consider expanding our forage and forage seed crops. I count that as a diversification.
I've already mentioned potatoes. We have been served notice by our major processors that they want virtually an extra 25,000 acres of potatoes in the next very short while. When you consider that our total potato production acreage is now about 58,000, it just gives you an idea of the significance.
I appreciate, of course, the chairman's origin in this great country of ours, but Manitoba is rapidly becoming the largest potato-producing jurisdiction in the country. All of that is part of diversification.
Added to that - and my own personal background is that of a modest livestock producer - we are, for instance, in this year setting all-time new records in beef-cow numbers in the province of Manitoba. We are recording, and will continue to record, significant increases in hog production. We're adding a capacity of some 370,000 wiener-pigs to our hog industry this year. That means about a 15% to 18% growth in one year. As you will know, we have talked about doubling the current 2.3 million hog production to 3 million or 4 million over the next relatively short period of one year.
I'm satisfied those opportunities exist, but not without considerable attention and some care and trouble on the part of governments to try to overcome some of the environmental issues that are raised.
Members of the committee, if you have the occasion to visit countries like Taiwan, Japan, or Korea, you realize.... I haven't had the opportunity to visit Denmark, which produces more hogs than does all of Canada. I think I can take Denmark and drop it into my Lake Winnipeg at home and there'd still be water all around it. So surely we ought to be smart enough in Canada to be able to resolve some of our economic problems through this kind of diversification.
So I see tremendous opportunities for livestock production in Manitoba. As a province we are also challenging and gearing up.... These don't come easily. We have to change some of the rules and regulations of our credit support organizations, like the Manitoba Agricultural Credit Corporation. In Manitoba it costs about $2,000 an acre to get a potato farmer started, and I'm advised that we need at least 70 or 80 new potato farmers in the coming year. That's a lot of capital.
We've done an internal review, with which the member would be familiar, that attracted some attention, the Gilson-Moore hog report. The report included a number of suggestions. One of them was that if we wanted to see this expanded hog production take place, we would require upwards of $350 million of capital for equipment, new barns, and breeding stock.
So these are the kinds of things that are fairly the responsibility of provincial governments and their agencies; they should respond to them. Equally there is a continuing role for Agriculture Canada to help us move in this direction. The net result will be that our producers will have the opportunity to look to a viable and promising future.
Mrs. Cowling: As to hog marketing and the potential for hogs in Manitoba, I too was in Taiwan, and the people I met had met with you as well, so I understand where we're moving in the province of Manitoba in that respect.
Have you had an opportunity to examine the Canadian Wheat Board proposal on the pooling of the catchment areas? What are your thoughts on that from a Manitoba perspective?
Mr. Enns: I've had the privilege of sitting in on some of the Wheat Board people's explanations to producer groups. They take a producer group and have an expert from the Wheat Board drawing on the map, showing what they call the catchment areas that would be most attracted to certain areas of the market.
The significance of the movement across the line is perhaps the most prominent feature. That's why my best advice to Minister Goodale and to all of you, certainly the members of the present government, would be.... I heard this - and if I could inject this as a politician - perhaps more often than anything else during the election campaign I just went through in Manitoba. People said, Mr. Minister, Mr. Enns, if you want to do something for agriculture, keep that border open for us.
The market has become just that significant for us. With the alternative being 300% freight increases, trying to move our grain from Manitoba to Vancouver or Montreal, the pressure on that American market will be greater.
I say this without fear or favour because I don't see somebody from Alberta or Saskatchewan at the table: if we have to live with a cap, then it makes rational Canadian economic sense that Manitoba and eastern Saskatchewan should have a priority, should have first dibs on the market. Our producers face the $300 freight increases, not the Alberta or western Saskatchewan ones. We should be using the Alberta - contrary to the advice that Mr. Harder was giving the committee. It would make a great deal of economic fairness and economic sense. We should try to move those producers who are most disadvantaged in this freight thing to the market that is most immediately available to us.
Mr. Goodale certainly gave me indications this morning that we are hopefully looking to not re-establishing the cap and in fact having that open-market access that's so important to us.
The other catchment area - interestingly enough, it involves the member for Dauphin - Swan River - that spreads over to northeastern Saskatchewan is fairly significant and all of a sudden makes Churchill considerably more attractive. I think it behoves us to try to do everything we can to give it a chance. It would be a tragic mistake if we in Manitoba, at this point in time, gave up on Churchill. We may have to come to it five years from now. I don't think so, quite frankly.
Hopefully our neighbours and great Russian friends across the Arctic will get their economic act together. There are specific trade missions being generated by my premier and by my colleagues in Industry, Trade and Technology. We are bridging over the northern sea to the Port of Murmansk. There is a real possibility for bringing in some fertilizer from Russia and offering our fertilizer guys a little bit of competition, which they could well do with. I happen to believe in competition.
More importantly, it would provide for something else. The weakness of the Bay line has been its sole reliance on grain. It's not enough. It needs tourism. It needs other commodities coming down.
The changes to the transportation at least force us to look at Churchill in a new light. I think that's going to happen, Madam Cowling.
The Chairman: I get the feeling you feel rather strongly about Churchill.
We had a number of witnesses before the committee on Churchill - the Hudson Bay Route Association, and Keystone was also here with a presentation.
I guess in terms of where we go from here, there are certain things that can be done within your provincial mandate. I don't think there's anybody on the federal government side or the provincial government side denying that these changes in transportation policy are not massive and have a major impact. What we've been trying to do is state them up front.
Given this fact, there are certain things you can do within your mandate, there are certain things the federal government can do within our mandate, and there are certain things that need to be done jointly. The key area we want to look at as a committee is what the federal government should be doing beyond the adjustment packages you talked about in order to assist Manitoba in developing in the future, either on our own, through programming, through regulatory measures, or jointly.
Mr. Enns: Mr. Chairman, we in Manitoba sighed a little sigh of relief in the most recent federal budget exercise as our research stations at Brandon, Morden, and Glenlea - close to Winnipeg - remained intact. Nonetheless, in the further reading of the small print, we are concerned that there has been a substantial reduction in the amount of research dollars in research programming that Agriculture Canada is engaging in.
At a time when we are challenging our producers to go out and do all kinds of new things, we perhaps need research support more so than at any other time in agriculture history. So I would ask this committee to offer its opinion with respect to the prioritization of funds within the agricultural envelope of the federal government in this specific area.
We place an extremely high value as a result of these changes.... I'm trying to answer your question. We can all agree that we're going to be trying to grow things that we haven't grown before under soil and water conditions that we're not all that sure of.
It's a worrisome question in agriculture when we talk about irrigation. Irrigation in some circles is quite a buzz-word. We have to be concerned about soil degradation. We have to know exactly the amounts of water that can be safely put on over a period of time in a sustainable way.
I believe we can do it very well in Manitoba. We're not the Imperial Valley of California, the Middle East or someplace, where all growth requires massive amounts of irrigation. We need very little water. We just have to supplement it for sustained quality and so forth.
So that's an area of growth. The other areas that have already been mentioned do tie in. I would ask this committee to make water supply as a recommendation in the area of Manitoba.
It's an ironic tragedy that in Manitoba - indeed, we'll be calling on the federal government to help, and the member for Dauphin - Swan River knows it well - we're suffering $6 million or $8 million worth of damage as a result of rampaging waters that have troubled us in the upper Assiniboine. We swoosh all that water out of our prairie region in six weeks, yet come July and August we're looking for water.
We feel constrained. We can't offer more allocation for irrigation permits because we don't have enough water. Water sourcing is an important issue. Again, it's related to the changing agriculture we're going to see. So we can have that doubling up of potato production that I was speaking of and more forage production.
The other possible area is the road infrastructure program.
I'm assuming, Mr. Chair, that you're asking about the longer-term, down-the-road things.
The Chairman: Yes, that's what we're looking for.
Mr. Enns: It's not specifically tied to a specific fund like the $300 adjustment fund or the$60 million. It's an ongoing role for the federal government beyond these immediate dollars that we're talking about.
I really commend you for having these thoughts, because I think there is that role. For instance, I say to you, as representatives of the government, that the infrastructure program put in place by our government has probably been one of the most well-received programs, certainly in my province. We hear reports that it may or may not be repeated.
Again, relative to the changes in the traffic you hear about and the pressures that are going to be put on municipalities and road systems, in my opinion, thought ought to be given to some longer-term support for that infrastructure requirement.
Mr. Lee: I would like to add a supplementary comment, with respect to research, to whatMr. Enns said. It's not the total dollars on research being spent in Manitoba, but how the shifts are taking place. As we've emphasized, we need to have more diversification and value-added.
What we're seeing is that swine research will probably move out of Brandon to Saskatoon or further west. We've talked about wanting to double swine production in Manitoba, but the research base is moving away.
The special crops research that has been at the Morden station in Mr. Hoeppner's riding is going to be moved to Lethbridge, yet that's the area in which we need to have diversification into special crops.
We're getting hard red spring wheat research concentrated at the Winnipeg research station. That's a commodity we're going to be moving out of production because that's where the negative impacts from WGTA change and Canadian Wheat Board pooling change are going to impact the most.
The total is right, but it's perverse in the way it's been done.
The Chairman: Thanks for that information. I have just one last point. Hog production is one issue that I think most every province or representatives from provinces have indicated to us as an area they want to get into, and you mentioned that you may be looking at 20,000 more acres of potatoes.
I guess the first concern there is, where's the market? It does look like there's a market. I guess what I am saying is that we don't want to put ourselves into a disaster. We all know that surplus product means lower prices once we get to that level, if the markets are not there. We don't want to find ourselves in a position where each province is competing against each other to see who can build the biggest hog herds the fastest, and then everybody loses at the end of the day. Does that need to be looked at, and have we got any way of seeing that we don't slit our own throats, for lack of a better expression?
Mr. Enns: Mr. Chairman, I fully support the gist of what you're saying. I think governments, federal or provincial, would be foolishly expending scarce public dollars.
Quite frankly, we have sometimes in the past used artificial stimuli, such as dollars, grants or programs, to propel, promote, and induce producers of a certain commodity to increase their production, simply because it's a government goal to do that. It was poor policy at the best of times. It distorts the marketplace and does precisely what you say it does: it invites a crash somewhere in the future.
On the issue of hogs, while I make it very plain, any expansion has to occur and will only occur if those who are investing the dollars are satisfied that the markets are in fact there. It's only under those circumstances that this expansion should take place. I happen to believe - and that's why you're hearing it - that there is virtually an unlimited opportunity for hog production and marketing.
I'll just relate this to Ms Cowling, so she'll appreciate it, as I am aware that she is making a similar trip in the east.
The biggest thing that amazes me when I go to a country like Japan, which is the biggest importer of pork in the world, is not that they import a lot of pork. The biggest thing that surprises me is that that rocky country, smaller than my province with 115 million people, can actually produce 76% of their own pork requirements, along with those 115 million people. They do it only because there's North American feed grain available, principally corn. That feed grain, in my opinion, is becoming excessively harder and more expensive to get. There'll be precious little feed grain moving out of Canada with the elimination of the WGTA.
We are moving in Alberta, in Saskatchewan, and in Manitoba to greater consumption value-added use, and it makes sense. Particularly, why should we use taxpayers' money to move a product that's worth 3c. a pound, which is what feed grain is worth, when we should be moving processed pork or beef? Now we do that, and the Americans are doing the same thing.
The Japanese knew that. The Japanese last year, in 1994, had the biggest American corn crop on record. Normally with supply and demand that should have meant the price of feed would go down, but it didn't. It went up 18%, and it'll go up 18% to them next year and 18% the year after.
That's why 25 of the most progressive Taiwanese hog farmers followed me back to Canada. They've overdone it; they've got too many hogs in that country. Furthermore, they are extremely concerned that they cannot sustain hog production in those countries based totally on offshore importations of feed grain.
In my opinion, Mr. Chairman, on that particular commodity, I'm very bullish, very positive.
The Chairman: Okay. We will have to adjourn at that. I know there are other questions. Maybe you can ask them individually.
I certainly thank you for your presentation and the good information that's enclosed in the submission.
Mr. Enns: Thank you very much, Mr. Chairman.
The Chairman: With that we'll adjourn the meeting.