EVIDENCE

[Recorded by Electronic Apparatus]

Monday, March 17, 1997

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[English]

The Chairman (Mr. Lyle Vanclief (Prince Edward - Hastings, Lib.)): Ladies and gentlemen, we will continue with the presentations.

We have four presentations this afternoon before we go to the individual presentations. We have with us the Western Canadian Wheat Growers Association, Keystone Agricultural Producers Inc., Manitoba Pool Elevators, and the National Farmers Union. The latter group has not yet arrived.

In case some of you were not in the room this morning, I'll just go over the procedure very quickly. You've been informed that you have a maximum of 15 minutes. I will try to give you an indication when there are a couple of minutes left for your presentation.

We will hear the four presentations, and then we will go to questions and comments from the members. They may address questions and comments to one or two of the groups or whatever. If we have four presentations, that should take a maximum of one hour. If it takes less than an hour, that's fine. We then will have, hopefully, one hour for dialogue between you people collectively and the committee members. So welcome to the committee.

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We're here in western Canada for our first of five days to hear comments on Bill C-72, an act to amend the Canadian Wheat Board.

We will begin with the presentation of the Western Canadian Wheat Growers Association, Kevin Archibald.

Mr. Kevin Archibald (First Vice-President, Western Canadian Wheat Growers Association): Thank you, Mr. Chairman. I will be presenting along with Dr. Paul Earl.

On behalf of the Western Canadian Wheat Growers Association, first of all, I'd like to thank the committee for journeying west to hear our concerns about Bill C-72. We asked for you to come west and you indeed did that. We feel privileged to be able to provide input to you on this important issue here today. Thank you, again.

The committee will recognize that the wheat growers have long been critical of the status quo in grain marketing and have called for fundamental reforms. The reforms we envision for the Canadian Wheat Board were first put together in a paper our association produced a few years ago entitled Vision of a Reformed Canadian Wheat Board. We then elaborated on this vision with our presentation to the Western Grain Marketing Panel, which dealt in detail with the mechanics and working features of a voluntary wheat board and presented our views on the governance and restructuring of the Wheat Board per se.

We feel that Bill C-72 is worse than the status quo we are committed to changing. The reasons are spelled out clearly in our brief. The wheat growers doubt that C-72 is salvageable in its present form as the changes required are so sweeping. Thus, it would be best to begin anew.

However, your committee has asked for suggestions to help improve the bill, and I would like to summarize those for you now.

Specific suggestions we would like to see to improve the bill are basically conceptual in nature, and I would like to present those. The first is that the provisions of the bill that would pass control of grain marketing from the Canadian Wheat Board to the federal government must be dropped or altered. This is very important to allow employees of the board the freedom and flexibility to meet the Canadian Wheat Board's fundamental marketing objectives. By moving the control of grain marketing towards the federal government, it basically creates a system of responsibility without power. This is very similar to taxation without representation, so we're very concerned with that item.

Also, by allowing the federal government more control over the grain marketing system, it attracts the attention of the World Trade Organization. We've just gone through a round of very tight negotiations and we're approaching some more, and state trading agencies are definitely going to be up on the block. We feel that the federal government connection to the Canadian Wheat Board may attract more attention than it does at present.

We feel that a majority of the board of directors should be elected farmer members. We feel that more details on the rules governing such elections must be included in the legislation and must be known prior to passage of the bill.

Also, elected directors should serve based on good behaviour, rather than at pleasure. This is important because a dissenting director, we feel, could not voice his or her dissent without violating the act. Essentially, this may hamstring some of the directors with regard to decision-making that may be controversial in nature but that may be important in order to move the Canadian Wheat Board into a more commercial enterprise, an area where we feel it really has to move in order to survive and be sustainable for the future.

The CEO and chairman of the board should be selected and appointed by the board of directors. The discretion of the directors should not be fettered by the provisions of the bill that define government directives as being in the best interest of the corporation and that provide liability protection to directors only if they decline to dissent from government directives. In the extreme it would seem that a dissenting director could be held legally responsible for the ill effects of a government directive that he or she may have opposed.

The autonomy and independence of the Canadian Wheat Board should be preserved and enhanced by dropping the mandatory requirement for the board to submit an operating plan encompassing all the business and activities and its entire borrowing plan to the Minister of Finance.

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The possibility of divorcing government guarantees of initial payments from the actual initial payments set by the board should also be explored.

The possibility of providing provincial guarantees on credit sales on a case-by-case basis rather than through mandatory approval of an operating and borrowing plan should also be explored.

We feel that the possibility of extending borrowing guarantees to a Canadian Wheat Board that is independent of the federal government should be explored as well.

And we feel that while the government guarantee on borrowings is usually granted only to crown corporations or, as we've heard this morning, only specifically to the Canadian Wheat Board, we feel the exception should be made in this case.

We're concerned with why the risk rating should be changed just because we have an elected board made up mainly of producers. In essence, the board's administrative people, the people who work behind the scenes to ensure sales are made and operations of the board run smoothly, are not going to change. Thus, an exception could be made in this case. After all, if we're going to create good agriculture policy and the Canadian Wheat Board is going to be part of that, we feel this definitely could be extended in their case.

We feel the Canadian Wheat Board advisory committee should be phased out immediately upon the election of a producer board. There's no need for duplication of input.

The Canadian Wheat Board should be made GATT-proof by divorcing it as far as possible from government. We touched on this a little bit earlier. We do not believe that a monopoly state trading organization is sustainable in the next round of trade talks.

Canadian Wheat Board control over transportation should also be reviewed with a view to removing all Canadian Wheat Board regulatory control over transportation. This would entail making the Canadian Wheat Board a port receiver of grain and repealing paragraph 28(k) of the current act, which provides the Wheat Board with its powers in transportation.

The current system exhibits an extreme lack of accountability and, as we've seen on the west coast recently, this has been demonstrated day after day. Removing the Wheat Board and enacting a commercial system where shippers access cars directly from the railroads with the proper contracts, penalties, and incentives in place is a better system than the one we have at present and is better than what Bill C-72 is proposing.

We also feel that the provision that would make the Canadian Wheat Board Act binding on any province should be looked at. That should be removed.

Also, the bill should be redrafted to encompass the possibility of a voluntary Canadian Wheat Board operating within a dual market. The bill in its present form is predicated on the assumption that a dual market is not a workable option. This was made clear in a backgrounder to a policy statement from the Department of Agriculture and Agri-food. The backgrounder showed grievous misunderstandings about the rationale for and concept and practice of a dual market.

The wheat growers' working model, complete with the contracting arrangements, pricing details, and implementation guidelines, needs to be given consideration in any amendments to the Canadian Wheat Board.

This also brings us to another point that Bill C-72 places on the system. In fact, in its present draft form it places hurdles in the way of removing any grain from the Canadian Wheat Board Act.

If, as an example, you have the situation where there is a board of directors that is currently marketing any class of wheat, why would any board director vote to give up that wheat, that class, that grade? In fact, when you're involved in an organization of any type you do like to maintain control. You do like to keep your organization going. It's part of your job in some cases. Having the board of directors actually vote on which grains they're going to give up is somewhat of an oxymoron and is an unworkable system. We feel it's completely untenable. It also takes away from the leadership capabilities of the government with respect to what it should provide here. We don't feel it's a workable system at all.

One other point we'd like to bring up that's not in the executive summary I'm quoting from here, although it came to the surface this morning, is the issue of cash trading of grains by the Canadian Wheat Board. When I start to listen to that type of discussion, it concerns me, partly because it seems as though the Wheat Board is trying to imitate the open market, in essence. By doing so, can it do as effective a job as the open market does in managing risk for farmers and in discovering prices for farmers on a cash basis?

We have real concerns here, partly even from our elevators and grain handling systems in the country, where grain companies in the open market normally take a very small margin and make up the rest of the difference on the sale of the grain. They have a merchandising feature on open-market grains.

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However, grain companies, when they market board grains, charge almost the maximum tariff allowable. Definitely, they charge a much higher tariff than for non-board grains. So in essence, if you have the board doing cash trading, you may in fact set up a situation where the Canadian Wheat Board would be having higher tariffs put on an open market system. Our concern is if you're going to imitate the open market, just give us the open market and let it work for us.

Those are the major points we would like to touch on. Our brief is fleshed out in fairly full detail on all of these points. I would like to end here and hopefully we will have some good dialogue around the subject in the future.

Thank you very much, Mr. Chairman.

The Chairman: Thank you very much, Kevin, for being so precise in your presentation. I'm sure there will be questions and comments later.

We will now go to Don Dewar from the Keystone Agricultural Producers.

Welcome, Don.

Mr. Don Dewar (First Vice-President, Keystone Agricultural Producers): Thank you,Mr. Chairman. I'll be supported by Werner Scheurer, the chairman of our grains committee, and Chuck Fossay, one of our committee members.

Keystone Agricultural Producers is the general agricultural policy agency for Manitoba, representing approximately 7,000 individual farm units and 17 commodity groups. This broad base of primary producers in the province, which is the home base of the Canadian Wheat Board, provides KAP with a unique and insightful perspective on the Canadian Wheat Board and its relationship with agricultural producers.

We thank you for this opportunity to express the views and opinions of our membership on Bill C-72, an act to amend the Canadian Wheat Board Act. We are pleased with the extensive consultations the government is conducting on Bill C-72. In particular, we commend the decision to conduct public hearings across the prairies where the Canadian Wheat Board conducts its business of marketing wheat and barley.

In principle, KAP supports changes to the Canadian Wheat Board Act. However, we believe the following suggested changes to Bill C-72 will result in a more responsive marketing agency.

KAP continues to support the commonly identified pillars of Canadian Wheat Board marketing: single-desk selling, price pooling, and government guarantees. KAP supports the addition of one new pillar to encourage adding value to products for the Canadian Wheat Board - and that is adding value. The objective is for the Canadian Wheat Board to maximize returns to grains producers without placing restraints on local value-adding processing. In implementing this pillar, the board of directors will take into consideration the natural, physical, and social advantages of the various regions.

Facilitating value-added opportunities in regions furthest from ocean ports, including Manitoba, should be a high priority. It is imperative that the Canadian Wheat Board recognize the particular circumstances present in Manitoba and work to assure development of value-added industries. The Canadian Wheat Board can play a crucial role in assisting appropriate value-adding industries based on local comparative advantage.

The Canadian Wheat Board pricing policy was changed to partially fix the anomaly that made the price of wheat charged to flour millers in Manitoba higher than the price in regions closer to ports. This price reform did not adequately address the anomaly because the present pricing policy did not remove the price disadvantage faced by Manitoba's milling industry. The Canadian Wheat Board is investigating modifications to the system, taking into account that the system is not reflective of the relative returns of producers and, to this extent, the appropriate mill pricing across the prairies.

Bill C-72 must ensure the board of directors is not inhibited in bringing about appropriate reforms to ensure Canadian Wheat Board policies do not hinder value-adding production. Manitoba's position relative to specific markets must also be recognized. One simple change that will encourage value-adding production is to ensure grains prices are related to both local industry and producers. The Canadian Wheat Board should ensure the price paid to producers in an area is reflected in the price charged to value-adding industries located in the same area.

KAP believes the surest way for the Canadian Wheat Board to ensure a level field for value adding in Manitoba is for the board to ensure that products, as well as commodities, are considered when marketing. An example of this would be an identity-preserved grain marketing, similar to what they're doing with the Glenlea wheat in the frozen dough market in the northern United States.

Werner.

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Mr. Werner Scheurer (Executive, Keystone Agricultural Producers): KAP believes a new mentality, based on principles of trust and cooperation, must accompany Bill C-72. In fact, Bill C-72 should encourage such consensus-building.

It is recognized that support of the federal government for the operation of the Canadian Wheat Board is essential. Therefore, KAP recognizes the advantages of leaving certain decisions with the Governor in Council. However, KAP feels that for the Canadian Wheat Board to operate effectively it is essential for the Governor in Council to operate in concert with the board of directors and vice versa. Agreement of the traditional three pillars of the Canadian Wheat Board, including the responsibility of the board of directors to ensure the integrity of the pool while adding a fourth pillar recommended in our foregoing section 2.1 should help facilitate cooperation between the Canadian Wheat Board and governments.

Regarding empowerment of the board of directors, the legislative changes should be based on the premise that the Canadian Wheat Board have the maximum flexibility and empowerment built into its operations through Bill C-72. As market circumstances change, being able to respond quickly and act appropriately is essential. Therefore, producers and government must have confidence in the ability of the appropriately constructed board of directors to make appropriate pragmatic decisions consistent with its power under the act.

KAP strongly supports a new government system that reflects a partnership between government and producers.

KAP supports the position that the Governor in Council shall, for the 1998-99 crop year and thereafter, designate a number of positions equal to two-thirds of the total positions on the board of directors to be filled through elections by producers, in accordance with the appropriate section in the regulations.

KAP would also suggest that the board of directors adopt definitions for producers. For example, a producer should be a Canadian citizen, a farm operator who receives over 50% of his income from farming, a producer of grain who holds a permit book for the district he desires to represent. The chairperson shall be a member of the board, elected by the board. KAP recommends the CEO not be a member of the board but be selected based on qualifications. The CEO should be appointed by the Governor in Council on the recommendation of the board of directors. The CEO must be answerable to the board of directors and can only be removed if over two-thirds of the board of directors vote in favour.

Mr. Charles Fossay (Committee member, Keystone Agricultural Producers): Federal government guarantees, and the ability for the Canadian Wheat Board to borrow at Government of Canada rates, is an essential pillar to ensuring ongoing producer support for and the maintenance of confidence in the Canadian Wheat Board.

KAP supports, in principle, the creation of a contingency fund. Financial benefits realized through the difference between Government of Canada borrowing rates and the rate charged on credit sales should be placed in such a fund. KAP further recommends that the board of directors assumes responsibility for the appropriate policies related to the creation, limits, usage, and future expansion of the contingency fund.

KAP believes such a contingency fund, astutely managed by the board of directors, would provide the backstop necessary for the Canadian Wheat Board to offer farmers flexible pricing options such as pre-seeding pricing contracts.

As the fund grows, it could be utilized by the Canadian Wheat Board to maximize returns to farmers and complement its mandate to promote the sale of western Canadian grain. These initiatives could include participation in international joint ventures and investments in value-adding enterprises similar to investment currently being carried out by the Australian Wheat Board.

KAP recommends the Canadian Wheat Board have the capability to make cash purchases from both the grain companies and directly from producers as required to maximize producer returns.

The Canadian Wheat Board is responsible for managing cash purchases to ensure the integrity of the pool. The underlying principle should be the adding of value to the pool through judicious use of cash purchases.

KAP believes the Canadian Wheat Board must be able to purchase directly from producers to ensure there is no speculation, which could result in the tying up of terminal capacity in anticipation of cash purchases. Also, any premium being paid for cash purchases must be available to producers.

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In conclusion, while KAP is supportive of the general thrust of the proposed changes, we believe that improvements can and should be made to Bill C-72.

A fourth pillar committing the Canadian Wheat Board to ensure that policies do not hinder the opportunities for adding value prior to export is essential from a Manitoba perspective.

KAP also feels that a new era of cooperation between producers and government - through the functioning of the Canadian Wheat Board - is important. This can be accomplished most effectively through appropriate empowerment of the board of directors. As part of this empowerment, it is important that two-thirds of the board of directors be elected by farmers. The chairperson of the board of directors should be elected by the board from the membership of the board of directors. The CEO of the Canadian Wheat Board should be appointed by the Governor in Council upon advice from the board of directors and should be answerable to the board of directors.

Federal government guarantees and the Canadian Wheat Board's ability to borrow funds at Government of Canada rates must be maintained.

KAP supports the principle of the creation of a contingency fund over a period of time, which can be used judiciously by the board of directors to conduct activities consistent with the best interests of grain producers.

KAP is supportive of the Canadian Wheat Board having the capability to make cash purchases as required, both from grain companies and directly from producers, in order to maximize producer returns.

It is the belief of KAP that adjustments to Bill C-72 to include these recommendations will improve the performance and accountability of the Canadian Wheat Board.

Thank you.

The Chairman: Thank you very much, gentlemen, for another concise presentation.

We will now hear from the Manitoba Pool witnesses.

Brian Saunderson, do you want to introduce your colleagues and proceed, please?

Mr. Brian Saunderson (Second Vice-president, Manitoba Pool Elevators): Thank you, Mr. Chairman.

I'm second vice-president of the Manitoba Pool. With me is Anders Bruun, our corporate secretary.

I welcome the committee to Winnipeg and I thank you for this opportunity to talk about Bill C-72.

I understand that Mr. Howe from the Saskatchewan Wheat Pool and Mr. Swanson from Manitoba Pool spoke to you in Ottawa on this very subject. I think they went into some description of the business activities and diversity of our companies. To add to that, I'll mention that we, as Manitoba Pool, have about 17,000 members from virtually all the farming areas of Manitoba. It's our chief priority to provide services to those members, and listening to them is a top priority.

MPE has been a long-standing supporter of the cornerstones of the Canadian Wheat Board marketing system, namely, single-desk selling, price pooling, and government guarantees.

At the same time, we recognize that this system must evolve to meet changing market and producer demands. Therefore, we support the federal government's stated objective of building on the proven strengths of the Canadian Wheat Board marketing system while increasing the accountability and responsiveness of the Canadian Wheat Board to producers.

MPE believes that single-desk selling, price pooling, and government guarantees are critical to the success of the CWB marketing system. Therefore, any changes to the system must preserve and enhance those proven strengths.

Because its credit sales, borrowings, and initial payments are guaranteed by the federal government, the CWB must be accountable to Canadian taxpayers for its financial operations. MPE supports the legislative provisions that require the Canadian Wheat Board to submit and obtain ministerial approval of annual corporate plans and annual borrowing plans.

However, as their marketing agent, the Canadian Wheat Board must also be accountable to prairie wheat and barley producers. As it is currently worded, Bill C-72 does not satisfy these requirements.

MPE supports the modernization of the governance structure of the CWB to include a board of directors. Further, we commend the government's stated intention to have elected producers form a majority of the board.

However, Bill C-72 does not stipulate that the directors elected by producers must form a majority. In fact, the legislation is unclear as to whether any positions must be filled by election.

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The following changes are proposed to improve the ability of the CWB board of directors to represent the interests of producers. Bill C-72 should be amended such that directors elected by producers comprise two-thirds of the members of the board of directors. All producer elections should take place for the 1998-99 crop year. Half the directors could be elected for a two-year term and half for a three-year term so that all terms do not expire at the same time. After the first election all directors would be elected for a three-year term, as specified in the legislation.

Directors should be required to serve ``during good behaviour'', as is currently the case with commissioners, rather than ``during pleasure'', as specified by the legislation.

MPE supports the selection of a president or CEO to oversee the day-to-day operations of the board. We believe that the president/CEO should be fully accountable to the board of directors and, through the elected directors, to prairie producers. However, while accountability requirements must flow from the government's guarantee of initial payments, we are greatly concerned about the proposed appointment of the president/CEO and of the chairman of the board by the Governor in Council. Further, we do not believe that the president/CEO should be a voting member of the board of directors as specified in the legislation.

The following changes are proposed to ensure that the board of directors has an appropriate level of involvement in the management of the Canadian Wheat Board. Consideration should be given to having the government select the president/CEO from a list of candidates provided by the board of directors. Also, the board of directors should be given the power to terminate the appointment of the president/CEO. The chairman of the board should be elected by the board of directors from its own group, rather than appointed by Governor in Council. The president/CEO should be fully accountable to but not a voting member of the board of directors.

These changes would bring the corporate structure more in harmony with that of many of our agri-businesses. We view these alterations as necessary for an effective board of directors, a board that would have the chance to earn the respect of farmers and customers of the Canadian Wheat Board.

A number of provisions in Bill C-72 improve the Wheat Board's ability to respond to producer needs, such as making payments for recognition of farm storage or issuing tradable certificates.

However, other provisions represent a threat to the integrity of the system, and I'll mention a few of those. The federal government guarantees represent one of the cornerstones of the Canadian Wheat Board marketing system and must be preserved. While MPE appreciates that Bill C-72 provides for the continuation of federal guarantees on CWB borrowings and credit on grain sales, we believe the government must also continue to guarantee adjustments to the initial payments. There has never been a deficit in a pool account caused by an adjustment to the initial price, demonstrating that there is virtually no financial risk associated with maintaining this guarantee. There is a risk and fear, however, that the withdrawal of the adjustment payment guarantee will lead to the withdrawal of the initial price guarantee. Many producers are drawing this conclusion and are disturbed by the prospect.

The government's stated rationale for removing the guarantee of adjustments to the initial price is to expedite the process of making adjustment payments. MPE believes that this could be achieved by removing the requirement for Governor in Council approval and replacing it with a requirement for approval by the Minister of Agriculture and the Minister of Finance.

MPE is very concerned about the provision in Bill C-72 that enables the Canadian Wheat Board to make cash purchases of wheat directly from producers. Our reasons are twofold. We believe that allowing the CWB to make purchases at other than the initial price will reduce the effectiveness of and ultimately cause the demise of price pooling, one of the cornerstones. As more producers opt for the cash price, which will need to be higher than the initial price, the potential for a deficit in the pool account will increase. This will result in more conservative initial prices and the possibility of producers withholding some deliveries in anticipation of a cash purchase opportunity being offered.

The efficiency of the grain forwarding system relies on an effective working partnership between the grain-handling industry in acquisition and the Canadian Wheat Board in marketing. If the Canadian Wheat Board has the ability to acquire grain on a cash basis directly from producers, it could direct deliveries of grain and ultimately influence the configuration of the country elevator system.

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MPE believes this could have a negative impact on efficiency of the grain forwarding system. With the availability of tradeable producer certificates, wheat producers will have the opportunity to sell the right to a final payment and realize a nearly full return for their grain without waiting for CWB to make its final payments. We believe this provision meets the needs of producers who desire payment for their wheat upfront without jeopardizing one of the cornerstones of the CWB marketing system.

MPE views the situation for barley as somewhat different from that for wheat. More than half the barley produced in western Canada is marketed outside the Canadian Wheat Board. This has made it difficult for the board to acquire grain to fulfil its export sales commitments. If barley producers are to continue to benefit from Canadian Wheat Board marketing of export barley, the Canadian Wheat Board must be able to source barley to meet its sales commitments.

MPE believes the industry and the board can work in partnership to source barley. We would support giving the Canadian Wheat Board the ability to enter into contracts with grain elevator companies to offer cash prices for barley at times when the initial price final payment system is not attracting required supplies. However, this provision must be employed as an extraordinary measure, with extreme caution, to protect the cornerstones of Canadian Wheat Board marketing.

Bill C-72 provides for the establishment of a contingency fund to replace government guarantees of adjustments to initial prices and to backstop potential losses from cash purchasing. MPE does not believe this contingency fund is required, for two reasons. We believe the government should continue to guarantee adjustments to the initial price, which would negate the requirement for a contingency fund. We note that guaranteeing adjustments to the initial price represents no real expense to government. However, the replacement of the government guarantee with the contingency fund would represent an expense to producers who would be required to forego some of the returns from CWB marketing to build and maintain that fund.

We have identified our concerns with allowing the Wheat Board to make cash purchases from producers. We do not believe it would be in the best interests of producers to use the returns from Canadian Wheat Board marketing to finance a measure that could ultimately destroy one of the cornerstones of the Canadian Wheat Board. Risk management tools, such as hedging, could be used to backstop the limited form of cash purchasing proposed earlier in this submission.

Under the Canadian Wheat Board Act, CWB manages the delivery of grain to the handling and transportation system. This ensures that all producers have access to Canadian Wheat Board marketing and that the efficiency of the system is maintained. Producers have invested heavily in on-farm storage to accommodate this managed form of delivery, and they've also owned or leased condominium storage at grain handling facilities as an extension of on-farm storage. Just as they do not apply to on-farm storage, the quota and contract requirements of the Canadian Wheat Board Act should not apply to condominium storage.

Bill C-72 attempts to make allowances for condo storage by relaxing the delivery requirements for grain-handling facilities exempted by the Canadian Grain Commission under the Canada Grains Act. However, it's our understanding that the Canada Grains Act applies to the exemption of entire facilities, not just condominium storage.

MPE is concerned that as more facilities are exempted to accommodate producers with condominium storage, the ability of the Canadian Wheat Board to manage deliveries and provide equitable delivery opportunities to producers will be eroded. MPE recommends that provision be made in the act to exempt only condominium storage from Canadian Wheat Board delivery requirements. Prairie Pools has forwarded additional information on this issue to members of this committee, I believe.

MPE supports provisions in the bill that protect Canada's identity preservation system and give producers input into decisions to exempt any type, class, and grade of grain from the restrictions on export or interprovincial trade. We appreciate the government's assurance that establishment of these provisions will not result in the reversal of exemptions that have already been granted under the act.

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MPE appreciates the federal government's efforts to enhance the effectiveness and accountability of the Canadian Wheat Board through amendments to the Canadian Wheat Board Act. While we support the intent of Bill C-72, we have serious concerns about proposed changes that would threaten the fundamental pillars of Canadian Wheat Board marketing. We believe the changes we are proposing will enable the board to be responsible and accountable to both producer and government stakeholders while preserving the strengths of single-desk selling, price pooling, and government guarantees.

Thank you.

The Chairman: Thank you very much, Brian, for that presentation.

We have one more from the National Farmers Union. Chris Tait is vice-president of the National Farmers Union. Welcome, Chris. Please proceed with your presentation.

Mr. Chris Tait (Vice-President, National Farmers Union (Region 5)): Thanks very much. I have with me today the regional coordinator of the NFU from Manitoba, Fred Tait.

The National Farmers Union thanks the House of Commons Standing Committee on Agriculture and Agri-Food for this opportunity to present the NFU's views on Bill C-72. The NFU is the only voluntary direct membership national farm organization in Canada. The NFU works on the development of economic and social policies that will maintain the family farm as the basic food-producing unit in Canada.

The NFU represents farmers across Canada, the majority of whom are grain and oilseed producers. Farmers have become very efficient at growing grain. However, farmers realize that their livelihoods, their futures and those of their families depend as much on the success in marketing that grain as on their ability to grow it. For this reason, the NFU actively promotes orderly marketing for grains, oilseeds, and other marketing commodities.

Producers gain several advantages from orderly marketing, including risk management, predictable and fair delivery opportunities, relatively stable and predictable prices, security of payment, and market development. Orderly marketing institutions market products on farmers' behalf, rather than buying those products from farmers and selling them for a profit.

The Canadian Wheat Board differs fundamentally from private grain companies. Private grain companies seek to maximize profits for their shareholders. Those companies do so by buying grain from farmers at the lowest possible price and selling it at the highest possible price. In contrast, the Canadian Wheat Board also sells grain at the highest possible price, but then returns all profits less expenses - which came to a modest 4.7¢ per bushel in the past year - back into the pockets of farmers.

Where private grain companies must make profits at the expense of farmers, the Canadian Wheat Board makes profits for farmers. The NFU represents the vast majority of western Canadian farmers in its support for the Canadian Wheat Board and its desire to see it strengthened.

Farmers' support of the Canadian Wheat Board has been demonstrated repeatedly. Pro-Canadian Wheat Board candidates won 10 out of 11 seats in the 1994 Canadian Wheat Board advisory committee elections. Hundreds of farmers voiced their support for the Canadian Wheat Board at the Western Grain Marketing Panel's town hall meetings, thousands more demonstrated that support at rallies over the past summer, and thousands wrote to Minister Goodale to support the Canadian Wheat Board.

The National Farmers Union supports increased flexibility in Canadian Wheat Board operations and more options for farmers. However, weakening or partially dismantling the Canadian Wheat Board will neither increase options for farmers nor flexibility for the Canadian Wheat Board. For this reason the NFU opposes many of the changes to the Canadian Wheat Board proposed in Bill C-72. It does so because reasonable analysis shows that many of those proposed changes weaken or have the clear potential to weaken the Canadian Wheat Board.

The NFU is eager to accept changes to the Canadian Wheat Board, but only if those changes expand, enhance, and strengthen the Canadian Wheat Board. The Kraft-Furtan-Tyrchniewicz report showed that the Canadian Wheat Board increased western Canadian producers' returns by an average of $265 million annually. The recent study by Schmitz et al, ``The Canadian Wheat Board and Barley Marketing: Price Pooling and Single Best Selling, showed that the Canadian Wheat Board increased western Canadian barley producers' returns by $72 million annually.

These studies did not find any chronic structural problems with the Canadian Wheat Board that would require dramatic changes to the Canadian Wheat Board. On the contrary, they found the Wheat Board and western Canadian farmers produced and marketed the highest-quality wheat in the world at the highest prices in the world. They also found that the partnership between farmers and the Canadian Wheat Board put hundreds of millions of dollars into farmers' pockets annually through higher prices on the world market and through lower marketing costs.

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Before making any changes to the Canadian Wheat Board, the government, farmers, and the Wheat Board must determine how those changes will increase the already large premiums the Wheat Board currently returns to farmers.

The Wheat Board rests on three pillars: price pooling, government guaranteed borrowing, and single-desk selling. Bill C-72 damages two of the three pillars and has the potential to damage the third. Further, it does little to improve accountability, a stated aim of the government.

Cash buying in proposed section 39(1). Price pooling, a fundamental pillar of the Canadian Wheat Board, would be clearly weakened by this section. Bill C-72 adds the following new section to the Canadian Wheat Board Act. Under the heading ``Cash Purchases of Wheat'', proposed subsection 39.1 says:

39.1 Notwithstanding sections 32 to 39, the Corporation may enter into a contract with a producer or any other person or entity for the purchase and delivery of wheat or wheat products at a price other than the sum certain per tonne for wheat as set out in section 32, and on such terms and conditions as the Corporation considers appropriate.

This section would give the Canadian Wheat Board carte blanche authority to buy wheat and barley from any person or any company at any place at any time and under any arrangement the Canadian Wheat Board elects. The section is vague and unclear. It provides for a wide range of scenarios, from once-in-a-decade limited purchases from grain companies, to trade, to fill a particular contract and avoid demurrage, to the total elimination of pooling where the Canadian Wheat Board purchases all western Canadian wheat and barley on a cash basis.

In regard to cash buying from the trade, almost unanimously proponents of cash buying point to the 1994-95 barley situation. Cash-buying proponents argue that in 1994-95 the Canadian Wheat Board had potentially high-priced sales contracts to Japan that it could not fill because it could not attract barley to fill those contracts. The argument goes that had the Canadian Wheat Board been able to get the barley it needed through cash buying from the trade, the high-priced sales to Japan would have raised pool returns to all farmers who delivered barley to the Canadian Wheat Board.

We have a table in our submission that outlines barley sales over the past ten years and it shows that farmers did lose money in 1994-95. It is also possible to conclude that the loss could have been reduced had the Canadian Wheat Board possessed the ability to buy grain on a cash basis from the trade to fill those Japanese contracts. However, the data from the last ten years shows very clearly that the 1994-95 situation was an aberration and that in that year the Canadian Wheat Board's inability to source barley cost farmers approximately $7 million.

On average, however, the Canadian Wheat Board has increased farmers' revenues by $72 million annually. Moreover, 1994-95 was the single year out of the last 10 when there was any reason to question the performance of the Canadian Wheat Board in marketing barley. The 1994-95 barley marketing situation, then, does not represent a chronic flaw in the structure of the Canadian Wheat Board, nor does it support calls for a fundamental overhaul in the way the Canadian Wheat Board buys grain. Given the potential problems that cash buying will cause, it would be wrong to institute cash buying to correct a problem that has only surfaced in one year out of the last ten.

Cash buying barley from the trade has the potential to damage pooling, and hence the Canadian Wheat Board, in the following ways: first, if the Canadian Wheat Board chose to buy cash wheat or barley from the trade and if that cash price eventually proved to be higher than the price it paid to farmers, farmers would be legitimately displeased with the Canadian Wheat Board.

Second, it's possible the trade, seeing a potential shortage of Canadian barley, could preemptively buy barley and attempt to hold the Canadian Wheat Board for ransom. Currently, the trade is prevented from doing this because it cannot export that barley, nor can it sell it to the Canadian Wheat Board to export it.

Third, while barley producers want high barley prices, cattle feeders, ranchers, and other livestock producers do not. Canadian Wheat Board purchases of feed barley from the trade could drive domestic feed prices up sharply and without warning, and livestock producers would be justifiably displeased.

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Cash buying, whether from farmers or from the trade, will erode and endanger price pooling, a fundamental pillar of the Canadian Wheat Board. The vast majority of western Canadian farmers support price pooling because it provides them with inexpensive risk management and predictable, orderly, and fair delivery opportunities.

The problem that cash buying is proposed to solve, namely, the Canadian Wheat Board's inability to source grain in exceptional years, is an insignificant and infrequent one. While farmers want options and flexibility, the vast majority who support the Canadian Wheat Board do not want these options and flexibility if they threaten the price pooling of the Canadian Wheat Board. The NFU recommends that the government delete proposed section 39.1 from Bill C-72.

Under proposed subsection 45(1), beyond allowing cash buying of wheat and barley, Bill C-72 proposes another mechanism to implement cash buying. That mechanism is simply to exclude any ``kind, type, class or grade of wheat'' from board jurisdiction. Bill C-72's proposed subsection 45(2) reads as follows:

(2) On the recommendation of the Minister, the Governor in Council may, by order, exclude any kind, type, class or grade of wheat, or wheat produced in any area in Canada, from the provisions of this Part either in whole or in part, or generally, or for any period.

Proposed subsection 45(3) states:

The Minister shall not make the recommendation referred to in subsection (2) unless

(a) the exclusion is recommended by the board; and

(b) a procedure approved by the Canadian Grain Commission as acceptable for preserving the identity of excluded grain, so as to prevent co-mingling with other grain, is in place.

Proposed subsection 45(4) states:

Where, in the opinion of the board, the kind, type, class or grade of wheat is significant, the Minister shall not make a recommendation referred to in paragraph (3)(a) unless a vote in favour of exclusion by producers has been held in a manner determined by the Minister.

As Bill C-72 is drafted, it's not mandate changes that producers will have the opportunity to vote on, but merely mandate reductions. The subject of a producer vote is not mentioned in any other proposed section of the act. It would seem that the producer vote mechanism is applicable only to changes that will weaken and dismantle the board and not to those that would strengthen it.

It is a mockery of democracy to limit producer votes to weakening the Canadian Wheat Board. There is no other corporation where the directors or shareholders are restricted to voting only on measures that would weaken or diminish that corporation.

Such provisions in Bill C-72 show a clear disdain for the Canadian Wheat Board and for farmers and call into question the government's interest in accountability or democracy.

The NFU recommends that proposed section 45 of Bill C-72 be amended to allow producers to add grains such as rye, oats, canola or lentils to the Canadian Wheat Board's jurisdiction. The mechanism for such additions should be the same as that used for exclusions. For example, they would be subjected to a producer vote. Further, the NFU recommends that the legislation include a clear definition of the word ``significant'', and the legislation should also state that if there are any grounds for doubt, the minister must seek broad producer opinion.

In regard to hedging and risk management, proposed paragraph 6(1)(c.2) of Bill C-72 would allow the Canadian Wheat Board to do the following:

in the course of its operations, to enter into and deal with such contracts and transactions as the Corporation considers necessary for risk management purposes, including options, futures contracts, forward contracts and currency, commodity and interest rate swaps;

The Chairman: You have about two minutes left.

Mr. C. Tait: Okay, we'll wrap this up.

It's difficult to comment on this part of Bill C-72 because - like many other parts of the bill - the powers conferred are so broad that they could be used in almost any fashion imaginable.

On the one hand, the Canadian Wheat Board might use any new risk management powers merely to lock in currency exchange rates on future grain sales. On the other hand, the Canadian Wheat Board could offer futures contracts to farmers or use contracts itself to hedge grain bought from farmers on a cash basis. The use of limited risk management tools by the Canadian Wheat Board is good business practice, but C-72's proposed paragraph 6(1)(c.2) does not limit the use of such tools.

The NFU recommends that proposed paragraph 6(1)(c.2) be amended to limit the Canadian Wheat Board's use of risk management tools. The amendment should specifically state that risk management tools should not be used in any way that undermines or diminishes the paramount importance of price pooling as the Canadian Wheat Board's primary risk management tool or used in conjunction with any practice that does so.

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I'll conclude briefly on governance. The NFU does not agree that the Canadian Wheat Board lacks accountability. Thus, the NFU does not support Bill C-72's proposal to create a partially elected board of directors for the Wheat Board.

In trying to address the alleged problem of a lack of accountability, Bill C-72 creates a real problem by endangering the federal government's guarantee of Canadian Wheat Board prices, borrowing, operations, and credit sales. The Canadian Wheat Board does not lack accountability. Bill C-72 does not increase accountability, and by attempting to do so it endangers a government guarantee worth over $60 million to the Canadian Wheat Board and Canadian farmers.

The NFU recommends that the commissioners of the Canadian Wheat Board and the Canadian Wheat Board advisory committee be retained, because the proposed partially elected board of directors' structure will increase neither the actual nor perceived accountability of the Canadian Wheat Board and will endanger a government guarantee of Canadian Wheat Board prices, borrowings, operations, and credit sales worth over $60 million annually.

Further, the NFU recommends that the farmer-elected Canadian Wheat Board advisory committee powers be strengthened in the following ways: one, the advisory committee must approve appointments of commissioners; and two, the advisory committee must play an active and paramount role in Canadian Wheat Board policy development.

That concludes our presentation. Thanks very much.

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

That concludes all of the presentations.

I will begin with questions and comments from Mrs. Cowling, and I will then turn toMr. Hermanson.

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

My very first question is with regard to membership of the various organizations that are here. That was triggered by, I think, a comment from Manitoba Pool Elevators when they indicated they were here representing 17,000 members. I'm wondering what representation each of the other groups brings to the table, including farmer representation. Perhaps I could have that from all of the groups.

The Chairman: Do you want to start, Don?

Mr. Dewar: At Keystone we represent 7,000 farm units. We're in the process of refining our computer program. Some of our farm units have four or five permit book numbers, which would indicate four or five producers, so it's only speculation. We believe we actually have at least double the 7,000 in membership, which would bring us close to the pool's 17,000 if you look at the demographics.

The Chairman: Kevin.

Mr. Archibald: Our group, the Western Canadian Wheat Growers Association, comprises 6,000 members across western Canada, all on a voluntary basis. Also, for the record I'm a member of Manitoba Pool, but their views do not represent mine.

The Chairman: Brian, I'll bet you're glad you're next.

Mr. Saunderson: I've already stated that our membership is 17,000, and you're quite aware what membership means: you haul to the pool; you become a member. And we're glad to have Kevin in the grain business.

The Chairman: Chris.

Mr. C. Tait: The National Farmers Union represents 10,000 members in all regions of the country in all different commodities. We differ from some of the other organizations around the table in that we are voluntarily funded. We don't have a check-off. Everybody who belongs to the NFU makes the conscious decision that they want to do so. I think we have very strong grassroots input and a democratic structure that perhaps some other organizations don't have.

Mrs. Marlene Cowling: Thank you. That gives our committee a perspective of where many of you are coming from.

But I want to come back to Kevin Archibald. In Manitoba, how many members do you represent?

Mr. Archibald: I'm sorry, Mrs. Cowling, I don't have a breakdown indicating that.

Mrs. Marlene Cowling: My next question is to Kevin from the Western Canadian Wheat Growers. You appear to be the only group at the table at the moment that does not support the single-desk selling of the Canadian Wheat Board. I'm wondering how many of your membership in fact sell outside the jurisdiction of the Canadian Wheat Board. Do they all?

Mr. Archibald: I'm not sure I quite understand your question on whether they sell outside the jurisdiction.

Mrs. Marlene Cowling: Do they sell outside the jurisdiction of the board or do they sell within the board?

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Mr. Archibald: If they're marketing Wheat Board grains, they're obligated to sell within the board. That's just a fact of life. That's the way the law is written, and they do adhere.

Mrs. Marlene Cowling: Okay. That's a fairly vague statement. However...

My next question is with respect to Keystone Agricultural Producers. You indicated that you would like to see another component to the legislation, the value-added component. Can you expand on that and help us understand what we should be doing in that area?

Mr. Archibald: I alluded to the milling pricing in our presentation. Maybe if I expand on that one it would make it a little easier to understand.

With Manitoba being the farthest from port, our producers receive the least for their grain because it's backed off from Vancouver or Thunder Bay. By the same token, if a miller were to buy wheat from the Canadian Wheat Board, the closer he is to the port the cheaper his grain is, which makes Manitoba wheat the cheapest to the producer and the most expensive to the miller. We think that's an anomaly that shouldn't be there. If it is cheaper to the producer, it should in fact be reflected in the price to the miller and it should be cheaper to the miller.

Does that answer the question?

Mrs. Marlene Cowling: Yes, it does.

My next question is to the Manitoba Pool Elevators. They raised the question with respect to the condominium storage, and it's an area that I don't think we're all familiar with. Could you expand on that for us?

Mr. Saunderson: I referred to a letter that I think went to all your committee members.

I think the avenue Bill C-72 is trying to identify the problem with doesn't differentiate between the elevator part of a facility and the condominium part. As you are aware, they are really all the same in terms of the physical structure.

So we want the bill to fix it up so that only the condominium part of the facility is exempted from the restrictions of contracts and quotas and not the company or primary elevator aspect. Our understanding of the Canada Grain Act is that they only exempt entire facilities, not segments.

Mrs. Marlene Cowling: Thank you.

The Chairman: Mr. Hermanson.

Mr. Elwin Hermanson (Kindersley - Lloydminster, Ref.): Thank you, Mr. Chairman, and welcome, gentlemen, to the hearings.

I have a number of questions, and because time is of such a limited quantity here, I'd appreciate it if you would make your answers as brief as possible. I'll go in the same order as you appeared. My first question is to the Western Canadian Wheat Growers Association.

Minister Goodale has said repeated times, and supporters of sort of a status quo wheat board have said over and over again, that a dual market or voluntary participation in the Canadian Wheat Board just won't work. They always act like they have irrefutable evidence to substantiate their position, but they never bring it forward.

Do you have any evidence to the effect that voluntary participation in the Canadian Wheat Board would work? It certainly isn't in this act, and it's crucial that we establish whether or not a voluntary participation or dual market could actually work.

Mr. Archibald: We have two fairly strong pieces of evidence, Mr. Hermanson.

First is our working model that we presented to the Western Grain Marketing Panel, and it spelled out in detail exactly how it would work, how the board would function with grain companies, and how they would function with farmers. It actually strengthened the board to the point that they could compete in a competitive environment. It put some specific rules in effect. It gave the board some new provisions to make them capable of interacting in that competitive environment.

But history does give us examples of where that has worked in the past. In the 1920s, I believe from 1924 until 1929, there was a dual-marketing system in place that actually featured the company beside me as one of the players. That's how the pools were created. They offered voluntary pooling. If you signed a contract, you were in the pool. It worked very well until 1929 when the crash came, because the pools didn't believe in using the commodity exchange to hedge their purchases and sales. They believed the commodity exchange was immoral, and thus when grain prices collapsed, the entire system collapsed.

From that time forward we've never had a system actually created on those grounds that did work. There was an attempt in the 1930s, but because the contracts were flimsy and did not work, it just fell to pieces.

That's the basis of our working model, a voluntary contracting system, a voluntarily contracted pool, where you sign a binding contract to be in the pool or out of the pool. It provides all the rules, all the flexibility, and it puts the Wheat Board in a sustainable position, an area where they will continue to survive. Without that, without moving them into that business environment, we are eventually going to lose them.

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Mr. Elwin Hermanson: So you think this would actually ensure the viability of the Wheat Board into the next century, rather than destroy it.

Mr. Archibald: Definitely so. It would strengthen it. It would improve it for farmers and the industry, the entire system.

Mr. Elwin Hermanson: Okay.

On the second question - I've never really heard this - I know elevator tariffs are considerably higher in Canada than they are in the United States. If I heard you correctly, you said they are highest with regard to board grains and they are much lower in off-board grains. Why is that? Was that different figure considered in Kraft's report?

Mr. Archibald: I'll answer the second part first, which I'm not sure about.

It would appear to me at the outset that it wasn't, because Mr. Kraft's work was strictly on Wheat Board sales. If it had been backed off to the farm gate, we could have had quite a different result compared to what American producers would receive. In fact, we farm right beside the border, five miles from a border crossing, and I have never seen American farmers trying to smuggle grain into Canada. So that's further evidence that this is the situation.

On the tariff side, yes, in most cases when non-board grains are moved through the system it's our understanding that the tariffs can be lower. There's a basis built in, and that basis can sometimes be made up of mystical numbers.

But regardless, non-board grains feature transactions where the companies buy and sell. In essence, they're merchandisers. They make money from that merchandising sale, which often will offset their tariffs, their handling charges, to attract grain into the elevator. Without a narrow basis, they're not going to get business. We're going to take it down the street to the competing company, and if they have a narrower basis on their grains and a higher street price as a result, that's where the grain will go.

Generally, you'll find that most Canadian grain companies charge the highest tariffs on board grain because it's the only way they can earn revenue from it. They don't get to merchandise; they just get to handle. So ultimately, definitely, there will be higher tariffs.

Mr. Elwin Hermanson: Okay.

To KAP, you made a couple of statements. One statement was that you want to see a fourth pillar for the Canadian Wheat Board, that being promotion of value-added industries. I certainly agree that it's a goal that should be in focus, and Bill C-72 should not hinder that objective.

One of the things I've heard right across the prairies is concern that it's very difficult for value-added industries to start on the prairies, in particular, with the whole buy-back situation through the Canadian Wheat Board.

For instance, we have producer groups in Saskatchewan that want to start pasta or semolina flour milling, but they feel it's not economically viable, simply because of the Canadian Wheat Board buy-back. We know it has also hindered flour milling here on the prairies.

Would you suggest perhaps that's a strong argument for a domestic market that's not a single-desk prerogative of the Wheat Board?

Mr. Dewar: Not really. I think what we're referring to - and part of the problem, as I explained for Mrs. Cowling, is the pricing mechanism, which I really believe the Wheat Board should and can fix.

If the economics aren't there for the pasta growers to buy the wheat from the Wheat Board, then it tells me the Wheat Board is definitely doing its job and extracting the highest price for that durum wheat. The company they want to build up would therefore have to manufacture on the margin that they can.

Mr. Elwin Hermanson: If I can interrupt, the buy-back is often far higher than the pool outlook.

Mr. Dewar: I think that's the pricing system we referred to that is detrimental to value-adding. It gets worse as you move east of the Vancouver experience.

Mr. Elwin Hermanson: The other question for KAP is this. You said you thought the CEO should not be on the board of directors. I agree with you on that. But you did suggest - and you're one of the few who did - that the CEO be appointed through a Governor in Council appointment, and then you said this CEO or president should be accountable to the board. I wonder how you expect that someone whose job is beholden to Governor in Council appointment will in fact be answerable to the board of directors.

It reminds me of the Senate, where the Prime Minister picks a senator who's supposed to be responsible to the province. If it was a Conservative senator, all he was worried about was that he had to get the GST through for Mulroney, and if it's one of Mr. Chrétien's appointees, he has to get Mr. Chrétien's legislation through.

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I see the same conflict of interest here if you have a CEO who's appointed by Governor in Council but supposed to be answerable to an elected board of directors.

Mr. Dewar: I'll read the sentence. I think that's the simplest way to answer the question:

The CEO should be appointed by the Governor in Council upon recommendation from the board of directors. The CEO must be answerable to the board of directors and can be removed by a vote of the board of directors in excess of two-thirds.

That's almost like recall.

Mr. Elwin Hermanson: Are you suggesting, then, that the board have a list of one candidate, or are they supposed to give the Governor in Council a list of 10 or 20 potential names?

Mr. Dewar: I would hope there are 10 or 20 people potentially capable of doing the job.

Mr. Elwin Hermanson: Okay. We'll go on to Manitoba Pool Elevators.

I imagine you found it interesting to know that someone - I can't remember who it was - thought you would get the lowest possible price for your suppliers, that if it was an off-board grain you would offer the lowest possible price to people who deal with you.

You were opposed to a cash purchase of barley except in extraordinary cases. Are you suggesting, then, that the Wheat Board has done a good job of marketing barley? Are you happy with the job the board has done? I know they've had some real problems in the last three years, particularly with feed barley, where the primary market is the domestic market. It almost seems that when the Canadian Wheat Board gets involved it tends to bring more problems to the industry rather than help the industry.

Mr. Saunderson: No. You phrased that in a very cautionary way. Actually, I said the opposite, that we approved the provisions in Bill C-72, as it applies to barley, to allow for cash trading. I did say under extraordinary situations, but that would be at the call of the management of the Canadian Wheat Board.

Mr. Elwin Hermanson: This is just for clarification, but you also said that with regard to condo storage you felt there needed to be a change to the Canada Grain Act. I made the same statement to the first group of witnesses. The Canada Grains Council suggested, no, whatever is necessary should be in the Canadian Wheat Board Act.

I tend to agree with you. Do you want to comment further on why there should be changes to the Canada Grain Act?

Mr. Saunderson: Actually, I'm probably getting out of my depth here, but I think our position is not to go into the vehicle of the Canada Grain Act. I don't think we're saying change that act but use other ways in this bill to differentiate the condo part of a facility from the rest of the facility.

The Chairman: For the record, sir, you just said you made that comment to the Canada Grains Council. I think your comments were to the Canadian Grain Commission.

Mr. Elwin Hermanson: You're correct. Thank you.

I think we're probably in general agreement, then, with the approach that needs to be taken here.

Addressing the NFU now, you talked about actually adding grains rather than removing grains and facilitating that. Actually, I'd have no opposition to adding grains to the board if everything were done on a voluntary basis. I think the private grain trade and the board would actually sharpen one another's skills, and farmers would have the best of both worlds. But I have a feeling you disagree with me.

With regard to niche markets, there is pretty convincing evidence that the Canadian Wheat Board has not been effective in filling some niche markets. I've had producer groups and farmers come to me and say they've had sales for 1,000 tonnes of Harrington barley and could have received a price in excess of what the board would have received for it, but the board didn't have the means to facilitate that type of deal.

That's not an isolated case. I've had several examples like that given to me.

If there was niche marketing available for wheats and barley outside the board, do you not believe it would stimulate higher prices for all producers? There has always been this attitude that if one farmer gets a little bit more somewhere, everybody else is going to suffer and lose, that somehow it's going to tip this way. Actually, economics tells us that if somebody gets a higher price it tends to lift prices for everyone.

How do you argue the opposite?

Mr. C. Tait: I don't think we can base the marketing of western Canadian grain on niche markets. There may be instances where the Canadian Wheat Board has not capitalized on a small market; however, it's the larger markets that buy our grain. It's places like Japan, where a farmer can't truck his grain. Those are the ones on which western Canadian farmers depend to make a living. Those are the ones that overall have earned farmers the best money. So I don't think we want to dismantle the system in any way in order to capitalize on a few niche markets.

I think farmers have the ability now if they want to capitalize on these niche markets. There are laws and regulations in place that I think the vast majority of farmers support. There is a democratic system in place there, and it's called the Canadian Wheat Board. It has opportunities and choice in it already.

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Mr. Elwin Hermanson: In response, what I was saying was that if we get those niche markets where there are higher prices, there's actually a better chance of getting better prices for those big sales to Japan and China and wherever.

Mr. Fred Tait (Regional Coordinator (Manitoba), National Farmers Union): Let me just add that inevitably when you talk to people who say they have done a lot of research, you'll find that they've been on the phone and they've found a market, and if you follow that to its conclusion, what they have found is a seller.

A voice: A buyer.

Mr. F. Tait: That person is only the middle person in a transaction. They're moving that grain through their structure, whatever it is, to the final user. The normal fee to do that is some $15 to $20 per tonne. That wasn't return from that market to the producer of the grain. The person who pointed that out was Richard Groundwater, the commissioner who resigned earlier in 1996.

The other thing is that when one looks at this sort of an approach, one certainly, first of all, is tempted to sympathize with it because one doesn't think of any volumes being involved. But when the east coast fishery collapsed, the federal government said it wasn't going to be totally harsh and was going to allow the local residents to subsistence fish. Do you remember the tonnage? It was probably big enough to feed every person in the Maritimes three meals a day. It soon turned from a subsistence fishery into an industry.

Once you start the process, because of the provisions of the free trade agreements, which you're quite aware of, CUSTA and NAFTA, you've accomplished an inevitable dual market. It's irreversible once you start.

The Chairman: Thank you. We'll move on to Mrs. Ur.

Mrs. Rose-Marie Ur (Lambton - Middlesex, Lib.): Thank you, Mr. Chair.

My question is for the Western Canadian Wheat Growers Association. I was reading through material prior to coming here and I made a few notations. One of the statements you made was this one. The minister and the Canadian Wheat Board should:

``...get their heads out of the sand and realize that a growing number of farmers are not satisfied with a system that fails to deliver the best returns and service...''.

I wonder how you can justify that statement when, in the same documentation, the Angus Reid poll says 3% of the farmers favour elimination of the CWB. That does not seem to be the majority.

Mr. Archibald: Is this the Angus Reid poll that Minister Goodale conducted?

Mrs. Rose-Marie Ur: No. I said Angus Reid, not Ralph Goodale.

Mr. Archibald: Who commissioned that Angus Reid poll?

Mrs. Rose-Marie Ur: This was done through your correspondence in articles I was reading through.

How can you say farmers really feel they're not getting the best service when it was 3%?

Mr. Archibald: Very easily. A vote in Alberta showed an outstanding number of farmers wanted a dual market. Independent polling in Saskatchewan also showed that about 66% of the farmers out there, if I remember exactly, were in favour of dual marketing. Those are two substantial polls.

Mrs. Rose-Marie Ur: Okay.

Mr. Archibald: We could poll this thing to death, but the fact remains the majority of farmers do want a dual market.

Mrs. Rose-Marie Ur: But that's not what this Angus Reid poll says. Dual marketing...that's interesting.

What would the criteria be? I don't want to sound flippant about this. In my opinion, dual marketing appears to be the best of both worlds: when prices are good, to heck with CWB, but when things aren't quite so nice, maybe we should opt in. What do you do for the people who choose to stay there when times are good and when times are bad? It just seems to be a rather difficult choice. You can't have it both ways.

Mr. Archibald: We believe you can. We believe dual marketing is a win-win situation, but it has to be constructed correctly. In order to do that, you need contracts in place so that whenever you contract into the pool, you're in it. If the market goes up and there's a better cash price out there, you're not available for that because you've already contracted to the board. It's a matter of how you want to manage your risk and how you want to capture your price.

These are individual business decisions that any businessman should be able to make. Yet, under the Canadian Wheat Board system, we don't have that option. We don't have the freedom to manage businesses like businesses. We're all subject to institutional risk, if you like. Whereas the board - and I'm not knocking their capability. Let's say, for example, that they make a mistake, that they sell at the wrong time or that markets suddenly take off. Every farmer in western Canada feels the impact. There's a huge institutional risk there.

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We're trying to create a system where each individual can do what's right for his business, for his farm, without jeopardizing Canada's quality and probably enhancing, in fact, our ability to treat customers fairly, to get product to market. Under the Wheat Board system, for example, we've seen shipments lag behind at the west coast. Have we seen canola or oat shipments lag behind? Not to the same degree - not even close.

Mrs. Rose-Marie Ur: The volume isn't there as well.

Mr. Archibald: Well, it may be, but it also may be gone at different times of the year. The fact remains, those customers are on the whole very happy with the system that serves them.

Mrs. Rose-Marie Ur: You say you're subject to institutional risk. I farm both ways, and I can tell you it's a heck of a lot easier farming when you know you have your products marketed than having to sit there while you're producing your crop, wondering where you're going to ship 200 dozen cauliflower or whatever else you're cutting. So there has to be a bit of a choice there. I can appreciate that.

Another statement you made was that when farmers can't choose, farmers lose in terms of marketing abroad. From the information I have from Asian markets or wherever, they prefer that one individual person represent a certain group. They don't want 50 different farmers showing up with a truckload of product that they want to sell in a niche market or whatever.

How can you justify that, then, away from the Canadian Wheat Board?

Mr. Archibald: The private companies would look after that. That wouldn't be a problem if there was a sale -

Mrs. Rose-Marie Ur: But they don't want a lot of people.

Mr. Archibald: Who doesn't want a lot of people?

Mrs. Rose-Marie Ur: It appears that they prefer to deal with one person rather than 5 or10 people representing the same commodity.

Mr. Archibald: Actually, I haven't found that. If you look at some of the research conducted for the Western Grain Marketing Panel, a paper done by Frank Rowan and Dennis Stephens showed that the majority of customers in the world are moving away from wanting to have a single-desk seller to deal with. They are looking for individual sellers out there.

In the barley market, for instance, the ConAgra report showed that most of the people who buy barley are looking for multiple sellers; they're not looking for that central-desk selling.

I'd also like to get back to a comment you made about cauliflower. The ability under the open market to actually lock in a price so that I can go to bed at night and sleep, knowing that I have hedged 20 bushels of canola to the acre, for instance, at $9 a bushel, gives me tremendous piece of mind. But with the Wheat Board system, I never know. There's a PRO out there that fluctuates with what the futures market in the U.S. is doing. I don't get a chance to lock that in. That's the market that leaves me sleeping uneasy at night.

Mrs. Rose-Marie Ur: I guess that's a difference of opinion you and I will share.

Another statement was that many amendments are phrased in too broad a language, and much is left up to the new board to decide.

Can you clarify that statement?

Mr. Archibald: Paul, would you like to handle that one?

Dr. Paul Earl (Policy Manager, Western Canadian Wheat Growers Association): That presumably was in a press release we put out.

Mrs. Rose-Marie Ur: Yes.

Dr. Earl: Probably the vagueness we talked about referred to some of the issues around election of the board. Both election of the board and the guidelines for removal of directors are left to subsequent regulation in the bill.

Mrs. Rose-Marie Ur: So would you feel more comfortable if the law was more precise and less flexible? Would you be able to support the mandate of the board, then, or the complexity of the board?

Dr. Earl: I think two things are being confused here. As far as the bill itself goes, buying this bill is buying a pig in a poke, because we still don't know exactly how directors would be removed, and we don't know what the guidelines are for the election of directors.

There was some question, for example, as to whether or not elected directors are at pleasure. I had a number of conversations with people about that when I was trying to get to the bottom of what this bill meant. So there's a lot of vagueness in the bill.

Now, to turn that around and say, well, if that was taken out, would you support the Wheat Board -

Mrs. Rose-Marie Ur: No, I'm saying the make-up of the board, not the Canadian Wheat Board, the elected officials within the Wheat Board, and if it was stated in there that there was two-thirds majority of farmers, and the CEO would be appointed by the members of the board of directors.

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Dr. Earl: There are a number of interlocking provisions in this bill, which we detail in our brief, the net result of which is to actually destroy and undermine the autonomy of the Canadian Wheat Board, and you have to look at all of those as a package, as we've outlined in our brief. There's the question of appointing the chair and appointing the CEO, the enhanced ability of the government to direct the Canadian Wheat Board, the fact that a dissenting director could be removed, and the fact that a director can't in fact dissent from something that the government has already told them to do. There's the changing of the requirement for a financial plan from permissive to mandatory. There's the requirement to submit an entire operating plan to the government for approval. All of these things are interlocking, and the net effect of all of them together is to destroy the autonomy of the Canadian Wheat Board. I'm amazed at the support that is there for this bill given the fact that we have a marketing organization and the control of that organization is going to pass to Ottawa.

Mrs. Rose-Marie Ur: Why would you not be in favour of a mandatory budgetary plan? That sounds like a reasonable thing to ask of anyone if you're giving money out, to see the budget plan of the particular company.

Dr. Earl: Nevertheless, I guess there are two aspects to it. Do you want to...?

Mrs. Rose-Marie Ur: Don't fight over it.

Dr. Earl: No, I was just deferring. After all, I'm just the hired hand around here.

The point is that when you necessitate this kind of approval on the part of government, you are taking away the flexibility and really the autonomy of the board, are you not?

Mr. Archibald: Let's look at a ``what if'' scenario. It calls for the submission of a business plan to the Minister of Finance. Grain markets can move very quickly. Especially lately, we've been in a period of really volatile markets, and that's probably not going to change past the millennium. It's going to probably increase in volatility, so there's going to be a need for whoever is doing the marketing out there to be able to move very quickly. Now, if all of a sudden a situation arises where they are able to make a sale quickly - and heaven knows, they should have the ability to do that - if that wasn't part of the business plan, the question we're asking then is, do they have to run back to the minister and say, we've just sprung a deal with Indonesia or Japan or whatever and we need to borrow more money to finance this until the money comes through, etc.?

It sets up a real bureaucratic nightmare in a sense. Rather than leaving the board free to operate and to have flexibility to market grain, which they are mandated to do, it takes that ability away from them somewhat, we feel, and that's why the mandatory part is of concern.

The Chairman: I'm going to go to Glen. There's a little bit more time. Are you finished, Mrs. Ur?

Mrs. Rose-Marie Ur: I guess I am.

The Chairman: Are you sure?

Mrs. Rose-Marie Ur: Yes, that's fine.

The Chairman: Okay. I'll go to Glen for four minutes.

Mr. Glen McKinnon (Brandon - Souris, Lib.): Part of the interest I've had while sitting here today is in listening to the diversity of opinion within this group, and I say that with respect. I don't want to deter any of you. I think I heard a proposal that we do away with the Wheat Board, and secondly, that we go towards a regime whereby we engage in dual marketing. So I'm going to ask all of the groups other than the Western Canadian Wheat Growers Association to comment on whether or not they feel that dual marketing is viable and that it would operate satisfactorily for the producers you represent.

I hope I'm correct in my assumption, Kevin, when I make that remark.

The Chairman: From Keystone Agricultural Producers, then.

Mr. Dewar: I think we were quite clear at the opening of our presentation that we support single-desk selling. We have discussed a dual market at several of our committee meetings and have tried to conceive how it could operate in the world we're living in, and we just can't. Our membership has told us, and the outcome of it is that we support single-desk selling. That's where we stand.

The Chairman: Manitoba Pool.

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Mr. Saunderson: I'll approach it from two aspects, Glen. The first is having the stocks to sell. As you know, at present the Wheat Board sells anywhere from 20 million tonnes to 24 million tonnes a year with certainty that the stock is there given the crop that has been grown. That's the first aspect. It would be the uncertainty of how much stock they had to sell. Even shortening the pooling period is really not the answer.

The other part of it I will mention is that the Wheat Board doesn't own any handling facilities, nor do I want them to, from a vested interest, I guess. I think there would be agreement at this table on that. About the only way for them to operate in a dual market is to own their own facilities. If Pool Elevators operated in a dual market, we'd be buying off that private market.

So are we competing against ourselves in the same facility? It's unworkable.

Mr. F. Tait: Our sentiments would echo pretty closely what the representative from Manitoba Pool has just said.

Let's suppose Japan tendered tomorrow morning for x number of tonnes of grain and let's suppose the Wheat Board is a player in that contract bid. Manitoba Pool, UGG, Cargill, and so on control the facilities. They all covet that same market. You have to envision that if they were unsuccessful in being the low bidder on that tender, out of goodwill they would then turn around and provide their facilities in good grace to a major competitor.

That's really about as logical as me going to a John Deere dealership and expecting him to sell me an International tractor.

It's not going to happen. Using normal business practices, they're going to put up every roadblock they possibly can in front of their major competitors in order to get them out of the marketplace. The logic of this dual market leaves me baffled. The reality is not there.

Mr. Glen McKinnon: Can I ask a supplementary, Mr. Chairman?

The Chairman: Make it brief. Then we'll hear from Jake.

Mr. Glen McKinnon: I also heard the wheat growers' comment. I think I heard the term ``bureaucratic nightmare''. Could you expand on why you feel that way?

Secondly, are you also aware that under the present regime or, if you will, the old regime, there's currently plenty of negotiation in setting initial prices going on with the Minister of Finance and/or other finance departmental officials?

The Chairman: Kevin.

Mr. Archibald: Thank you, Mr. Chairman.

Mr. McKinnon, I want to quickly respond to a couple of earlier comments. With respect to the mention of stocks to sell, under our working model for a dual market we would see farmers contract with the board in the fall. The board would know by an early date in the fall what stocks they had to sell, so the issue of whether they'd have stocks to sell and of how much they'd know is no issue at all. Even less of an issue is the item about whether the pool or anybody else running a grain company would deal with the board.

We've been talking about the board here sometimes like it's some kind of a social club when actually it should be a business entity. If we're going to create a business entity and we're going to work in a business format, when we enact a working model of a dual market there definitely would be contracts between the Wheat Board and the grain companies to ensure that if they are handling board grains they would do so under the contract provisions or they'd be in court. They're in court a lot these days, so they would probably know the ins and outs of that.

Voices: Oh, oh!

Mr. Archibald: Getting back to the ``bureaucratic nightmare'', just look at what we're going through here today. This should be a business entity, as I talked about, and here we are talking about how a marketing agency is going to market grain.

This could conceivably happen every year when a business plan is forwarded to the minister or to the government where they have to look at it and they say ``Gee, we're not sure we should do business with China this year''. If the business plan calls for business with China, what kind of discussions are we going to have then?

We have to set up a marketing agency that is businesslike, that is commercial in nature, and that can actually go out there and do business.

The Chairman: Mr. Hoeppner.

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

This is very interesting.

I'd like to ask Mr. Chris Tait a question. He's been pretty tough on the grain companies.

I don't know where we'll go with this, but I just wonder if you can still sell your grain to any grain company. How do you market your grain?

Mr. C. Tait: We feed our barley to our cattle. If we have a surplus, we market through the board.

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Mr. Jake E. Hoeppner: Not through an elevator?

Mr. C. Tait: Yes, through an elevator.

Mr. Jake E. Hoeppner: So you still have to use the facilities?

Mr. C. Tait: Right.

Mr. Jake E. Hoeppner: This leads me to the next question. We heard this morning that elevator companies pay huge selection bonuses to divert grain from their opposition or from mills. Have you ever been able to access these huge selection bonuses and take advantage of this?

Mr. C. Tait: No.

Mr. Jake E. Hoeppner: Why not?

Mr. C. Tait: I haven't grown grain for a number of years except what we feed the cattle.

Mr. F. Tait: You're talking about two different systems here. Probably you're talking about marketing it into the domestic market, Jake, through the board -

Mr. Jake E. Hoeppner: No. I'm talking about marketing it into the domestic market and also into the U.S. market, because we know there have been huge selection bonuses paid by grain companies marketing into the -

Mr. F. Tait: Yes. In this case, we market it through the board, and whatever benefits the board accumulates out of not only this specific sale we share; we share in the benefits and we share in the risks.

Mr. Jake E. Hoeppner: This leads me to the other question to the pool people. You are now accused of being the guilty ones paying these selection bonuses outside the pooling system. But still, in your presentation you were saying if the board buys cash on a certain basis it will destroy the basic, simple pooling system. How can you avoid one by doing the other?

Mr. Saunderson: I just have a question. Maybe you could expand on us being guilty of paying selection bonuses outside of the Wheat Board. I'm not sure I understand.

Mr. Jake E. Hoeppner: Yes. This is what we heard in testimony this morning when I asked the grain commission and Mr. Hehn how they could explain the selection bonuses paid to some producers for feed wheat or unlicensed U.S. wheat. He said this was a fact of daily living, that this was happening, that grain companies or milling companies used these selection bonuses to divert grain away from their competition.

Mr. Andres Bruun (Corporate Secretary, General Counsel, Manitoba Pool Elevators): Mr. Hoeppner, this issue has been discussed, and there is a recent, very stupid and malicious - if I can say that - article in Grainews in which we are attacked for this. The reality of it is that in our Warburtons contract we are able to supply this British baker with exactly the varieties of wheat he needs. The net result is he buys all of his requirements from outside of Europe - from Canada. We've been able to lock up for Canada this large volume of business, and we've been able to do it in a way that allows us to return a small premium - it's only $20 - to those producers who buy the certified seed, produce this special product, and take the risk that it may not be selected.

Mr. Jake E. Hoeppner: But aren't we going to a dual marketing system here?

Mr. Bruun: No.

Mr. Jake E. Hoeppner: The pooling system was supposed to be equal for all participants. In the ruling of Judge Wright of the Queen's Bench just lately on the M-Jay case, he says because the Canadian Wheat Board has the monopolistic power to sell grain, it has to recoup the pecuniary benefits for the benefit of all pool members. You're not doing it with this type of a contract.

Mr. Bruun: There is some additional risk to those specific producers that is above and beyond the ordinary risk of producing wheat. They have the risk that they may have to buy certified seed, for example, and not have their product selected. They also have to hold this grain back until it is called for, which costs money. Each month this grain sits in a bin it costs money. They're being compensated for the additional money and time they have to put into the production of this product in much the same way a malting barley producer receives more for his malting barley than he would for feed barley.

The basic value of this product is realized by the Canadian Wheat Board, and there is something extra that goes into the pool accounts on this as well. It's not a sneaky, insidious little thing, as has been implied. It's a good thing for Canada that we're doing this.

Mr. Jake E. Hoeppner: I appreciate -

Mr. Bruun: It expands our ability to market our product and to get a better dollar for it.

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Mr. Jake E. Hoeppner: I appreciate those comments, but when we look at a pooling system that's supposed to be fair, I could come back to you and say that I paid $20 an acre for property taxes on some of my property, whereas people further north paid maybe $5 or $6. How am I going to be accommodated or paid for those extra risks I take if you're going to do it the other way with the Warbutons contract?

Mr. Bruun: You're selling your product into an international market, and you're presumably going to be making that adjustment in the price that you pay for that land.

Mr. Jake E. Hoeppner: I don't agree with you. I don't think it works that way.

Mr. Bruun: It does.

Mr. Jake E. Hoeppner: There is another question I wanted to ask you. You had your annual meeting this year, and you were debating the issue of a voluntary wheat board. I think your organization passed a resolution not to include canola, flax, and oats in the marketing system of Manitoba Pool Elevators if it was available. Why would you have so little confidence in the Wheat Board marketing these other grains and not have the same confidence with some of the other issues?

Mr. Bruun: I did the minutes for that meeting and I don't recall that resolution.

Mr. Jake E. Hoeppner: That's the way it was reported in the papers. Maybe it was wrong, but -

Mr. Bruun: I don't recall seeing it in the papers either.

Mr. Jake E. Hoeppner: I'm pretty sure I remember -

Mr. Bruun: I think the view of our members has been that the addition or removal of grains from the Wheat Board's marketing mandate has to be decided on the basis of a vote among producers. That's the policy; it always has been.

Mr. Jake E. Hoeppner: Would you go along with the voluntary wheat board then?

Mr. Bruun: Yes, if a majority of producers had voted for it. It's a democracy.

Mr. Jake E. Hoeppner: That's a good point.

I'd like to get back to the issue of selection bonuses. I had a Wheat Board permit from 1957 to 1991. I know of a couple of instances in our area in which elevators and farmers were prosecuted for delivering before quota was announced. I've never experienced the selection bonuses that we're talking about today, and I agree with Mr. Tait. The bonuses have never been offered to me, nor was I ever aware that they were in existence. How come you, as organizations, haven't made this information available to all producers?

Mr. Bruun: It has been generally made available to producers in the regions that are suitable for producing these products - primarily the southwest part of the province. Areas that have fusarium in them are not suitable for this. As well, I should indicate that there is a private company that is now part and parcel of this program. The company has about 25% of it and we have about 75%, but it's certainly well known in those areas that are suitable for growing the varieties and for producing the quality that this buyer requires.

The Chairman: This is your last comment. I want to get around to everybody and it's already 2:45 p.m.

Mr. Jake E. Hoeppner: I could prove to you by documentation that during the fusarium issue of 1993-94, some of that fusarium was trucked directly to Robin Hood flour mills in Saskatoon. Because of the protein level that it had, and because the Wheat Board refused to set an initial price on it, there was no market. How would you explain that?

Mr. Bruun: Perhaps that mill does not have a difficulty with fusarium, but we know this miller does have a difficulty with it and does not want to accept wheat that has fusarium in it. I am told that this miller produces a loaf of bread that sells for a significant premium over the standard price for a loaf in England. The miller is offering the marketplace what is perceived to be and is present as a premium or high-quality product, and the company wants to be fussy about everything. It's just good business, and we're happy to work in that way.

The Chairman: We have Mr. Calder, Mr. Easter, and Mr. Taylor. We have 15 minutes to wind up those three, and that lets everybody around the table have a comment.

Mr. Murray Calder (Wellington - Grey - Dufferin - Simcoe, Lib.): I'll only ask one question, Mr. Chairman.

The Chairman: You get to the point very quickly.

Mr. Murray Calder: On credit risk, I asked this question this morning, but I'd like to put it to the people who are across the front table.

As a federal politician, I have the responsibility to the taxpayers of Canada - not just the taxpayers in western Canada, but those in all of Canada. From that, I go to the Western Canadian Wheat Growers' brief. On page 2, in point 7, I see that you have said the wheat growers shouldn't have to put in an operating plan. To me, that's the same as going to the bank and asking for $10,000. When the bank manager says he'd like to see my business plan, I say that I don't want to submit one but I want the $10,000 anyway.

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Right now, as the Wheat Board stands as a crown corporation, a broad loan guarantee is automatic. Under Bill C-72, we're working with what we're proposing as a mixed entity. It still means the government is going to be involved in that, but what you're talking about is the government not being involved at all, yet you still want us to underwrite the loan.

A voice: They want to have their cake and eat it too.

Mr. Earl: Perhaps I can address that. It's a very fundamental question. One of the problems that we've had in the western Canadian grain industry has come up through attempts to try to implement a whole bunch of social goals through commercial entities. We've said that it's a good thing to support agriculture and it's a good thing to support the western farmer. There's no question about that. Fundamental public policy says this is what we have to do, but how have we done it? We've done it through commercial entities. One of the big ways in which we did it was through the Crow's Nest Pass rate. For years and years, the Crow's Nest Pass and WGTA rates were defended on the basis that they were fundamental rights of western Canada. But we lost the whole works at the end of the day, and we lost it because we tried to do something social through a commercial entity.

Now one of the thrusts, one of the really fundamental things, that is underlying our brief and is underlying what the wheat growers have said for some time, is that we have to have a commercial arrangement for marketing grain. The financial guarantees that the government provides through the Canadian Wheat Board are in fact implementing social goals. One of the things we suggest in this brief is to take a look at ways of divorcing the Canadian Wheat Board from meeting those social goals, including these financial guarantees. Do them in other ways.

We don't have all the answers on how to meet those social goals. What we are saying is that, given the way trade obligations are going and given the fact that we have a large number of farmers in the west who are very discontented with today's present arrangements, if you don't make the Canadian Wheat Board a commercial entity, it's going to be destroyed. It cannot survive those pressures.

That is what we mean when we talk about not having the Wheat Board submitting a financial plan and so on. It's really part of a package. Look at the whole brief. Read it carefully, because there are some fundamental, underlying concepts in this brief, and they suggest making the Canadian Wheat Board more commercial. That's the only way it's going to survive.

Mr. Murray Calder: Mr. Chairman, I would like a comment from the other three presenters on what was just said.

The Chairman: Mr. Easter gave you the time, did he?

Mr. Dewar.

Mr. Dewar: Thank you.

In our brief, I think we referred to the contingency fund. That would be a move away from the requirement or necessity for government guarantees. As was mentioned earlier, I believe there was a lot of discussion around setting up the initial prices, and that's where we need the guarantees on credit.

I'm inclined to agree that what is required has to be spelled out, but perhaps a full business plan is a little too much to put on the table, under the public eye. The political side of our system is very public, and some of this information is not information that the Wheat Board would be willing to put on the table. I don't want to show everybody my business plan - sometimes I have trouble showing it to my banker - but you have to be able to divulge enough information to get the job done. A full and complete business plan may be asking for too much information, though.

The Chairman: Just as a point of clarification, I don't believe it indicates that it would have to become public. Just because it would go before a minister, that doesn't mean it would become public. There are things that the board of directors of any company will do confidentially. That's part of the responsibility of the board of directors.

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Does that clear up whether or not it becomes a public document per se, Don?

Mr. Dewar: I'm not sure how clear it is in Bill C-72, so that's something that really should be considered.

The Chairman: Yes, that's what I'm referring to.

Brian.

Mr. Saunderson: If the wording on that business plan or borrowing plan was ``monthly'', I'd have a lot of concern. Since the wording is ``annual'', though, I would assume it will be a fairly general business plan, probably based more on the business practices of the past - ones in which they have a lot of experience - than on each precise sale that they probably can't foresee in the coming year. So I don't think we as farmers really have a problem with it.

The Chairman: Mr. Tait.

Mr. C. Tait: The benefits farmers gain from their current relationship with the government, through the Wheat Board, are quite significant. They result in a $60-million savings to farmers every year, so we oppose any change that's going to jeopardize those benefits.

As we outlined in our brief, we don't see the need to establish a contingency fund or to eliminate the guarantees on initial price adjustments. Establishing a contingency fund is going to cost farmers quite significantly, it's going to save the government absolutely nothing, and it's going to erode one of the key pillars of the Wheat Board. So in our minds, I guess that eliminates the need for a business plan, and it makes the case for continuing the current structure.

The Chairman: Mr. Easter, followed by Mr. Taylor.

Mr. Wayne Easter (Malpeque, Lib.): Thank you, Mr. Chairman. I would love to be able to get into the dual marketing issue, but that would be beside the point -

The Chairman: It would take more time than you have.

Mr. Wayne Easter: - other than to say that the reason the majority of customers want multiple-sellers - the system we have in the potato industry - is that you can always play one seller off against the other, lowering the price in the process.

Kevin, I think it was you who mentioned the possibility of the Canadian Wheat Board making a mistake. It is a possibility, but I'll tell you something. If you have thousands of sellers out there, the risk of an individual farmer - one who may be under financial pressure - making a mistake in terms of his decision-making, and the risk of that mistake impacting on the whole, is a lot greater than the Wheat Board making such a mistake with its market intelligence and everything else it has in place. In any event, we're not talking about dual marketing, Mr. Chairman. The minister has stated, and we believe, that single-desk selling is a part of the changes to the Canadian Wheat Board.

My question is this. Of the witnesses before us, is anyone concerned that there may be areas of this bill, as it is currently written, that could in fact undermine to some extent the ability for us to retain that single-desk marketing pillar that is there at the moment? If not, great. If we're on sound ground, great. But I do know there is some concern over cash-selling.

Mr. Dewar: On the whole, we support the changes. We would hope the legislation turns out to be enabling legislation. Give the three pillars the ability to do what they have to do to get the job done, maintain those three pillars, and add our fourth pillar, so to speak: look after Manitoba and its value-added industries.

I think the bill is essentially on the right track, but we don't want it to be restrictive. If we're going to give the board the ability to get the job done, let's do it. Let's not have it running back to the minister, to the Governor in Council, to get extra privileges, so to speak.

Mr. Archibald: Our greatest concern is that the connection with the federal government may lead to some trade friction. The World Trade Organization is slated to meet in a couple of years. Any time an agency is connected with the federal government, there are going to be some serious questions asked. Whether those questions will have to do with the credit guarantees, the guarantee on borrowings, or the guarantee on initials, just the fact that there is a government connection could raise some serious concerns. So to preserve the Wheat Board, by moving that accountability and retaining the autonomy with the board itself rather than with Ottawa, we feel would lessen some of that possible trade friction.

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Mr. Wayne Easter: But we do have that now. Isn't that correct? Earlier, Paul made the point that the control of that organization is going to pass to Ottawa. That's not correct. Currently, under the act, the Wheat Board commissioners are appointed by the Governor in Council. So there's not a change there. In fact, there's greater accountability to farmers through the commitment by the minister to go to a majority of the board elected.

Mr. Archibald: I didn't see that commitment of a majority elected in the bill. We had some concerns there.

The Chairman: It has been addressed. As the minister said in his January 21 statement, Kevin, there are areas there that he is certainly prepared to clarify, and that has been indicated.

Mr. Archibald: Okay, thank you. But despite that -

The Chairman: It's not there presently, we'll admit that, but we're not done yet.

Mr. Archibald: Okay.

The Chairman: That's why we're out here, to hear what people want to say.

Mr. Archibald: That's good. Thanks.

Just on that again, though, the way the board stands now, if you say that government connection is there, we already see that trade friction beginning, and we know that state trading agencies could be on the block.

The Chairman: Brian, do you have a comment?

Mr. Saunderson: I'll just refer to our brief on cash trading. I think we are fairly clear that we see no place for cash trading in connection with wheat, though we do see a minimal role for barley. In the submission I referred to the fact that a spot price or cash trade price would probably have to be higher than the initial, and it could lead to farmers speculating and withholding some stocks, trying to force a spot price. All this puts single-desk selling in jeopardy.

I also referred to the vehicle of tradeable certificates that should really be able to answer a lot of those producers' needs, who want a majority of their payment upfront instead of waiting for a final payment.

Mr. C. Tait: In our view, changes to section 45 very clearly jeopardize single-desk selling. Again:

the Governor in Council may, by order, exclude any kind, type, class or grade of wheat, or wheat produced in any area in Canada, from the provision of this Part either in whole or in part, or generally, or for any period.

For us, it's very clear that that jeopardizes single-desk selling. It was put into the act for a reason. When you look at the background documents that Agriculture Canada has produced, it refers to this allowing some of the proposals of the Western Grain Marketing Panel to be enacted. If there's some misconception in Ottawa that the Western Grain Marketing Panel had some broad support in western Canada, it certainly didn't. It was very thoroughly, very totally, very eloquently rejected by farmers en masse. At the rally this summer in Oak Bluff, for example, there were a thousand farmers out and there was a motion from the floor to reject the panel report in its entirety. That passed nearly unanimously.

Call that a straw poll, if you will, but I think the Western Grain Marketing Panel was not something farmers wanted, and yet we see it reappearing in proposed changes to section 45 and we see single-desk selling very seriously jeopardized.

The Chairman: Mr. Taylor, welcome to the committee. Len, go ahead, please.

Mr. Len Taylor (The Battlefords - Meadow Lake, NDP): Thank you very much. In the interest of time I'll be fairly brief, but I'm hoping the witnesses in their testimony can help out a little bit more on the whole question of the contingency fund.

We haven't heard a lot about the contingency fund in evidence in front of us, although today the Manitoba Pools suggested here that the contingency fund is not required. The National Farmers Union representatives have said they don't see any reason to establish a contingency fund. Before we left Ottawa we heard representation, from the pools again, that the contingency fund was not necessary. This morning, Lorne Hehn said the contingency fund allows for the board to operate a few additional options. But to all intents and purposes, the contingency fund seems to exist primarily to eventually allow the government to opt out of its guarantees.

Could I have a little more information about how each of you see the contingency fund, what the long-term implications are of the contingency fund being in place, and how farmers should feel today about contributing to that fund out of their earnings from their operations this year, as well as over the long term, with the operations of the contingency fund?

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Mr. Dewar: I guess we referred to the contingency fund briefly in our presentation, so I'll start it.

We don't see the contingency fund as being set up out of the pool returns. We're suggesting that it gets started on the difference in the interest that's earned between the Government of Canada borrowing and the cost of the credit sales that has turned a profit. That could give this contingency fund a start.

The use of it is partially perhaps to remove us from the government, because we do share some of the concerns that it's called a state trading agency, and we know this is going to be on the table at the next round of the WTO. Although we disagree with the terminology, we recognize that we're going to have to deal with it.

We refer to the Australian Wheat Board specifically in our brief because they have a joint venture with the Chinese government, I think it is, in setting up mills. It's the Australian Wheat Board, through the contingency fund they have, that has developed this market, put up the mill, so they're not going to be milling Canadian wheat in that mill in China, I don't think. So I think the contingency fund would only broaden the market base for the Canadian Wheat Board.

Mr. Archibald: Mr. Taylor, we could not support a contingency fund under a monopoly single-desk seller. Our working model for a dual market, however, did call for the implementation of a capital fund, and this was very important to help the Canadian Wheat Board survive in that competitive environment. We saw it exactly as Mr. Dewar has pointed out, to aid in securing markets for the board; to be set up to possibly invest in overseas markets; to set up a market out there where customers of the board would have access to breweries, mills, whatever the marketing plan would decide on, in other countries, or even possibly in Canada.

It would be a very hard sell to sell a mandatory producer check-off to a monopoly single-desk selling entity. It would, in essence, be like another tax, and I can assure you that farmers would not settle for it at all.

The Chairman: Have you any other comments, Brian?

Mr. Saunderson: There are two reasons for the contingency fund. One is as a backstop to losing our guarantee on adjustment payments. I've already said we oppose giving up the government guarantee on adjustment payments. We see no need for it.

The other reason was to serve as some backstop for cash trading. I've said that our view is that this trading should be very limited. There are other vehicles to hedge a risk, using the futures markets.

I can't agree with Keystone on using the contingency fund for bricks and mortar, or the farmers' money. There are private investors to do that very well. So we really see no benefit in this contingency fund, and even if the revenue for it comes from revenue from the money market, right now those revenues go into the pool fund. There's no other place for it to go. Indirectly, it comes out of the final payment pool of farmers. So you could attach so many cents or so many dollars per tonne onto that.

The Chairman: Fred or Chris?

Mr. F. Tait: Principle is what it is; it's an extension of the user-pay concept. Regardless of the method that is used to accumulate the funds in this fund, we as farmers are going to pay for it out of lower returns.

In my own own mind I see it as the beginning of a multi-stage process where the federal government will, over a longer term, withdraw all financial support from the board.

The creation of this contingency fund also creates some question about individual producers' equity within that fund. What happens to their portion in that fund as they retire from farming, etc.?

I see no benefit to us as producers. I see no benefit to the federal government. If you look at the history of the federal government's funding to the Canadian Wheat Board, the most recent very large failure we had was during the export enhancement program's finest hours, where I believe it was close to $900 million. If the financing hadn't come through, federal guarantees to the marketing of wheat, it would have had to come to farmers through other processes and agricultural policy.

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The Chairman: Thank you.

Did you have another brief comment, Len?

Mr. Len Taylor: No, that's fine.

The Chairman: I want to thank the witnesses for their cooperation. Your presentations were concise and to the point, as were your answers.

I also thank committee members for their cooperation. I think we've had another good round of dialogue and comments and questions and clarifications so that we have a better idea of each other's views. I thank you for that contribution to the process we are in.

I don't know about the rest of you, but I need a five-minute break. We have a number of individuals who each wish to make a five-minute presentation to the committee. We will hear a number of them, and then, if we have time, we'll go to a brief question and comment period with them as a group.

We'll take an adjournment of about five to seven minutes, no longer.

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