EVIDENCE

[Recorded by Electronic Apparatus]

Tuesday, March 18, 1997

.1004

[English]

The Chairman (Mr. Lyle Vanclief (Prince Edward - Hastings, Lib.)): This meeting is called to order.

For those in the room, you're obviously here in Regina today to listen in on or take part in a manner of making a presentation to the Standing Committee on Agriculture and Agri-Food on Bill C-72, an act to amend the Canadian Wheat Board Act.

.1005

The committee is travelling through western Canada this week. Yesterday we were in Winnipeg, tomorrow we're in Saskatoon, on Thursday we're in Calgary, and on Friday we're in Grande Prairie.

When we return to the House of Commons after the Easter recess, we will continue the deliberations of the committee in the legislative process as far as this bill is concerned.

We have a number of presenters this morning. There are three groups. Each group is aware that they are going to be allowed 15 minutes to make their presentation, after which we will spend a period of time for the members of the committee to have points of clarification and questions to the presenters.

Later in the morning we have a number of individuals who have asked to make a five-minute presentation each to the committee, and then we will follow that with a discussion. This afternoon we will have more groups on this subject.

There's probably room at the table for the first three groups to all come forward: the Saskatchewan Association of Rural Municipalities; the Saskatchewan Wheat Pool; and the United Grain Growers. I welcome you to the committee.

In fairness to everyone, we are going to limit you to 15 minutes, so when you get a couple of minutes away from the end of your time I'm going to signal that to you in some way. If you haven't made the points you wish, please bear with us and move to them very quickly at that stage. If yesterday was any indication, everybody was very cooperative in staying within the time line so that we could have the period of dialogue that I think is very worthwhile as well.

We will begin with the presentation of the Saskatchewan Association of Rural Municipalities. I don't know who's going to make it, Jim Hallick or Ron Gleim.

Ron, I see you're taking the mike. Are you making the presentation?

Mr. Ron Gleim (Director, Division 2, Saskatchewan Association of Rural Municipalities): We were both going to, if that's fine.

The Chairman: Okay, welcome, and please go ahead.

Mr. Jim Hallick (Director, Division 4, Saskatchewan Association of Rural Municipalities): Thank you, Mr. Chairman, for the opportunity for the Saskatchewan of Association of Rural Municipalities to bring our comments and concerns respecting Bill C-72, an Act to amend the Canadian Wheat Board Act. I'm going to speak to the governance part of it, as we have some concerns in this area, and Ron will speak to other areas of the bill.

Speaking to proposed subsection 3.2(2), it states that a director shall be appointed for a three-year term, with a maximum service of three terms. It is our view that there should be no maximum number of terms imposed on the service of directors. If a director is serving his or her constituents effectively, he or she should be allowed to continue to serve.

Proposed subsection 3.4(1) outlines that the Governor in Council shall designate the chairperson for the board of directors on the advice of the minister. It is our recommendation that the chairperson should be elected by the members of the board of directors, without seeking ministerial approval.

Proposed subsection 3.6(1) states that the minister may decide to fill the board of director's position with one or more producers, by election. We believe the act should set out clearly that the board of directors shall be comprised of a majority of elected producers. This section seems to indicate that the minister is not bound to fill the positions through elections.

Proposed subsection 3.6(2) sets out regulations for election and removal of directors. It is our view that the removal of directors should be done through the democratic process.

.1010

Proposed subsection 3.9(1) states that the Governor in Council shall appoint the president. We believe that the board in consultation with the minister should appoint the president. We clearly believe that the administration of the Canadian Wheat Board must be accountable to the elected board members. If this is not the case, the Canadian Wheat Board will not be acceptable to western Canadian farmers.

Thank you.

Mr. Gleim: I want to talk a little bit about clause 17, buying grain on the farm, and a little bit about the contingency fund.

I'm also involved in a transportation planning council in southwest Saskatchewan with about 100 municipalities. They're looking at the Canadian Wheat Board. They're looking at short lines and at moving grain logistically from their grain facility right to the terminal.

The Canadian Wheat Board can buy grain on the farm and pay the producer's storage. It's going to go a long way towards helping them implement their dreams and aspirations on branch lines.

The Canadian Wheat Board, we believe, has to keep the ownership. Producer control through the whole system is very important. It will help to create competition.

We talked to different grain companies and rail companies in the U.S., and they said the first thing you have to do is your logistics. You have to find out what inventory you have and where it's at. That's the way they do it in a lot of the U.S. Then you can bid that grain in blocks. That's the way they move their grain. We were down there three weeks ago. A $600,000 facility moves 7 million bushels of grain in one year at a cost of 7¢ a bushel. These are the kinds of competitive advantages we're looking at. Buying on the farm through the Wheat Board is going to go a long way towards achieving that.

If the Canadian Wheat Board can buy grain on the farm, we realize that there are some pitfalls that we'll have to overcome. We don't believe that you have to transfer the grain, weigh it and put it back in the bin. That doesn't add value. There has to be a way between that and the cash advance so that we can make it work. Perhaps the producer can get 80% of the value of that grain and move it through a contract system where the farmers who are going to move it in the two weeks of their contract will get a premium, and if you don't move it, you won't get asked again.

I think there's a lot of optimism out there that the Canadian Wheat Board will move in that direction.

Producers realize that they need the railroads and they need the Canadian Wheat Board. They can also utilize the grain companies, but they want to put some pressure on the grain companies to drop their tariffs. The tariffs are double what they are in the U.S.

I notice we're sitting beside one of the major grain companies. We're trying our darndest to get along with them.

Some hon. members: Oh, oh!

Mr. Gleim: But all our comments are made representing producers. The grain companies and railroads are quite capable of looking after themselves.

Buying on the farm is very important. We believe that you have to give producers the mandate. Let them have some say in their future. It's enabling legislation, and I believe that the Canadian Wheat Board under producer controls should enable the producers to do whatever it takes to put another penny into their pockets.

Before I get into the contingency fund, another thing we're looking at is the blending part of the grain. That can happen anywhere from the grain bin right to the terminal. You can blend a 100-unit car train on the way down to port and if the Canadian Wheat Board owns that grain, every penny of the blending is going to go back to the producer, where it should be, because that's the guy who's growing it and paying for all the changes. He's paying for the transportation, and they're paying for the grain handling both at the primary elevator and at the terminal.

.1015

I see a lot of grain is being cleaned on the prairies, and I believe they are talking about the just-on-time logistics. The facilities that the producers are talking about will cost $600,000, and will be able to load 50 cars in 24 hours, at half to a third of the cost incurred today. So this enabling legislation has to be just that - enabling - and it has to give producers control. They want some say.

As for the contingency fund, based on our conversations with people in the industry, we believe the contingency fund probably never would have had to have been used in the last fifty years. So while it's not a red herring, I believe there should be some money there. We've looked at other jurisdictions around the world. I believe it's the Australians who are using their contingency fund for value added, both within their country and overseas. I think there is definitely some opportunity there.

I know I'm going to vary a little bit from the Canadian Wheat Board Act, but this is important: every time producers make an extra penny, somebody is always there to grab it. We believe that a contingency fund could be used for many other things that producers may desire, like bartering for grain, or for bringing fertilizer in from some other country at half the cost that we're paying here today. Between what we end up getting for our product and what it costs us to produce it at the end of the day, even if we make an extra billion dollars worth of sales, we still don't take any more money home from one year to the next.

There are a lot of things that will affect what happens with that bushel of grain, what it's going to cost, and what happens to the Wheat Board. The Wheat Board is just one part of many issues out there. We certainly support a producer-controlled Wheat Board, and we commend the minister for making enabling legislation. Producers do want control, and the sooner the better.

I know we have a few minutes left, and I could talk a little bit more about buying on the farm. You may have questions, though, so we can go into that later. I'll leave it at that.

Thank you very much.

The Chairman: Thank you for being so concise and to the point with your concerns, gentlemen. I'm sure there will be some questions and comments later.

We'll now go to the presentation by the Saskatchewan Wheat Pool. Whichever one of you is going to lead off can introduce your colleagues, and we'll go from there.

Mr. Marvin Wiens (Director, Saskatchewan Wheat Pool): Thank you, Mr. Chairman.

I'm from the Swift Current area of Saskatchewan. I'm a director of the Saskatchewan Wheat Pool, and I sit on its executive committee. With me today is Mitch Ozeroff, a director of our board from the Saskatoon-Watson; and Dan Schmeiser, a manager from our policy and economic research division.

I understand the members of the committee have our complete brief. I won't be going through all of it, but I will be giving an overview of the executive summary.

The Chairman: If it was only presented to the committee in one official language, it won't be circulated to the committee until it's translated the other official language, gentlemen.

Mr. Wiens: But it will be available?

The Chairman: It will be, yes.

Mr. Wiens: Thank you, Mr. Chairman.

On behalf of the 73,000 member-owners of Saskatchewan Wheat Pool, we are pleased to have this opportunity to provide the standing committee with input with respect to Bill C-72. Saskatchewan Wheat Pool operates approximately 380 country elevators in Saskatchewan and parts of Manitoba, and terminal elevators at Thunder Bay and Vancouver. Over 30% of the grain, oilseeds and special crops delivered to country elevators in the prairies moves through Saskatchewan Wheat Pool facilities. In the interest of diversification, we are involved in a host of activities, including wheat and oat milling, the production and marketing of baking supplies, barley malting, and oilseed crushing and processing.

Through the operation of our democratic structure, Saskatchewan Wheat Pool develops and promotes various policy positions on issues important to our producer members. Because of our historic roots in the collective gathering and marketing of wheat, our policy on grain marketing - and specifically the Canadian Wheat Board - is a fundamental part of our organization.

Saskatchewan Wheat Pool strongly supports the orderly marketing of western Canadian grain through the Canadian Wheat Board. We believe the success and strength of the Canadian Wheat Board stems from three key pillars: single-desk selling, price pooling, and government guarantees and credit. Any changes to the Canadian Wheat Board through Bill C-72 should preserve and enhance these three.

.1020

We are in agreement with the stated policy objectives of the federal government, which are to build upon the proven strengths of our existing marketing system while at the same time modernizing the governance structure, enhancing its accountability, improving responsiveness to changing producer needs and opportunities, providing more flexibility and faster cashflows through Canadian Wheat Board operations, and minimizing future complications in international trade. However, we believe some amendments are imperative if the goals set by the government are to be fully met.

Our recommendations may be grouped into the following two areas: changes to the Canadian Wheat Board's governance structure and enhancement of the three pillars.

First of all, in the area of governance, the future governance of the Canadian Wheat Board is a sensitive issue to prairie grain farmers. The Canadian Wheat Board is their marketing agent and its mandate is to maximize returns to them. Its policy decisions must reflect the needs and wishes of the majority of its farm constituency. As a result it should be fully accountable to them.

Therefore, in respect to the board of directors, Saskatchewan Wheat Pool recommends the following.

Two-thirds of the board should be filled through election by producers. At least half of the elected directors should be elected by Saskatchewan producers in recognition of the grain marketed through the Canadian Wheat Board from this area.

In the first election, half of the positions should be for a three-year term and half for a two-year term. The first elected directors should assume office on August 1, 1998. The directors should hold office ``during good behaviour'' rather than ``at pleasure''.

The president should not be a member of the board of directors. Furthermore, the board of directors should have the power to appoint and to terminate the employment of this individual, and to determine his remuneration. The chairman of the board of directors should be elected by the board.

The second area is enhancing the three key pillars. Provisions in the legislation such as allowing the Canadian Wheat Board to make payments to producers to offset the costs of farm storage or to issue tradable certificates are consistent with the three key pillars. Other provisions, such as limitations in the federal guarantee to the initial payment, cash purchasing, and the creation of a contingency fund, will have a negative effect.

We appreciate that the legislation provides for federal government guarantees of Canadian Wheat Board borrowing and the sales of grain made on credit. However, Bill C-72 would also remove the federal guarantee on adjustments to the initial price. It is our understanding that there has never been a deficit in a pool account caused by an adjustment to the initial price. Therefore the federal guarantee on adjustments represents virtually no financial risk to the government.

Therefore Saskatchewan Wheat Pool does not support the removal of the federal guarantee on adjustments to initial price. In addition, more timely adjustments could be achieved by removing the requirement for cabinet approval and simply requiring the approval of the Minister of Agriculture and the Minister of Finance.

Sask Wheat Pool is uneasy with the provision in proposed section 39.1 of the bill, which will enable the Canadian Wheat Board to make cash purchases directly from farmers. The coexistence of an ongoing, unrestricted cash market and a revenue pool would not be sustainable and would lead to the ultimate demise of the pooling system. Managing two different pricing systems would be unworkable for grain companies, could undermine the efficiency of the grain handling system, and could have significant influence over the configuration of the system. We believe the creation of tradable producer certificates, which is provided by the legislation, will largely negate the need for cash purchases of milling-quality wheat.

We recognize that a different situation exists for feed barley, and if barley producers are to continue to benefit from Canadian Wheat Board export marketing, the board must be able to source barley to meet its sales commitments. Therefore Sask Wheat Pool does not support the concept of cash purchase of wheat by the Canadian Wheat Board. In addition, the Canadian Wheat Board should make cash purchases of barley only in extraordinary circumstances where additional grain is needed to fulfil a sales commitment. These cash purchases should be made from the grain trade.

Saskatchewan Wheat Pool is uncomfortable with the possibility of several pooling periods during the crop year. Taken to extremes, this could lead to regular cash pricing via different means. Even the use of two or three separate pooling periods could introduce speculative decision-making and supply uncertainty, which would be detrimental to effective single desk selling.

.1025

Therefore, we recommend that the provisions of proposed section 16 should not be used in a way that undermines the fundamental principle of pooling.

The Saskatchewan Wheat Pool also does not believe that a contingency fund, as proposed in Bill C-72, is required to achieve the goals established by the government or to enhance the three pillars of Canadian Wheat Board marketing.

If such guarantees are replaced with a contingency fund, it will represent a real expense to farmers. They will be required to forego some of the returns from the Canadian Wheat Board to establish and build such a fund. Farmers are already burdened with the effects of government cutbacks and cost recovery measures. We recommend that the references to the contingency fund in Bill C-72 should be deleted.

We appreciate that the government has attempted to address the need to accommodate producer-owned or producer-leased condominium storage in proposed subsection 12(3) of Bill C-72. However, we believe this provision needs to be improved to prevent over-delivery. We propose that proposed subsection 12(3) of Bill C-72 should be amended to apply in respect of deliveries of grain to an elevator that is, or has connected to it, a producer-owned facility as defined in the regulations, provided such a facility is operated in accordance with any terms and conditions prescribed.

In closing, I would again like to express my appreciation for the government's efforts to enhance the effectiveness and accountability of the board. We are generally positive towards the intent of Bill C-72. We also appreciate the fact that the Minister of Agriculture and Agri-food has recognized that the bill requires some fine-tuning to ensure that the policy goals are truly met.

We are confident that the suggestions made in this submission will strengthen the key pillars on which the Canadian Wheat Board is based and will help to ensure that the Canadian Wheat Board is effectively governed by producers and continues to serve them well into the future.

Thank you.

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

We will move on to the United Grain Growers, with Mr. Rutter and Mr. Piper.

Welcome, gentlemen.

Mr. Roy Piper (Director, United Grain Growers Limited): Thank you, Mr. Chairman.

Good morning and welcome to members of the committee. By way of introduction, I'm a director of United Grain Growers, and the Saskatchewan UGG vice-president. With me is Blair Rutter, the manager of policy development for United Grain Growers.

I've been parachuted in at the last minute. I believe Ken Motiuk was the individual who was earmarked to attend this meeting, but as you can appreciate, there are some smaller matters that we're attending to these days -

Voices: Oh, oh!

Mr. Piper: - so I'll be giving the presentation, Mr. Chairman.

The Chairman: I'd like you to address the presentation to that too, but we'd better not get into that today.

Mr. Piper: No, I don't think that's the focus.

United Grain Growers welcomes this opportunity to present its views on Bill C-72. In particular, we appreciate you people coming out and listening first-hand to the concerns of prairie farmers and other industry players.

United Grain Growers has had a long and proud tradition of serving farmers in western Canada. Throughout our ninety-year history, UGG has been at the forefront in advocating grain marketing reform that gives farmers greater choice and a greater voice.

In keeping with that tradition, UGG is a strong proponent of a voluntary Canadian Wheat Board and an equally strong supporter of those reforms that would give farmers a greater sense of ownership and control over the Canadian Wheat Board.

In light of these principles, we find the provisions of Bill C-72 to be extremely disappointing. The bill fails to confront the real and important pressures facing the Canadian Wheat Board. As presently drafted, the legislation will not resolve the long-standing and fractious debate over the role of the Wheat Board. In our view, Bill C-72 suffers from two fundamental flaws.

First, the bill is based on the premise that the Canadian Wheat Board can carry on indefinitely as a compulsory organization. This is a faulty and potentially fatal assumption.

Second, the bill further entrenches Ottawa's control over the Canadian Wheat Board. Instead of giving farmers a greater sense of ownership, several provisions in the bill actually tighten Ottawa's grip over the board and strip it of any autonomy it may have enjoyed.

Our disappointment with this bill is magnified by the failure to incorporate the key recommendations of the Western Grain Marketing Panel. Admittedly, we had our reservations about the panel process. Nevertheless, UGG participated in good faith and put forward forceful and reasoned arguments in support of a voluntary board. We believe the panel recognized the strength and merit of the case we and others put forward.

.1030

The panel's unanimous recommendations, while modest, acknowledged that some accommodation must be made to those farmers who are seeking relief from the compulsory provisions of the Canadian Wheat Board.

Of course, we were not enamoured with every recommendation of the panel. We would like to have seen the panel go somewhat further. Nevertheless, as industry experts, we respected their judgment, and we would ask the committee members to do the same.

The committee has a very important role to play here. Fundamental changes to this bill are required to ensure the long-term survival of the Canadian Wheat Board. Our recommended amendments are designed to prevent the board from being destroyed by those who think that mere tinkering and fine-tuning is all that is required. Let's be clear: those who think the compulsory provisions of the Canadian Wheat Board can be maintained are as wrong as those who thought the Crow rate would never end.

As mentioned above, we believe the bill must be amended to improve accountability to farmers. True accountability will only be achieved when farmers are free to take their business elsewhere. However, in the meantime several amendments can be made to give farmers a greater sense of ownership and control over Canadian Wheat Board operations.

We have a list of things we want to present to the committee. They're done in the order that they follow in the bill.

Several measures need to be adopted to improve accountability to farmers and free the Canadian Wheat Board, where possible, from political interference. Again, our rationale is to ensure that producers gain as much control as possible and that the relationship with government be made as much as possible at arm's length.

Accordingly, we make the following recommendation. The president should not be a member of the board of directors. It is our belief that the corporation is best served by ensuring that the CEO is not a member of the board. This allows the board to makes its decisions independently and not be unduly influenced by the views of management.

We also recommend that directors can only be dismissed for just cause. We maintain that directors, certainly those elected by farmers, should not serve ``during pleasure''. Instead, these directors should only be subject to dismissal for well-defined reasons. Our aim is to ensure that the board is free from political influence to the greatest extent possible.

We note that the legislation indicates that directors should hold office for a maximum term of three years, up to a maximum of three terms. We agree with these provisions, although we suggest that the initial terms of the producer-directors be staggered such that an equal, or near-equal, number of directors is up for re-election every year.

We do not yet hold any firm views on how these elections should be handled, although some geographic representation - for example by province - would be desirable.

We also recommend that the chairperson should be elected from among the directors. To impart a greater sense of ownership among farmers, it is essential that the chairperson be selected from among the directors. A democratic election from among all directors will do much to enhance the board's image among farmers at little or no risk to the federal government.

We note that as the bill is now written, the chairperson is not instilled with any special powers, other than the ability to call and preside over meetings of the board of directors. As such, we do not believe there is any need for this position to be a government appointment.

We also recommend that for the 1998-99 crop year and subsequent crop years, the Governor in Council should designate at least two-thirds of the positions on the board to be filled through an election of producers. This recommendation ensures that the majority of the board positions will be filled by elected producers starting on August 1, 1998. The government has indicated that, as a matter of policy, farmers will form a majority on the board. We see no valid reason why this policy should not be enshrined in the legislation. We believe a minimum two-thirds threshold provides adequate farmer representation.

An even more critical issue is to ensure that the president is appointed by the board of directors and is subject to dismissal by the board. If the board of directors is to have any credibility among farmers, then this amendment is crucial. The only possible reason for the government to have control over this appointment is for it to have a direct say in its operation.

Again, the controls of the government should be confined to those necessary to protect the interests of taxpayers. Any other measures designed to exert government influence over the board are superfluous.

.1035

In terms of the scope of the Canadian Wheat Board powers, under the existing act, the Canadian Wheat Board is responsible for marketing grain grown within a designated area and has the further responsibility of issuing export and import permits across Canada. The power to issue permits should be not be vested with the Canadian Wheat Board. Quite frankly, we don't think the Canadian Wheat Board's board of directors, as controlled by a majority of prairie farmers, should have any say over the export of wheat or barley from other parts of the country, nor should it have any say over the import of barley by end-users.

Consequently, those provisions that deal specifically with the export or import regulations of wheat and barley should be removed from the jurisdiction of the Canadian Wheat Board and vested with some other government body, such as Foreign Affairs or International Trade.

Removing this responsibility from the jurisdiction of the Canadian Wheat Board would have the following added benefit. It would be a further step in distancing the Canadian Wheat Board from government. Vesting the responsibility of issuing export and import permits outside the Canadian Wheat Board makes the Canadian Wheat Board less vulnerable to trade challenges.

Regarding the contingency fund, UGG has carefully considered its merits. The concept has a certain appeal in that it could eventually be built up sufficiently so the government guarantee of initials, adjustment payments and perhaps borrowings, would no longer be required. This would enable the Canadian Wheat Board to better withstand any challenges under the World Trade Organization.

It is worth noting that the government guarantee in Australia of borrowings by the Australian Wheat Board will cease in 1999. The Australian Wheat Board borrowings instead will be backstopped by funds accumulated in its wheat industry fund. The wheat industry fund, established in 1989, was funded by a compulsory producer levy, and by November 1996 had grown to about $360 million Australian. We understand that the Australian Wheat Board is in the midst of privatizing this fund such that each farmer's individual entitlement to the fund will be represented by tradable shares.

While the Australian model has merit, we do not think it would work here. If we would have had the foresight to establish the fund five or ten years ago it might have been a workable solution. However, at this late stage we do not think it would be successful, primarily because farmers are not receptive to the notion of compulsory check-offs. In the highly charged atmosphere of today, the proposition of a compulsory check-off is untenable, especially when you consider the pending sharp decline in projected wheat and barley prices.

Aside from this issue, there are also the thorny administrative issues. For example, would a contingency fund be established for each pool? Would the amount contributed by each farmer be tracked individually? If so, would the amount paid out to each farmer be restricted to past contributions? If that's the case, what's the point of establishing a contingency fund? Why not just give the farmer money in the first place and allow him to establish his own contingency fund?

Given these and other problems, it is UGG's recommendation that a contingency fund not be established for the purposes of guaranteeing adjustments or initial payments.

Having said this, however, UGG would not be opposed to those who wish to contribute voluntarily to the establishment of a capital fund. We believe those farmers who support price pooling and the marketing ability of the board may be interested in establishing such a fund. This would ensure that the Canadian Wheat Board would be in a position to continue operations when the day arrives, as it surely will, when it is no longer a compulsory marketing organization.

The issue of backstop in cash trading is a somewhat different matter. We recognize that a small fund, perhaps $5 million, would be necessary to backstop the Canadian Wheat Board's cash-trading activities, although it is important to realize that, over time, any losses on futures trading related to cash purchases would be offset by trade in gains.

Thus, while an initial surcharge might be deducted on cash purchases, say upwards of a dollar per tonne, to establish the fund, once established, the fund should be self-sustaining. It is important, however, to ensure that any risks associated with cash trading are not borne by the pool accounts.

UGG recognizes the importance of the government guarantee of initial and adjustment payments, borrowings, and sales made on credit. Given the size of this contingent liability faced by taxpayers, we appreciate the need for certain checks and balances. It is, however, our strong contention that the provisions of this guarantee do not warrant the heavy intrusion of government on governance issues as contemplated by the bill. Our objections to these intrusions were documented earlier.

.1040

It should also be noted that Bill C-72 introduces several new provisions that further strengthen the financial accountability of the CWB to the government. Many new provisions now require ministerial approval. We do not object to these provisions, if indeed it is felt necessary to protect the interests of taxpayers, although it occurs to us that requiring the CWB to provide a corporate plan that ``shall encompass all the business and activities of the Corporation and shall contain any information that the Minister considers appropriate'' does go a bit over the top. Nevertheless, we can accept the requirements for ministerial dictates on these issues if the government drops its insistence on owners' controls over governance issues.

In terms of mandate changes, Bill C-72 provides for the Governor in Council, on the recommendation of the minister, to exclude any kind, type, class or grade of wheat or barley from the jurisdiction of the board.

However, before the minister can make such a recommendation, the proposed change must overcome three rather rather large hurdles. First, the exemption must be recommended by the board of directors. Second, the Canadian Grain Commission must also give its stamp of approval. Third, if the board of directors deems the kind, type, class and grade of grain to be significant, then a producer vote can be held in a manner determined by the minister.

We see these as an indication that the process would be slowed down substantially. We would recommend that in those cases it could be onerous in terms of responding to needed changes as they occur on a year-to-year and month-to-month basis.

In conclusion, UGG has put forward several recommendations in this submission that are designed to improve the accountability to farmers and to minimize the involvement of the federal government. Reducing the role of government will have the added benefit of placing the CWB in a more defensible position in the next round of World Trade Organization negotiations.

Our recommendations also preserve the accountability of the CWB to taxpayers. While we think the provisions to provide this comfort are onerous, we are prepared to accept these conditions if it means farmers can gain greater control over the governance of the board. We recognize that the CWB has a number of strengths in its marketing and risk-management services to adequately serve the needs of a large number of farmers.

For this reason, we have put forward recommendations that will help secure the Wheat Board's long-term survival. At the same time, we recognize that the CWB cannot be all things to all people. It is not sustainable as a compulsory organization. At some point, it will be transformed into a voluntary organization, and we believe our recommendations help the CWB become better prepared for when that day arrives.

We thank you for the opportunity to present our views, Mr. Chairman.

The Chairman: Thank you very much to all the presenters.

We will now go to a period of questions and comments. I'll begin with Mr. Easter, and then go to Mr. Hermanson.

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

I guess probably the two key areas in terms of the hearings we've had so far are governance and then ensuring that the three main pillars of the Canadian Wheat Board that are presently there are protected.

In fact, I was surprised yesterday by the number of witnesses who were urging us to keep the current structure of appointed commissioners. I'd be interested in knowing what your views are on it. I don't think we expected it to the extent that it came forward yesterday.

Does anybody have any views?

Mr. Piper: United Grain Growers certainly believes that for the Canadian Wheat Board to function properly and be accountable to producers, there has to be a true corporate governance structure. Indeed, I think it has to follow what is proper and what is the norm in the corporate world.

.1045

Quite simply, you have a board of directors, which has accountability and responsibility to its constituents, and it's up to them, in terms of their responsibility and the accountability they hold with management, to select that CEO. In turn, management throughout the organization is responsible through that individual to the board. If you're going to make a meaningful change, let's go the whole route and set up the CEO and the board of directors. There's no need for the present commission structure in terms of the vision as we see it.

Mr. Gleim: We somewhat agree. I think the board of directors will set policy. There's lots of expertise out there, and I believe the commissioners will be very valuable in the interim. In the long term - and I guess that will be a decision made by those producers on how they want to handle that aspect of the business - it will be a commercial enterprise that will make decisions to put dollars back in producers' pockets. The expertise is out there, so I don't really have a problem. I believe producers will make the right decision on how they're going to handle that.

Mr. Wiens: Probably the area that has received the most discussion in the country is the accountability to farmers of the Canadian Wheat Board. Not to criticize the present structure, because I think it's served farmers well, but the accountability is not there. Farmers pay the bills of the Canadian Wheat Board - they pay the cost of operating the board - and yet they feel very helpless at times when decisions are made, that they cannot have influence in making them. Through an elected board of a majority of farmers, that problem would not be there. I think that has the support of a large number of producers in western Canada.

Mr. Wayne Easter: Mr. Chairman, Roy mentioned ``let's go the whole route''. Well, let's put the cards on the table and say clearly what we're talking about in terms of the whole route. The proposed legislation very specifically outlines that the government will appoint the CEO and the chair, and we're certainly willing to hear views on that.

On the other hand, the government is, as you know, providing basically three guarantees. One, we're providing the initial initial guarantee; two, we're providing credit guarantees in terms of export; and three, and probably most importantly, we're providing a borrowing guarantee, which accounted for approximately $61 million last year in terms of interest earnings to the board and to producers.

If we're talking about going the whole route, is the farming community...are you people willing to make a trade-off in terms of, ``Yes, it's a corporate board in the normal sense with a normal board of directors, but because the government really has no involvement and no ministerial authority over it any more, then in the taxpayers' interests, the government will not be expected to provide those kinds of guarantees''? That's going the whole route. Let's be clear about what's on the table. What are your view on that?

Mr. Piper: There's a balance, Wayne, that has to be struck between the requirements of the taxpayer and the government and producers. We firmly believe that if you have representation on the board, and they are reasonable individuals, they can make those kinds of decisions.

Under the system as proposed, there would be ample representation from the government side. But I don't know how you can maintain accountability to producers if you do not give them the fundamental rights of hiring or firing a CEO. We believe if there are financial guarantees from the government, they have to be at the table, but we would not abdicate to the government and the minister responsible the right of the board to appoint that individual. Sure there's more than one player involved in this, but under the structure as proposed I think that can be accommodated.

.1050

Mr. Gleim: I believe we'll have to be accountable not only to the producer but also even to the government in the short term. But I guess you have to walk before you run, and this bill is going to let us walk, hand in hand with the government. They will have the control over the government guarantees; they will be giving us that. I think with good, sound management and with the good, sound economic decisions that the board will make, they will show this government over the next four or five years that they can run the Canadian Wheat Board and there will not be nearly the risk that maybe some MPs, or some government officials, or even the public, will see or foresee with the government guaranteeing the initial price.

I think we have to walk before we run. I think we're quite able and the producers certainly can make the right decisions and work with the government and show them that they can run the Canadian Wheat Board as a sound, economic Canadian Wheat Board that can be accountable to this whole country, not just the producers. If they do that, I think the rest will come. Maybe there's a lot of belief there, but you have to start somewhere and I think this bill goes a long way compared with where we were two years ago.

Mr. Wiens: The government guarantees is one of the three key principles that we feel very strongly about. We do not want to jeopardize that. But I'd like to point out that we're saying that a majority of the board should be elected by farmers. That still leaves a significant area where the government can appoint directors to that board to protect the government's interests in that process.

As I said in my presentation, if you look back in history there's never been a call on the guarantee for increases in initial prices. The borrowings really are not a cost to government. It's very important for farmers, but it really doesn't cost government anything. When it comes to the call on initial prices, I think it has happened only once or twice in the history, generally triggered by trade wars that have been financed by governments of the European countries or the U.S. If that's what happens, I think there's a really good argument that our government should also be in that type of a trade-war scenario where other governments are causing a deficit because of an initial price because of a trade war.

Mr. Mitch Ozeroff (Member, Board of Directors, Saskatchewan Wheat Pool): It has been a long time since I called Wayne ``Mr. Easter'', but -

Mr. Wayne Easter: Just call me Wayne.

The Chairman: He's been called other things, too.

Mr. Ozeroff: Further to what my colleague has said here, to me, the way Wayne presented it this morning is an ultimatum, an either/or. Of course, in our submission, in I think the first paragraph, we state that the government guarantees are one of the three pillars that we as Saskatchewan farmers have always believed in. It must be preserved and, we say, enhanced.

I think the problem, though, Wayne, we've got into in this past while, when you talk to farmers, is the way that the commissioners have been appointed. I'm not going to refer specifically to this, but it has happened where a person or people have been appointed as commissioners to the Canadian Wheat Board who have had no expertise in the selling of grain.

Mr. Larsen says, and I agree with him, that we look at the Canadian Wheat Board as an extension of our farmers, as our marketing agent. We don't have to go and sit and wait for prices to drop or fall. These are the people who market our grain and we believe in them. But it must be managed and must be staffed by people who are not there on a political basis, not put in there as part of political goals or whatever, but based on expertise in the area they're in.

Mr. Wayne Easter: The reason I put it to you as an either/or is because that's what we may face as a committee when we get back to the House of Commons. I think we have to think very seriously about the implications.

.1055

I agree with what Roy said, that we have to find a balance. But if the farm community is saying unequivocably that the board has to appoint both the CEO and the chair, let's think clearly about what the consequences of that decision may be on the other side. We have to find a balance somewhere in between.

It hasn't been stated much, but I think there's the theory out there in the farm community that the ministerial authority of appointing the CEO jeopardizes the farm community's control over the Wheat Board.

That's not necessarily the case. The ministerial authority shouldn't weaken the power of the board of directors to determine basically the corporate and business plan and to operate as a board of directors, and the CEO to operate in the day-to-day business operations. But it does give some assurance to the Government of Canada in terms of the connection between the minister and the CEO in terms of discussions, and some assurance to the Minister of Finance that things will be run to protect the interest of the taxpayers at large.

This is my last question. Everybody has mentioned the need to maintain the three pillars. Saskatchewan Wheat Pool has outlined a few points where they do have concerns that might weaken those three pillars, the cash market, and so on. I wonder if the witnesses could be very specific in indicating if they see any areas where the three pillars might be weakened in the current legislation and that should be deleted. If so, what are they specifically?

I know Roy is in a little different position. I could have an argument with you, Roy, now that you're in the real free market. We used to have those. But I wonder if you would answer that.

Mr. Piper: We have concerns about the three pillars that were expressed in the longer term, if they're indeed built on a strong foundation and if they can survive without adaptations within the board.

Mr. Hallick: Getting back to Mr. Easter's comment that you may be faced with an either/or when it comes to your decisions down the road, I'm not sure you have a choice. I think the choice will be accountability to farmers or we may not have to worry about a bunch of the other problems, because it is crucial in western Canada that we have absolute accountability to the producers.

The funding guarantees seem to be a bit overblown, because they've never been used in the past. There's no reason to think that an elected board would be less frugal than the boards we have today. I think we have to be very careful in putting so much weight on this that we may lose the whole process.

Mr. Wiens: In our brief we've referred to a number of areas that weaken the three pillars. I'll mention a few of them.

First of all, the cash trading, specifically in wheat, really can jeopardize the whole area of price pooling and the single-desk selling. We don't believe it will ever work. It will ultimately lead to the demise of price pooling.

Increasing the number of pools you can have during the year will do the same thing. Eventually, you don't have a pool if you allow that to happen.

The establishment of a contingency fund, we believe, is probably the first step in removing the government guarantees.

There are a number of areas like that. There are others, but those are two or three that I can think of right off the top.

Mr. Wayne Easter: Thank you.

The Chairman: Thank you. Elwin.

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

Welcome, gentlemen, to our committee. I have a question for each group and then a common question I would like all of you to answer.

First of all, I might mention that I think Wayne threw a little bit of a curve ball at you when he said that there was overwhelming support to leave the commissioners in place. I would suggest that the individuals who suggested that were probably on the fringe element of his farm organization and didn't represent mainstream thought in agriculture.

First of all, to SARM, I appreciate your presentation. A number of your recommendations are the same recommendations we have been making as far as changing the bill is concerned, particularly with the issue of governance and so forth.

.1100

One area you didn't touch on - and I was sure you were going to; I want to give you a chance to say something - is the impact of the changes to our grain handling system on roads. I know you're very concerned about that.

In the current Wheat Board marketing structure, as you know, when it comes to car allocation and that whole business, the Wheat Board is one of the major players. We have CAPG involved with developing policy for the allocation of cars, we have the Canadian Wheat Board involved in allocating cars, we have the grain companies involved in allocating cars, and we have the railroads involved in getting the cars to where they're supposed to go. To me that sounds as though perhaps there are too many cooks in the kitchen.

I know even on my own line, from Saskatoon to Beechy, we don't get enough trains, and when we do get a train, there are only a few cars - far fewer cars than what could be spotted - increasing the cost of the line. I know the farmers in my area would rather have half the train show up with a full complement of cars.

I'm wondering if perhaps you have a comment on whether the board should really be taking possession of that grain at port and be one less player in the allocation of cars. Then perhaps we'd see the grain companies and the railways do a better job of moving our grain, with less impact on our road system. Do you have a comment?

Mr. Hallick: When we look at some of the possible changes under the Wheat Board, where we're looking at purchasing the grain on the farm and probably leaving it there until it's pulled forward on a just-in-time basis, this will certainly take some of the pressure off our roads and off our systems, because we will not be clogging the system with unneeded product. If we can do blending on the wheels, we don't have to be hauling 300 miles for the advantage we can get by blending at a facility. These types of things will address some of the road problems.

Talking about the allocation process, we have CAPG started and probably not working as well as it should, but we at SARM back that process. We don't see day-to-day involvement of producers in car allocation.

Mr. Elwin Hermanson: I have a question for Saskatchewan Wheat Pool.

You've been the same as just about every other presenter in suggesting the governance structure is bad. I don't think we've heard anyone who thought the government should be left the way it is, other than a few yesterday in Winnipeg, and I commented on them.

Everyone says this bill is drafted really badly. We can't think that the minister and his department drafted the bill so badly because they're dumb. I don't think that's why they did that. If they did, we certainly need to chastise them for that. So they must have had a motive for doing it.

From everything I've seen, groups are coming forward and suggesting that a majority of the board should be elected. You have gone farther and suggested that at least two-thirds of the board should be elected, and I appreciate that, but I wonder, had the minister brought forward a suggestion that the majority of the board be elected and actually put it in writing in the bill, which he didn't do - he stated verbally that's what he wants, but he didn't put it in the bill - perhaps a lot of farmers would have been suggesting that the entire board should be elected and that would have been the push. He didn't want that.

Given the way the Ontario Wheat Board works and the way other marketing boards work with their relationship to government, I can't see that a good relationship between the Canadian Wheat Board and an entire board of elected directors wouldn't be a real possibility.

Right now we see the minister trying to mix oil and water. We've seen that here in Saskatchewan with our health boards, partly appointed, partly elected, and there's been some friction. Don't you think there would be a good case for an almost entirely elected board, rather than this ``perhaps majority'' view that's being expressed?

Mr. Wiens: We believe that if two-thirds are elected, it will address the accountability issue. The majority there are farmers, but we still believe very strongly that there has to be a government presence to address some of the concerns Mr. Easter has regarding the guarantees.

So we have to have a combination of the two to make it work. We believe it can work, with the expertise the board does have and with the past record the board has had regarding losses in the pools. That combination of two-thirds farmers and one-third government appointees could work very well.

Mr. Elwin Hermanson: But clearly 5 out of 9 or 6 out of 11 is not good enough for Saskatchewan Wheat Pool. It has to be two-thirds.

.1105

Mr. Wiens: No, we're saying that two-thirds should be farmer elected.

Mr. Elwin Hermanson: I think that's a step in the right direction.

To the United Grain Growers, I enjoyed your presentation. Actually, a lot of the recommendations you made are similar to those we have been expressing. In particular, the fact that the board should be voluntary is something we have been expressing for quite some time.

We've had a number of submissions, particularly from the pools and from the Wheat Board itself, saying that any time you have a voluntary board or you somehow weaken the monopoly situation of the Canadian Wheat Board, the prices are going to drop. Now, obviously, as a grain company with farmers as customers, I wouldn't think you'd be in the position of wanting to see prices for your customers drop, so you must have thought this through. Why are they suggesting that a voluntary board would see the returns to producers lowered, and what argument do you have to counteract that, that in fact a voluntary board would not lower prices but hopefully would increase prices to producers?

Mr. Piper: I can respond to you, but for this one I'll let Blair respond.

Mr. Blair Rutter (Manager, Policy Development, United Grain Growers): We're convinced that most farmers would see higher prices under a voluntary marketing system.

We can look across the border at the U.S. where you are seeing higher prices. It is not a subsidized market. So here's a market where there are multiple sellers, and we're seeing that prices at the farm gate on average are higher in the U.S. than they are in Canada. So you have to ask yourself why that would be the case. Those farmers are getting more at the farm gate, and we do not see U.S. farmers trying to smuggle their grain up to Canada to take advantage of the prices being offered by the Canadian Wheat Board.

All the pressure is to go south, and it's not just to take advantage of higher spot prices. It is that the prices on average in the U.S. are higher than on average in Canada. There's the evidence.

Mr. Elwin Hermanson: Thank you.

My final question to all three groups requires a simple yes or no answer. If you were sitting in my chair in the House of Commons, would you support Bill C-72 if it's not changed at all? To give you a chance to comment further on that, what would be the two changes we could make in this bill that would make it most palatable to your association? I'm just limiting it to two for the sake of time. I know several of you have suggested more than two changes, but which two changes would be tops on your list? If we couldn't get those changes and the bill stayed the way it is, would you vote yes or no on Bill C-72?

The Chairman: Who wants to start ?

Mr. Wiens: I could start. I'd like to respond to your last question regarding the higher prices in the U.S., though, first, Mr. Hermanson, if I could. I think if you want to look at some of the economics, you could prove otherwise. I think it was the response from the UGG that said that on average prices were higher. You have to be a little careful about that argument because there are economics involved and there are farm programs involved that have caused that to happen in the U.S.

At times I really envy a U.S. farmer with the protection he has by the U.S. government. A lot of people don't realize that the prices we've seen in the U.S. over the past number of years have been caused by government intervention in the U.S. So we have to be a little careful about that argument.

As far as one or two main changes, I'm not sure I'll single out one or two. I will just again emphasize that we want changes that will enhance the three pillars and address the accountability-to-farmers issue. I think that pretty well sums it up. If changes are made in the bill that will enhance those three pillars and make them even stronger, we support that.

Mr. Elwin Hermanson: If you have those changes, would you vote yes or no?

Mr. Wiens: Yes, very definitely. We believe the present act weakens the three pillars in a number of areas, which we talked about earlier.

Mr. Elwin Hermanson: So if you were in my chair in the House of Commons you would vote no if there weren't any changes to Bill C-72.

Mr. Wiens: I think that's exactly why we're having these hearings. The minister has recognized that there are shortcomings in the proposed changes to the act, and he's prepared to accept recommendations for change before it goes to the House of Commons.

.1110

Mr. Elwin Hermanson: So without those recommendations you would oppose the bill.

Mr. Wiens: Yes, I think it boils right down to that. Without those changes, it's very hard to support the bill in its present form.

The Acting Chairman (Mr. Wayne Easter): You know what that would mean, Elwin: you would be in favour of the current act.

Mr. Elwin Hermanson: I know. Isn't that awful?

Some hon. members: Oh, oh!

The Acting Chairman (Mr. Wayne Easter): That would be great.

Mitch.

Mr. Ozeroff: First of all, I'll make a comment on this whole aspect about the U.S. I guess Marvin has dealt with it, but let's not forget EEP and some of the other programs other countries have that we do not have.

Let's also be careful - and I speak to you now as my representative, as my MP - in comparing the Ontario Wheat Producers' Marketing Board with the Canadian Wheat Board. In some ways, that's a case of comparing apples with oranges. Let's not forget the size of the business done by both boards. What works there might not work here, so you can't use that... I'm not suggesting that as a blanket statement, but I think you have to be careful.

In answer to another comment, if I were in your seat in the House of Commons I certainly would not support a voluntary board. It can't work. You've never been able to prove to me and to other farmers that it will work to the betterment of the Canadian Wheat Board and the betterment of western Canadian farmers. So that's one suggestion I would make.

The Acting Chairman (Mr. Wayne Easter): Are there any comments from the UGG or SARM?

Mr. Gleim: I have a couple of comments. I want to bring that last one in first. I don't think a voluntary board is the answer either.

Would we support the bill the way it is today? Probably not. I think you need the two-thirds majority in governance. The CEO probably should be appointed jointly. Given our talks with the minister, I think that's very probable.

I think we have to entrench the Canadian Wheat Board ability to buy grain on the farm, and that brings me back to a comment I wanted to make about the logistics, about where to start. You have to start with an inventory, and if you're going to just-in-time delivery you have to know what you have on the farm. We have all the storage we need on the farm today.

I'm not sure the system that we're starting today, that we're building today, is in the best interests of farmers. It may end up costing them more. You mentioned the road system. If I have No. 1 grain on my farm, it should be No. 1 in my local elevator, in Moose Jaw, in Weyburn, or anywhere else, and I think we can do that.

Producers don't have any control. Today, through car allocation, the grain companies can allocate in blocks. They can put all their cars at two or three big facilities, and can ``de-market'' any small facility anytime they want. That control is there, and it's something I never did agree with. I think the logistics should be put back in the hands of the Canadian Wheat Board. If you're going to have six hands in there, maybe you should have the one that actually does buy the grain, and that would be the Wheat Board.

The farmers are going to build a lot of their own grain elevators along those branch lines. If they want to bid their grain to port so that they don't have to pay all the demurrage, they're going to need some control. I think that control is going to have to come through an agency that's working for them, that being the Wheat Board.

The Chairman: Are there any other comments on Elwin's last question? Go ahead, Roy.

Mr. Piper: Is SARM through with their presentation? I guess everybody is sort of getting in a last kick at the cat and doing a little bit of debating here.

My answer is that we absolutely could not support it. Quite frankly, in terms of what we view as the need to respond to producers' positions out there, it represents cosmetic change and not real change. I think the keys are corporate governance and a change in mandate. Because of time restrictions, I couldn't point that out to the committee earlier, but I would ask that you read that in our submission.

In closing, I think a lot of these economic issues probably aren't the ones that will decide the final end to this debate. A lot is based simply on philosophy, and I look at this and say that I can provide reports and economic analyses that would support either point of view. I look at it from the point of view of an individual, and I would certainly support a choice, which we were not given in the barley plebiscite.

.1115

I think the majority of surveys that were done out there show that producers want some kind of choice in how they market their grain.

The Chairman: Mr. Hermanson, is that it?

Mr. Elwin Hermanson: Yes. I've asked my questions.

The Chairman: Mr. Collins.

Mr. Bernie Collins (Souris - Moose Mountain, Lib.): Thank you, Mr. Chairman.

It's a pleasure to have you here in Saskatchewan with us. Let me assure you that we're not tinkering with the bill. That was never the intent of the minister in the first place, nor, in the final analysis, would we come here and tinker with the bill. I think the whole process is for us to get some feedback from you on the direction you would like to see in regard to you as producers.

I think you have mentioned that there are some pillars and cornerstones that you feel are essential in any bill and in any changes we make to it.

With regard to those changes, we talked about risk management and corporate structure. I would be interested in knowing from you if two-thirds...I have no problem with that. I think the minister is committed to ensuring that the majority of the people who serve on that board will be farmers. In the end, they will be accountable.

Let me just touch for a minute on this business of the corporate structure, where the minister would appoint the CEO or the president. This question is for each of you. If you were one of the people sitting on the board with that CEO, would that cause a problem for you? What kinds of problems would you envisage with that kind of structure where the minister would have that power to appoint that one individual?

Mr. Wiens: If I may begin, I think it puts the elected board and the government appointees of the board, that complete board structure, in a very direct conflict with the CEO.

First of all, he's not responsible to the people who will be sitting around the table establishing the policy. He's responsible to the government, so in effect he has two masters.

You have a board of directors with government representation, as I understand it, that will be setting the policy, and yet the government is the one that will make the decision whether he sits there or not. It's a direct conflict of interest. It's very hard to understand how that would ever work.

Mr. Hallick: Very clearly, Bernie, I think our answer is very much the same. You can only be accountable to one master. You can't serve two. I think the board would be in a very delicate position if they had absolutely no control over the final say for the CEO. You need to have that control if you're going to be a corporate board.

Mr. Piper: I think there's common agreement on this one. Again, who are they accountable to? You also asked whether or not I would be willing to sit on a board. Certainly not, not if I didn't have that fundamental right in terms of appointing a CEO and of establishing the goals and direction of the company and holding that CEO accountable for achieving that, based on the results in terms of his performance and that of management.

Mr. Bernie Collins: If we're going to be involved with the federal taxpayers and you're going to ask us to backstop - whether it has been used very recently or very often, at the end of the day we do need to have some credit sales and some backstopping through the federal government - what kind of involvement should the minister have?

On the one hand, you're saying you'd like us to do this, this and this, but you don't want to involve the federal government in the way you will go through the procedures. On the other hand, you're saying that at the end of the day we should make sure we do credit sales and backstop initial payments, and there may be some other elements that you haven't touched on...nor do we have the time.

Could you tell me, then, how I go back to the minister and say, ``Mr. Minister, all they want is this, this and this, but...''? There's a big ``but'' in there. How do we broach that subject? I think that's an important point.

Mr. Rutter: I think we should look at the guarantee and separate it into its three parts. There's the guarantee of the initial and then there's the guarantee of credit sales. Both of those require government approval. The setting of the initial payment is a government function, and approving credit sales is a government function, so those two things are preserved. But if those exist right now, then nothing in this bill changes. There is no need to have people on the board to satisfy those two guarantees, because those functions are still vested with the federal government.

.1120

The other guarantee is the guarantee of borrowings. We have to consider what the risk is of the Canadian Wheat Board actually defaulting on borrowings. The Wheat Board has never had to renege - at least not to my knowledge - on any loan they've had with any bank or any financial institution.

Really, what are we financing? We're financing inventory, stocks of wheat. Who bears the risk if the price falls? It's borne by the farmer. If the price falls below the initial payment, yes, then the government assumes that risk, but the government has the authority to set the initial payment. That is in the bill.

I'm at a loss as to why the government feels that having people on the board of directors is essential for this guarantee.

Mr. Gleim: Just a short comment on that. You'd have to say that the rest of this country also benefits from what happens with that bushel of grain, and it may be that while the government will be guaranteeing that initial payment, it's a very low-risk guarantee.

I remember that in the past, when that bushel of grain has been used for political manoeuvring by the federal government both in Canada and the U.S, we paid the price. We've always been two steps back from what happens through the Canadian Wheat Board, and we've always paid the price. But there are many benefits there, not only to producers in Canada but to everybody in Canada.

I just don't see where the government should be really that concerned. It's going to have appointed members on the board, and will be able to state its case. When it comes down to a government guarantee, that can be changed by the government at any time it wants anyway, I would presume. If this board goes out and does something dramatically left-wing or right-wing that affects that government guarantee, I think the government will make its adjustment accordingly. I guess we just don't see it as that big a risk.

The Chairman: Bernie.

Mr. Bernie Collins: I don't think Marvin has had a chance to respond.

Mr. Wiens: I guess we recognize the government's concerns in this area. They seem concerned that they're signing a blank check, and that is not the case in this process. We have a number of areas that guarantee or protect the government in this.

First of all, corporate plans have to be submitted both to the Minister of Agriculture and the Minister of Finance. It will be a very important process. You can look at the Canadian Wheat Board expertise in setting prices and increasing initials in the past. That will not change. They will be very, very careful to make sure they do not have to use these guarantees.

I agree with the last comments from SARM. If the new elected board and the government appointees on that board do not handle this guarantee very carefully, governments will take another look at it. This is a very important area. I believe the elected board and the government appointees there will be very careful in how they use those government guarantees, because they are so critical.

The Chairman: Before I go to Mr. Hoeppner, I want to make a comment; I don't comment very often from the chair.

In the controversy we are discussing over the accountability and over the government guarantee, etc. - and I know this is not a simple matter - I tend to compare things to a simple situation. In reality, a lot of things have been stated, and correctly so. Other than in a couple of instances, such as trade issues or government direction on trading, government guarantee has not been called upon. The track record of the board, as such, has always been exemplary and there's really no reason to think that might change.

.1125

However, if I could bring it closer to a personal situation, I think we have to raise this question and as individuals put ourselves in the position of a government. If I go to my bank and ask it to provide me with a sum of money to purchase a piece of property, and assuming I had always paid everything, had my business plan, had my job, my company was doing well, and I had always been exemplary, but still wanted a financial institution to be a backstop for me, I suspect the financial institution will still want, in some way, shape, or form, some stake in that, such as a mortgage on the property, just in case there is an unfortunate worse-case scenario, in case something happens in the business world or I lose my job and am unable to pay my mortgage. I doubt that any financial institution would give that backing without some sort of security net, if I could use that term, and I think that's the area we're in: how far does a government, on behalf of all the taxpayers on Canada, feel it has to go in order to fulfil its obligation to the taxpayers of Canada? How far, in all sincerity and in all earnestness, can the government, as the government wants to, give more of the operations and more accountability of the Canadian Wheat Board to the producers who are their primary customers?

I think that's the conundrum we're in: how can we get the best of both worlds? The indication from most people is that we don't want to lose the three pillars and the government guarantee. How can we get a government guarantee with the least intervention by government but nevertheless with the government there as a backdrop to give the strength the government guarantee gives?

I'm repeating myself, but I think that's the conundrum we're in. How do we get there? I'm going to throw that out as my personal thought. We heard different suggestions on that yesterday, and we are again today, and we as a committee value that very much.

Jake.

Mr. Jake E. Hoeppner (Lisgar - Marquette, Ref.): Ladies and gentlemen, we've had some good discussion this morning and some good thoughts have been brought forward.

I would like to take a little different approach in addressing the issue of the Wheat Board as either a voluntary or a compulsory issue. We have two grain companies here that were cooperatives at one time. They had farmers who controlled their interest or their direction. We know both of them now have, for their own benefit or reasons, gone to public share offerings and lessened the control that farmers have over their corporation. We know now that the possibility of hostile takeovers are there, which lessens the impact farmers have on these companies.

How can you justify saying that the Wheat Board should be a monopoly when you yourself and your grain companies have taken advantage of the public financing and better structures, as you feel, while demanding that farmers take control of the Wheat Board because it should be their selling agency?

To me - and maybe I'm looking at this wrongly - in the long run you're probably asking the Wheat Board to more or less protect your interest in the marketing arena rather than really protecting the farmers' interest. You haven't shown that interest in your own company as far as farmers' control is concerned.

Please comment on that. Maybe I'm dead wrong in analysing it that way, but to me it seems as if self-interest could be behind your motives.

.1130

Mr. Wiens: I'd like to respond to that. You are dead wrong from Saskatchewan Wheat Pool's perspective.

First of all, everyone on our board of directors is a farmer. They are elected, put there through a class A share that is held only by farmers. Yes, we have gone public to raise capital to do some things we need to do, but I think it really doesn't affect the discussion around the Canadian Wheat Board. I fail to see the connection there. We still are farmer controlled and have a very strong democratic structure, which we're working to enhance at all times.

The Chairman: Mitch, do you want to comment?

Mr. Ozeroff: I agree; you're dead wrong on that. You make reference to public financing. Let's not forget that the pools have always been financed by equity held by members. If that isn't public financing, I don't know what it is.

I'm not taking offence at what you said, I simply want to explain that this past year, with the one AgShare program we have, our patronage has payment based on the business that farmers have done in Saskatchewan. At Wheat Pool it has been over $8 million - and that's in this system, based on business. If that's not patronage, I don't know what it is. But I don't know what this has to do with -

The Chairman: What was the number again?

Mr. Ozeroff: It was $8 to $10 million.

The Chairman: Are there any other comments? Roy.

Mr. Piper: As you're quite aware, we went public a few years ago for the sole purpose of positioning ourselves to be competitive in the 1990s. We had a vision and a mission that we wanted to accomplish at that time, and we felt it had to be done through the equity market. We assumed the risks by doing those kinds of things and are in the process now of fighting an unwanted centre, if you like.

But it's interesting; a couple of the issues that come into the discussion about the take-over with the United Grain Growers is the concentration of power and the lack of competition, especially in two provinces, Alberta and Manitoba. I find it somewhat difficult when we all believe, as does United Grain Growers, that competition is good for the market. Yet we feel we have to have a monopoly, a single-desk seller for our product. I would suggest that there is some conflict in those kinds of views. That's why over the years we've always proposed an opportunity for producers to have a choice about how they market their product.

I leave that with you.

Mr. Jake E. Hoeppner: I'd like to follow this up a little with Mr. Wiens. I appreciate his remarks, but five or ten years ago if we had heard that Sask Pool and Cargill would go into partnership to open a grain terminal, we would have thought the world had come to an end. My Dad always said if you sleep with the devil, you can expect some of the results from it.

A voice: It's true, too.

Mr. Jake E. Hoeppner: Well, I think you can analyse that yourselves by going back to the philosophy of pools and cooperatives.

It's to their advantage and it's the marketplace, and I don't condemn you for doing it, but I think we have to start seeing the rationale and what is happening in the markets, not just locally but also worldwide. Somewhere along the line we will have to make some big decisions. I think you've made some already, and I hope it's for the benefit of the farmers and not for the benefit of the grain companies.

Mr. Wiens: I have a quick comment relative to working with other players in trade, as far as it concerns Saskatchewan Wheat Pool and the Roberts Bank new terminal that's being proposed. That's not a new issue. Prince Rupert was built way back in 1984. I think it was six grain companies that cooperated to do that for the benefit of all western Canadian farmers.

We believe exports to the west coast are going to increase. There are some real opportunities, and we have to position ourselves so that we can serve the farmers of Saskatchewan and the producers we represent.

.1135

One other issue I didn't mention when you raised the issue of takeover is the fact that Saskatchewan Wheat Pool has a 10% limit on ownership of our class B shares, the ones that are traded. No one individual or investor can own more than 10% of our tradable shares.

Mr. Jake E. Hoeppner: I thank you for those comments.

Mr. Gleim: I know this was for the grain companies, but I do want to make one point. I believe there is a conflict of interest. You can't serve two masters. For a grain company the bottom line is first and foremost, and it should be. The CEO and the people who run the company are there to make a dollar. I'm not saying the grain companies don't have the wishes of farmers at heart. I think they very genuinely do. I'm just making the point that they do have two masters, so which one comes first?

Mr. Jake E. Hoeppner: Well, that's -

The Chairman: To balance the time, Mr. Hermanson, do you have a quick question? Then I'll go to Mr. Taylor and Mr. McKinnon.

Mr. Elwin Hermanson: I'd like again to address my question to the United Grain Growers, about the issue of the single-desk selling. Yesterday we had one group presenting a view that the Wheat Board should be voluntary. I think the group's phrase was that dual market would work, and they had a plan. The United Grain Growers has suggested a similar plan. The response from other presenters and the response from my Liberal colleagues have always been that you're in the dark ages, you just don't understand, it can't work. I've in fact asked them to bring forth evidence that a dual market or a voluntary system can't work, and I've never gotten a good response to that question.

On the other hand, I'd like to ask United Grain Growers what evidence it has that a dual market or voluntary Wheat Board would work. I think it's very important to the bill we're debating, because the bill does not allow for voluntary boards unless, as you noted, you go through an excessive number of hoops to create any kind of change. You've got to have the minister approve it, the board of directors approve it, the farmers approve it, and then the minister's got to approve it again. It's rather difficult. I'd like to see that changed, but to get it changed in the act I think we need some solid support for the position that a voluntary board would in fact work.

Mr. Piper: Well, I think all you have to do is look at the Australian Wheat Board. They made their changes in the late 1980s, and it's amazing how people who do look at it say it can't be adapted to the Canadian situation. We think it can. We don't have all the answers about the changes in structure and so forth, but we also believe that for the board to operate in that kind of environment, you have to allow meaningful changes to its structure and mandate to accommodate such a thing.

It's not something you could do overnight, but I think it's certainly doable in the longer term if you have the will to move in that direction. I sense there are a number of people who simply reject it because they feel it can't work in Canada. We're convinced it could and it could probably do an extremely good job.

The data that come out of Australia say domestically they handled upwards of 80% of the trade. They're certainly not shut out. They have sole jurisdiction on wheat on the export side, but they're also allowed into other commodities, in terms of what they want to market and where they want to market it. So I think there is a model that can be looked at for its best features and how it could be adapted to Canada.

Mr. Elwin Hermanson: You also said that it might be forced upon us. I wonder if you want to expand on the issue. It may be coming whether we want it or not. In fact, I think you said that it's going to come whether we oppose it or not. Do you want to expand on that?

Mr. Piper: I think there's a high risk that it will occur in the next trade negotiations, if indeed there aren't some major changes. I think it will certainly be front and centre in the gun sight of other countries when we get around to those kinds of negotiations. So I think the more you remove government from the board and turn it over to producers, the better it will be viewed in the longer term. So there is a risk by not making some changes in that regard.

.1140

To add to that, at this point in time a significant number of producers out there want some changes, and they have the resources and the commitment to pursue those changes until they get them. You cannot disregard that element, which is strong and vocal, at this point in time.

Mr. Wayne Easter: Mr. Chairman, I have a point of information. Documented evidence dictates otherwise. The Kraft-Tyrchniewicz study clearly showed that the current system, as compared to multiple sellers, brings to producers $34.47 more per tonne.

Mr. Elwin Hermanson: You can dispute those numbers, though, Wayne. Those are just some numbers from a closed system. You can prove anything you want with numbers. Don't throw that kind of stuff out.

The Chairman: We'll go on to Mr. Taylor.

Mr. Len Taylor (The Battlefords - Meadow Lake, NDP): Thank you, Mr. Chair.

We have an opportunity to pursue this a little further, and I'd like to do that before I ask some more specific questions relating to the amendments in front of us.

We have two grain companies here, and it gives us an opportunity to explore this so-called voluntary marketplace. The minister has said the dual market doesn't work. He expressed that very clearly in the barley plebiscite that's just been completed. The essence of this legislation is to enhance the ability of the Canadian Wheat Board to function, not only in this marketplace, but in any the world may throw at us in the future.

But United Grain Growers said they want a voluntary Canadian Wheat Board, and in answer to a couple of questions, Mr. Rutter examined the U.S. market. I'd like to ask something with regard to that matter of trying to keep the price up - not produce any lower prices for producers.

I'd like to ask the two grain companies present whether, should a voluntary market exist, they would both participate in that voluntary market, trying to achieve the best results they could for their own members. And in doing so, would they find themselves competing against each other? Would they respect each other's markets, should they gain a share of that American marketplace? Would they contribute in any way to assisting in the reduction of the price that might come out by trying to achieve a share of somebody else's marketplace?

Finally and more importantly, who do they think would be responsible should the American politicians overreact to Canadian competition in the American marketplace and threaten to close the border, as they've tried to do on many occasions? Is it then the grain companies' responsibility, or does it fall back to the Government of Canada to protect that border and that important trade between our two nations?

Maybe the UGG could start and Sask Pools could respond. Are they prepared to compete against each other in that so-called voluntary marketplace that they think will exist?

Mr. Rutter: When you say ``compete against each other'', are you saying ``compete against the board'', or do you mean us competing against other grain companies?

Mr. Len Taylor: If it's a voluntary market and you have the opportunity to sell into the American or the international marketplace, you're competing against each other, are you not?

Mr. Rutter: That's right, and we're quite prepared to do that. Competition is how you provide higher returns to farmers.

If a farmer wishes to market through the board and wants to take advantage of the marketing skills of the Wheat Board and the price-pooling features, as a grain company we would fully accept a farmer coming up the driveway. We can't afford not to have his handle, so by all means we would be quite willing to accept that grain.

We already are a sourcer of product for a lot of exporters, such as Louis Dreyfus and Continental, who do not have facilities in the country. They make export sales of canola, then they come to us - or they go to any other grain company - and ask us to source it for them. We're more than happy to do that business, because it means more of the handle for us.

.1145

So the same thing would happen if the Canadian Wheat Board was in the market. They would do some sales and, yes, you would see all the grain companies vigorously competing to get a piece of that action.

You talked about going into the U.S., and selling in the U.S. I think it's important to look at that market, and see how much we're shipping there in oats and canola. In the last two crop years, we've shipped more oats than wheat. We've shipped more canola and canola products - canola and canola oil - into the U.S.

For both those commodities, there is not a sniff of trade friction. It goes in there -

Mr. Len Taylor: We're not talking about those products: we're talking about wheat.

Mr. Rutter: Okay. Well, because wheat has been politicized, and government is very much involved, unfortunately, we've got ourselves in a situation where if the border was open tomorrow, yes, we'd probably face some sort of restrictions.

Fortunately, oats were removed from the board back in 1988, and since that time we've seen oats acreage really increase in western Canada. It's decreased in the U.S. We're pushing that into there, and without any problems. If we had done the same thing for wheat, moved it to a voluntary board 10 years ago, we probably would have good access to the U.S. Now, unfortunately, I think yes, because it has become an issue, because government was involved, we would probably have some trade friction with the U.S.

The Chairman: Please say it quickly, Roy, because we have to wind up with you people in about 10 minutes.

Mr. Piper: This whole issue is politically charged. I'm not so sure we wouldn't get trade retaliation or some grievances from the U.S., whether any company could sell down there, or because of some restrictions imposed on the Canadian Wheat Board.

I think it's an issue that has to be resolved over time, and I think it will be. In the short term, no, I think they will try to run interference in that regard.

From a personal point of view, and in an historical context, I just want to say that at one time, in my grandfather's day, my market was probably represented 10 miles around town. It became restricted by provincial boundaries. Those were removed, and you could trade interprovincially.

Either by myself, or through another company, I would certainly look at the opportunity to market into the U.S. I would do it if indeed it made some financial sense to me, if indeed the customer down there recognized my quality, and the other factors that go into making a market.

But quite frankly I think there are some small niche markets, smaller markets, that other companies can handle, and they do it extremely well, whether it's a small trading company, an elevator company, or the Canadian Wheat Board.

Thank you.

The Chairman: Last but not least, we have Mr. Wiens.

Mr. Gleim: Mr. Chairman, I think Mr. Taylor's question was whether the Saskatchewan Wheat Pool would be in the market if it was a voluntary pool. Unfortunately, very definitely, yes, we would. We would have to be in the market.

Under the present monopoly system, the Canadian Wheat Board does not buy my grain; it sells my grain. It takes my grain and goes out and sells it at the best possible price.

Under a voluntary system, the Canadian Wheat Board would become another grain company. You could have a scenario where Saskatchewan Wheat Pool, United Grain Growers and the Canadian Wheat Board would be down in the U.S., all trying to sell to the same market. I fail to understand how that would increase prices for farmers.

A voice: Do you want to just hang on and do an end run?

Mr. Ozeroff: In addition to that, I sometimes wonder, when trade talks are quite a way away, and mention is made of trade talks, why we as Canadians are so eager to give away something long before even the trade talks start. This has been our problem for years and years on end.

The fact of the matter is, in California they've organized supply management to handle anything from nuts to fruits to grain to everything. It's supply management through a cooperative system. From what I understand, and from listening to the radio this spring, they're also doing that in New York state and the eastern seaboard of the United States.

.1150

The other fact is that when you go to talk to producers in North Dakota, they'd love to have what we want to get rid of. They suggested a long time ago that maybe we should expand the border, and create a North American wheat board, at least to start on the durum. I believe 26% of the best durum in the world is produced along both sides of the border.

We want to get rid of this kind of stuff. I mean, how can you guarantee a better price for farmers? If you're concerned about farmers, how can you guarantee a better price for farmers by having more sellers in the market? That's something that nobody has been able to tell me.

We make a comparison with Australia, but why don't we compare southern California? Why don't we compare comments made by North Dakota, and so on?

There is another part. We're talking about a niche market going to the United States. My God, let's not forget 20 million tonnes or better go someplace beyond the United States, to other parts of the world.

Are we going to take our trucks, and haul to China? I doubt it. So let's not forget about the bigger picture.

Mr. Gleim: I'm not a grain company, but I still would like to answer the question. You should probably ask the farmer maybe a little more often about some of these things.

Voices: Oh, oh.

Mr. Gleim: I have an investment in one - yes, I do - but my choices are very limited. I have to haul my grain somewhere. I have to haul my grain to a grain company today.

Talking about the Canadian Wheat Board being under attack, well, the U.S. isn't playing by the rules. As far as I can see, Canada is the only country in the world playing by the rules.

We were down there three weeks ago. An American farmer is getting 90¢ a bushel over and above what he gets from the elevator, from the government. If the Canadian Wheat Board is doing such a rotten job, why do the Americans want to get rid of it? I think it's a thorn in their saddle.

As well, we tried in the southwest. We wanted to move a shipload of Colombia grain to the port of Portland. We did this through the Canadian Wheat Board. We went down and talked to the Montana state department of highways.

They told us, if you guys are going to move 1.5 million bushels across the border, we're going to limit you to 350 pounds per square inch. The minute we notice any road damage, we're going to shut you down. You cannot move grain across the border in any amount, at least in Montana.

I think we're going to have to sit down and talk to those people. The grain companies definitely want our grain, because they can value-add; they're going to make money on it. That's why ConAgra is up here today: they're going to buy a lot of good durum, they're going to take it down there, and they're going to make a good buck.

The Canadian Wheat Board should be able to do that. The new Canadian Wheat Board, run by producers, will get into those niche markets, and if they don't, then they won't have my vote or my support.

The farmers down there will close the border - no doubt about it - and when they close, it will not only be for grain; it will be for our beef, and every other industry we have.

If we're going to move grain across the U.S. border, we have to do it in a reasonable manner. It has to be facilitated, and it has to make logistical sense; we cannot just load up our trucks.

The day the Wheat Board is gone... Believe me, I know fellows from North Battleford who've said they're loading their semis and we're going down too. They want to get that extra buck.

That's for a lot of their domestic market. That's why the price...and it's higher on the spot market here today, and maybe lower down the road.

We're going to have 50,000 trucks sitting at the border. The Americans will shut her down faster than we can hit the border with our trucks.

So I can't see us moving any amount of grain across the U.S., except by rail. If we're talking wheat, I know oats are going down there, and oats are gaining momentum in Western Canada because of the WGTA. We're paying for all the freight.

I can sell my oats today for $1.95 at the farm - there's no transportation by rail. But if I'm going to sell it for $1.95, and take it to the coast, I'm only going to get 45¢.

That's why we're growing oats: we can't afford it when the price of wheat is down. By the time I pay the handling and transportation, it's $1.45 from my farm. You can't grow those low-commodity products, and put them on rail.

The Chairman: Thank you, Ron. Mr. McKinnon.

Mr. Glen McKinnon (Brandon - Souris, Lib.): Gentlemen, this has been most interesting. I'll likely be the last person on our side to speak.

The Chairman: Yes, you will; you have five minutes.

Mr. Glen McKinnon: My observation in two days has been this: don't mess with single-desk selling. That was the word we heard yesterday, except for one group, and no individuals. Today we've perhaps heard an opinion.

.1155

There's a lot of suspicion out there of the motives of any groups who are supporting voluntary wheat boards in that they want to weaken single-desk selling. That would be a suspicion.

I'm also very interested, and I wish we had more time, to hear how SARM envisions the development of the farm purchase program. I'd be interested in hearing that. I know we don't have it today.

I think there is reality in that competition will ratchet down prices, and we heard that yesterday.

I was in Australia last summer and I talked to some farmers. They think that's the best thing they've got going over there, all the boards. They're far more regulated in their society than we are, but they still sense that the wheat board is the best of them all.

But they're dealing in commodities other than farm commodities. They're hauling fertilizer from the ports back to the farms on the same cars that they're also exporting their grains on.

Reference was made both days about the smuggling of grain back into Canada. That's absolutely ludicrous to consider in terms of a way of comparing the two markets. That's the Farmers for Justice line. In my riding, and this has been a staging area for the smuggling of grain, it's a very emotional issue and I know there's a very emotional level of interest.

I think UGG is being irresponsible, I really do, in making comments like this, that you are almost saying it's okay to smuggle. You didn't say it wasn't.

The Chairman: Mr. McKinnon, you'd better wind up pretty quickly if you want a response.

Mr. Glen McKinnon: The day of the voluntary board may emerge, but I think it will be at our peril.

If anyone wishes to comment on any of my lines, I would certainly be interested.

Mr. Piper: Mr. McKinnon, you're welcome to your viewpoint, but when you pass those kind of slurs on to United Grain Growers, I strongly object on behalf of our members and our shareholders and certainly the board of directors.

The Chairman: Are there any other comments?

Gentlemen, we thank you very much for your presentation and your contribution to the debate and discussion on the amendments to the Canadian Wheat Board Act. It's certainly the goal of the government to maintain the positive aspects of the Wheat Board. However, it's also the goal to put the Wheat Board in a position to do more for more people in western Canada. We thank you for your contribution to that. You have been courteous and cooperative in your presentations here today. Thank you again.

The meeting is adjourned.

Return to Committee Home Page