Rolf Penner Testifies in Ottawa for Marketing Freedom

Agriculture, Frontier Centre, Marketing Boards, Publications, Rural, Uncategorized

On October 24, 2006. the Frontier Centre’s Agricultural Policy Fellow, Rolf Penner, testified in Ottawa before the House of Commons Standing Committee on Agriculture and Agri-Food against the Canadian Wheat Board’s monopoly on the marketing of Prairie wheat and barley. Following are excerpts from Penner’s testimony, and some of the discussions he had with committee members.

Rolf Penner also presented the committee with a sampling of the Frontier Centre’s recent publications on the Wheat Board issue, along with materials from other sources. Although much of the committee’s time was devoted to that matter and that witness, other business did intrude. The material describing non-Wheat Board matters has been summarized within brackets [], and is included only for purposes of context.

[Discussions and testimony in favour of subsidies for distressed potato farmers and nursery operators in Québec.]

[Serge Lebeau, the senior international trade manager for one of Québec’s largest farm organizations, the Union des Producteurs Agricoles du Québec (UPA), makes a short statement in which he registers his group’s objections to marketing freedom for Western farmers.]

The Chair (Gerry Ritz, MP, Battlefords-Lloydminster):

Thank you, Monsieur Lebeau.

Mr. Penner.

Mr. Rolf Penner:

Good afternoon to you, committee members. Thank you all for inviting me here to share my thoughts with you on the Canadian Wheat Board. I’d like to start by saying that I’m here not only as the agricultural policy research fellow for the Frontier Centre but, more importantly, as a farmer from southern Manitoba who’s running 1,700 acres of land and whose primary source of income is that farm.

I have grown up and have had to live under the thumb of the Canadian Wheat Board monopoly my entire life. Personally, I am very excited about the current government’s plans for marketing choice and the role that a new invigorated Wheat Board will play in that.

Let me bring you up to speed a little bit on what the situation is with me and my neighbours since harvest wrapped up about a month ago. I’ll mention some of the cash-flow issues we’re having.

Right now we are in the middle of a really major rally going on in the wheat markets. We’re at the highest levels today that we’ve seen in 30 years. We can’t take advantage of it and it’s incredibly frustrating. The little bit that we can price out, we can’t deliver, which means we can’t get paid for it.

Instead, if we need cash, and most farmers do in the fall in order to pay their bills, we are forced to sell our other crops at prices that right now are lower than where I expect them to be later this year. In some cases, it’s below the cost of production. If we were free to sell our wheat, we could hold on to these crops until those prices improved and actually make money on everything.

Equally frustrating in all this is that, if this current rally were occurring in any other crop, I could right now start selling next year’s production at a guaranteed profit. But I can’t. The primary reason is not the Wheat Board; it’s the Wheat Board monopoly.

I can’t tell you the number of times in my life that I have seen these kinds of opportunities fly by when it comes to board grains. One of the most frustrating times that I remember was the 2002-03 crop year. In that year we were able to sell most of our non-board crops for anywhere from above-average prices to some record prices. There was a really good general rally going on in all crops, wheat included. Not only did the Wheat Board completely miss this rally, it did such a poor job that it ran an $85 million deficit in the pool accounts, which have to be covered by the taxpayers of Canada. What should have been a banner year for prairie agriculture wound up being another one in which we struggled to make ends meet.

In its current form, the Canadian Wheat Board sits like a wet blanket over the entire prairie economy—starting at the plant breeders, through the farm gates, on to our rural communities, into our cities, and right on out through our ports. This dampening effect is widespread, pervasive, and very tangible. It’s high time that we give this wet blanket a well-deserved airing out.

A monopoly may have been appropriate in the days when we were negotiating five-year contracts for millions of tonnes to the Soviet Union, but it certainly is not an effective marketing tool for negotiating small, single-lot sales into individual flour mills and niche markets. The board’s own sales records are showing us that this is the trend. They are selling more of less—smaller amounts to more and more customers all of the time. This is not a phenomenon unique to wheat. We are seeing this with more and more commodities and more and more products all over the world. The future of business in general is selling more of less.

Equally important is the fact that we are no longer the lowest-cost producers of grain in the world. We must instead compete on the basis of identity preservation of specific traits, traceability programs, and precise quality standards for each shipment. The current Canadian Wheat Board model was designed for large bulk exports. It’s not able to compete successfully in these new specialty high-end, fast-moving world markets. It was just never designed for this.

Some fear that tinkering with the board’s monopoly power would result in a loss of jobs. This fear is particularly a concern in my home province of Manitoba. The truth is that under the current arrangement we have been bleeding jobs for decades. The grain industry is steadily consolidating because of a lack of access to new opportunities. We continue to lose farmers because they cannot pursue new markets at home or abroad. Every unprocessed bushel exported is another lost possibility, another lost opportunity, and another lost job.

I am talking specifically about value-added processing. I’m talking about flour mills, pasta plants, malting facilities, and a wide range of specialty products that are all currently being stifled in western Canada. We should be exporting meat pies, not bulk wheat and live animals.

Then there is the development of new wheat and barley varieties, especially the high-yielding ones for feeding livestock. New uses, like nutraceuticals and bioenergy, ethanol, are all currently being hampered with regulatory bias toward the type of grains that the Canadian Wheat Board sold in the good old days.

All of these things I’m talking about will happen, but if we continue along this current monopoly path they will happen elsewhere. In fact, they are happening elsewhere.

For example, when we compare the level of investment in value-added processing in Ontario and in the northern U.S. states, it is two or three times the level that we see on the Prairies. This is according to a study done by the George Morris Centre. The world is not only quite literally passing us by, it’s leaving us behind in its dust.

Let me give you a specific example. A couple of weeks ago in Australia, a small farmer by the name of Doug Cush recently fulfilled a dream that western producers would love to emulate, but today in Canada is illegal. He opened his own flour mill. Gasp! This gives him the final link in a chain that takes his farm’s durum wheat from the farm gate to the gourmet dinner plate. He is now selling pasta successfully into, of all places, Italy, the home of pasta. This is unbelievable. And he is doing it successfully. That’s like trying to take coal to Newcastle.

This pasta of his is now being sold in more than 500 stores all across Australia, Italy, the United States, the United Kingdom, Dubai and Korea. He is not afraid of the multinational bogeyman, because he, a small farmer, is now a multinational himself.

Many claim that a dual market in wheat and barley is a metaphysical impossibility. They say it’s not going to work and it would be the end of the Canadian Wheat Board. That is exactly what the doomsayers said with regard to another monopoly that I am personally very familiar with: Manitoba Pork. Not only did it survive the loss of the single desk, it is thriving in the new marketing environment. It retains a full 30% of the market share of what is now – and this is crucially important – a greatly expanded marketplace. It is marketing more hogs now than it did back in the old single desk days. We saw the same thing with Saskatchewan Pork, Alberta Pork, and we see the same thing with Ontario wheat. It really is amazing how a little choice and a little competition can really improve things.

In sharp contrast to this, the acreage of Wheat Board grains in the west keeps dropping, as does our market share. Ten years ago we had 20% of the world’s share. Today it’s 15%. Five years from now, it’s predicted we will be down to 10%. The writing is on the wall. The status quo isn’t working, and things have to change.

I would like to remind you all at this time of one of the recommendations of the all-party standing committee, which talked to hundreds of farmers across the country in 2002. I think a lot of you were on that committee, and I will quote your recommendation directly: “…that the board of directors of the Canadian Wheat Board authorize, on a trial basis, a free market for the sale of wheat and barley…”.

I am pointing this out because it shows that the support for marketing choice is far more widespread than we’re being led to believe by a lot of people, and it goes far beyond mere ideological and partisan political positions.

As to the question of a plebiscite on dual marketing, I echo the sentiments of former Manitoba NDP cabinet minister, Sidney Green, who was quoted in the Winnipeg Free Press last week as saying, “The wheat board is an organization that was created by a democratically elected government. Absent government creation, the wheat board would not exist. It is important to remember that what a democratically elected government createth, a democratically elected government can taketh away.”

There is the question of civil liberties in all this. Yes, there are strong economic arguments. The research that I’ve done with the Frontier Centre shows that. We’re talking tens of thousands of dollars of increased income for individual farmers across the Prairies, probably three-quarters of a billion to a billion dollars a year if we look at them as a group; 26,000 extra jobs in value-added processing; another $1 billion to possibly $2 billion in extra economic activity because of that value-added processing. These are strong pervasive economic arguments.

But there is the question of civil liberties. When is it appropriate for the state to allow one group to vote away the civil liberties of another group? There should be no such thing in a free and democratic society as the right to vote away civil liberties. We’re not talking about electing a government here, and we’re not talking about finding out who likes strawberry ice cream better than chocolate. In this case, if strawberry wins, not only are you not allowed to buy chocolate, but if we catch you with chocolate ice cream, you’re going to jail.

What this is all about is finally giving western farmers the freedom to run their businesses in the way they think is best – not how the government thinks is best, and certainly not how their neighbours think it should be run. Western Canadian farmers should be able to enjoy the same rights, freedoms, and civil liberties as the farmers in the rest of Canada do. It is not right, in this day and age, that they are still forced to sit in the back of the bus.

There are two extreme positions that dominate this current debate. The one holds that the forced collectivization of wheat and barley growers is for their own good. The other says that the federal government has no business being involved in the marketing of grain in any way whatsoever. To its credit, the federal government appears to have found a sensible middle-of-the-road compromise between these two very polarized extremes. It’s one that recognizes a very simple universal fact: there is no one absolutely right way to sell wheat and barley that works for everyone all the time. The government intends to let individual farmers who want to sell their own crops do so and, at the same time, let those farmers who are more comfortable selling their grain on a collective basis keep that opportunity as well.

I believe not only that moving forward with this agenda will be in the best interests of our farmers, but that it’s in the best interest of Canada as a whole, as it would promote rural development across the Prairies by declaring to the world that, hey, the wet blanket is off and western Canada is now open for business.

The Chair:

Thank you, Mr. Penner.

Both groups have been short and succinct, and that’s fantastic.

We’ll move to our first round of questioning. Mr. Easter, for seven minutes, please.

Hon. Wayne Easter (MP, Malpeque):

Thank you, Mr. Chair.

My questions will be to Mr. Penner, who seems to live in quite a dream world, but in any event –

Mr. Rolf Penner:

I make my living in that dream world, Mr. Easter.

Hon. Wayne Easter:

I do, too.

Let me just turn to your brief on the airing out of the wet blanket. You’re basically saying that the Canadian Wheat Board model was built for large exports and that it’s preventing sales of high-value crops. Well, Warburton’s, which is a company, just announced a little while ago that they’ll purchase 250,000 tonnes of high-quality wheat from about 730 farmers, many in Manitoba and Saskatchewan. They will do it in such a way as to not let the lowest seller set the price. That is holding prices up, so I just point out to you that your wet blanket argument doesn’t hurt.

Furthermore, I just cannot understand why the opponents of the Wheat Board – and we’ll go to your Australian example, Mr. Chair – continue to perpetuate this myth that there can’t be any processing or development of pasta plants. The fact of the matter is that western farmers have exactly the same ability domestically. There is the buy-back program for export, but western farmers do have, within their abilities, the same ability to mill their own grain in their own mills and sell that resulting production directly to Canadian consumers from one end of the country to the other. If they sell it outside the country, then they have to do it through the buy-back program.

So you continually perpetuate these myths.

I’ll make one last point before I go to answers, Mr. Chair.

Mr. Penner goes to great lengths to talk about the Carter–Lyons–Berwald [sic] study, which is a study, Mr. Chair, that I believe you know has been completely discredited by academic people with academic credentials, for one simple reason. It arrived at its conclusion, in terms of Carter–Lyons–Berwald, by comparing farm gate sale prices between the United States and Canada without accounting for the distortion of American subsidies, including the export enhancement program.

Even on spot prices, when you folks get into comparing spot prices of crops, you basically get into comparing a different variety of crops, but not the same grain. The fact of the matter is that I know one variety of grain you’re quite enamoured over, Falcon. Yes, the spot price is sometimes higher for it. But what do the Americans do with it? They buy Falcon, a lower-quality grain, and they blend it in with the higher-quality grains and sell the product.

So it’s not a fair comparison, Mr. Chairman.

I guess the question is this: where we do have accurate figures? We listened to your figures, and you say probably, probably, probably. I heard the same arguments from many people during the Crow rate fight. Just get rid of the Crow rate, my God, and we’d be wealthy and prosperous in western Canada. Now these very same people are saying the same thing about the Canadian Wheat Board. But you have no concrete studies to prove so, unless it’s the discredited Carter–Lyons–Berwald study.

The Wheat Board, though, in response to the task force report that they tabled on their website, claims – and they back it up with documentation, and there is the independent study by Hartley Furtan – that the loss to the industry collectively in western Canada would be between $530 million and $655 million. How are you going to compensate for that loss when we have it? That’s my question.

Mr. Rolf Penner:

Mr. Chairman, I would be glad to answer as many of those questions as I can in the time allotted.

Let’s start where Mr. Easter left off, with the Wheat Board-sponsored studies that supposedly are legitimate. I’ve had a good look at those studies and at the Furtan study, which he referred to. The problem with these studies is that they’re cost-benefit analyses that don’t list any costs. They don’t go back to the farm gate, and they’re based on a secret data set that no one’s allowed to verify. Other than that, they’re great, but I’m not going to bet my life on them.

As for the spot price comparisons on Falcon – and yes, I grow Falcon on my farm – as of last Thursday, the difference between the Wheat Board pool price and what I could receive at an elevator in South Dakota, very close to my farm, was $1.11 a bushel. That is a real world number, not from a study. Yes, you can get a bit better with the fixed-price contracts, but that’s going to end at the end of this month. On that particular day, I was leaving 60¢ a bushel on the table.

It really is disingenuous of the minister to try to suggest who I should believe – him or my own lying eyes. As to the Carter-Loyns study, it was done very rigorously, and again it compares farm gate prices, which is where it actually matters.

The buy-back program is again incredibly disingenuous. Yes, there is a buy-back program, and you get to buy your own grain back, which is an absurdity in itself. My bin in Manitoba bases the price out of Vancouver, which many times is the kind of price Tony Soprano would charge, which is why hardly anybody ever does so.

Concerning the value-added processing, again the honourable minister is mistaken –

The Chair:

The honourable member.

Mr. Rolf Penner:

Member, sorry. I’m a little rusty with my protocol.

The Chair:

All right. I didn’t want to confuse anybody here.

Go ahead, Mr. Penner.

Mr. Rolf Penner:

Fair enough. We know who we’re talking about.

I was quoting the George Morris Centre study specifically, and it is very easy to compare the levels of investment. Either you have investment or you don’t. Yes, we do have investment in the Prairie provinces, but it is nowhere near the level it should be, and this is specifically because of the monopoly. I can give you an example with malting barley especially.

In the west, we should be the malting barley capital of North America, due to the economics. The only reason we’re not is that maltsters need to be able to contract directly with the producer to get the kind of specs they need. I believe it was either in 2004 or 2005 that we saw about $400 million worth of malting investment in the northern tier states, even though there was a $35 to $40 a tonne advantage to malting that barley in Canada. The reason it went south was the monopoly.

The Chair:

Thank you, Mr. Penner.

Mr. André Bellavance (MP, Richmond-Arthabaska):

I would like to thank you for your testimony.

The Bloc Québécois has given its position on the Canadian Wheat Board, and I can’t tell you how much of a stir it caused. We were the target of insults. Of course, we come from Québec, and everyone knows that the Canadian Wheat Board does not apply to Québec.

Mr. Lebeau, after hearing your testimony, I am tempted to play devil’s advocate. I wonder why you are here to talk about the Canadian Wheat Board. It doesn’t concern Québec. Our grain producers are not subject to the Canadian Wheat Board. Certainly, you have the right to your opinion on this matter. We do the same thing as politicians.

How is your intervention relevant, given that it doesn’t concern Québec?

Mr. Denis Bilodeau [another official from the UPA]:

Our intervention is primarily focused on the concept. Having experimented in marketing agricultural products over the years, I would say that there is a great temptation for a producer – and I think it’s human nature – to try to get a better price than his fellow producer. According to my observations, producers who don’t know how to adopt a collective marketing approach constantly believe they are getting the best price. However, when they meet their friends at the bar and get more information, they find out that it wasn’t them who got the best price.

The collective approach allows the marketed supply to be grouped together. Whether they want to or not, the stakeholders on the other end of the equation, the buyers, team up and work in this fashion. The concentration ensures that today, buyers purchase very high volumes. The same thing applies to foreign contracts. The large exporters determine the price.

It is easy for a producer to believe that he has a value-added product that corners a niche market. In Québec, we believe that maybe certain aspects of the Canadian Wheat Board need to be modernized. After all, this infrastructure has been in place for 70 years. If constant studies of this collective approach reveal that there are improvements to be made, they will be made using a collective approach.

In Québec, we also experiment with the added value and distinct market approach. When it comes to agricultural products, the important thing is to identify consumer needs and meet them. As soon as the consumer requires a specific quality or characteristic for a specific product, the objective is to meet this demand. This is made possible through a collective approach.

We do business with marketing agencies in Québec, for milk production, among others. Certain particularities apply in the case of organic milk, which meets a specific need. The collective approach allows us to buy and sell this milk through a system that allows us to maintain a consistent supply and prevent inventory shortages, and to ensure that volumes meet the needs of the market. This approach has always proven beneficial to producers as a whole. It guarantees revenues for the majority of farmers. There’s a proverb that says not to throw out the baby with the bath water. That provides a brief overview of the situation.

We have to be aware that once compliance with the Canadian Wheat Board becomes voluntary, it opens a huge breach in the system. A voluntary approach changes the effects and synergies of the collective approach as it relates to markets and pricing. Producers end up being in competition with one another, which means that prices are constantly negotiated lower. This would have much significance for Québec farmers.

The Chair:

Did Mr. Penner have a comment?

No? Okay.

Mr. André Bellavance:

I have another question.

The Conservatives also accused me of comparing the Canadian Wheat Board, an important collective marketing tool, with supply management, the other important collective marketing tool in Canada.

Evidently, that wasn’t the comparison I was drawing. I was expressing my apprehension towards the attitude of the Conservative government, who is facing enormous pressure from the WTO, especially from the Americans and the Europeans. Mr. Lebeau, I think you know about this. The Bloc Québécois brought in ambassadors. You were there when we spoke of supply management. The UN ambassador told us that the Canadian Wheat Board and supply management were the two systems that irked them, let us say.

What I’m concerned about is the possibility that we get rid of the Canadian Wheat Board. What would happen after that? I received a news release prepared by the Canadian Federation of Agriculture. Laurent Pellerin is the CFA’s Vice-President. He is also your President at the UPA, Mr. Bilodeau and Mr. Lebeau. The news release, which specifically deals with the future of the Canadian Wheat Board, states the following: “What kind of precedent would that set for the future of other farmer marketing tools here in Québec, or in any other province?”

I’m basing myself on this to say that we could ruin the collective marketing tool to then… we have the right to make this concern known. I wanted to know what you thought about it.

Mr. Denis Bilodeau:

Mr. Lebeau was there. I’ll let him take over, and then I’ll wrap up.

Mr. Serge Lebeau:

To return to your first question, there is solidarity between producers, and that solidarity guides the Union des Producteurs Agricoles du Québec. We have solidarity with the western producers. We are part of the same Canadian federation. It’s also a question of principle. There is a law that states that the future and destiny of an organization like the Canadian Wheat Board must be debated and decided by the producers. If they decide to put an end to the single desk, that’s their decision.

That’s how things work in our industry. For a joint plan to be adopted, it needs 66% of the vote. Not 50% plus one, 66%. If we want to implement a collective marketing plan—for example, a joint plan for strawberry production—it needs 66% of the vote. The Farm Products Marketing Act, which came into force in 1957, states that it has to happen this way, and we support this.

Organized collective marketing has effectively suffered a breach. We wonder what the next step will be. This doesn’t only affect supply management. We use collective marketing for many production lines, including potatoes, apples and pork, among others. This is a great concern for us. Know that many buyers would love to see freedom of choice, so that they can call the shots. We have a lot of statistics to back up our point. For example, when we started electronic auctions in the pork sector in 1989, we noted that the difference in prices paid to Québec producers compared with American producers was about $25 per 100 kilograms. After the auctions started, we saw that our prices caught up to those of the Americans. So you can see the advantages that can arise out of collective marketing.

Again, it will be up to the western producers to debate this point against those who in favour of these advantages. In our opinion, we are convinced that there is an advantage. There are large farmers within the pork sector in Québec. Initially, they were very skeptical and thought that because they had high production volumes, they would get the best prices. However, these producers realized that they would get a better price by regrouping all of the production and collectively negotiating with buyers. That’s what happened.

Mr. Denis Bilodeau:

The important thing is to return to where producers have control of the situation. Mr. Penner stated that the government imposed directives, directions and a market on the producers, but that isn’t what should be done. There are democratic structures built up within the Board. It has to be able to play its role. If there are changes or updates to be made to the structure, the producer committees within the structure are able to make proposals and vote on future directions, and not proceed with dismantling the whole thing right off the bat. You should be aware that if we adopt a voluntary approach, a lot of buyers will be very happy. The survival of the Canadian Wheat Board is seriously threatened, that much is clear.

The Chair:

Thank you, Mr. Bilodeau.

Mr. Anderson, seven minutes please.

Mr. David Anderson (MP, Cypress Hills-Grasslands):

I found this last part of the discussion interesting, because the Canadian Wheat Board, as we know, was never put in place by producers. There was no plebiscite, and you certainly wouldn’t get 66% support for maintaining it. I found it interesting that your marketing boards are required to reach 66% in order to be established and maintained. I know that even the latest Wheat Board survey shows that 54% of farmers wanted change, so we know a majority in western Canada would like to see changes to the system.

I should also express, and I think André was trying to be a little mischievous here, that the Conservative Party has been clear in its support for the supply management system, and that will continue. We were also clear in the election campaign that we were going to move to marketing choice for the Canadian Wheat Board. Our policy has been clear; we’ve been consistent with it, and I think you can count on us to continue to be that way.

Wayne made a comment earlier about the fact that he doesn’t like some of the figures that are used. He talks about how we use probably, probably, probably. I wanted to correct you on one of the numbers you used as well, because I think we’re getting some of this on both sides of the issue. When people talk about the benefit to the Wheat Board, we’ve had a variety of figures. We’ve had $200 million per year, we’ve had $500 million, and now we hear $525 million to $565 million. We’ve had $820 million; and you brought a new high of $852 million, I think you said, in your presentation. I guess we’ll soon expect someone to hit $1 billion on the anticipated figures.

In reality, I think Mr. Penner is probably more accurate when he’s talking about the fact that there is a huge cost in western Canada. We’re looking at 15,000 to 20,000 jobs in value-added development. We don’t have up to $2 billion a year on the value-added side of things. We’ve heard in other areas of the committee that the KVD system — our grading system, which does not apply in Ontario and Québec — costs us somewhere between $100 million and $400 million as well. The direct costs to the Wheat Board, according to George Morris again, are $15 to $22 a tonne. There is money being thrown around on both sides of this, but clearly there would be huge benefits to western Canadian farmers if we can make some changes.

I think Mr. Bilodeau said we don’t want to throw the baby out with the bathwater. Mr. Penner, you work under the Wheat Board. Can the Wheat Board survive as one option in a western Canadian marketing choice environment?

Mr. Rolf Penner:

Absolutely. There’s no reason to believe that it can’t. All of those pork boards that I mentioned are still operating, and operating viably.

I realize what the gentlemen from Québec are talking about – some of the Québec experiences. I’ve looked at these things on an even broader basis. I’ve looked at some World Bank studies on these kinds of actions. This is an older study, but it’s still very enlightening. Between 1985 and 1997, more than 80 countries sold off 8,500 state-owned enterprises. This is exactly the kind of thing we’re talking about, and they did it successfully.

Yes, there is the odd time when it doesn’t work properly, but it is incredibly rare and it’s not an overall indictment of the commercialization process itself. The failures usually are very predictable. If you don’t go all the way, you’re not going to get the right results. Usually it’s because of poor practices, such as non-competitive bidding – the backroom variety – sloppy contract writing, inadequate monitoring of performance, and those kinds of things.

The odds of successfully transitioning the Canadian Wheat Board into more of an open market setting are extremely high. Most of the success stories we see around the world come from high- and middle-income countries exactly like Canada. It’s because positive results happen in countries where you have a more market-friendly policy environment, and that’s exactly what we’re in here.

Mr. David Anderson:

Some of the organizations and individuals supporting the present system have really ramped up the hysterical rhetoric about the consequences of what will happen if there are changes. Do you feel there are people on that side who would sooner see the board destroyed than see it changed?

Mr. Rolf Penner:

It’s certainly looking like it. I don’t know if there is a poison pill out there, but I was one of the gentlemen at that Saskatoon meeting. I can’t remember who mentioned it, but the Wheat Board was invited, and they refused. The transition committee that you have — they were invited. They refused.

Supporters of the board are not giving the board the freedom to be able to chart its own destiny. If they continue along that path, it’s going to become more and more difficult to keep this organization around. I don’t think they’re doing service to their fellow producers by taking these kinds of hard-line ideological positions on the concept of forced collectivization; it’s just not good for western Canada.

Mr. David Anderson:

I would like to ask this of the UPA.

Do you believe that farmers should have the opportunity or the ability to sell their own grain directly to producer-owned processing facilities? Do you think that would be a good idea? Do you oppose that or do you support that kind of idea? If I’m a producer, I can take my grain and sell it to a producer-owned facility and then process the grain that way and gain benefit from it. Do you have a position on that?

Mr. Denis Bilodeau:

As I mentioned earlier, balance will be achieved when there is only one producer and one buyer. Negotiating power would be equally divided. Once this objective is reached, we must be aware that several farms and producers living off of their businesses will have come up short and had to leave the industry.

If this is not the case, they will be in competition. This is what is happening, the producers are competing against one another. For a few, the minority, it will be profitable. This will create a concentration of producers, and one producer will gradually eliminate his competitors.

This is not the situation we’re looking for. We want a large number of producers to be able to make a living off of their farms, that they are a positive part of their community and environment, and that their income is fair, compared to other members of society.

The advantage of collective marketing ensures that the smallest producer can sell at the same price as international marketing networks, which won’t happen when that producer goes to the negotiating table by himself.

Marketing or added value approaches can have certain particular items in the production chain. We have a ways to go to be able to recognize the involvement or added value of a particular product, but we can do it.

As I was saying earlier, this is not an approach that will threaten an institution created years ago, probably for the same reasons, to control the same situation as the one that we would have to deal with if the structure was removed. For grain buyers and negotiators, these structures are a hassle, and they’re hampered to a certain extent because of them, because they can’t deal directly with the producers. The buyer cannot negotiate with one producer, then another, to get a better price. However, we, who represent the producers, want our producers to make a decent living off of their farms.

You also know that the condition of the agriculture industry, generally speaking, in Canada and Québec, is not in a position to blossom in the near future. Canadian farmers won’t have it any better if the organizations and structures that have an influence on raising prices are removed.

The Chair:

It was sort of a yes or no question.

Anyway, Mr. Atamanenko, for seven minutes, please.

Mr. Alex Atamanenko, MP, BC Southern Interior:

Thank you for coming.

Thank you very much, Mr. Penner, for coming.

Yesterday, I spoke with farmers in northern Ontario. We all recognize that Québec producers have it better than their counterparts in Ontario. The programs that were put in place in Québec help the farmers, including the cattle farmers, which we used for our comparison.

Clearly, you do things that work well. You have this collective approach that you spoke of. I’d like to know more about what you said about the failure of voluntary agencies. I think that’s the key.

And here also, Mr. Penner, maybe we could get your thoughts on the Ontario Wheat Producers’ Marketing Board, which has gone from 100% of the wheat crop down to as little as 13%; or in other words, the average has been just over 20% in the last three years. In other words, how effective is the voluntary board? And we’ll get to that.

You are here. Your president, whom I met with our leader, Mr. Layton last week, is going to Manitoba this week in order to speak with the Canadian Wheat Board. You aren’t here to get yourself on TV or on the radio, so you evidently believe that this is an important issue. I’d like you to expand on this subject and to talk a little about the future.

How do you see the future of agriculture? Why do you think the Canadian Wheat Board will play an important role in the future?

Mr. Serge Lebeau:

We have studied the question of voluntary agencies very seriously. They existed in the 1990s in the apple and potato sectors, among other plant productions. They were failures. Ultimately, they had to be abandoned.

Here are the reasons that I gave: there was no critical mass, and supply was divided. As a result, the competitors did everything they could to make these voluntary agencies disappear. That’s what happened.

There are other examples of this in Canada. For example, the Ontario pork industry uses a mixed system. Producers can sell directly to slaughterhouses, but they have to submit their information to the board. There too, the results are mixed, because the information is never as accurate as it would be if the board was the selling agency.

We also examined the situation in England, in the United Kingdom. We found that there was a selling agency in the milk industry that was dismantled in the 1990s, and resulted in the price of dairy products plummeting for the producers, while the consumer price either stayed the same or increased. We have statistics on this.

This is the kind of impact that we expect here. The same thing will probably end up happening to the Canadian Wheat Board, it won’t be able to survive voluntary markets. The farmers could be the biggest losers in all of this.

I will let Mr. Bilodeau complete my argument.

Mr. Denis Bilodeau:

On the subject of support for the agriculture industry, when the time comes where farms will be shut down, year after year, because people can’t make a living from them anymore, choices will need to be made. Government action will need to be taken.

If we want to obtain the highest possible prices for farms on the market, we will need government intervention. If not, the agriculture industry and groups of producers will disappear. We would have to deal with production concentrations, which isn’t the outcome that we’re looking for. These models weren’t recommended in Québec.

There are a variety of collective marketing structures. Recently, apple producers implemented a structure that is relatively unrestrictive, but which provides an overall, integrated picture of apple inventories.

It’s easy for a buyer to sow doubt in the heart of a producer and influence prices: he can say that inventory is too low, or too high and that since there are heavy volumes, a given price has to be paid, if not, the producer has to sell for less later.

However, in a collective structure, production volumes are posted, and information on volumes and reference prices are available. This information serves to provide indicators to the buyers. And that’s what we stand to lose.

Mr. Alex Atamanenko:

Mr. Penner, what’s your reaction? Here we have the collective approach, the so-called individual approach. In line with the question, how do you react to this?

Mr. Rolf Penner:

A couple of things have come up a number of times concerning what the gentlemen have been saying. They’ve talked about critical mass and the voluntary system and that we need some government intervention to help out. In this case – the Canadian Wheat Board – the government intervention is not helping out. It is hindering us.

Earlier you asked about the Ontario experience and my thoughts on that one. Yes, when Ontario first went to the voluntary system they did go down to a 13% market share, but they’ve been coming up steadily ever since. The latest figures now show that they are at a solid 30% and growing. The reason they are growing is that they are now providing good services to their producers.

The key point is not only market share. Look at the acreage. The acreage in Ontario continues to increase, which means the producers are very confident in the system the way it is. They look at this and they say, “This is a good way of doing business. We’re making more money. If we’re making more money, we’re going to do more of the same.” And that’s what we’re seeing in Ontario. And that’s what we’ve seen in the west when it comes to the pork boards. The idea that if you allow producers the individual choice, they will never, ever market their crops or their animals or their products collectively is disingenuous. Of course they do.

I’m also a pork producer, and I work cooperatively with a whole bunch of producers in Manitoba. In Manitoba we have probably a half dozen such organizations that are all successfully marketing hogs on a voluntary basis. It works to the benefit of all the producers, because you have that competition between those different groups. They want to maximize their return to their producers and they want to be able to try to bring other producers in from other places and grow the industry organically, from itself.

Go ahead.

Mr. Alex Atamanenko:

Okay. I have another question.

If the Wheat Board is performing as poorly as some people state it is, and they have concerns, why have the board of directors and the members tolerated this so far? They compare the sales figures. If it has been doing as badly as people say, why hasn’t there been an outcry amongst the members of the Wheat Board and the directors?

Mr. Rolf Penner:

Well, let me put the question back to you and say that if they’re doing such a darn good job, why are they afraid of letting farmers themselves choose and vote with their trucks? If they’re half as good and half as popular as their polls and indicators say, there is not going to be a concern for the Wheat Board to compete in the open market environment.

Mr. Alex Atamanenko:

So you don’t believe that farmers themselves should have a choice in the direction they go?

Mr. Rolf Penner:

I believe they should have a choice, and I believe that choice starts and ends with their grain trucks. When they have to pay the bills – the fertilizer bills, the fuel bills, the land bills, the mortgages – and they have to fight off the insects and weeds, they have more than earned the right to market that product they have created in any way that they see fit.

Mr. Alex Atamanenko:

Should there be a vote by those who are using the Wheat Board, in your opinion?

Mr. Rolf Penner:

No. That goes back to my strawberry ice cream and chocolate ice cream analogy. It’s an opinion poll that tells us who’s on this side and who’s on that side, but it doesn’t really settle the matter. This is a feud that has been going on for probably 50 years, if not longer. We’re not going to solve it with a vote. We need some decisiveness on this thing to finally get it over with.

The Chair:

Thank you, Mr. Atamanenko.

I think everyone was allowed to extend over time today, because they knew they’d only get one round. So I thank you for your cooperation.

This is the start of a week-long – in fact, probably two-week long – series of meetings on this issue.

Gentlemen, thank you so much for your interventions today. Thank you for your input. I look forward to seeing you again.

This meeting stands adjourned.