CANADIAN BOARD ALLIANCE P.O. Box 125, Hussar, , T0J 1S0 www.cwba.ca

Submission to Standing Committee on Finance Pre-Budget Consultations in advance of 2017 Budget October 3, 2016

Thank you for your invitation to contribute to the work of the committee. The CWBA is a voluntary prairie-wide organization of grain farmers who recognize the value of collective marketing, the independent and impartial quality assurance provided by the Canadian Grain Commission, and the importance of public interest .

Prairie farmers export approximately 70% of their annual production into the global market. In the absence of the single-desk Canadian Wheat Board, access to that global market is now controlled by four giant grain companies known as “the ABCD” group (Archer Daniels Midland, Bunge, and Louis Dreyfus). Glencore Inc. is the next largest international company. Canada has two comparatively small grain companies of note: J.I. Richardson and Parish & Heimbecker Inc. Transportation to ports accessing the global grain market is provided by two foreign owned railways.

Consequently prairie farmers face several competitive disadvantages. • Our average distance to port is 1,524 km over mountain ranges, while Australians have an average distance of only 280 km largely downhill to port – this is very similar to the other major grain producers in Argentina and the Ukraine. • Prairie farmers no longer have direct access to end use customers. • Prairie farmers have lost their competitive advantage of supplying quality assured grain • Individual prairie farmers have no market power to deal with either the railway or grain company oligarchies.

Most farmers also feel that the Wheat Board and its assets were unjustly seized from them. To clear the air, a full audit of that seizure needs to be undertaken as soon as possible. In the interim we would call on the Minister of Agriculture to release the un-redacted audit of the final year of operation of the CWB which the former Minister withheld from Parliament.

Your committee asked: “What federal actions would assist Canada’s businesses – in all regions and sectors – meet their expansion, innovation and prosperity goals, and thereby contribute to economic growth in the country?”

We would answer this way:

With the end of the single-desk CWB prairie farmers lost the beneficial ownership of their wheat and from the farm gate to the end-use customer. In an August 2015 paper Dr. Richard Gray, an agricultural economist at the University of , explained farmer losses in 2013/14 and 2014/15 crop years:

"The resulting increase in export basis is reflected in a lower price paid to producers and reduced farm revenues. A conservative basis impact of $5.05 billion, in addition to the $1.43 billion price differential for Canadian wheat relative to US wheat in Portland, means that the minimum total value of loss to producers is approximately $6.5 billion dollars.”

This has meant the transfer of one third or more of the end-use value of wheat and barley from Canadian farmers into the pockets of the international . In addition the price premiums provided by the CWB for protein levels greater than the low American standard have also been lost amounting to as much as $173 dollars per acre (Gray/CWBA). http://www.cwbafacts.ca/wp-content/uploads/2016/10/CWB-loss-impact-Mar-2016-FINAL-1.pdf

CANADIAN WHEAT BOARD ALLIANCE P.O. Box 125, Hussar, Alberta, T0J 1S0 www.cwba.ca

1) We would recommend the Federal Budget give priority to funding a single-desk marketing agency for prairie grains. Historically this type of organization has been shown by many trade challenges to maximise returns to prairie farmers and consequently to their communities.

2) Restore full funding to the Canadian Grain Commission to reclaim Canada’s quality advantage. This would provide customers, whether they are the customers of the giant grain companies now marketing prairie grain, or any future marketing board, with objective and impartial quality assurance.

3) Reduce the costs of inspection and handling by re-instating Kernel Visual Distinguishability (KVD) so buyers can see that they are getting good Canadian quality. This places the responsibility for quality control where it belongs with the Canadian Grain Commission. It also provides an objective measure in regard to varietal evaluation, segregation, and control.

4) The amalgamation of and agro-chemical companies creates a clear conflict of interest that must be eliminated if we are to continue our long tradition of producing the highest quality wheat, barley and other grains that are expected by our international and domestic customers.

Therefore we would recommend that all funding of new seed variety development be undertaken as a partnership between prairie producers through the Western Grains Research Foundation (WGRF) and a fully funded Agriculture and Agri-food Canada with all patent rights being held in trust by the Crown for the sole benefit of prairie farmers.

5) The continuation of the Maximum Revenue Entitlement (MRE) for the two railways is critical to prairie agriculture. The MRE must include any expansion of interswitching distances.

6) Given the implementation of our recommendation number one we would further recommend that the Federal government nationalize the railway and grain facilities at the port of Churchill to allow prairie farmers in the Churchill catchment area to once again capitalize on its financial advantages for that region.

Canada’s ability to provide quality-assurance guarantees and after-sales support to our former high-end customers is now gone. Market development, transportation efficiency, and coordination of grain to market have been lost in the chaos created by the oligarchy of grain companies mishandling the high value and high quality prairie wheat and barley crops.

These negative economic consequences felt by farmers result in considerably less money being available to finance continued economic growth on the prairies. This money is also removed from Canada’s net foreign exchange earnings.

To preserve export wheat production on the prairies some mechanism allowing prairie farmers to retain the beneficial ownership of their grain from the farm gate to the end use customer is needed. A market friendly solution would be to create a single desk marketing agency for all prairie grains.

You also ask: “What federal measures would ensure that urban, rural and remote communities throughout Canada enable residents to make their desired contribution to the country’s economic growth and businesses to expand, prosper and serve domestic and international customers in order to contribute to growth?”

CANADIAN WHEAT BOARD ALLIANCE P.O. Box 125, Hussar, Alberta, T0J 1S0 www.cwba.ca

Prairie grain farmers have actual physical product that must be moved to export position. Grain marketing, handling, and transportation logistics are central to this – producers cannot e-mail their product to port or customers. The railways are already regulated to limit their income from the prairie grain crop.

The CWB successfully used its market power to arrange timely and cost efficient use of the private rail and grain handling systems already in place. In the absence of the single-desk CWB we have an intelligence and organizational problem.

We are now seeing a rapid overbuilding of the prairie grain handling system with new facilities adding costs to the overall system – costs which will be downloaded to farmers.

Again, a single-desk marketer for prairie grain is a more cost-efficient alternative which would work in the interests of prairie grain farmers as opposed to the current trend that works to the advantage of grain companies and their shareholders. It would also serve to make the port of Churchill and its rail line economic once again.

Aside from a single-desk marketing agency, there are no market solutions to the current problems of grain marketing and handling that do not cost prairie farmers more money. To keep our historic economic niche supplying international customers we need to resume providing a reliable supply of quality assured grains. We cannot afford to discount customer requirements as has happened with canola.

Our competitive disadvantages are already great and they must be offset with regulatory advantages only Ottawa can provide - foremost of which must be a single-desk marketing agency for prairie grains.

Agricultural sustainability on the prairies and the sustainability of our communities are absolutely dependent on producers retaining the beneficial ownership of their grain from farm gate to end-use customer.

Thank you for allowing the CWBA to contribute to the work of the Standing Committee on Finance

Respectfully submitted – October 3, 2016 On behalf of the Canadian Wheat Board Alliance