ISSN 0542--5492 Second Session - Thirty-Second Legislature otlhe Legislative Assembly of Manitoba STANDING COMMITTEE on AGRICULTURE 31-32 Elizabeth 11 Chairman Mr. A. Anstett Constituency of Springfield VOL. XXXI No. 7 - 1:00 p.m., THURSDAY, 21 APRIL, 1983. PrinttKI 11y the OffiCe ot the a.-.s Prinlflr. Province ot --

MANITOBA LEGISLATIVE ASSEMBLY Thirty-Second Legislature Members, Constituencies and Political Affiliation Name Constituency Party ADAM, Hon. A.R. (Pete) Ste. Rose NDP ANSTETT, Andy Springfield NDP ASHTON, Sieve Thompson NDP BANMAN, Robert (Bob) La Verendrye PC BLAKE, David R. (Dave) Minnedosa PC BROWN, Arnold Rhineland PC BUCKLASCHUK, John M. Gimli NDP CARROLL, Q.C., Henry N. Brandon West INO CORRIN, Brian Ell ice NDP COWAN, Hon. Jay Churchill NDP DESJARDINS, Hon. Laurent St. Boniface NDP DODICK, Doreen Aiel NDP DOERN, Russell Elmwood NDP DOLIN, Mary Bath Kildonan NDP DOWNEY, James E.

Arthur PC DRIEDGER, Albert Emerson PC ENNS,Harry Lakeside PC EVANS, Hon. Leonard S. Brandon East NDP I EYLER, Phil River East NDP FILMON, Gary Tuxedo PC FOX, Peter Con cordia NDP GOURLAY, D.M. (Doug) Swan River PC GRAHAM, Harry Virden PC HAMMOND, Gerrie Kirkfield Park PC HARAPIAK, Harry M. The Pas NDP HARPER, Elijah Rupertsland NDP HEMPHILL, Hon. Maureen Logan NDP HYDE, Lloyd Portage la Prairie PC JOHNSTON, J. Frank Sturgeon Creek PC KOSTYRA,Hon. Eugene Seven Oaks NDP KOVNATS, Abe Niakwa PC LECUYER, Gerard Radisson NDP LYON, Q.C., Hon. Sterling Charleswood PC MACKLING, Q.C., Hon. AI St.

James NDP MALINOWSKI, Donald M. St. Johns NDP MANNESS, Clayton Morris PC McKENZIE, J. Wally Roblin-Russell PC MERCIER, Q.C., G.W.J. (Gerry) St. Norbert PC NORDMAN, Rurik (Ric) Assiniboia PC OLESON, Charlotte Glad stone PC ORCHARD, Donald Pembina PC PAWLE Y, Q.C., Hon. Howard R. Selkirk NDP PARASIUK, Hon. Wilson Transcona NDP PENNER, Q.C., Hon. Roland Fort Rouge NDP PHILLIPS, Myrna A. Wolseley NDP PLOHMAN, John Dauphin NDP RANSOM, A. Brian Turtle Mountain PC SANTOS, Conrad Burrows NDP SCHROEDER,Hon. V.c Rossmere NDP SCOTT, Don lnkster NDP SHERMAN, L.R. (Bud) Fort Garry PC SMITH, Hon.

Muriel Osborne NDP STEEN, Warren River Heights PC STORIE, Jerry T. Flin Flon NDP URUSKI, Hon. Bill lnterlake NDP USKIW, J1on. Samuel Lac du Bonnet NDP WALDING, Hon. D. James St. Vital NDP

LE GISL ATIVE ASSEMBLY OF MANITOBA THE STANDING CO MMITTEE ON AGRICULTURE Thursday, 21 April, 1983 TIME - 1:00 p.m. LOCATION - Brandon, Manitoba CHAIRMAN - Mr. Andy Anstett (Springfield) ATTENDANCE - QUORUM - 6 Members of the Committee present: Hon. Messrs. Bucklaschuk, Plohman, Uruski and Uskiw Messrs. Anstett, Blake, Carrol l, Downey, Harapiak, Manness and Orchard. WITNESSES: Mr. Lorne Parker, Manitoba Farm Bureau Messrs. Allan Chamb ers and Sheldon Fulton, Manitoba Farm Bureau Mr. Bill Moore, NDP Candidate in the May 24th Federal Election Messrs. Doug Campbell and Peter Gosman, CN Rail Mr.

Keith Proven, National Farmers Union, Local 516 MATTERS UNDER DISCUSSION: Western Transportation Initiative proposed by the Government of Canada. MR. CHAIRMAN: Com mittee come to order please. Ladies and gentlemen, we have a quorum. Before we begin, I would like to apologize to those mem bers of the public who are here, for that half of the com mittee which arrived a little late. We were on a slower plane, I guess. My apologies for us getting under way a few minut es late. Before we begin, I would like to introduce the members of the comm ittee. On my far left, Mr.

Henry Carron, the Member for Brandon West; beside Henry, Mr. Jim Downey, former Minister of Agriculture, the Member for Arthur; beside Jim, Clayton Manness, the Member for Morris; the gentlemen in the beard is Dave Blake, the Member for Minnedosa; immedia tely beside me is the Honourable Sam Uskiw, Minister of Highways and Transportation, the Member for Lac du Bonnet; on my far right, I don't know if that was intentional, Don Orchard, the Member for Pembina; beside Don, John Bucklaschuk, Minister of Consumer Affairs and Co-operative Development. John is the MLA for Gimli; beside him, Harry Harapiak.

Harry is the MLA fo The Pas; next to Ha rry, John Plo hm an, Minister of Government Services, the MLA for Dauphin; last but not least, the Honourable Billie Uruski, Minister of Agriculture. My name is Andy Anstett. I am the chairman of the com mittee and the MLA for Springfield.

Ladies and gentlemen that's your comm ittee. 142 The authority to hold these series of meetings is vested in a resolution passed by the Legislative Assembl y unanimously on March 15 th of this year. lt reads as follows - I hope everyone has a copy of the resolution and the accompanying document, if not there are additional copies by the door you came in. WH EREAS, on February 22, 1983, the Saskatchewan Legislature unanimously passed the following resolution: Because the proposals advanced by the Minister of Transport for Canada to replace the statutory Crow rate: 1.

Do not recognize the principles of the statutory rate for grain; 2. Do not provide cost protection for farmers; 3. Do not recognize that grain must be sold in a competitive international market; 4. Do not remove the distortion in rates by including all prairie crops and their products under the new structure; 5. Do not deal with unacceptable high taxation levels on farm input such as fuel; 6. Do not provide sufficient performance gu arantees for the future gr owth and development of all facets of prairie agriculture; 7. Prescribe an unacceptable limit of 31.1 mill ion tonnes for subsidized shipments; 8.

Provide central Canada with further artificial processing and livestock incentives; and 9. Are not supported by a consensus of Western Canadians. And because these are fundamental concerns and must be dealt with in any plan for the western rail transportation, this Assembly therefore rejects the Pepin Plan. THEREFORE

BE IT RESOLVED that the Legislative Assembly of the Province of Manitoba concur in the above resolution passed by the Saskatchewan Legislature; and BE IT FURTHER RESOL VED that the Standing Committee on Agricu ltur e of the Legislature be authorized: (

a) To inquire into matters relating to the Western Transportation Initiative proposed by the Government of Canada; (

b) To hold such public meetings as the committee may deem advisable; (

c) To report to this Session of the Legislature. Ladies and gentlemen, that is our manda te. The primary purpose then of the meetings is pointed out under (

a) in the Resolve portion of the resolution, to enquire into ma tters relating to the Western Transportation Initiative. When you came in at the door, in addition to a copy of the resolution, you also found an outline of the Federal Western Transportation Initiative. lt is fairly self­ explanatory. At previous meetings, I have read the full four pages or five pages of the Western Transportation Initiative. Some members have suggested that because

Thursday, 21 April, 1983 everyone has copies and most people are familiar with it we may wish to dispense with that reading. What is your will and pleasure? lt is agreed that we dispense with the reading. Ladies and gentlemen, if anyone is unsure as to exactly what the broad outline of the Pepin proposal is, I suggest to them they consult then the document that was at the door. Western Transportation Initiative 1. The Federal Government will im plement the principle recommendations of the Gilson Report for the four-year period, 1982-83 through 19 85-86. 2.

The Federal Government has defined the Crow Benefit Payment as representing the difference between the amount paid by producers, under the Crowsnest Pass rate, and the actual cost of moving grain during the crop year 1981- 82 and has calculated it to be $65 1.6 million. The average Crow rate was $4.89 per metric tonne for the Prairie region and $3.65 per metric tonne for Manitoba. 3. Starting in the 19 83-84 crop year, producers will pay (

a) The total cost of any future volumes of grain and grain products exceeding 31.1 million tonnes; (

b) The first three percentage points of railway cost increases due to inflation in the crop years 19 83-84, 19 84-85 and 1985-86; (

c) The first 6 percentage points of railway cost increases due to inflation for the crop year 19 86-87 and beyond. 4. Blended freight rates set by April 30th of each year for the following crop year by the Canadian Transport Com missi on, after consu ltation with grain shippers and railways. 5. Freight rates will remain generally distance related. 6. (

a) Under the Gilson recommendation, the federal contribution will be divided between the railways and the producers. In 1982-83, 100 percent of the federal contribution will go to the railways. After that the proportion paid to the railways will decrease over time to a minimum of 19 percent by 19 89-90. In 1989-90, 81 percent will be paid to producers. (

b) The method of paying the government contribution will be that recommended by Dr. Gilson, but the method will be reviewed in 19 85-86, when the split is approximately 50 percent to each party. Parliame ntary approval will be required to continue any further progression of payments to the producers. 7. Payments to producers will be on a acreage basis, including cultivated acreage devoted to non-Crow crops and to Crow grain used on the Prairies, not on the basis of tonnes of Crow grain shipped by rail.

Since this 143 would mean less money per tonne of grain shipped, the Federal Government will pay the producers an additional $204 million for the crop years 19 83-84 to 19 85-86, as an agricultu ral adjustment paymen t. The Federal Gover nment will com mit an additional $56 million after 19 85-86, if the phased payments continue to 19 88-89. 8. Canola oil and meal and linseed oil and meal will be included under the new statutory rate regime in 19 83-84.

For the crop year 1982- 83, these products will be assisted through an exis ting program in the absence of legislation that will pay the difference between the statutory rate and the current minimum com pensatory rate west of Thunder Bay. However, the Federal Government believes the commercial rates for these products beyond Thunder Bay to eastern markets should be established. Current ly, the railways charge a lower minimum comp ensatory rate on these products. 9.

A new grain transportation agency will be established to perform the current duties of the office of the grain transporation co­ ordinator and will have an enlarged mandate, including car allocations, performance and service guarantees, and im proved efficiency and capacity in the transporation system. 10. The Canadian Transport Commission will undertake the necessary major costing reviews every four years in consultation with grain shippers and railways. 11. The Federal Government will purchase up to 3,840 more hopper cars over the next three fiscal years.

Timing of the purchases will be made with the advice of the new grain transporation agency. 12. The Federal Government will commit an additional 670 million to branch line rehabilitation this decade. The future of the Branch Line Rehabilitation Program will be reviewed in 19 85-86. 13. In accordance with the Gilson Report, the railway compensation of 100 percent of the long-run variable costs with a 20 percent contribution to overhead costs will be phased in. 14. The railways will receive 313 million for the crop year 19 82-83 as a payment towards their shortfall in revenues in that year. 15.

Cos t savi ngs due to branch line abandonment or acquisition of government hopper cars will accrue to the Federal Government and shippers. 16. The Federal Government has agreed to extend special additional capital cost allowances to the railroads for investment in railway assets during the period January 1, 1983, to December 31, 1987. 17. In return for the impl ementation of the new rate regime on grain and the extended capital cost allowance, the two railroads have indicated they will: (

a) Increase investment in 1983 in Western I I

Thursday, 21 April, 1983 Canada by 242 million and investment in Eastern Canada by 33 million; (

b) Increase investment in the period 1984- 87 in Western Canada by $2.592 billion and investment in Eastern ,Canada by $395 million; , (

c) Meet specific gr ain transpor tation performance and branch line maintenance obligations. 18. Under Industrial and Economic Development Initiatives, the Federal Government will commit $75 million over the next five years to: (

a) Develop railway equipment manufacturing industry; (

b) Develop processing of agricultural products in Western Canada; (

c) Assist suppliers of equipment and material for future resource development projects in Western Canada; (

d) Assist western firms to develop new products and im proved productivity and com petitiveness. 19. Under Agricultural Development Initiatives, the Federal Government will undertake a five-year $17 5 million package of agricultural development initiatives, including: (

a) Im proving local feed grain self-sufficiency in non-Canadi an Wheat Board designated areas of Canada; (

b) Assistance to farms and farm organizations for activities leading to im proved sustainable incr eases in production of gr ains, livestock and special crops in the designated area of the Canadian Wheat Board; (

c) Assistance to the food processing industry in Quebec; (

d) Soil and water conservation research in the Prairie provinces; (

e) Development of a crop information system by Agriculture Canada; (

f) Development of an electronic marketing system by Agriculture Canada. 20. In 19 85-86, the Federal Government will review the following:

(1) The sharing of grain transportation costs between producers and the Federal Government.

(2) The system of payments to producers and progressing reducing distortions in the western agricultural economy.

(3) The possible imp act on eastern agriculture.

(4) The system of railway performance guarantees.

(5) The freight rates required to provide appropriate comp ensation to the railways.

(6) The future of the Branch Line Rehabilitation Program. We have a long list of individuals who have indicated they wish to speak to the com mittee today. I will read through the list and then ask if there are any additional people who wish to have their names added to that 144 list. Mr. Lorne Parker, President of Manitoba Farm Bureau; Mr. Bill Moore, private citizen; Mr. Doug Campbell, CN Rail; Mr. Keith Proven, National Farmers Union, Local 51 6; Mr. Wayne Sotos, National Farmers Union Local 505; Mr. Bill Nicholson, Shoal Lake Local Commi ttee, Manitoba Pool Elevator; Mr. Dennis Heeney, private citizen; Mr.

Ken Sigurdson, Manitoba Pool Elevator Delegate; Mr. Larry Maguire, Souris Valley Farm Business Association; Mr. John Whitaker, private citizen; Mr. Brad MacDonald, private citizen; Messrs. Tony and Allan Rile y, Claris Nicholson, John Mitchell, Alex McWilliams, lan Robson, Emil Shellborn and Henr y Rempel. Is there anyone in the audience who wishes to make a presentation today whose name is not on the list? Seeing none, Mr. Lorne Parker please. MR. L PARKER: Our presentation today from the Farm Bureau is in three parts, Mr. Chairman. I will give the overview, Mr.

Allan Chambers will give the presentation or that part of it in regard to method of payment, and Mr. Sheldon Fulton will make the presentation in regard to the safety net. The Crow debate from our prospective is one of the most interesting "hodgepodges" of economics and politics and emotions that any one of us is likely to experience. The gut issue is change -and change means different things to different people.

One group of people argue that any increase in grain freight rates would spell the death knell of almost every small town in Western Canada; while others suggest that higher grain shipping costs would see unlimi ted opportunities for further processing within the prairies. The truth is perhaps somewhere down the middle. Why was the Pepin plan brought forward? Back in 19 79, Jim Deveson and Mac Runciman, former presidents for Manitoba Pool Elevators and United Grain Growers respectively, gave some real leadership on the statutory grain freight rate issue.

They basically said that the status quo was no longer good enough. The railways would have to be paid if the grain was to be moved and the farmers would have to pay a share of increasing costs under the strict rules of a new federal statute. Why did I argue vociferously within the Canadian Wheat Board Advisory Commi ttee to persuade the board to buy 2,000 hopper cars with farmer's mo ney when no one else would place additional car orders? One need go no further then the Canadian Wheat Board Annual Reports to see why the pressure for change was gaining momentum.

Carry-over of stocks of all grains on prairie farms at July 31s t was 3.3 million tonnes in 1975. lt went up year by year to 3.6, 9.1 million in '77; 8.9 in '78; 13 .3 million tonnes in 19 79. I would like to quote directly from two Canadian Wheat Board Annual Reports. I have them here with me, but I took the quotation out and put it into the text. In 1977-78, the Board said and I quote: ''Producer deliveries exceeded rail shipments by nearly 3 million tonnes, resulting in serious congestion in country elevators in the latter part of the crop year.

Rail shipments fell well short of market requirements causing serious vessel lineups. This, together with other disruptions drained terminal stocks, resulted in high demurrage costs, and forced the deferral of a large quantity of export commitments.

Thursday, 21 April, 1983 "The effects of this situation, of course, were felt for some time after the close of the 1977- 78 crop year." And again, in 1978-79 the Board said this: "The cumu lative effect of all of these delays was extensive. The Wheat Board was once more forced to forego sales opportunities and defer shipments against sales contracts already made. Rail shipment s from country elevators to terminals dropped by 1. 2 million tonnes.

This meant lower quotas which in turn reduced producer deliveries by 3.8 million tonnes from the previous crop year." A conservative estimate of lost grain sales revenue in those two yers is $1 billion. Is it any wonder that there was growing pressure for change? In Novem ber, 1979, the Farm Bureau staked out a policy position which empha sized that the issue was much wider than just statutory grain. While statutory grain rates were frozen, inflation was impacting on the commercial rates for livestock and livestock products, non-statutory grains and the end products from our oilseed and crushing industry.

The resulting distortions were serious and escalating. The Farm Bureau took the rather enlig htened position in 19 79 that an increasing portion over time of any federal subsidy would have to be paid to farmers on some sort of acreage related basis. Articulate spokesmen for the livestock, poultry and special crop sectors within the Bureau were seeking greater resource neutrality in the production arid transport of their products.

That should not be surprising when firstly, in most years, cash receipts in Manitoba from the sale of cattle, calves and hogs exceed wheat, and secondly, when roughly 9 percent of our seeded acreage is in miscellaneous crops - 894,000 acres in 1982 - most of which do not now move under Crow. We were unable to come up with an exact figure on the dollar value of miscellaneous crops but an educated guess would suggest that they make up at least 15 percent of farm cash crop receipts. Let me restate the Farm Bureau 1979 policy position:

(1) The railway revenue shortfall, and remember at that time it was estimated at $225 million, be paid in perpetuity to the railways.

(2) We argued that canola and flaxseed oil and meal should be put under the statutory rate.

(3) Prairie feed grain prices to be backed off from export position by the full real cost of transport.

(4) The federal share of future cost increases to be paid to farmers on some form of acreage related basis. The Western Agricultural Conference, which consists of the Saskatchewan Federation of Agriculture, Unifarm in Alberta, United Grain Growers and the Manitoba Farm Bureau adopted a transportation policy in January, 1980. lt had simi larities to the Farm Bureau position but was silent on our point (4).

In the event that the eventual decision was to pay all federal subsidy money to the railways, we got tacit agreement from the WAC that it would support inclusion of all special crops under the statutory rate but we never got it in writing in the WAC policy. From January, 1980 forward the Farm Bureau was prepared to support, and did support, the WAC policy until parts of it were proven unworkable. The WAC transportation package - and ·1 stress the word package - was a key element in getting to the negotiating table. I have attached a couple of appendix, 145 both of which are letters to the Prime Minister.

One was written on February 11 , 19 81. lt was signed the presidents of the four federations and the United Grain Growers that make up WAC, plus the presidents of the three Pools. Later on April 20, 19 81, the Farm Bureau wrote the Prime Minister again and it was signed by all member groups of the Farm Bureau at that time. I don't intend to read those letters, but you can look at them for yourselves. (See Appendix A and Appendix

B) The Manitoba Farm Bureau participated fully in the negotiation exercise headed by Dr. Clay Gilson. Our representatives were Allan Chambers, who is with me today; Bob Douglas, our secretary and myself with Sheldon Fulton who is also here today as our consultant. As chief spokesman, my bottom line man date was to seek a fair and equitable solution for Manitoba farmers no matter what their enterprise. I would draw your attention in particular to one of the Federal guid eli nes laid down for the Gi lson negotiations and that. is Appendix C. Of particular interest is the one I've quoted. "5.

The economic distortions within the agricultural sector stemming from the statutory rate should be reduced, without recourse to new transportation subsidies for crops not covered by the present statutory rate, or for goods such as livestock and processed agricultur al products." That gu ideline prevented us and Gi lson from recommending any massive extension of the statutory rate structure to other grain and products. We were successful in getting canola and flaxseed oil and meal included for two reasons: 1.

The crushers made a pretty good case that imp ending bankruptcy if they didn't get im mediate relief, was the scenario. 2. Of course, the feds had in place certain ad hoc subsidies which had set a precedent and we could argue that they weren't entirely new subsidies. Early in the Gilson exercise it became apparent that the Western Agricultural Conference proposed to back off feed grain prices by the full, real cost of transport was unworkable. We knew it was a weak link but the Western Agricultural Conference hoped that the grain co-operatives could figure out a way to make it work.

That didn't happen between Janu ary, 1980 or the start of the Gilson negotiations in February, 1982, a span of two years. The annual cost of recycling grain into the elevator at a price reflecting the subsidi zed cost of rail transport was estimated to be in excess of $10 0 per year, most of which would come out of the Canadian Wheat Board barley pool. To get some perception of the magnititude of the distortion problem, the cost to extend the Crow Benefit to non-statutory grains and the temptation to recycle feed grains I refer you to Appendix D, a document that we tabl ed during negotiations last April.

And so it was that with some three weeks to go in the Gilson negotiations, we still had no middle ground that could deal with the major problem of economic distortions; nor had any organization made an offer to pick up a share of future cost increases. Since the bureau had a degree of flexibility on these two points, we suggested two things: I

Thursday, 21 April, 1983 First, that farmers should pick up the first 3 percent annually of future cost increases. Given that degree of inflation protection, the Farm Bureau was prepared to see farmers accept all cost increases on volumes in excess of 31.1 million tonnes. lt appeared as though inflation was likely to increase faster than volume, admittedly a judgment call. The suggestion of making the Federal Gover nment responsible for any cost increases over 3 percent on the first 31 .1 million tonnes is sound. If inflation is kept down to 3 percent or less, everyone wins.

If runaway inflation is the scenario, then Ottawa toots a major portion of those increased costs. Secondly, we suggested that there should be a phasing in of federal subsidy payments with 100 percent of the federal subsidy in the first year going to the railways and in subsequent years any increasing proportion of the subsidy being paid to farmers. This latter suggestion was qualified by the rider that a certain minimum sum should always be paid direct to the railways to give some additional leverage on their performance. Dr.

Gilson recommended a phasing in of payments to producers with a maximum of 81 percent of federal subsidy to farmers by 1988, '89, '90, and beyond. The 3 percent figure for annual cost incr eases was recommended to 19 85-86 in Gi lson's report, but because of financial parameters set by the Federal Government, Gilson went to three, plus a half of the next three, to a maximum of 4.5 percent annually beyond '85-86. Upon release of the Gilson report last July, the Farm Bureau endorsed it in principle but said that we weren't happy with the cost-sharing formula beyond '85-86.

In the opinion of the bureau, major tinkering with the Gilson package of recommendations is dangerous. There is balance, there is fairness in that package in the long run. Over time, mo st of the economic distortions within the prairies would be removed . Failure to use the federal legislation and federal dollars in a way that does address the distortion problem for all sectors would surely lead to pressure on prairie Provincial Governments to provide counter subsidies.

The Farm Bureau warned Premier Pawley and his Cabinet of this possibility in January, 1982, and repeated the warning at a meet ing with the Premier and Mr. Uskiw during the Gilson exercise. Of the three prairie provinces, Manitoba can least afford such action. The recent Alberta subsid y to canola crushers is an unfortunate example of the effect of this type of action on the Province of Manitoba. Much of the initial criticism in Western Canada to Gilson's report centred on method of payment.

Those who favoured payment to the railways failed during Gilson to come up with any solution to the distortion problem for feed grain users. In tabling the Western Feed Grain Rate Equalization Fund, or WREF proposal, in August, 1982, the Pools did recognize that there was a serious problem of distortion for feed grain users if the subsidy is paid to the railways. The WREF proposal received no government support at either the federal or provincial level and very little amongst individual farmers within the Canadian Wheat Board area. Nothing has been heard of the WREF proposal in recent months.

That leaves payment to farmers as the only hope for fair and equitable treatment insofar as the livestock, poultry and special crop sectors go. 146 Since the release of the Western Transportation Initiative on February 4, 1983, we have seen more and more of the western criticism aimed at the overall cost­ sharing formula beyond '85-86. That is as it should be. The Federal Government is suggesting that farmers pick up the first 6 percent of cost increases beyond '85-86 while retaining the volume cap at 31.1 million tonnes.

That is not acceptable to the bureau or, as far as I know, to any other farm organization in Western Canada. Some concessions will have to be made during the parliamentary process in regard to cost-sharing, and the Farm Bureau was confident that if we get our act together out west, the government will listen. Before moving to some specific recommendations for your consideration, Mr. Chairman, let's look at the government's estimated dollar commitment for the four years ending in 1985-86.

The first four, totalling $1.4 billion, and that is the interim payment, the branch line rehabbing the branch-line subsidies and, perhaps, I threw in the hopper car purchases and leases. That part might be secure. I stress "might" because I'm not sure and I don't think any of you are on the hopper car one, because no contract has been signed. The last four, including the Crow benefit payments, the federal share of cost increases, the agricultural adjustment payment and I suppose most of the admini stration, totalling $2.3 billion, would likely be lost.

In other words, I said Items 5 through 8 listed above are totally dependent on passage of the proposed legislation. I would remind you again that our letter to the Prime Minister signed by the people I mentioned earlier, the first one, accepted the suggestion that the government commitment was contingent on successful negotiations. If the proposed legislation were not introduced or were totally defeated in parliament, we stand to lose an infusion of $2.3 billion federal dollars into Western Canada between now and '85-86. That in itself would be an utter disaster, but that's only part of the potential loss.

If the required rail capacity is not in place before the movement of other bulk commodi ties, forest products, and general freight pickup, then grain movement will again be impeded as it was in 1977- 78-79. Every million tonne shortfall on grain movement costs farmers roughly $200 million. Our exports in 1980-81 totalled 24 million tonnes, in '81- 82 we reached 27 million tonnes. In the current crop year, we could see, if we're fortunate, an export level of 30 million tonnes.

The Farm Bureau hates to contempla te a situation where a lack of foresight, a lack of rail capacity forced us back to an export volume of 24 or 25 million tonnes. That is why, on instructions from the Farm Bureau executive, I wrote the Prime Minister on March 28, 1983, and we've attached that letter as well. In effect, we said to him the imp ortant thing now is to get the bill tabled. In the opinion of the bureau, the deal is a good one through '8 5-86.

Beyond that, we have concerns and our recommendations for amendment in the proposed legislation include, first, a reduction of that 6 percent sharing formula beyond '85-86, we've said here in the text, to 3 percent, which was our original position or failing that, at least to the minimum of 4.5 percent that Gilson had in his report. Second recommendation: The firm commitment, in principle, in the bill - our understanding now is that

Thursday, 21 April, 1983 they're proposing they'll consider this idea in the next three years and im plement it at the review period. We want a firm comm itment in principle, in the bill, to a safety net. We're suggesting at an 8 percent level on grain freight rates as a percentage of the weighted farm gate price of the three major grains. A proper safety net would, in our opinion, (

a) provide some level of price protection for grain producers in years when grain prices were low and export volumes high relative to freight costs, and (

b) would reduce the level of uncertainty facing grain producers in the long run about excessive freight costs under the Crow amendment proposals. Our third recommendation, Mr. Chairman, is an amend ment to the proposed bill, removing the legislative action necessary to allow the phasing in of payments to producers to proceed as in Gilson's Report. We are asking for the support of the Manitoba Government in these proposed amendme nts. That concludes my part of the presentation and I would turn it over to Mr. Cham bers for the second part.

We would prefer to make the whole presentation and then we would entertain questions. MR. CHAIRMAN: Please proceed, Mr. Chambers. MR. A. CHAMBERS: Thank you, Mr. Chairman. My initial comments reiterate some of the comments that Lorne had made but I would just begin by saying that during the Gilson hearings and in subsequent months, the Manitoba Farm Bureau representatives actively pursued ideas that would achieve comp romise on the contentious issue of method of payment. Last summer we were active in developing the concept of the Producer Credit Accounts.

I might also mention that the Manitoba Hog Board had an idea that would attempt to measure the actual grain production from each producer and by keeping very detailed records of sales of all grains plus livestock, and we actively explored that notion, it was interesting that we were exploring that notion about the time that the Pools were developing their WREF proposal and it floundered on the same shoals that it would require quite excessive gathering of information to make it work. During the Gilson process, we were the first to propose a phase­ in of payments direct to producers.

Throughout this activity we continued to seek a solution that best met the twin objectives of (1) largely protecting incomes of grain producers and (2) to remove the major portion of existing price distortions against all prairie grain consumers. As Lorne has outlined, the various proposals, coming from the people that prefer the payment to railroads, are no longer on the table and they now have no proposals for remo ving distortions on feed grains, in particular. Since Mr.

Pepin's announcement of February 1st, we have participated in a Method of Payments Task Force to work to protect the financial interests of all Manitoba farmers. Our purpose today is to provide the comm ittee with an understanding of how the system of payments will work and some background on the related policy decisions that have been made. We'll begin with the mechanics of the direct to farmer payments.

The intent is to compensate as closely as possible those producers who previously had the 147 opportunity to produce and ship grain at the Crow rate and who will now be shipping grain at higher per-tonne freight rates. The calculation of an individual farmer's payment would involve four items: mul tiplying the cultivated acres times a local-weighted average yield times the local Crow rate times a multiple of Crow. The latter figure will be determined by the stage of the phase-in of government payments and will vary yearly. The sources of the data that will be required to make the calculations are: (

a) provi ncial-munic ipal assessment records and from that we would acquire the actual cultivated acres per parcel of land. We have done some prelimi nary work that would indicate that the Wheat Board books are not accurate enough for our purposes; (

b) The Wheat Board permit books; this is to provide the local crop rotations for one part of the calculations and secondly, for details of land parcels that are farmed by each operator so as to determine where the payments will go; and (

c) Crop Insurance Risk Rating, to provide local, long-term yields by soil type. The purpose of this is to provide the productivity adjustment in the calculation. The definition of cultivated acres that we're using is defined by the provincial­ muni cipal branch in each province, but excluding what might be called "perman ent pasture" or "range land" in Alberta. What we are attempting to do is to include that land which does now or could easily shift into growing Crow grains. I include a sample calculation.

I don't have some of the exact data but have gone through an example of a farmer near Arborg and hope the Mini ster of Agriculture pays particular attention to this example. I'm not sure if this farmer produces turkeys as well on his farm. This Farmer X has 1, 000 acres of cultivated land. He has 750 acres of soil type F, which on the crop insurance rating is medium quality and 250 acres of J land, low quality.

To calculate how much he would receive in compensation in 19 83-84, which would be the first year of the phase-in of payments, we would first calculate a comp osite yield, which I do on a couple of pages in example, but in this case, the average weighted yield on soil type Fi n risk zone which should be 15, not 35 as in the text, is .51 tonnes per acre. The weighted yield on the soil type J, which is poor quality, is .31 tonnes per acre. The second item that 's required is the local transportation factor which is just an adjustment on the Crow rate.

In 1983-84 the government compensation to producers will be approximately 1. 5 times local Crow; the 1.5 may not be exactly right after all the calculations are done, but it will be very close. The local rate at Arborg is $3.53 for tonne and you multiply by one­ and-a-half which would provide us with a local factor of $5.29 per tonne. I would just point out that if you were in Brandon - I don't have the exact present rate in Brandon but I believe it's about $3.80 or so- it would also be multipli ed by 1. 5 and you would have a compensating adjustment up for the Brandon area.

Swan River, which is further away again, would have a higher per-tonne rate at present and it would also be adjusted higher accordingly because of distance. The third factor, (

c) compensation per acre, is a calculation of this per-tonne rate above by each soil •

Thursday, 21 April, 1983 type, time s the yield per acre, the composite yield, $5.25 times .1 or $2.70 per acre. On soil type J, the calculation is again the same rate per tonne times a lower rate on a poorer type of soil and comes out to $1 .63 per acre. The total compensation for this farmer in the first year of the phase-in of payments then, would be 750 acres of soil type F multiplied by $2.70 or $2,025; and 250 acres of soil type J times a lower rate of $1 .63, $407, which comes out to $2,432.00.

The intent is that this would compensate him for the higher freight rate that he would actually pay on grain that he would ship. There are a numb er of remaining questions of admin istrative detail that the commit tee is working on and I would like to go over some of them with the commi ttee so that you're aware of some of those discussions. The first is in the calculation of the local weighted average yields.

The original proposal by the Western Comodity Coalition included an adjustment for regional rotations to adjust for different amounts of summer fallow and/or production of higher per acre yielding crops such as barley. They proposed using seeded acres as reported in Wheat Board permits as a source of the rotational data. These calculations do ind eed achieve the adjustment proposed, but we in the Bureau felt they had two main disadvantages: (

a) lt makes the entire calculation more difficult for individual farmers; and

b) lt creates boundaries where compa rable farms will be treated somewhat differently, depending on which side of the boundary you are on. The calculations for my example was done for soil type F for Arborg, and I would admit that I don't have the access at this point to the actual Wheat Board rotational data, so I've did an example here. If wheat represented 35 percent of the acres in that area, it would be multipli ed by the productivity rating that the Crop Insurance has put on it of .661 tonnes per acre, which comes out to 23.1 for the sake of a calculation here.

If, for examble 30 percent of the acres were in barley, you multiply by the rating that the Crop Insurance puts on barley, which .678. Flax, I used an example of 5 percent, which is times a lower average yield of .258; rape, if we took it as 10 percent, or canola times .34, which is the rating provided at Arborg. Then I used an example of - in the text it says forage seed, it could be forage hay.

The discussions there in arriving at an average tonnage on that, to make it compa rable the discussion is involved around using a weighted average of the other crops in the area, so I said if there were 10 percent of that it would be times .563, which is that weighted average.

If 10 percent were summer fallow, it would be put in at zero rating, you get a total, divide through by your total acres in the area - in this case I had my percentage add up to 100, but in the actual case you would have so many thousand acres and divide through and for the risk area up there it came out to . 507, which I rounded off to .51 tonnes per acre in my calculation.

During the Gilson process and again during the work on the method of the Payment Comm ittee, the Farm Bureau has argued that simply using a long term yield of wheat on stubble as the factor would effectively adjust for the differences in summer fallow. We further argued that adjustments for historical crop choices, such as for barley, were not necessary. 148 We understand that the initial draft of the legislation will be written as first proposed by the Commodity Coalition.

If sample calculations done by Can­ Agriculture staff are done when the data is all in place, indicate that our proposal will work, that proportion of the calculation written into the legislation adjusting for rotation will be given zero weight. That decision won't be made until those calculations are done by the staff. The second area of discussion has been splitting the payments by provincial boundary initially. Dr. Gilson recommended an initial splitting the payment by the provinces, mainly due to the lack of uniformity between Crop Insurance data between provinces.

During the work of our task force, a method to overcome these difficulties has been devised. This removes a number of potential problems and will simpli fy the admin istration of the payments. At this point we're proceeding without the initial provincial split. An area that has had a lot of discussion at our commi ttee is what to do with the changes in the land base over time. Some land will be lost to urbanization. A more serious problem is new land that will be brought into cultivation.

This is a particular concern in Alberta and people in the Peace River district On one han d, the comm ittee did not want to encourage the cultivation of marginal land by operators just in order to collect the payments. We could partially control that by not making the payments available to the lowest land categories. Secondly, the use of muni cipal assessment data to determine the numb er of cultivated acres should make this aspect largely self­ policing. I should just enlarge on that perhaps.

What is visualized as a method of changing things over time would be, in terms of the cultivated acres, that the individual would have to go to the Municipal Assessment Branch to point out that he had more cultivated acres than previously. You can visualize what would happen to his property taxes when the Assessment Branch made that change, so we felt that on the lower quality land this probably would be self-policing. At any rate, that final decision on this has essentially been deferred. The decision at this point is to freeze the land base until the review period in '85-86.

At that point with data as to the magnitude of the changes that take place between now and then, this subject will receive further consideration as part of that major review in '85-86 and some decisions will have to be made then. Fourthly, the question of timing of payments. Farm groups have talked about one payment at the front. In fact, it appears that payments will be made in two or three payments during the year to fit in with the Federal Government's Cash Management Program.

A recent clarification that we had is that in cases where volumes shipped were less than 31.1 million tonnes, the money not going to the railroads would be paid to producers in an additional payment after the crop year . The regular payments will probably be made in the September and April period. On admin istrative considerations, the admin istration of the payments are to be handled by the Western Grain Stabilization Office located in Winnipeg.

This office has had experience with and access to the data required. lt has been estimated that extra staff, travel costs and mailing costs for the first two years to set up the

Thursday, 21 April, 1983 procedure could be $400,000.00. This would be reduced by at least 25 percent after the initial start-up period. There would also be one time start up costs of $200,000 for computer systems, program ming costs and the purchase of office equipment. Additional issues relating to the method of payment and the first one I want to discuss is definition of Crow benefit versus Crow Gap. We would define the Crow Gap as the shortfall of railway revenues for hauling grain. Dr. Gilson and the govennment have set this at 65 1.6 for the '81- 82 period.

The government in their material has been deferring to that figure as a Crow benefit. Throughout Gilson, we refer to the Crow benefit as that larger numb er which is the grain producer income benefit of the Crow, which include the higher prices on grain grown and sold within the prairie region in those years without the burdens and services so that it's the larger figure than just the railroad shortfall.

During the Gilson process, the Manitoba Farm Bureau tabled calculations of this additional Crow benefit on locally consumed feed grains, plus the funds that would be required to place all other crops under the rate. On one side, we were attempting to estimate the additional costs of that original Western Agricultural Conference policy position that Lorne described. Another way to define this same figure would be the amount of subsidies that will go to those acres producing non-Crow crops if all payments were made direct to producers.

We estim ated this figure to be 167 million per year and the calculations arriving at that are in Appendix D. The government has accepted this argument and has agreed to com pensate for this slippage during the phase-in period by additional payments of 204 million for the crop years '83-84 to '85-86. An additional 56 million will be commi tted if the phase-in is continued through to '88-89.

A concern has been expressed that those grain producers, who are now export grain shippers, will have a portion of their Crow benefit "diluted" by that portion of producer payments going to producers whose land is producing non-Crow grains. This concern has enough validity to warrant a more detailed examination. The actual amount of this dilution will not be known until all the data is gathered and the calculations done for direct payments. However, we offer the following to provide a better understanding of the issue:

(1) The purpose of the Agricultural Adjustment Fund is to eliminate this concern in the years '83-84 to '85- 86. Note that in these years payments to farmers will exceed increased freight costs by 204 million. Now, that's at '8 1-82 costs and volume to the extent that farmers pay the inflation sharing and extra volume, that excess will be dimi nished.

(2) In Manitoba, at least, we have very few producers who only grow Crow crops and ship all of them to market by rail cars. Almost everyone either grows some special crops, grows some forage, grows seed, feeds grain to livestock or sells grain to other feeders. On the other side, almost all the so-called special crop producers seed a significant portion of their farms to Crow grains because of rotational requirements. Therefore, most of the dilution or slippage that we've been talking about will be within farm boundaries and not from one farm to another.

(3) Perma nent pasture or range la nd is to be considered uncultivated land and set in the payment base and will not be included for payment. 149

(4) If the Crow benefit payments were to exclude certain crops over time, more land will shift into production that will receive the Crow benefit with resulting dilution of those benefits anyway. The phase­ in with the Agricultural Adjustment Fund gives all producers time to adjust to minimi ze the effect of slippage. Gentlemen, the above has not been an exhaustive discussion of all the technical details dealt with by the Task Force. lt has been a brief discussion of some of the main issues. We are prepared to respond to questions of elaboration on these or other issues.

Payments of a portion of the Crow benefit to farmers does indeed have admin istrative problems. However, we in the Farm Bureau remain convinced that these can be overcome without major problems. MR. CHAIRMAN: Mr. Sheldon Fulton. MR. S. FULTON: Thank you. In the Farm Bureau's consideration of the Pepin formula as it came out, there was some concerns that Lorne has raised with respect to what happens beyond 19 85-86.

The concept is to look at a potential of a safety net that producers can have confidence in, that should prices fall or volumes increase without corresponding increases in prices or inflation move it up, that they'll have some protection that the freight rate won't rise to an exorbitant level. In that discussion, we put together a proposal, which is being presented for consideration of this particular group, which we think addresses those major concerns. I'd like to present that particular proposal and then I can clarify with some numb ers or examples, if necessary, how in fact it works.

I think it's a fairly important proposal, because it does address most of the major concerns. In looking at the list of concerns in the rationale for this comm ittee, to address at least five of the concerns, five of your nine concerns that you've enumerated. Rationalization of an acceptable grain transportation network and stimulus to a waning secondary agriculture industry in Western Canada are laudable objectives. However, as with most social and economic initiatives, the proposals are not without limi tation.

The Pepin formula, as set out in February, is a fair synthesis of the dual objectives of moving grain to export more efficiently without continued detriment to the livestock in agricultural processing sectors on the prairies. lt achieves this balance of objectives during the current decade, but raises some ma jor conc erns and uncertainty about the future.

Concerns with respect to the 31. 1 million tonne cap and its im plications for future prairie grain production to the 6 percent contribution to inflation in rail costs to be assumed by producers, and to the relationship of the producer's freight bill to his grain prices, are with legitima te cause. lt is necessary to consider the implic ations of the Western Transportation Initiative both from its perceived im pact on producers as its various mechanisms come into effect, as well as from its real transfer of rail costs from the railways and federal Treasury to the producer. lt would appear that there exists a considerable consensus to avoid a dramatic increase in the producer's grain freight rate through various cost

Thursday, 21 April, 1983 deferral mechanisms, including the four-year phase-in for railway contributions on volume-related costs to progressive shift of government payments from railway to producer and the agricultural adjustment payments over the next three crop years.

In deed, in the release of the WTI in Febru ary, government indicated that one of the primary objectives of the major review proposed for '85-86 is to examine whether there should be a change in the producer's share of increased cost in the '86-87 crop year and beyond, bearing in mind trends and producer incomes prevailing and anticipated grain prices, etc.

As a result of the uncertainty and concerns within the formula, and given that a consensus may exist for long-term protection for the producer against an excessive freight cost relative to grain income, it should be constructive to consider a measure that will provide a ceiling to producer transport costs in any crop year relative to grain prices in that year.

Provided such a measure would not affect the government's current commitment of $3.7 billion over the four crop years '8 2-83 to '8 5-86, except under highly unusual circumstan ces, it may be expedient to incorporate this safety net in the current proposed legislation. This should lead to an alleviation of the uncertainty facing many producers concerning the potential magnitude of rail costs relative to grain income. Such a measure encompassing net producer rail costs as a maximum percentage of farm prices is proposed for consideration.

The major objectives of the safety net to increasing freight costs is to ensure that the producer maintains an ability to pay relative to his historic contribution to freight costs . The following formula inc lu des consideration of this historic relationship and provides for an assurance that whatever future volumes, inflation, or grain prices may be, the net freight cost will be below an acceptable maximum.

The calculation is first to determine a net producer cost per tonne, which would be equal to the total rail cost which inclu des all volu me-related costs, all contributions to railway, and all line-related costs, netted by the total amount of government payments, which includes all payments to the railways, direct to the producers and the federal share of any cost increases as well as the agriculture adjustment payment That would be divided by the total tonnage moved by rail under statutory rates. That will result in a net producer cost of moving grain by rail per tonne.

That number is then divided by a weighted average farm gate price per tonne which is to take the tonnage of all the statutory grains times their respective farm gate prices which are calculated by Stats Canada on an annual basis. That would then be divided by the total tonnage. That resulting ratio, which is the net producer cost per tonne, divided by his average farm gate basket price, should be less than 8 percent So if the ratio exceeds 8 percent, the Federal Government would pick up all of the difference in excess of that 8 percent numb er.

The major effect of this measure would be to provide producers in general, the certainty that their rail cost in any given year would not exceed 8 percent of their average farm gate prices for grain moved by rail. All calculations could be made from readily available information and thus it would facilitate im plementat ion. The payments in excess of 8 percent, if required, would 150 have to be made in such a manner so as not to affect the calculation of the subs equent crop year. Determination could not take place until after the end of the crop year when all the information is available.

Payments could be made in one of a combination of several means including: Reduction in the subsequent year's calculated freight rate through increase in direct payment to the railways; a direct payment to shippers of grain on the basis of the grain shipped, i.e. included in the Wheat Board final payment; and increase the payments direct to producers via the acreage payment. The 8 percent maximum is based on a historic relationship between producer contributions to rail costs and farm gate prices.

Calculations by the Canada Grains Council on the freight rate from Scott, Saskatchewan and a weighted basket price of wheat, oats and barley indicate an average share of 7.4 percent from 1925- 26 to 1981- 82. This ratio varies from a high of 41.4 percent in 19 32-33 to a low of 2.7 percent in 19 80-81. Neither of those are a reflective measure of a reasonable contribution of freight costs by producer; one is excessively high and the other is probably too low.

If one considers the 22 years, from the end of the Second World War, through to the introduction of The National Transportation Act and the corresponding introduction of branch line subsidies in 1967, as a period when the statutory freight rate, paid by producers was a fair proxy for total transportation costs, the ratio of the average freight cost of $4.88 per tonne to a price basket, including flax and rapeseed, of approximately $53 a tonne, is about 9.2 percent.

The proposed formula, taking into consideration that after the phase-in period, the producer would be prepared to pay up to 87 percent of this historic level -that's 87 percent of that 9.2 -the ongoing Crow benefit representing the difference. In the past decade, the average farm gate price has increased and as such the statutory rate, as a ratio, has declined. The following table sets out the average basket value, the maximum under the proposed ceiling. In the last 10 years, the average farm gate price of all grain shipped by rail is $13 7 a tonne.

The 8 percent ceiling would have seen that the maximum that the producer would have paid in that decade would have been $1 0.96 per tonne; what was actually paid was $4.88 and so on; for the last 5 years at $15 5 per tonne and a maximum of $1 2.40, and in '81- 82, the estimate of $17 5 per tonne as being the basket would suggest that the producer would be prepared to pay up to $14 per tonne. lt doesn't suggest that that's what he would pay but that would be the maximum that would be payable under this particular formula.

If the ceiling formula were in place then, an average rail freight cost of $14 in 1981- 82 would have been the maximum paid by the producer. What's the im pact on the Western Transportation Initiatives? The following table sets out some calculations for this maximum, using the figures presented by Transport Canada in conjunction with the release of the information in February of this year.

Since '81- 82 costs to producers were unchanged from the statutory rate of $4.89, it begins with '83-84 and emplo ys all of the factors for cost increases, tonnage and rail costs from the Western Transportation Initiative information and for their crop year calculations, so it looks at a progression from 32.1 million tonnes up to 40.8. The

Thursday, 21 April, 1983 net result - we'll go down to the last two lines and I won't go through all the num bers - but the per-tonne calculation for '83-84 is $3.68 per tonne. That's the net producer cost in '83-84, which suggests that the minimum farm gate basket price would be $46 before it would be triggered. Now we're currently sitting around $17 0 a ton so obviously it's not going to come into effect in '83-84. The '84-85 figure of $5.15 per tonne suggests a maximum or a minimum farm gate basket of $6.89; in '85-86 it's $86.00.

We get to '86-87, the $11. 18 net cost to the producer suggests $14 0 minimum gate before it would be triggered and that's within the realm of possibility, but unlikely, and it's not until we probably get into the 1990s that we'd actually have a concern, that if farm gate prices are low, if volumes are high, if inflation rates are faster than what are projected, then the cost to the producer will be higher than what his 8 percent figure is. What happens is that the assurance of the particular formula is that he would not pay anymore than 8 percent of whatever that numb er is.

In keeping with Tuesday night's activities, we've made some changes and you'll have that extra slip that we put into the document. Actually it didn't get photocopied - we didn't add $200 million to it, it just inadvertently didn't get put into the papers. As is apparent from these calculations, it is unlikely that the 8 percent ceiling would be of consequence beyond 1985-86. How ever, with tonnage increasing beyond the 31.1 million cap, and the producer bearing an increasing share of inflation by the early 1990s, the burden of freight costs could become onerous unless grain prices keep pace.

A 31 percent increase from 31 million tonnes of grain in '81- 82 to 40.8 million in 199 1-92, coupled with over a $1 billion increase in rail costs from the '8 1-82 requirement of $803 million to $1 .83 billion in 19 91- 92, $636 million of which is attributable to inflation, would require grain prices to increase by over 80 percent from the 1975 tonnage range in 1981- 82.

Now the assurance of this proposed formula is that should prices not increase by that magnitude, then the producer would have the protection of the ceiling. lt was the view of the Manitoba Farm Bureau that such an assurance must be forthcoming as part of the total initiative package. There is a series of computer outputs that follow, where we've done various other calculations and I won't go into it but we looked at what happens if we vary the inflation rate, what happens if we vary the tonnages, to see what the im pact is and what the effect of timing is.

Jus t in summ ary, what it really says is that if there is increases in inflation or in tonnages which exceed increases in grain prices, then the amount that the producer is going to pay would increase. What this does is that it assures the producer, it provides a certainty that he would pay no more than 8 percent of whatever his farm gate basket is. Now if we have any questions on this particular area I'm certainly prepared to go ahead and diagram how it all works and what the mechanics of it are, where the im plications are. Thank you. MR. CHAIRMAN: Thank you Mr. Fulton.

Are there any questions from mem bers of the commit tee or members on the Farm Bureau presentation? No questions? 151 Mr. Uskiw. HON. S. USKIW: My question is to any of the three gentlemen. The premise on which your position is based is the theory that, as I understand it, you may correct me if I'm wrong, the theory that by altering freight rates that we will have a much greater opportunity for diversified agriculture in Western Canada. lt sounds good if it were to happen.

My question is, if that were so, if we were to realize that objective pursuant to the changes that are being proposed, where would we market that increase production of other commodit ies? MR. CHAIRMAN: Mr. Parker. MR. L. PARKER: The first objective, Mr. Uskiw, is to remove the distor tions and remove some of the deterioration that we've seen in the livestock industry and in Western Canada.

If you look though at what has been happening to freight rates in regard to livestock products, it is obvious now that the cost of moving red meat from Calgary to the Pacific northwest coast is now considerably less than moving that same product to Montreal. There are opportunities there that perhaps have not been capitalized on to this point in time. What we should point out is that it is only in the last eight to ten years that the distortions have started to impa ct severely, and if inflation continues of course those distortions will rapidly escalate in the future.

If we're wrong, if there aren't the extra markets for red meats and processed products, remember that money, to the extent that it's in the farmers pocket, leaves him perfectly free to use it in any way he wishes. If he decides to continue to grow those grains that are under the statute rate he would do so. He would use part of that money to offset the extra cost of transport. If he decides to process that grain, either through hogs or cattle or to the local crushing plants, the same thing of course is true. That's what we mean in trying to get back as near as possible to resource neutrality. HON. S.

USKIW: I don't believe anyone is arguing - I shouldn't say anyone, that's a pretty broad statement -but certainly the Government of Manitoba and indeed the official opposition in Manitoba is not making the argument that the railways ought not to get fair revenue for moving commod ities. We recognized a need there. The problem that we have with the present package is that it's premised on assumptions that are supposed to enhanc e Western Canadian agricultu ral diversification.

Those assumptions were based on the theory that we would, in fact, be invading Eastern Canadian markets with new production in Western Canada. Because that was so over sold, the Government of Canada was faced into a position on having to buy expensive ads in Eastern Canada, which in effect are convincing Eastern Canadians that in no way are Eastern Canadians going to give up a market to Western Canadian beef, or poultry production, or even oil production. There will be guarantees to Eastern Canadians that they will not be dislodged from their traditional market area.

So when we raised that question with the Minister of Transport for Canada, he said, yes, we really didn't

Thursday, 21 April, 1983 want to sell the idea that the West is going to win at the expense of the East, but to the extent that you produce more commodi ties other than grain in Western Canada, you will have to look offshore for disposal of that extra production. That was a very candid answer and I appreciate it in that form. So, therefore, your whole submi ssion here in stressing the opportunity and the need to ma ke these chan ges to meet tho se opportunities fall somewhat flat on my ears, gentlemen, because I don't see much there.

There may be, but it's a long road to hoe, and it's a development of foreign markets which are all protected. If they aren't sufficiently protected, there is no doubt they may be more protected than they are. We have no control of that. So setting aside the one assumption and that is that we must have better capability of our railway system to deliver grain, we accept that. We may not agree with how to do that, but we accept that as a need. I have difficulty accepting the fact that there are these huge spin-off benefits that necessitate the acreage payment system ... MR. CHAIRMAN: Question, please. HON. S.

USKIW: . . . that raises me to the question, why would we want to im pose on Western Canadians such a cumb ersome mechanism in order to upgrade a railway system, mainly the mechanism of mailing out 15 0,000 cheques? Well, in fact, it would be more than that because your suggestion is that we do it three or four times a year as opposed to the Government of Canada mailing two cheques, one to CP and one to CNR, in order to meet that shortfall. MR. L. PARKER: I think I will respond in this way. Over the past four or five years, there have been massive increases in pork production in the Province of Quebec.

During part of that time period, we were in a deficit position in Western Canada in pork. The Quebec pork did not come this way because the freight rates don't allow it. lt made more sense for the Quebec people to ship that pork into the Eastern United States where they had a freight advantage and to Japan where they had a freight advantage, believe it or not, or Alberta pork to Japan. They argued within the Quebec Farm Organization at the CFA level that because they were increasing pork production, were on a North American market, it wouldn't have a major impa ct on prices. We agreed.

Now, there is no way that the people in Quebec can now turn around and say if we do produce some mor e pork or red meat in Western Canada, then all of a sudden the bottom is going to fall out of the market. We're not likely to move pork. Our board is not moving much pork to Eastern Canada, as you well know. If I look at their Annual Report here this year, their exports to the U.S. last year went up 44 percent. Why did they go there?

We're jus t saying tha t we want equal opportunity for our special crops and our livestock and poultry people, if there is a buck in it, if the most remu nerative thing, they should have that opportunity. If we're wrong, and I don't think we are, they will still have those bucks that are going into their pocket to subsidize or offset their increased freight costs on their export grains, but it will be their decision. MR. CHAIRMAN: Mr. Uskiw, further questions? Mr. Blake. MR. D. BLAKE: Mr. Chairman, I think I will address it to Mr. Cham bers.

In Page 2 of your brief, in calculating the individual farmer's payments, under your source of data you mentioned municipal records to provide the numb er of cultivated acres per parcel of land. Has an official request been made to the Provincial Municipal Affairs Branch for this information to your knowledge? MR. CHAIRMAN: Mr. Chambers. MR. A. CHAMBERS: Maybe some of the government side can answer. lt is my understanding that it has been. I would indicate that it is in the Municipal Assessment record area that we will have the most difficulty with the data. Saskatchewan is pretty well compl etely comput erized

whereas we, in Manitoba, are only partially and Al berta is less so. lt is in this area that there will be the highest amount of manual labour, etc., to get the data together. But the answer to the specifics of your question, I think the answer is yes. MR. CHAIRMAN: Further questions? Mr. Uruski. HON. B. URUSKI: Mr. Chairman, in your brief on producer payment methods, do I und erstand the formula that you put forward is the formula that will be within the legislation being put forward? 152 MR. A. CHAMBERS: Yes, that's my understanding.

I, of course, haven't seen the legislation but that's what their last recommendation was. HON. B. URUSKI: So that you would have had a very major role played in the development of that formula, am I correct? MR. A. CHAMBERS: Yes. HON. B. URUSKI: Can you tell me, do you foresee a fairly large impa ct on what is traditionally known in the cow-calf producing areas of this province which, if I understand your brief correctly, would be totally or nearly totally excluded from receiving any benefits that originally were touted as being the benefits to the livestock sector? MR. A.

CHAMBERS: Earlier on I indicated that the purpose was to try to make the payment to those acres that are capable of producing Crow grains. In much of the so-called ranching area that is not the case. There also would be some provisions on requirement that the land would have to been in a permit book at one point, a numb er of years in the last five. Those ranchers per se will be largely excluded from the direct payments.

There will be an indirect benefit to the cow-calf sector in that the changes that we anticipate will reflect in a lower feed grain price than would otherwise be the case as under the present situation. That lower price, of course, is to be comp ensated for through the direct payment to the producers of that feed grain.

Thursday, 21 April, 1983 To the extent that Manitoba and prairie feeders bid for calves and are a factor in the price of those calves, the cow-calf sector on the prairies will receive some benefit. lt's very difficult to put a numb er as to who sets the price; the eastern buyers or the prairie buyers. Certainly it will make the prairie buyers more aggressive in the market and will have some filter-down effect, very hard to define on the price of calves. HON. B.

URUSKI: Given the reduction and quite substantial reduction in the consumption of red meats in Canada and I would think probably over North America, what areas can you tell me - I know the Minister of Transport has now said that the benefits of increased livestock production may be a loser -can the bureau tell us where they see that kind of expansion occurring and how do they believe that expansion in the livestock industry will occur as a result of these changes and where? MR. A. CHAMBERS: I'd like to respond to that if I could, Mr. Chairman, and the previous question as well.

There has been some carelessness in the terms of expansion versus stopping of decline, in fact. A good portion of what the benefit we see is to go back to what we would call a neutral situation which is to stop the deterioration in the economics of feeding hogs and livestock on the prairies. lt's interesting, Mr. Minister, that I participated on another comm ittee on agriculture policy in this province last year which attempted to do the same thing, to solve some of the problems of the economics in the beef industry, to not particularly expand the industry but to stop it from disappearing.

There's a good portion of what is in this package that's in the same direction, to at least maintain what we have. If the market expands, the red meat consumption goes up again, and if the economics becomes better on the prairies than elsewhere then our industry will expand. But at least we will be on an equal competitive basis with or without the transportation subsidy in whatever form it is. We simply want to apply it in a neutral manner so as to not further damage the users of grains on the prairies. HON. B.

URUSKI: Do I get the theory, the assumptions of the brief, are that we will have an expansion, or at least a maintenance of the livestock industry at the expense of the grain farm? MR. A. CHAMBERS: No, that's certainly not the case. Of course, we worked very hard at finding a way that would resolve these two issues, try to maintain the grain farmers' incomes and at the same time not pose an additional cost on feed grain users, whether they be rapeseed crushers or whatever. No, you didn't hear me correctly, Mr. Minister. MR. CHAIRMAN: Further questions. Mr. Manness. MR. C.

MANNESS: First of all, gentlemen I tell you I support the attempt to remove distortions because I believe the Crow rate has hurt western livestock industry over the years, and the attempt to bring in some type 153 of neutrality. I suppose one of the answers to my concern which I share with the Minister, that indeed there's no guarantee that livestock expansion will occur, is that if it does not, well then of course those producers will grow grain and they have the same right to share in any Crow benefit as indeed I do as a pure grain farmer.

However, I ask you, have all possible methods of removing a distortion been exhausted? My concern is that what we have here is a very complicated formula, one which in the long run may in some degrees pit farmer against farmer because they might not even understand, first of all the formula, and secondly the assumptions used are the basic elements of data basis used . Again have all possib le alternativ es been exhausted to remove again distortion and to provide neutrality? MR. CHAIRMAN: Mr. Parker. MR. L.

PARKER: If we knew of other alternatives would have hoped that they would have surfaced between January 1980 and the start of Gilson, or during the Gilson exercise, and the fact is they didn't. The Pools as I indicated did float an idea last August, almost a year ago now, but it got nowhere. For those of you who are not familiar with that Pool proposal I think we should talk about it a wee bit. They were opposed to a payment to producers. They were proposing that method, but when it came down to a crunch they turned around and proposed that a direct payment be made to feed users.

So they still hadn't got around to payment to farmers. On top of that of course, as you know they were proposing to fund that idea; one-third from the Federal Government; one-third from the provinces; one-third in the form of a levy or an increased rate to be charged to grain shippers. That was a Johnny-come-lately, but it died. Since that time, so far we know there's been no other ways or ideas put forward as to how to remove those distortions. MR. A. CHAMBERS: Can I just make one additional comment? MR. CHAIRMAN: Mr. Chamb ers. MR. A.

CHAMBERS: We've agreed many times that the calculation is not as easy as it would be nice to have it. All the other ideas that we've tried out are at least as cumb ersome, in addition have the difficulty of problems gathering the data. The main advantage of this particular proposal is that the data is in place and can be accessed. MR. CHAIRMAN: Mr. Parker. MR. L. PARKER: One other short addition to that. Subsequent to the Gilson exercise, as you will recall, he recommended that four task forces get to work right away.

Three did, I was on one of them, we also had a rate task force and we had a Legislative task force. There was supposed to be a method-of-payment task force, however, mainly because the three Pools said no, we won't accept that idea, that task force was not struck. The Federal Government refused to strike the I

Thursday, 21 April, 1983 task force until they had made a decision as to whether they were going to go with the basic package. As soon as they made that decision and announced in on February 2nd the task force was struck, as I recall, Allan, the next day. We became involved immedia tely at that time. We had done a bit of work prior to that in preparation in case, but the task force per se didn't get going until February 3rd. From our perspective some of this work should have been done way back last May and June. MR. CHAIRMAN: Mr. Manness. MR. C. MANNESS: The safety net concept is one that I can support.

I suppose I'm curious as to how the 8 percent figure was chosen and I know Mr. Fulton gave us some of the rationale but I'd like to reaffirm that in my own mind. Are you saying that, indeed, up till the inflation years in the early '70s that, indeed, farmers as a share of the revenue received were paying some roug hly 8 percent of their total revenue towards transportation up to the inflation years known as the early '70s. MR. S.

FULTON: 9.2 percent is what they were paying and you're probably wondering why you go from 9.2 to 8 but from the end of the World War 11 to roughly mid-'60s when the necessity for branch line subsidies came in because of the losses that were been incurred in moving grain by the railways, the average freight rate or total freight cost paid by producers as a percentage of their weighted average farm gate prices, was about 9.2 percent.

That period of time is a relatively good proxy when there was no profit in rail costs or at least dimini shed over that 25-year period such that they were in a loss siutation so it's a fairly good proxy of what real rail cost is and what it should be in a long term as a relationship to farm gate prices.

If we accept that the Federal Government has said that they will maintain a long-term Crow benefit, a payment, what we're suggesting then is that in the long term that Crow benefit should be no less than each individual year 1. 2 percent of whatever that is and in the years when it's more than 1.2 they pick up all the rest of the difference, the 1. 2 being the difference between 9.2 as the average if that happened to be average and 8 which is what we're saying should be the maximum that a producer should pay in any given year.

There's nothing sacrosanct about the 8 other than one needs a numb er as being that particular maximum. MR. C. MANNESS: Mr. Chairman, a couple of short specific questions to the formula. Is there any thought being given to changing the historical boundaries, in other words, the Crow rate boundaries that have been in existence for some 50 years. Does anybody have an idea as to whether those boundaries are to change? MR. S. FULTON: There has been a change in redefinition of some of the boundaries where there were some inequities as a result of distances.

The freight rate didn't really correspond to distance and those have been redefined and new rates will be incorporating those changes. In '85-86 in the review there's going to be a major review of some of the other factors that 154 go into that rate setting but right now it's been a rationalization so that the distances and the rates are reasonable. MR. L. PARKER: You know, of course, that's been done within the rates task force. Just a word of warning in that area and I'm sure the comm ittee is aware of it.

We want so far as possible, distance-related rates but neither do we want to get caught in the position vis-a-vis Prince Rupert where if we went totally on the basis of distance relationship we wouldn't be building a new terminal in Prince Rupert. So, yes distance­ related, with caution. MR. C.

MANNESS: Gentlemen, I'm wondering if you can tell me what type of response you've had from the crop insurance agencies? lt seems to me that they're going to become even more high profile than, indeed, they are because there's going to be a large payment coming to each and every one of us as farmers on a yearly basis and, of course, the base of that is going to be some historical and crop insurance data and it's going to be highly visible and focal because it's going to be the base for an awful lot of payment.

The first question, how confident are we that the historical base of crop insurance within the provinces is as it should be, and secondly what type of pressures will come upon crop insurance agencies to ensure that it is? MR. S. FULTON: The part with respect to the data. The data that the crop insurance agencies has is very acceptable data in terms of being usable for determination of the calculations. Certainly there will be some appeals to a yield factor that may be on a quarter

section that hasn't been insured in the recent past as to whether or not that's a fair rating for that particular quarter

section but we don't perceive it to be an undue demand in terms of that particular activity. I'd just like to go back, if I might, Mr. Chairman, to an earlier question that you'd raised which I think leads to some confusion where you're suggesting that the payment to producers is, in fact, a compl icated formula and I'm going to try to explain in such a way to see whether or not, in fact, you do understand it because it is really quite simple. lt gets compl icated by a lot of other attachments that get put to it. There's three basic principles in mind. You take the numb er of acres of cultivated land that can grow grain in a quarter section; you take the yield factor for that quarter

section based on its historic productivity; you take the distance that that quarter

section is away from the port that the grain is exported to. You use those three factors to determine what the payment is going to be for that quarter

section and that's what the producer gets. That's as simple as the formula is, there is nothing more complex than that. Total cultivated acres, a yield factor and the distance from port and you can determine what it is that you want to determine in terms of the payment. MR. C. MANNESS: Well, Mr. Fulton, I'm not going to enter into debate now but I can tell you that there are milk producers who have simi lar un derstandable formulas but yet only 3 percent of them understand

Thursday, 21 April, 1983 how the price of their milk is arrived at and I can tell you there are crop insurance users that don't really understand the basis on which payments come out to them either. My final question is, what does one say that supports Crow change, and I can tell you that I'm one of them, what do you say to individuals who are not large producers in the sense that they do not use high levels of fertiliz er, do not use the latest ma nagement techniques and therefore their productivity per acre is much less than modern high-intensive input farmers. What do you say to them when, indeed, a 12 bushel wheat quota will remove all their production

whereas in Manitoba over average we might require a 20 bushel plus. What is the benefit to them of paying more? MR. S. FULTON: In fact under payments to the producers the benefit is to them, the disbenefit, if you will, is to the highly intensive farm managed activities because the crop insured productivity factor doesn't take into consideration management. lt takes into consideration only the productivity capability of the soil itself and historic yields in an area. lt is not the historic yield of that quarter-section, but of all quarter-sections in that area of the same soil type.

So that farmer that does not have high volumes of production gets the same payment as that one that has had high volumes of production. His payment's based on acres, not on tonnes and as such, he gets a higher return per tonne than the one that produces more. So the converse is true. MR. CHAIRMAN: Mr. Cham bers. MR. A. CHAMBERS: Just to add to that. The fact that you've identified in a reverse way the major weakness of the proposal as I see it, is that it does not adjust for superior management or superior luck or whatever, higher yields. MR. CHAIRMAN: Mr. Orchard. MR. D. ORCHARD: Mr.

Parker, you mentioned on Page 4 of your brief that the Farm Bureau was instrumental in getting canola and flaxseed oil and meal included for a couple of reasons. But on the basis of the Federal guideline No. 5, would you think there is any success of getting sunflower oil and meal included in the package, as has recently been drawn to probably everyone's attention, that its exclusion may cause some serious problems to that industry in Manitoba? MR. CHAIRMAN: Mr. Parker. MR. L. PARKER: Yes. As someone who grows about 300 acres of sunflowers a year, I know what you're asking.

That's what I meant, I guess, by the phrase that it is dangerous to tinker with the Gilson package. You must remember that the idea of a phase-in of payment to producers, that your livestock sector takes it on the chin while that phase-in takes place. In other words, they don't get a fair degree of equity until that progression is complete. The sunflower guys and the fellows that are growing peas and all of the other special crops that are not 155 currently under the rate are also going to have to suffer while that phase-in takes place.

They are in no different a position than the hog guy, the beef guy, or the poultry people in that respect. That is why, of course, we put forward an argument for the Agricultural Adjustment Fund, and that's where that extra money came and will be paid out in the first two and three years. Yes, the sunflower people have a point but if their commodity was brought under, what about all of the others that will suffer during that time? That is why we've come down and said, the crushers had a point. Maybe we were foolish to weaken to the crushers' argument. Maybe they should have waited for relief for eight years too.

But their case was so strong they convinced us that if they had to wait that long, they were all going to be bankrupt. Now the one crusher that gets caught is CSP Altona, and given. I accept that and I know what they're saying. But I patronize that plant too and I grow sunflowers, as I've said. But that's the danger. If we start ad hocking Gilson's suggestions and putting this in and this in and this in, where do we stop? MR. D. ORCHARD: Right. I recognize the problem in what you're saying. I take it then that the Farm Bureau would not be supporting any effort to bring sunflowers under the proposal then. MR. L.

PARKER: You'll recall in the brief that we said in response to the Western Agricultural Conference that if we found out the feed grain pricing proposal in the WAC stood the test -which it didn't in Gilson eventually - but if it had stood up we would have insisted that all special crops, products and whatnot be brought under the rate structure, but that's as far as we went. That didn't size up, and now we are saying that the best alternative for Manitoba farmers is the phase-in itself. Let me just add one more thing to that.

I don't have the 1982 figures, and most of you around the committee are as familiar or more so than I am, but in 1981, farm cash receipts from livestock and products in this province were $621 million. From all grains and special crops, there were $974 million. I mean that tells the story of the im portance of getting a fair deal for livestock and products. In that special crops sector, Don, 15 percent of those cash receipts - in fact it was 15.4 percent in that year - were the special crops and it's impo rtant that they get relief, I agree with you entirely on that one.

But we think the best hope is that phase­ in. MR. CHAIRMAN: Mr. Chamb ers. MR. A. CHAMBERS: Just to add to that, it's imp ortant that the phase-in continue after the review period. We are concerned that the legislation isn't going to be clear that the phase-in should continue after that review period. We would very much hope that we would get support in urging the government to continue that in, and therefore that will eventually remove most of the distortions against your sunflower producers and against everybody else. MR. CHAIRMAN: Mr. Orchard.

Thursday, 21 April, 1983 MR. D. ORCHARD: One more question to Mr. Parker. I assume the weighted farm gate price of three major grains, that's wheat, oats and barley. Am I correct there? MR. L. PARKER: Yes. MR. D. ORCHARD: A question to Mr. Chambers. In developing your formula, I would assume that a farmer's land base would include owned as well as rented land. MR. CHAIRMAN: Mr. Chambers. MR. A. CHAMBERS: Yes. There has been a fair amount of discussion around that point.

Although there may be some rental agreements that initially would be somewhat unfair to the owner of the land, we felt that in fairly short order that rental agreements would adjust and that there would be redistribution of the benefit in a fair way. But the only reasonable way to distribute the monies initially would be to the actual operator of the land or the renter. MR. D. ORCHARD: Just one comment on that possibly, that might introduce a yearly change factor in there where you 've go t your rental farms, and the admini stration of that could become a little more nightmarish. MR. A.

CHAMBERS: Well, I'm not sure, Mr. Chairman, that nightmarish is the right term. Each year when the individual would apply for his permit book, the data would be taken off the application of the permit book as to what land he is operating in that current year and, therefore, what payments he would be eligible for. Just as an aside, there is a side issue in this whole area, and that is that the acres recorded in permit books and the use of land will be forced to become much more accurate than we now have as a result of these changes. MR. D. ORCHARD: Pity. I'm not sure of the num ber.

Someone around the table should have it. How many permit holders have we got, Canadian Wheat Board permit holders? MR. A. CHAMBERS: A 14 5,000 this year, more or less. MR. D. ORCHARD: Thank you, Mr. Chairman. MR. CHAIRMAN: Mr. Downey. MR. J. DOWNEY: Thank you, Mr. Chairman. I'll try and be fairly brief. A couple of questions, one basically dealing with your presentation dealing with the safety net. How widely has this proposal been advocated or dealt with or explained across the prairies, basically dealing with the concept of tying the freight rate to the return that producers get for their grains? MR. L.

PARKER: Yes. We tried during the Gilson exercise, Mr. Downey, to get this idea fleshed out; I guess those were the right words at that time. One of the major players around the table felt that they didn't have the mandate to agree that the farmers should pay one cent more, so they weren't going to get involved 156 in discussions of anything, even any simi larities to this. lt didn't happen during Gilson. A group of us took it upon ourselves-About a month ago, Sheldon, I believe? Involved in that meeting were the Farm Bureau. I believe the Canada Grains Council made some input.

Both the Saskatchewan and Alberta Governments were involved; Alberta cattlemen; the commodity groups; Alberta Wheat Pool and I believe they were representing the three Pools that day - I may have forgotten some - were involved in that very intensive one day technical session. We sent Sheldon Fulton to that workshop. They put together the nuts and bolts. We presented that, as we have to you today, to our last Farm Bureau quarterly meeting. In principle and in much of the detail, they think that we have a runner in the Bureau.

We didn't put it forward today as a firm, finite position and that's really why we're, you know -Sheldon indicated there may be some flexibility in that 8 percent figure. We wanted to get some exposure. The Farm Bureau and various groups have it now and we are currently getting feedback. So far though, from what we've heard -and this is right across the west, not just in Manitoba - it's very, very positive. I don't know whether that has answered your question, but that is the best I can do right now. MR. J. DOWNEY: You answered the second question without me asking it. Mr.

Chairman, to the President, in principle it seems as if it is a concept that the majority of the agricultural community could live with. MR. L. PARKER: Yes, and that's why I stressed that if there is common ground in the west, if we get our act together and hammer hard in front of the federal comm ittee, maybe we can get it in the bill, but it's going to take some unanimity out west to win it. They have to make concessions and this one, we think, has a high priority. MR. J.

DOWNEY: To the President, in view of the fact that the Federal Government have the authority over national transportation and that you as farm groups, as all farm groups, were invited to participate in the negotiations and that such things as we've just mentioned could be possibly put into place to benefit the farmers of Western Canada following the process of negotiation, do you feel that you still have, before the legislation is tabled and finalized, the ability to continue to negotiate and make changes that would give the kind of protection that I believe the majority of people want in statute? MR. J.

PARKER: I'll have to give you an honest answer to that one, my guess is that the changes will be made if they're going to be made in comm ittee and not before. That's why I stress it's im portant now that we get as many organizations, if possible, as many provincial governments, out here onside on this one in principle. There is one other point I think we should make and I'm not sure whether we stressed it in regard to the safety net. We're looking at the safety net as a ceiling. We're not talking about forever and a day tying the rate to the price of grain.

There's a danger in that one and if you don't think so ask the costing guys, for

Thursday, 21 April, 1983 example, in Alberta Pool. No way, because if you go that way, it'll be run as a stabilization fund and you'll pay through the nose when grain prices are high, to throw in the trough when they're low. So, I stress that, tt's a safety net working as a ceiling. MR. CHAIRMAN: Mr. Chamb ers. MR. A. CHAMBERS: I'd like to make an additional point.

Probably, if we attempt to push the numb er much below 8 percent then what we're going to be getting into is, in fact, a stabilization fund with producer money and so on. lt's not likely we'll be able to push it down below that, so that's a consideration. MR. J. DOWNEY: In view of the fact that we are a legislative comm ittee dealing on an issue that we have no jurisdiction in, dealing in an area where none of the provinces were invited to participate in, how can input now go from the exercise that we're going through to influence the Federal Government on the proposals that are being made. MR. L.

PARKER: Well, the same as we did during Gilson. If the province wants to make input through the bureau or the comm ittee they can do it, but there's absolutely no reason at all why the Province of Manitoba cannot make a presentation in front of the Agricultural Commit tee when the time comes if they see fit that this idea of a safety net has merit. MR. J. DOWNEY: Mr. Chairman, I wasn't only talking about the safety net principle, I was talking about any changes; for example, the cap of 31 million tonnes or the inflationary costs, those types of things. MR. L. PARKER: I think my answer would be the same.

You'll note though that we were instructed, and I didn't put priorities on the recommendations we attached to the brief, the bureau says we still want to do our darnedest to get that 6 percent figure down after 1985- 86, because this ceiling, if Mr. Fulton's calculations are correct, will not trigger extra federal dol lars until sometime perhaps in the early '90s and if we can chop that 6 percent figure at all, then we're going to be money ahead. So, we will be pushing both of those ideas. MR. J. DOWNEY: I believe you indicated in your brief, Mr.

Chairman, through you to the President, that if nothing had been done, absolutely no negotiations had taken place and no incentives put forward by either the Federal Government or any of the farm groups, that in fact we would have a major loss of economic income to the Western Canadian farmers and in fact would be in a very tough situation at this particular time. Did I read your brief correctly in that manner? MR. L. PARKER: Well, the record is clear in the past.

I have to admit in the current year and, of course, our ability to move and expect the 30 million tonnes this year is a direct result of the slowdown in the movement of other bulk comm odities, but I can recall very vividly sitting around a wheat board advisory commit tee and batting our heads against the wall when we were turning 157 down sales for two years and more in a row because we didn't have the rail capacity, and I hope we never get back in that situation again. That's why we were able to draft the kind of letters signed by the people who signed them that are attached as appendix.

In essence, we were telling the Federal Government to get off the pot and we're now telling them, for Pete's sake get the bill out so we know for sure what's in it. Right now we're all second guessing and if want amendments we'll put them forward at the proper time during comm ittee. MR. CHAIRMAN: Mr. Plohman. MR. J. PLOHMAN: Mr. Parker, do you think that your position put forward by the Farm Bureau now represents a consensus of western producers? MR. L. PARKER: lt depends what you mean, Mr. Plohman. In a democracy we'll never get total consensus, as you well know, and I hope we don't.

I don't want that kind of a system. But the fact is, around the bureau table we still have 16 member groups that are strongly arguing for change. We're not entirely happy with the package as we've pointed out and we want some changes made and we're going to go after those changes. But the worst possible thing would be if there was a total pull back of the federal initiative leading to an inability to export grain two, three or four years down the road. We paid for that one once and I hope we don't have to do it again. HON. J. PLOHMAN: Mr. Chairman, I'd just like to ask Mr.

Parker, how many producers do you feel you represent through the Farm Bureau? MR. L. PARKER: Well, how do you count num bers? How many hog producers have you got in the province? Close to 4,000; they are represented around the bureau table.

We have the cattle organization with something like 11 , 000 farmers; we have United Grain Growers, I'm not sure how many members they claim in this province, but it'll be in the neighborhood of 10,000 to 12 ,000 and there's duplication in all these figures; we have the Turkey Marketing Board; we have the Egg Marketing Board; we have the broiler people; we have the sugar beet growers. I can go down the whole 16 list, if you will. HON. J. PLOHMAN: No, it's okay. MR. L. PARKER: But, in essence, they told me to write that letter as recently as March 28th. HON. J. PLOHMAN: You say they told you to write that letter.

How do you know you represent the views of those producers? MR. L. PARKER: Because all of those member groups around the bureau table elect their people and their del egates and, you know, appoint or elect their executive members to the bureau, most of them annually; and when the delegates of the bureau come together, some 50-odd, at their annual meeti ng, they elect their president annually. -

Thursday, 21 April, 1983 HON. J. PLOHMAN: Do the individual producers have a say in the proposals, or vote on it, or are they asked for their views on the position that was put forward by the bureau? MR. CHAIRMAN: Order please. Mr. Manness on a point of order. MR. C. MANNESS: Mr. Chairman, I thought the witnesses came forward to present briefs and we were going to ask questions pertaining to the briefs, is there a change in that format? MR. CHAIRMAN: To the point of order, Mr. Plohman. HON. J. PLOHMAN: Yes, I think it is significant to know, and I believe the precedent was set in earlier hearings by Mr.

Downey, when he asked a num ber of people at various organizations represented, because we have to look at the matter in the resolution about the consensus, whether we feel a consensus is necessary, and I'm just trying to determine whether the people from the Farm Bureau feel that they represent the views of the member organizations and that they do have a consensus. MR. CHAIRMAN: Mr. Orchard to the same point of order. MR. D. ORCHARD: Mr. Chairman, my honourable friend is correct that membership numb ers of organizations have been as ked. That question was asked and answered. I don't think Mr.

Downey ever asked whether each individual member of a given organization agreed with the point that was being presented by the person representing that organization, which is what Mr. Plohman is now asking, which I suggest is not in order, Mr. Chairman. HON. J. PLOHMAN: Mr. Chairman, I didn't ask if they agreed, I asked if they were consulted. MR. CHAIRMAN: To the point of order, gentlemen.

There have been questions, by various members during our meetings, of individuals as to whether or not they belong to political parties; whether or not they spoke for different groups to which they belonged; whether they were there as just a private citizen or representative of the local group, as opposed to the provincial group; what their readings were; the feelings of those groups. I understand why those questions are asked. I have never ruled them out of order in the past, but I do agree with Mr.

Manness that they're not the prima ry purpose we're here, so I would sugg est to other mem bers, who have intent to ask such questions, both of this presentation and of others, to keep the numb er of those questions to a minimum, please. Please proceed, Mr. Plohman. HON. J. PLOHMAN: Mr. Chairman, Mr. Parker did mention that there are tho usands of farmers represented in Farm Bureau and I just simply ask whether they have been consulted with regard to the proposals that are being put forward. MR. L. PARKER: I think I'd answer in this way, Mr. Plohman.

The Farm Bureau is a federation, as is the case with the SFA, and Unifarm, and UPA in Quebec, and so on and so forth. The positions put forward by the different commodity groups are developed by those commodity sectors, so what their delegates, or their executive mem ber, are saying I have to assume is the majority position as expressed from their particular group, and it's on that basis that Farm Bureau policy is established. 158 Now, the cattlemen are here through AI Cham bers and he can speak for them, I can't. I don't sit on the board of any of those individual commodi ty groups at the current time. HON. J.

PLOHMAN: Mr. Chairman, I wonder if Mr. Parker could tell me whether, with financial conditions as they are for farmers of Manitoba, whether he feels that they are able to pay for the changes, or for what was negotiated up by the Farm Bureau? MR. A. CHAMBERS: Well, of course, the package is not specifically the proposals of the Farm Bureau, as I'm sure you're aware. Certainly, in terms of the ability of individual producers to pay any more for any product we're buying, whether it be freight, fertilizer, or whatever, the price rela tionships on gr ain and many other commodit ies couldn't be worse.

The specific additional costs in the first three years are quite minimum, in fact, as we pointed out with the Adjustment Fund, in fact, the net freight rate to Manitoba producers will probably be lower in the next crop year. So, certainly we don't have a lot of room to pay more at this point, or hopefully, to cover our costs of fertilizer and other kinds of things, the situation will im prove dramatically in the near future. HON. J. PLOHMAN: Just one final question. You stated in the first page of your brief that the railways would have to be paid if the grain was to be moved.

I'll just ask you how you feel that this is going to be guaranteed and how much faith do you have in the guarantees? HON. L. PARKER: In terms of the performance guarantees, this is what you're getting at?

Okay, we saw fit during Gilson, and I think it was supported by all players around the table, to recommend that the cu rrent gr ain transportation autho rity be given permanence in the new legislation, and Gilson called it Central Co-ordinating Agency, or some different name. it's that body that has an overall advisory comm ittee, a comm ittee that is now known as the Senior Grain Transportation Comm ittee, and that comm ittee is to be expanded.

Let me tell you who is on that comm ittee: all eight of the major grain compan ies are on it, so that includes the four major grain co-operatives; the Wheat Board sits on it; the Canadian Grains Commis sion sits on it; the two railways sit on it; and we're proposing that we add three farmers, one from each province, to that senior comm ittee. They will have a numb er of roles, amongst which is looking at the performance of the railways and all other players in that system.

They will be running a tally system, if you will, and if they see opportunities for impr ovement in the system, if they see potential savings that can be made - and I stress "shared" by all players, including farmers - if those potential savings are approved by the senior comm ittee, that I've just described to you,

Thursday, 21 April, 1983 only then is it likely to happen. That is the kind of control system that we have attempted to build in, and that is the task force that I sat on myself. If the nuts and bolts of that task force are in the legislation, and I stress that word, Sam, "if", because that's the first thing that I will be looking at, I will be satisfied that there's adequate protection there. MR. CHAIRMAN: Mr. Plohman. HON. J. PLOHMAN: Jus t one question further to that. Then you're saying that couldn't be done under present conditions?

That farmers are going to have to pay more in order to get this guarantee in the legislation. MR. L. PARKER: Yes. What have we got now? We have a Crow rate of half-a-cent-a-ton mile. We had a National Transportation Act in 1967 that brought in a branch line subsidy but certainly didn't pick up all the railway costs. We didn't have enough clout to keep the system whole. Surely we've got to do better than that. But we want that kind of assurance and we want it in statute and we've all said that from Day One. That's why we've got to see the bill. HON. J. PLOHMAN: How much, Mr.

Chairman, do the producers have to pay to get that in statute? How much is fair to you? MR. L. PARKER: I'm not sure I quite follow that question. MR. CHAIRMAN: Can you rephrase the question please, Mr. Plohman? HON. J. PLOHMAN: Well, essentially, Mr. Chairman, what Mr. Parker is saying, that we have to get those guarantees and I guess to do that we have to pay more. How much more? How much should farmers have to pay to get that guarantee? MR. L.

PARKER: Okay, well the figure as we indicated in our brief that we put forward, was that there was a willingness on the part of the Farm Bureau and the people we represent, to pick up not more than the first 3 percent of increased costs annually. That was our position within Gilson. Now we've said, in essence, we've achieved that up until 1985-86. We rebel against the 6 percent figure and that's why we're arguing either for a reduction in that 6 percent, and/or the impl ementation of a safety net. MR. CHAIRMAN: Mr. Uskiw. HON. S. USKIW: Just one question, Mr. Parker.

Of the 16 mem ber groups that you alluded to make up the Farm Bureau at the present time, is Manitoba Pool one of them? MR. L. PARKER: No, they're not, as you well know. HON. S. USKIW: They have not come back to your organization? 159 MR. L. PARKER: Not as yet and I haven't been on the comm ittee that has been negotiating with Manitoba Pool. That decision will be made by their delegate body and not by the board. The chances are that would not happen until next November. HON. S. USKIW: Then I have the logical second question.

Can you truly claim to be representative of the grain sector in Manitoba, without Manitoba Pool being part of that? In other words, if Manitoba Pool comes out with a different proposition than what the Farm Bureau is proposing, it seems to me that the weight of the grain industry would lie sooner with Manitoba Pool than it would with Manitoba Farm Bureau. Would that be a fair assessment? MR. L. PARKER: Of course, if you had Manitoba Pool in, you would be in a stronger position. But let's take a look at some of the common ground.

Manitoba Pool was the first organization to say that changes had to come and that the farmer was going to have to pay a part of those increased costs under statutory protection and we agreed entirely with that. The difference has been entirely around the question of method of payment. Now, if they have been able - and so far we haven't seen anything that would remove the distortions - fine. HON. S. USKIW: Could you envisage the Government of Canada, ignoring the main thrust of Manitoba Pool, Sask.

Pool, Alberta Pool, if they were in total opposition to the package as it is, or if they were not prepared to accept the package - and I'm asking that because it has to be assumed that they are big players in this game and I know that can be challenged from many quarters - but they do have the credibility of speaking for the grain industry, by and large, throughout the country. Would it seem logical to you that we can have new legisla tion, or the scra pping of the present arrangements, without a consensus that involved the pools of the prairies? MR. L.

PARKER: You'll have to ask the pools that one, not Lorne Parker. But I might say in a personal vein that Manitoba Pool gets about 90 percent of my grain and they don't represent me on this one and I'm not the only member of Manitoba Pool that doesn't feel that way, they represent a major ity. But we're not without grain representation. Don't forget the United Grain Growers still is a member of, don't forget that Manitoba Pool was a member of the Bureau and argued strongly and pushed me, as president, to get to the negotiating table.

The mand ate that I was given when I was president for the first year-and-a-half or so, was to devote, almo st exclusively, my time to get to the negotiating table, period. HON. S. USKIW: I think you misread my question, Mr. Parker. What I was really wanting to know from you, and it's an opinion I'm seeking, whether or not any government in Ottawa could put together a package that didn't have the support of the pools. MR. L. PARKER: You'll have to ask the government that, but I would also turn the question around. I don't

Thursday, 21 April, 1983 think that they can ignore the position of the crushers or the livestock and poultry people anymore than they could the grain sector. There has to be balance. HON. S. USKIW: Would you agree with me, though, that the grain producers on this issue are the ones that have the most to gain or to lose, and are the ones that ought to be consulted more so than other sectors? MR. L. PARKER: Whether you can quantify that or not, I'm not sure. But I know what the losses were in the two years we talked about and that was a direct loss to the grain producer.

Now what is the loss going to be in the future? lt will depend on the capacity of system and what the markets are. That's my concern as far as the grain person is concerned and a costing formula that's within reason. That's why I think we are going to find that there is a lot of common ground on this safety net, whether it's Manitoba Pool, or whether it's the Farm Bureau, or Alberta Pool, or any other organization in the west. That's the missing part. HON. S. USKIW: Mr.

Parker, would you feel that it's reasonable on our part, as a provincial government, to conclude that since Manitoba Pool broke off from the Bureau on this issue, that there is no way we can say there's a consenus on this issue in the Province of Manitoba? MR. L. PARKER: What do you mean by a consensus? HON. S. USKIW: Of the farmers that are affected by this issue? MR. L. PARKER: How do you define consensus? HON. S. USKIW: Well, Mr.

Parker, I'm not sure that I want to be the one defining it, excepting I would think it would have to be what would be considered to be a majority opinion of the people that will be affected, the people that now enjoy what is there by statute and which will have to be giving up some thing that they know is there, in place of some thing that they may not like. MR. L. PARKER: I think there is a consensus for change and that includes Manitoba Pool. We've never been told different. HON. S. USKIW: That's fair enough. MR. L.

PARKER: Maybe not by all their mem bers and I accept that, but the vast majority of their delegate body has been voting for change. MR. CHAIRMAN: Further questions? Seeing none, gentlemen, thank you very much for your presentation here today. Before I call the next person wishing to present a brief, I'd like to point out to mem bers of the audience, that normally exhibits are not allowed in the Legislative Assembly or in Standing Comm ittees thereof. When we started our meeting there were some signs at the back. I did not raise that point.

However, there are now two signs which have wandered to the front. 160 I would like the owners to put them back where they were when we started the meet ing so that we don't have those kinds of disruptions here in the meeting. Mr. Uskiw. HON. S. USKIW: Mr. Chairman, I would like to move that all offensive signs be removed from the hall. Well, I think it's quite obvious. MR. CHAIRMAN: Your Chairman will have some difficulty determining, if you pass this motion, what is offensive. HON. S. USKIW: Well, Mr. Chairman, if you want I'll elaborate for you. MR. CHAIRMAN: Mr. Uskiw, would you elaborate so that I know. HON.

S. USKIW: Mr. Chairman, I believe any sign that defaces an institution or a person in some way, I think, is offensive, and to that extent I think it's uncalled for in this hall. MR. CHAIRMAN: lt's been moved by Mr. Uskiw, no seconder is required. What is your will and pleasure? Is there any debate? Mr. Uruski. HON. B. URUSKI: Mr. Chairman, I think your suggestion in moving the signs to where they were was a good suggestion. MR. CHAIRMAN: Mr. Downey. MR. J. DOWNEY: I would like to see the signs placed at the back of the room.

I think that would be appropriate because it is a legislative hearing and a formal process, and would show courtesy to do that. MR. CHAIRMAN: Well, I have two opinions, one to remove all offensive signs, the other to have the signs kept at the back of the rooms. I'll put the question on the motion. All offensive signs to be removed from the hall. Those in favour? Five. All opposed. The vote is 5 to 5. You forgot to count Henry Carron. My original suggestion was that the offensive signs be removed to the back of the hall and that no signs HON. S. USKIW: A point of order, Mr.

Chairman. think we should have that vote again. MR. CHAIRMAN: Oh, the Clerk says she may have counted 5 to 4. All those in favour of Mr. Uskiw's motion, please raise your hand. All those opposed to the motion, please raise your hand. The vote was 5 to 5. I declare the motion lost. The original proposal was that all signs be moved to the back of the hall. If individuals are in possession of offensive signs, they can take it that certainly the concern of the comm ittee is that offense should not be given and you can use your own judgment. But I

Thursday, 21 April, 1983 would ask that the people who own the signs that are up at the front of the hall please take them away now. Seeing no movement, I'll ask the Clerk to remove those two signs. Please take them from the hall since the owner denies ownership. Mr. Bill Moore please. MR. B. MOORE: Mr. Chairman, my name is Bill Moore, and as most of you know, I'm a candidate for the New Democratic Party in the upcoming May 24th federal election, in case someone had to ask me of my political viewpoint.

I hope no one figures that my sign of "Keep the Crow" is offensive, but I should say to the comm ittee that it is offensive to all the farmers of this area to suggest that the Crow be done away with. Mr. Chairman, too often economic questions are dealt with assuming a rational model. According to the com puters, like the brief we just heard, if only we were rid of this anachronism called the ''Crow rate'', we would have an efficient transportation system. Neglected in this corporate model of society are the people who actually produce food because they prefer a rural way of life.

The banks and the railways do not feed people - farmers do. Those not aware of economic, political, social and cultural significance of the Crow rate might think a fixed rate for grain transportation is as ludicrous as would be regulating the price of chocolate bars, but Canada itself is an economic absurdity created by political interference in a continental market where natural trade flows north and south. The decentralized political economy of prairie Canada has never fit the market economic model.

The Canadian Pacific Railway and the settlements which followed its construction were made possible by a national policy of subsidized transportation. Not anxious to see mineral traffic in southern British Columbia siphoned off by the American railways, the Canadian Pacific Railway agreed to the Crow rate as a condition of public subsidies to build the Crowsnest Pass line. Over the years the Canadian Pacific Railways have received subsidies which if adjusted to present-day values would amount to over $13 .5 billion.

The Crow rate opened up the grain economy and prevented non-agrarian capital from exploiting the prairie region. By preventing variable freight rates, the Crow made inland grain terminals uneconomic, but the international grain companies are anxious to move in once the barrier has been removed. Variable freight rates will change more than the elevator system. Ending Crow will centralize and stratify prairie society, making farmers and workers less aware of each other's contribution to the commun ity.

Today the elevator agent knows farmers, their families and their problems and is a respected member of the communi ty. Division of labour in inland grain companies will isolate workers from the farmers and relegate many of them to repetitive mundane tasks, alienating them from the new industrial process. For the farmer, delivering grain will mean long truck hauls and waiting in line-ups. As farm incomes are reduced, ownership of land will be concentrated into fewer and corporate hands. Those farmers who cannot afford to expand will have to quit 161 farming and work off the land.

This will reduce the numb er of farm famili es to support commu nity businesses and services. The quality of life in small towns will decline and social infrastructure made redundant will have to be replaced at a higher cost in the cities to which the landless will have to move. The Federal Government says it must risk this social disaster in order to provide the railways with a higher return on investment. Presumably the railways will increase the production of transporation service if they are paid more for each tonne of grain they haul. That is what the government assumes will motiv ate the railways.

The very same people, the very same government also say that the way to motivate the farm family to produce more is to pay them less per tonne. The Crow debate is fundamentally a conflict between two economic cycles. The Crow rate protects farm income from high transporation costs, funneling farm spending through local businesses linked to the wider economy via the incomes of workers making trucks, tractors, and other farm supplies. Ending Crow shortcuts this decentralized economic path and siphons farmers' money into railway corporations, much of which will flow out as dividends and investments in real estate.

If the Crow is ended, the drop in farm income will be much more than the extra billions of dollars farmers will pay