NFU letter to CGC Commissioners re: Eastern wheat class

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Patti Miller, Doug Chorney and Lonny McKague, Commissioners
Canada Grain Commission
600-303 Main Street
Winnipeg, Manitoba R3C 3G8

Dear Commissioners,

RE: Eastern Wheat Class Modernization

The National Farmers Union has been participating in the Eastern Wheat Class Modernization consultation process. We have serious concerns and believe that both its process and outcomes to date are contrary to the Canadian Grain Commission’s mandate – to, in the interests of the grain producers, establish and maintain standards of quality for Canadian grain and regulate grain handling in Canada, to ensure a dependable commodity for domestic and export markets. We believe we need to raise these concerns with you now, and urge you to take action to prevent harm to the integrity of our wheat quality system.

In 2016 the CGC proposed a new class for Canadian Eastern wheat which would have no quality parameters, would require disease and agronomic data and include varieties that do not fit within the parameters of any other Canadian Eastern wheat classes. The NFU submitted a brief to the CGC’s consultation on that proposal, held in the spring of 2017. Our concerns were in line with the majority of stakeholders, as reported on the CGC website (grainscanada.gc.ca/consultations/2017/stakeholder-en-17.htm):

The majority of stakeholders were not in favour of developing a Canada Eastern Special Purpose wheat class as proposed. Some stakeholders were concerned that varieties approved for the Canada Eastern Special Purpose class could end up in milling or feed wheat shipments and negatively impact overall wheat quality and the Canada Brand.

Some stakeholders said that the Canada Eastern Special Purpose class could open the door for varieties that fail to meet the quality parameters of the 10 existing classes. These stakeholders said that developing a wheat class with no quality parameters could introduce the potential for market loss, price discounts, and a higher incidence of gluten strength issues.

Stakeholders said that adding a wheat class with no identified direct end-use market does not add value for producers.

As a result of the 2017 consultation, the CGC decided not to proceed with the proposed new Canadian Eastern wheat class and announced it would invite stakeholders to participate in a review and evaluation of the existing Eastern wheat class structure before making any changes. The NFU is participating in this process.

Our first concern is that the majority of stakeholders included in the consultation do not represent grain producers’ interests. Of the corporate representatives, four are foreign-owned corporations and three are lobby groups with a strong presence of foreign corporations on their Boards. It is not reasonable to expect the recommendations of these people to be something that is in the interests of grain producers. The discussions and decisions of the consultation to date reflect the undue influence of the vested interests at the table, while farmer concerns have been dismissed or minimized.

Representatives of the following have been involved in the stakeholder meetings:

• Corporate Grain Producers Government
• Canadian Seed Trade Association – lobby group for seed companies (Cortevia -formerly Dow and DuPont – and C&M Seeds )
• National Farmers Union
• Régie des marchés agricoles et alimentaires du Québec
• Canadian National Millers Association – lobby group for milling companies (Archer Daniels Midland)
• Producteurs de grains du Quebec (UPA affiliate)
• Canadian Grain Commission
• Cereals Canada – elevator and seed company majority (two reps)
• Grain Farmers of Ontario
• Atlantic Grains Council (PEI Grain Elevators Corporation)
• Canadian Grains and Oilseeds Exporters Association (G3 Grain)
• Ontario Agri Business Association – lobby group for elevators and input companies (London Agricultural Commodities Inc.)

The proposal now being brought forward involves:

• Elimination of minor wheat classes (CE Red, CEHWW, CESWS, CEHWS)
• Creation of a new class that has no merit requirements
• Moving varieties from the eliminated classes to the new class
• The new class is intended to be sold through Identity Preserved (IP) contracts. If the farmer does not have an IP contract (or presumably, if the contract specs cannot be met) the grain will be sold as Feed.
• The new class will have only one grade – Feed

Our wheat class system is designed to serve our customers by matching end-uses with wheat classes. It provides efficiency for the elevators, as they can sort grain by known class parameters that have value instead of segregating numerous bins based on specifications. It provides farmers with freedom to grow varieties that work on their farm, knowing they will have a market based on the variety’s class.

The proposed new merit-less class is not in the interests of producers for many reasons.

It is clear that the new class is wanted by multinational seed companies to allow them to register inferior milling varieties that would otherwise be rejected by the Recommending Committee for failing to meet merit requirements. The proposed class would allow them to sell varieties already developed for, and sold in other markets. Examples CGC staff brought forward as being “impacted” by the current class definitions were Pioneer’s 25W38 (SWW), currently sold in Ohio and Michigan and Dow’s DS572RW (SRW), a UPOV ’91 PBR variety that they would like to bring in to replace Emmit, which is in the public domain and thus royalty-free. It is significant that the implication is these varieties are somehow victims of our quality control system, not that they fall short of our standard.

There would be nothing to prevent grain companies from blending grain from this new class with milling wheat of the existing classes, whether they purchase it on IP contracts or as feed. The impact on farmers would be lower prices due to increased availability of cheaper wheat for blending.

Blending inferior milling varieties into other classes would also reduce the overall quality of Canada’s wheat in domestic and international markets, which would make our wheat less desirable and thus lower priced.

During discussion of the proposed grading schedule it became clear that the CGC expects this new class to be used as milling wheat even when purchased as Feed. CGC staff suggested that the fusarium damage parameter (5%) was perhaps too high for human consumption, even if DON was low, and wondered if there should be grades 1, 2 and 3 of this new class. This indicates that the CGC is considering not only creating a class of inferior milling wheats that would be available for blending with other classes, but is actually looking to facilitate blending by grading to separate out low fusarium-damaged loads.

CGC staff have suggested that registration of inferior milling varieties would provide choice to farmers who want to grow them, and this is in the interests of producers. We disagree, because the impact of these varieties will be system-wide, lowering prices for all growers and diminishing Canada’s reputation for quality. Canada’s wheat quality system gives us a competitive advantage on world markets; diluting the quality of Eastern wheats by creating a supply of inferior wheats for blending will diminish or even eliminate this advantage.

The CGC should not rely on Identify Preserved (IP) contracts to prevent harm to the system, since there is always the possibility that IP grain will be delivered to the elevator if premiums disappear. Farmers will end up bearing additional elevation costs that would result from the additional segregation more IP contracts would entail, as well as from failed IP programs when buyers disappear, when grain doesn’t meet IP specs, or when yield exceeds contracted volumes. Furthermore, the CGC should not be institutionalizing IP programs. If farmers are compelled to use IP contracts, they become tightly bound to specific buyers, reducing their autonomy, while the buyers increase their power by obtaining intelligence that allows them to pay farmers the lowest feasible price based on expected yields.

We also see this merit-less Canadian Eastern wheat class as a trial balloon for the multinational seed companies’ goal of eliminating Canada’s wheat class system altogether.

Shifting to a system where wheat is bought on spec alone will put farmers at a disadvantage by eliminating the CGC’s role as arbiter in the event of a dispute over grades and weights. Without merit requirements or grading schedules, the buyer has virtually all the power to determine whether a contract has been met, as specs can be highly technical and require lab measurements.

We also see the new class as a trial balloon towards bringing in mandatory variety declaration. The onus will be on farmers to declare the variety if they are delivering varieties of the new class to the elevator as Feed in the absence of an IP contract. Elevators may begin demanding variety declaration to prevent fraud if farmers try to get a better price by delivering into another class, since kernel visual distinguishability is no longer available as a tool. Variety declaration is a puzzle piece that would need to be in place for the implementation of an End Point Royalty collection system, as it would indicate the Plant Breeders Rights status of each load delivered. An EPR system is not in the interests of producers, as we already have effective levies which are allocated by farmer-elected boards to fund desired research purposes.

After the first consultation meeting, a CSTA rep circulated the following input to the group, saying “These comments reflect the view of DuPont Pioneer a wheat variety developer. Although they do not reflect official CSTA policy, I believe other germplasm developers would have similar views.”

1. In general DuPont Pioneer does not feel variety registration and restrictive class definitions are in the best interest of the crop production value chain. A nimble, progressive value chain doesn’t require either. The food grade soybean industry serves a good example. Such a system enhances value creation through both genetic gain for yield and agronomics and quality.
2. Given we need to operate in a system of classes we support the creation a special purpose class.
3. We are of the view that a producer declaration of variety at the point of delivery would allow the grain channel to segregate materials in the system as they see fit.

We can see by these comments that the proposed new merit-less Canadian Eastern wheat class is aligned with the desires of the seed companies and is not in the interests of producers or the quality of Canadian grain.

Throughout the consultation process, the NFU has raised concerns about the impacts of the proposed new class on wheat prices for farmers, the quality of Canada’s grain, and our international reputation. Our concerns were dismissed and minimized by the CGC staff representatives. It increasingly appears that the creation of this new class was a predetermined goal, regardless of negative impacts, and the consultation process was constructed to create a pathway to achieve this goal.

As you reminded Western farmers in the media release dated July 25, 2018, Grain grading and variety designation changes come into effect on August 1, the CGC is responsible for establishing and maintaining Canada’s grain grading system, it is the federal agency responsible for ensuring grain quality, and its role is to ensure that varieties assigned to wheat classes reflect the end-use functionality needs of buyers of Canadian grain. The CGC’s duty is to regulate the grain industry to protect producers’ rights and ensure the integrity of grain transactions. We urge you to uphold these responsibilities in regard to Canadian Eastern wheat by halting the creation of a new class with no merit requirements.

Sincerely,

Coral Sproule,
President, National Farmers Union

CC: Hon. Lawrence MacAulay, Agriculture Minister
Hon. Ernie Hardeman, Minister of Agriculture, Food and Rural Affairs (Ontario)
Hon. Laurent Lessard, Minister of Agriculture, Fisheries and Food (Quebec)
Hon. Robert Henderson, Minister of Agriculture and Fisheries (Prince Edward Island)
Hon. Wilfred Roussel, Minister of Agriculture, Mines and Rural Affairs (New Brunswick)
Hon. Keith Colwell, Minister of Agriculture and Minister of Fisheries and Aquaculture (Nova Scotia)