Mr. MANION:

No matter whose proposal it is, it seems to me that now, before any of the bills are discussed, is the time to make a complete statement on them all. I was of the opinion, although I was not consulted, that in respect to these bills, which are all interrelated, there might be one general discussion covering them all-I quite agree with that. But before any of them are dealt with, both the Minister of Agriculture and the Minister of Trade and Commerce should make

their general statements, the Minister of Agriculture dealing with the three bills in his name, and the Minister of Trade and Commerce with his Bill No. 63. That would simplify the matter and I think shorten the discussion. If on the other hand we had a general statement made on Bill 63-

Mr. GARDINER:

Bill 82.

Mr. MANION:

If we discuss bills 82 and 89 without having the general remarks by the two ministers, naturally there are many questions we shall have to ask, and it will lead to duplication and repetition. I say with all respect that the proper way to proceed would be to make a general statment now on all four bills; it would tend to promote a more informed discussion. For myself I am not as familiar with western problems as hon. members from the west, and I should like to have a general statement made on all the bills before I take part in the discussion. I am making this suggestion without consulting with the others, but it seems much the better way of proceeding.

Mr. GRAY:

I think the general arrangement suggested by the whips of all parties was that the Minister of Agriculture or the Minister of Trade and Commerce would make a general statement covering all the bills mentioned by the leader of the opposition (Mr. Manion) and then following that statement the debate would proceed. That was our understanding of the suggestion, at least, -to bring down all the bills, in an attempt to correlate them as has been suggested by the leader of the opposition.

Mr. MANION:

Did I misunderstand the Minister of Agriculture?

Mr. GARDINER:

No. The discussion last night took place with a group of half a dozen members who came over as a result of this understanding by the whips. Bill No. 82 does not come into effect immediately; it is the one which will come into effect by proclamation. It concerns a matter somewhat different from that dealt with in bills 83 and 63. I do not think it would interfere in any way with proper discussion to take Bill 82 first. The other bill, No. 89, has no connection with wheat; it has to do with the marketing of agricultural products generally other than wheat. It was thought that we might have bills 82 and 89 go through the second reading stage and into committee, and have whatever information is required by hon. members given at that stage, and then when other hon. members have had more time to read over the two bills distributed

Cooperative Wheat Marketing

last night, Nos. 63 and 83, which cover completely this question which has been under discussion for some considerable time, we could go into full discussion of the whole wheat question on these two bills.

Mr. COLD WELL:

I was one of the group last night that discussed this matter with the minister, and my recollection is substantially that of the minister rather than of the chief government whip. My understanding was that the two bills dealing with cooperative marketing, which would probably not require long debate, might be dealt with first; hon. members who have something to say bearing directly on those bills might say it in a comparatively short discussion, and then the major debate could take place on the other two bills. That was my understanding.

Mr. MITCHELL:

I also was one of those who discussed the wheat debate with the minister last evening. My impression was that there was no intention on the part of anyone to curtail discussion of the whole wheat problem. The government's concern, as expressed by the Minister of Agriculture, was that the discussion be facilitated as much as possible, in such a way as to cover all the ground and yet devote to it no unnecessary time. The impression I got was substantially what the minister has stated. He emphasized the intention of the government to refer bills 82 and 89, having to do with cooperative marketing, to the agriculture committee of this house-

Mr. GARDINER:

To the committee of the whole house.

Mr. MITCHELL:

Yes, the committee of the whole house, for fuller discussion then. My impression is that the method suggested by the government would facilitate discussion rather than curtail it.

Mr. PERLEY:

Last evening at the close of the sitting I happened to notice a group standing together around the Minister of Agriculture. I went over and the discussion that took place was practically as stated by the minister and the hon. member for Rosetowm-Biggar (Mr. Coldwell). I think possibly there was some reservation made. I have the envelope that I happened to have in my hand at the time, and the minister will recall that just at the close I put down the numbers of two bills and put a circle around them. The understanding was that bills 82 and 89 would be considered first, and the minister would make a general statement. Following that, discussion would be permitted in a general way on both bills, and then they would [Mr. Gardiner.)

be moved into committee. We would not be prevented from making a short statement, but there would be no lengthy debate on the bill following the minister's statement. As I understood it, the minister was to make a statement on these two bills before moving them into committee. Then when they were cleaned up, so to speak, bills 83 and 63 would be more or less considered together; bill 83 would be taken first and then bill 63 would be dealt with. That was my understanding.

Mr. GARDINER:

In moving the second

reading of Bill No. 82 I desire to say that it deals with a matter which has been the subject of general discussion in western Canada more or less since 1931, when the wheat pools which had been operating prior to that time found it necessary, because of financial difficulties, to cease operations on a signed contract pooling basis and to allow only voluntary pooling. That voluntary pooling was permitted until the appointment of the wheat board under the legislation of 1935. During that period there was carried on through the central selling agency of the three pools what has come to be known as stabilization activities. During the period of those stabilization activities some 20,000,000 bushels of wheat were delivered to the voluntary pools by the wheat producers, but since the time the activities in connection with the marketing of wheat were taken over by the wheat board there has been no pooling of wheat in western Canada. The discussion in regard to the pooling of wheat has continued, however, and I think I would be safe in saying that at least one-third of the farmers of western Canada still believe they can market their wheat to better advantage under a pooling system over which they themselves have control than they can either through the open market or by any other method that has been tried so far. I am of the opinion that it would be in the interests of the grain trade of western Canada to make it possible for that group of producers to satisfy themselves and the people of Canada generally as to whether or not their contention with regard to the marketing of wheat is reasonable and can be effectively put into operation.

Under this bill we intend to place at the disposal of farmers who hold the view that wheat can be profitably marketed through the pooling system, facilities and a means of credit under which that pooling system can be tried out. It will be remembered by those who are familiar with the situation in western Canada that when the pools were first organized, in 1923. they had no handling facilities.

Cooperative Wheat Marketing

They were simply organizations of producers who desired to pool their grain under contract; then, after it was marketed by their own selling agency, they distributed back to the producers any profits which were made as a result of the sale of the grain, over and above the initial payment. In due course, however, the different pools obtained elevators. The Saskatchewan pool took over the Saskatchewan cooperative; the pool in Manitoba took over a line of elevators in that province, and the Alberta pool took over a line of elevators there. So eventually, in addition to their central selling agency, these pool organizations had pool elevator companies as well. As a result of their activities a very considerable number of elevators were operated by these three companies.

Mr. MANION:

Would the minister give the date on which the pools commenced operation?

Mr. GARDINER:

The pool in Alberta

began in 1923 and the pools in Manitoba and Saskatchewan in 1924. They all started their sign-up in 1923, but the Alberta pool was the only one that obtained sufficient signatures to get into operation that year.

The Alberta pool now operates 423 country elevators; the Manitoba pool operates 154 and the Saskatchewan pool 1,069. Since 1935 these pool elevator companies have been operating and disposing of their grain in much the same way as other elevator companies. Some of the other large elevator companies of the

west are as follows:

Number of

Name of company elevators

Alberta Pacific 339

Bawlf Elevator Company 106

Federal Elevator Company 390

National Elevator Company 120

Northern Elevator Company 149

Ogilvy's 146

Patterson Elevator Company 102

Pioneer Elevator Company 215

Reliance Elevator Company 162

Searle Grain Company 347

United Grain Growers 425

Western Grain Company 238

That makes fifteen companies, each with over 100 elevators, operating in western Canada. Many other elevator systems also operate there, each with from less than 100 elevators down to one elevator; all told I believe there are some 153 elevator companies, but of these the great majority are small companies operating one or two elevators, quite often associated with local mills.

The purpose of this legislation, as I indicated in the beginning, is to make it possible for farmers who desire to pool their

grain to make use of the facilities now in existence in western Canada in order that their grain may be handled through these elevators, as they are accustomed to handle it, and turned over to one or more central selling agencies whose offices in all probability would be located in the city of Winnipeg, where most of the grain trade is located. So the bill provides that any cooperative organization-and a cooperative organization is defined-or any elevator company, which is defined as an incorporated organization which handles or controls 100 or more elevators, may come within the provisions of this legislation. It will be seen that this does not eliminate or exclude any of the smaller companies which may form themselves into an organization which will come within these provisions, for the purpose of accepting pool grain and delivering it to any central selling agency that may be set up on behalf of those who desire to pool their wheat.

The legislation then goes on to provide that any of these organizations, or any combination of them, may set up a central selling agency to take delivery of this wheat from the producers and to pool it. The only obligation assumed by the government in connection with any such agreement is that we are prepared to guarantee the financing of the initial payment provided that such initial payment is not more than 60 cents a bushel. The reason we have set the figure at 60 cents a bushel is the reason I gave the house when this matter was under discussion in the resolution stage, namely that it has been the experience of the last fifty years that in only one crop year has wheat sold on an average at Fort William at less than 60 cents a bushel. I may add, Mr. Speaker, that in only eight crop years in the last fifty years has No. 1 northern wheat sold on an average at Fort William at less than 70 cents a bushel. So that what the government is actually doing in proposing that we place in this bill an initial payment of 60 cents is to choose an amount which we consider to be safe as an initial payment in connection with an operation of this kind.

In order to make it clear why we found it necessary to do that, I would remind hon. members of the fact that when the pool was set up in 1923 an initial payment was established of, I think, 75 cents a bushel. That initial payment was raised in the next year to SI a bushel, and it was continued at $1 a bushel until 1928, at which time the pools ran into some financial difficulty in meeting their initial payments because of a fall in world market prices. In 1928 the payment was set at, I think, 85 cents a bushel. In 1929 it

Cooperative Wheat Marketing

was raised to SI, and there was difficulty experienced in meeting that payment. The result was that the three pools lost or paid out to the farmers $24,000,000 more than they were able to obtain for grain that year for the purpose of refunding to their bankers the money which they had paid out in their initial payment.

The direct result was that the three western provinces assumed the obligation of guaranteeing to the banks approximately $24,000,000 that had been paid out in initial payments by the pools during the year of the placing of that guarantee-in February of 1930. I believe the pools have been meeting their payments; I am sure the Saskatchewan pool has, and I think the others have been too. The pools have been meeting their payments through the years from 1930 until the present in order to pay off their part of that particular obligation of approximately $24,000,000 which was assumed by the three pools. I think I am stating what will be admitted by any of the officials of the pools, and by all those who have been associated with their activities in western Canada, when I say that the real reason the pooling activities of that time were not as successful in the years following 1929 as they had been in the years preceding 1929, was that in the years preceding 1929 the pools were operating on either a rising or a fairly stationary market price. But in the years following 1928, after the big crop of that year, the pools were attempting to operate on what was really a falling market, and they then experienced difficulty in persuading the signers of contracts in the western part of Canada, and persuading even those who were elected as delegates, and boards for the operation of the pools, that the price should be brought down as rapidly as the price was dropping in the world market. The result was that they eventually landed in financial difficulty, and this financial difficulty brought about the end of a number of what were known as contract pools.

With that experience behind us, we held the point of view that if a system of the kind is to be tried out again in western Canada it should be tried out on a basis which is considered to be absolutely sound financially. And in order to have it tried out on a basis which is absolutely sound financially we have considered it wise to get down to a figure for the initial payment which the government can safely guarantee, and which we can be reasonably sure will be met from year to year during the time of the operation of an organization of this kind.

Opinions have been expressed to' me by different persons who are concerned with the

IMr. Gardiner.]

operation both of line elevator companies and of pools in western Canada, since this question was first brought before the house, which have some bearing upon any action which might be taken by members of the house and which I think should be mentioned. One of the statements is to the effect that there would be no difficulty in operating the handling of pool grain by the same organization which is operating in the purchase and sale of grain in the open market. There might be some reason why the two things should not be carried on together, but in so far as the physical operation is concerned no difficulty would be experienced in doing those two particular things. Then, the opinion has been expressed to me, as well, that there would be no difficulty, beyond that of securing the cooperation of the boards of different companies, in setting up a central selling agency which might handle the grain of a number of companies, and that perhaps outside of business differences there should be nothing to prevent all the grain from being handled eventually under one central selling agency. But the measure does not make that essential to the carrying out of the objective we have in mind.

I have before me one or two communications which, in view of the understanding we have reached with regard to debate, it might be well to place before hon. members at this time. One of them comes from the Saskatchewan pool. I might add that since the letter was written I have had with those officials further discussions which have cleared up some of the points and have entirely removed from their minds some of the representations made. This letter, which is addressed to the Minister of Agriculture at Ottawa, Ontario, and is dated April 12, 1939, is as follows:

Re Cooperative Marketing Bill No. 82

Dear Sir:

The executive of the wheat pool have gone over this bill somewhat carefully to-day and we have the following suggestions to make: Section 2, subsection 1 (a), after the word "an" in the first line insert "incorporated."

ouusection , a) oi me same section delete. Subsection (i) of same section delete. Section 3, subsection 1, wherever "selling agency" appears delete and insert "cooperative.

Section 4, subsection 3 delete "selling agency" and insert "cooperative."

Section 6, delete words "or elevator company associated with such selling agency under a cooperative plan."

The comment on that is this:

The pool executive feel that if an act is to be passed to encourage the cooperative marketing of wheat it should definitely provide for

Cooperative Wheat Marketing

the operation of the cooperatives, and that no encouragement should be given to an organization unless it is an incorporated association of primary producers.

With the above alterations in the bill the pool elevator companies of none of the pools could operate a cooperative for marketing wheat.

I would emphasize the fact that the pools are not there saying that the line elevators should be eliminated and that they should not be allowed to operate. They are suggesting that under an amendment of that kind none of the elevator companies, including themselves, would be able to operate unless they first organized a separate cooperative. They go on to say:

It would have to be set up as a separate company controlled by producers, not controlled by a private joint stock company.

Then, from the point of view of what I have just said, the last paragraph is important :

They are not prepared to go so far as approving of the 60 cents as an adequate initial payment, but they are not taking any objection to it at this time. They do feel very strongly, however, about the act permitting any joint stock company operating a pool as they feel these pools should be altogether producer organizations.

Yours truly,

MacPherson, Milliken, Leslie & Tyerman.

This communication bears the initials of Mr. Milliken. It sets forth clearly the view of the Saskatchewan pool organization as of April 12, 1939.

Since that time, as I said a moment ago, I have met the representatives of this particular company and have discussed the matter with them. I have pointed out clearly what I pointed out this afternoon to the house, that the intention of this bill is not to ask the pools again to become cooperatives; the intention is not to ask the elevator companies to become cooperatives; the intention is not to ask those who are operating commission agencies to become cooperatives. The intention is to ask those who have control of the handling facilities, whether they call themselves pools or private elevator companies, to place those facilities under certain circumstances at the disposal of producers in western Canada through which they may pool their grain. In other words the intention is that the facilities be placed at the disposal of a group of farmers who desire for one year at least to turn all their grain into a marketing system at an advance of 60 cents a bushel; and if it is sold through one or more central selling agencies and it is found at the end of the year that a surplus has been accumulated as a result of the sale of that grain, 71492-224

it will be returned to the individual producers who have placed their grain in that particular pool.

That is the intention of the proposed legislation. There is nothing compulsory about it. It merely sets up provisions under which purely voluntary arrangements can be entered into.

The part which the government plays in it is this. We say to an organization that comes to us and places its facilities at the disposal of the producers of western Canada for the purpose I have mentioned: We are prepared to guarantee an advance of 60 cents a bushel. You ask me what is covered by that 60 cents advance. You will find on reading the legislation that the 60 cents is to cover the advance payment that is made at the initial point; to cover all the operating expenses of the central selling agency for the selling of the grain, and to cover all the storage charges in connection with the grain. With all the experience of the pools behind us and the information we have as a result of that experience, we know that it cost the pool in an average year three cents a bushel for carrying charges on the grain in an elevator; that is, it cost the elevator companies three cents. In one year it went to about five cents a bushel. So it may be judged from that, in order to make themselves absolutely safe, if they were to start a pool this year, with the price hovering between 70 and 60 cents a bushel, the pools could not make an advance payment at the initial point of more than 55 cents.

Mr. MANION:

The minister did not include transportation costs in his statement of what the 60 cents covered. Should not that be included?

Mr. GARDINER:

Yes, transportation from the point of delivery; this is covered in the fact, that the basis is No. 1 northern, Fort William. There would be transportation and handling charges, in addition to at least three cents to cover storage, taken off the 60 cents to arrive at the price to the individual farmer.

Mr. MANION:

I asked the question because the minister did not include transportation. It is 60 cents Fort William?

Mr. GARDINER:

Sixty cents; that is basis No. 1 northern Fort William.

To continue, the bill also makes provision under which a reserve may be set up. This reserve would be governed by the regulations provided in the latter part of the bill. This reserve, I presume, would be set up under conditions different from those of the present year. There is the possibility that none of

Cooperative Wheat Marketing

these companies may undertake to operate this year with the wheat board operating, but if we get back to a position where wheat is selling at a higher price than 70 cents a bushel, it would be possible for any company or any central selling agency operating under this bill to set up a reserve, and that reserve could be based on one cent a bushel or two cents a bushel, or any amount they decided upon. Provision is made in the bill that when a company has set up a reserve which is sufficient to satisfy the government that it would be safe to make the initial payment of 60 cents a bushel No. 1 northern at Fort William, the government may enter into an arrangement whereby the carrying charges of three to five cents a bushel could be taken care of out of a reserve set up by the central selling agencies themselves as a result of their operations.

I do not think it is necessary for me to say more at present, other than to indicate that in addition to the letter I have read I have received a lengthy statement from the United Grain Growers, which operate over four hundred elevators in western Canada, to the effect that they were very early in the field in advocating the pooling system of marketing, that they still agree with the cooperative marketing principle, and that under normal conditions they would be more than willing to try to operate a pool under legislation of this kind. But to be absolutely fair to them I must add that in the last few sentences of their memorandum they state that in their opinion it would have been wise not to attempt to have the legislation go further this year than the discussion stage, in view of the fact that we are still in an emergent condition, under which it would probably be veiy difficult to operate the legislation. With this last suggestion I am not in agreement. I think it is better to put the legislation on the statute book in order to have it before the public for discussion, to be made effective by proclamation. This would place the government in a position to consider all the facts in relation to it. Then when any organization comes to the government and says that it is prepared to try out once more the pooling system on the basis of the details of this bill, the matter can be discussed in a practical way and those who have been considering operating under this legislation can come to a final conclusion as to whether or not they desire to do so.

I want to say one word more with regard to the advance. Every farmer in western Canada knows what an advance is. He knows that an advance is not a price for grain. The hon. member for Humboldt (Mr. Fleming)

the other evening said that I was just splitting hairs when I made that statement, but what I want to say is this, that an elevator advance-

Mr. JOHNSTON (Bow River):

What

about the 1929 advance?

Mr. GARDINER:

This is not like the

1929 advance. I was going on to say that when you drive into an elevator with a load of grain, the elevator company decides in the light of its experience what it is prepared to pay to any farmer in cash as an advance, and it does not matter whether it is a pool or not a pool elevator. If I drive into an elevator with a load of grain and ask the elevator operator what is the price of grain, he tells me. If I am not satisfied I may say "I think I can do better later." But I have to pay my expenses of operation from seed time to harvest, and so I ask him, "What advance will you give me on my grain?" In a rising market the elevator companies have been in the habit of advancing up to about 60 per cent of the market price on that particular day. In a falling market they will probably not go so high as 60 per cent, perhaps only 50 or 40 per cent; and in years of low prices perhaps very much lower than that. But they have always been prepared to make an advance which they thought to be safe. Farmers in the area who have carried on their business over a long period of years with a particular elevator company have usually been able to get a higher advance than those just driving into the elevator irregularly to sell a few loads of grain. So that the regular customers of the elevator can sometimes get an even higher price than I have indicated.

But the advance made by the elevator company was always subject to three conditions: (1) you must pay interest on it from the day you got it; (2) you must pay storage on your grain after it has been in the elevator fifteen days; (3) when the price advanced to you, plus the elevator storage charge, plus the interest, came anywhere near to what the market price was on a certain day, the elevator company had the right to sell your grain at the day's market price. That is the way the advances always operated under the system of marketing grain in western Canada.

Now, what the government is actually saying under this bill is this. Based upon the experience of fifty years, in only one year has No. 1 northern wheat been below 60 cents at Fort William on the average throughout a crop year; and the government is saying to the farmers of western Canada that we are

Cooperative Wheat Marketing

prepared, because of that experience, to guarantee that initial payment of 60 cents. This means that when the guarantee is 60 cents on the basis discussed at the beginning, where possibly storage charges and interest and other charges are taken into consideration before the initial payment is made to the farmer, up to the 60 cents no further interest is added, no storage charge is added, and even if wheat drops for two or three days or a week or a month below 60 cents, the farmer is not sold out. He still has his wheat, and that wheat carries on into the succeeding months. If there is finally an accumulated surplus over and above the 60 cents, the farmer will still get his part of that accumulated surplus. In other words, there is an advance guaranteed of 60 cents, which the government considers to be a safe guarantee, the basis from which we can work in order to establish in western Canada not only an effective guarantee, but from which our financing can be done.

The greatest weakness of the financing in western Canada has been associated with the fact that wheat has been the one cash product which we have been selling from the greater part of the west; that we get that crop only once a year, and that it is impossible, or has been up to date, for farmers to finance storage capacity on their own land to take care of the wheat which they produce. The result is that about eighty per cent of the crop has been rushed to market in the three or four months of the fall, that such wheat as is not sold is stored in storage facilities, and that of necessity elevator companies must charge from three-quarters of a cent to a cent a bushel every month it is kept in those storage facilities. Being in that position, farmers have had in most years to sell out their entire crop immediately they delivered it in order to pay their expenses of operation.

What we are suggesting under this policy is that we lay down something which farmers throughout western Canada can operate towards and operate from. They can say: We have a fairly safe guarantee that if we market our wheat in a certain way, we can get 60 cents a bushel for it at Fort William, and we can-have that paid to us the day we are in a position to deliver our grain to any elevator anywhere in western Canada. Then they can say, in addition to that, under the other bill which we shall be discussing later, that that 60 cents per bushel is fairly well guaranteed up to a crop of about 12 bushels to the acre. In other words, they can figure in advance where the bottom limit of their financial position is, and during that part of 71492-224J

the year which precedes August or September of every crop year they can carry on in such a manner that they will know they can finance when they come into the harvest season. If it turns out that they get a good price, they are in a position to do what farmers have been able to do in every other part of the world; they can do the things which they have been inclined to do previously by going into debt. As a result of having got a better crop than they figured on getting, or of having received a better price than the bottom price which experience has taught us we can get any year over a fifty year period, they can finance to better advantage.

I believe that in five or ten years time, operating under a system of that kind, western Canada can put itself on a sounder basis than it is to-day. It can operate its farms in much the same way as farmers elsewhere have been able to operate theirs because they are selling their product over the whole year instead of selling it once a year. In other words, farmers can put themselves more nearly on a cash basis than they have ever been able to put themselves in the past. Through the operation of this bill, combined with the acreage payment plan, I believe that many farmers in western Canada who have financed up to the crop period in the hope that they would have a crop, and then, finding themselves without one, had to go on financing through the next year in the hope that they would have a crop, with the debt of a previous year piled up behind them, will in future be able to finance in the current year from what they have already in hand. Thus they can enter the next year in the hope, of course, of being able to take a crop off their land of the bountiful kind which they have reaped many years in the past, but with the assurance that if they do not, and if they finance in a reasonable way, they will not be adding unduly to the debt charges against their land. I believe that when all this legislation which we are going to discuss in the next day or two is placed on the statute book, we can a least start to work towards that end.

I suggest that this bill be placed on the statutes as the first of a group which will, I believe, make possible the objective I have outlined. When it is on the statute book, and when the measure is enacted which I hope to take up next, leading with the general cooperative marketing on a similar basis of other farm products, I think we shall be able to establish the basis of a farm policy which will be helpful to producers from one end of Canada to the other.

Cooperative Wheat Marketing