July 4, 1935 (17th Parliament, 6th Session)

Mr. LUCAS:

As a .member of the special committee dealing with Bill No. 98, I think I am within the judgment of all the members of that committee when I say that we all received a great deal of very useful information from the various witnesses who appeared before us. But in my opinion the greatest justification for the setting up of that special committee was the fact that it enabled the representatives of the pools to place on the official record an. absolute refutation of the false propaganda that has been circulating throughout not only this country but the world in regard to the selling policy of the pools, suggesting that the situation facing Canada now in not 'being able to dispose of her grain has been entirely due to that policy. I will deal with that a little later by means of some of the evidence, and I think it is very important because a strong opinion prevails among a large number of people that the setting up of a government board to take over the handling of Canadian wheat is more or less a continuation of the pool policy, and therefore if that policy were false, then of course a number of people believe the board would be carrying out something that would not be in the best interests of this country.
One point- we should bear in mind is that the marketing of Canada's wheat is no longer a local or farmers' problem, but haa now become a national one. When one considers not only the importance of our crop but also the fact that the government of every important wheat producing .country in the world is giving some form of support to its wheat producers. Canadian farmers can not be allowed to shift for themselves. Another factor in this regard is the value of the crop as it is set forth at page 3563 of Hansard. This gives the figures from 1920 up to the present time, running into not hundreds of millions but billions of dollars, and it shows that Canada is now the largest single wheat exporting country in the world. Wheat is the most important commodity in the export business of Canada, amounting I believe to almost one-third of our export, business. When the final chapters of Canadian history are -written, I believe none will foe more interesting than that dealing with the opening up and development of the great western plains.
fMr. Ralston.]
I think I am safe in saying that there is no man in the house who is more familiar with the struggles, disappointments, hopes and ambitions of the farmers in trying to get a fair price for their product than is the hon. member for Melville (Mr. Motherwell) who has been out in that part of the country from its pioneer days- and who took a prominent, part in leading and encouraging the farmers to organize, in order to get a .more fair return for their products. Those efforts were not for the purpose of taking from somebody else what was his but to try to get for the farmers themselves tha-t which rightly belonged to them and to give them a fair return for their toil. I am sure nobody can object to that.
I am not going into early history, because the hon. member for Acadia (Mr. Gardiner) when the bill was before the house on second reading gave a very interesting account of the early development of the farmers' movement. We are all familiar with the Canada Grain Act. That act first came into being because of petitions from the farmers and as a result of commissions set up to investigate the problem. Finally' the Canada Grain Act was put upon the statute books. Its main purpose was to prevent abuses and protect the farmer. Then came the war, and then in 1919 what was known as the Canadian wheat board was set up. I think it is fair to say that when the 1919 wheat board was established there was a good deal of antagonism among the farmers because there was a belief largely prevalent among them, whether or not it was erroneous, that this wheat board was not established for the purpose of getting the farmer more for his wheat but of stopping the price of wheat from going up. However, when the year was finally closed the results were so satisfactory, as well as the handling of the wheat during that period, that there was a complete change of attitude, and a great effort was carried on in the succeeding years to have the 1919 wheat board reestablished. In 1922, a measure was passed in this house providing for the establishment of a wheat board. We are all familiar with what happened. While agitation for a new wheat board was being carried on, the Saskatchewan government appointed a commission under James Stewart and F. W. Riddell to look into the matter and report. The first question that this commission was asked to decide -was as follows:
Is it possible for any kind of pool comprising less than the whole of the western wheat crop to market the crop to the same advantage from the producers' point of view as a system of national marketing of the whole crop by a Canadian wheat board?

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In answering that question they had this to say:
During the early months of the season, when a large volume of wheat is offered for sale, there is a natural decline in prices. This system of competitive selling permits of no intelligent regulation of supplies of either the farmers' wheat or that owned by the elevator companies. To the extent, therefore, that the marketing of wheat outside the limits of the pool is continued, on this basis, the marketing of the wheat within the pool would be affected detrimentally. Therefore the object of the pool, which would be the stabilization of prices by a more even distribution of supplies, would be adversely influenced.
There is hardly a favourable basis of comparison between the advantages accruing to the producer of wheat through a pool under national control, and any other form of pool attempting to control an- unknown portion of the crop in competition with the balance of the crop in an open market. It is perfectly obvious that under a system of national control, where only one seller exists, and buyers are numerous, the advantage in trading is with the seller.
Now, when the farmers could not get the government ryheat board reinstated, they determined to handle their own wheat, and organized the pools. The operation of those pools in western Canada brought satisfaction not only to many farmers, but to the general business of the country. It relieved the farmer of the worry of deciding when he should sell, and I think any hon. member from western Canada will agree with me that it is veiy difficult to know when to sell, with the market fluctuating each day and no stability, for it must be remembered that the farmer gets only one crop and when it is sold that is his only chance of getting a return for that year. By the wheat pool he was given an initial payment, and following that he received interim payments which enabled him to carry on his business, and at the end of the year when the crop was all sold he knew he was going to receive a fair average price. For my own part I sold wheat to the pool from the very beginning of its organization, and I am still selling wheat to the pools. I understand that the banks and the business men were w-ell satisfied, because the farmer had money distributed to him through different periods of the year, and so was able to finance much more satisfactorily.
However, when those pools were organized they came into conflict with the organized grain trade. It is just as natural as can be that that trade, seeing some of its business likely to be taken away, set out to oppose the pools. This was done by circulating all kinds of propaganda against the pooling method.
At one o'clock the committee took recess.
The committee resumed at three o'clock.
,Mr. LUCAS: When the committee rose
at one o'clock I was dealing with the fact that when in 1921 and 1922 the producers could not induce the government t'o reestablish a wheat board similar to that of 1919 they decided) to organize themselves as voluntary pools, and endeavour to sell their own wheat. In doing this they had to face the opposition of the organized grain trade. At page 209, of the evidence, we find that Mr. Brouillette stated:
There is another point that I think you as a committee should satisfy yourselves about before you go out of your way to make changes on the supposition that there is something of such importance in this open market that would warrant keeping it operating. There have been a lot of charges. You take the first year we started to operate the pool when the market price was $1.49-$1.51 on .August 2, 1929. We continue on operating. We make a dollar initial payment. We decide some time in March or April to make our first interim payment. The 2nd or 3rd of March the open market is $2.05 and a fraction. Unfortunately, we decide on making an interim payment of 35 cents. That brings your total payment up to $1.35. Inside of a month the price on the Winnipeg market goes from $2.05 and a fraction down to $1.38! on the 2nd or 3rd of April. Then within a month following that it rebounds up to around $1.70.
Hon. members will observe that there was in this instance a drop of 67 cents a bushel in the market price of wheat in one month and I think all hon. members will agree that that drop was not due to world causes, because within a month the price rebounded back again. While it may be difficult to prove I a.m satisfied that there was an actual attempt made by the grain trade not only to embarrass the pools but to pratic-ally put them out of business. Our pools began operating first in Alberta in 1923, and in Saskatchewan and1 Manitoba in 1924. They had only got nicely into their swing when in August of 1925 the market price of wheat had reached $1.51. At that time the pool set its initial price at what was considered to be a safe figure of SI per bushel. On March 4, the market price was $2.05|, and1 the pool deciding to make an interim payment to their customers had their cheques written out when the price dropped 67 cents, or from S2.05J .to S1.38f. The fact that the pools had made an initial payment of $1 and announced an interim payment of 35 cents put them in an embarrassing position: When
the market .price came down to SI .38 the pools found themselves in difficulties with the bank due to the fact that their credit was gone, because they were supposed to keep a margin of 15 cents a bushel. How-
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ever within a month's time the market price rebounded: to S1.72J. The only thing that saved the pools was that before they had their cheques sent out the tremendous drop had taken place and in order to protect themselves they withheld) the cheques which had already been made out from the producers. That is one place where the exchange made a mistake. They brought about the drop in price too soon. Had they waited until the cheques 'had gone out to the producers they certainly would have placed the pools in an awkward position.
The statement 'has been made that the policy of the pools antagonized foreign buyers and for that reason they are responsible for the carry-over. In this connection I shall quote from the evidence of Mr. Milner, president of the Winnipeg grain exchange. At page 66 of the evidence he is reported as follows:
Q. Well now, is there any other cause you want to mention as an example of past experience in centralized control; or, have you any in mind-A. I have the Canadian pools.
Q. Well, what do you mean by that, just explain that-A. Well, the result of their operations was a large carry-over.
That is the propaganda that has been broadcast throughout the .country until it is firmly believed that the pools were entirely responsible for this large carry-over. I believe it is fair to say that if the pool policy had created antagonism and they were unable to sell, it would have shown in the amount of wheat he'd by the pools and the trade. What are the facts? I turn to page 208 of the evidence and find that in answer to questions by Mr. Ralston Mr. Brouillette gave the following evidence about carry-overs.
Q. We ought to know?-A. Yes, we should know. I think this is the best proof we can get of it. Our Mr. Bredt, who will be appearing before this committee, will go into more detail; but for the four years when we were operating on the largest scale, 1926, 1927, 1928 and 1929, the total deliveries of grain in the three western provinces were 1,455,252,835 bushels. The percentage of that total delivered to the three pools was 755,719,373 bushels, or 5T9 per cent of the total. The total carryovers at the end of each year for that period of four years was a total of 402,000,000 bushels. Now, if we sold more or less of our share in that period' it would show up in our share of the carry-over, would it not?
Then, following further questions the witness stated:
The Witness: Yes, the pool's share of all that -that is what we carried at the end of each year, totalled for those four years on the same basis as the figure above referred to was 170,000,060 bushels, which was 42-3 per cent, and we were entitled during that period to 51-9 per cent, to have carried our fair and equal share on that basis.

Dealing with the same question of carryovers Mr. Bredt is reported at page 236 of the evidence as follows:
The Witness: In 1929-30, the Canadian
carry-over again was 127,000,000 bushels. The pool share of that carry-over was 50 per cent, and the pool handlings in that year of the total were 5T3 per cent. It is rather a coincidence that the carry-over of the pool handling and the total are identical; that is, 127,000,000 carry-over and the pool handles 51-3 per cent. Does this indicate that the pools were responsible for the large carryover? They had 41 per cent in the one year, 50 in another; they handled 51-3 per cent. Now, surely they cannot be accused of not selling, withholding, refusing to sell or holding up the price, because if they had, they would not have sold so much. They sold more, comparatively, than the trade did. They only held 41 per cent of the carry-over in the one year when they might have held off 50; and in the second year they held 50 per cent and they handled 51-3 per cent.
I believe those figures should set at rest for all time the allegation that the pools were responsible for the carry-over.
Then, again, there was a story circulated that when the Hon. J. H. Thomas, a minister of the British government came to Canada he communicated with the pools and tried to make negotiations for a large quantity of wheat, but that- the pools had refused to sell.
I want to deal with that for a moment. It will be found on page 221 of the evidence, where I asked this question of the witness, Mr. Brouillette:
Q. Some time ago there was a statement circulated widely in the press that the Hon. J. H. Thomas, minister in Great Britain, had come before the pools and made an effort to buy a large quantity of wheat, and the pools refused to sell to him. Is there any truth in that statement?
The answer was:
There is no truth in that statement whatsoever. If there is any wide circulation of such misunderstandings in this country it might be worth while to read from our records covering exactly that situation.
Further on this same witness said:
Aside from speaking from this record, I was present at the conference at the time the Hon. Mr. Thomas met our central board, if not the executive. This was in September, 1929.
Now I wish to put this statement by the Hon. Mr. Thomas on the record. The evidence continued as follows:
Q. Hon. J. H. Thomas?-A. Yes.
At the request of the British government, conferences were arranged with the right honourable J. H. Thomas, Lord Privy Seal in the British Cabinet, and representatives of the wheat pools on September 2nd and 3rd, 1929, at Winnipeg. ....
Discussions took place on the possibilities of facilitating the interchange of commodities

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between Canada and the United Kingdom, having regard in particular to the desirability of ensuring an even flow of outward and return cargoes between Canada and the United Kingdom.
At the first conference with wheat pool officials, it was evident that Mr. Thomas was under the impression that the Canadian wheat pools had been refusing to sell wheat at prevailing prices. The situation was fully explained to him and Mr. Thomas expressed himself as quite satisfied th at the Canadian wheat pools were anxious to dispose of their wheat, and were freely offering it to consumers at prevailing prices. When quoted some months later as criticizing the policy of the pools, Mr. Thomas, in an official interview, sent to the Canadian Press by the British High Commissioner, made the following statement:- _
My attention has been drawn to comment in Canada upon a statement made by me in the House of Commons on the 1st of April. The suggestion that the statement was based upon any feeling that the pool had been attempting to hold up wheat is wholly baseless. My statement was made in reply to an opposition supplementary question and was based on assurances given me, by you, at Winnipeg in September, that the pool had been anxious to sell at prices substantially lower than those prevailing. I fully accepted these assurances, and welcomed them as evidence of a friendly attitude towards my plans for encouraging more regular interchange of goods between Canada and Great Britain. I trust you will give full publicity to this explanation. As you know, I fully appreciate the difficulties with which the pool has been confronted', and
1 earnestly hope the situation may soon rectify itself to the advantage of both countries.
I quote that because only last week I was talking to a business man in Ottawa who referred to this very question, that the pools had refused to sell to Great Britain when Mr. Thomas was trying to negotiate with them. The statement also was made that placards were displayed on delivery wagons in London advising against using Canadian flour. This has also been refuted. It has also been claimed that the pools held the price above the market and of course therefore could not sell, but what are the facts? I want to call the attention of hon. members to a table that appears on page 282 of the evidence, exhibit "C" which absolutely refutes that charge. It was filed by the witness, Paul T. Bredt, Canadian Cooperative Wheat Producers Limited, and gives the export offers and comparison with market prices for July, August and September, 1929. Here is the summary of that table. Out of 76 market days the pool offered wheat below the market on 52 days and sometimes over 6J cents a bushel below the market; on 14 days out of the 76 it offered wheat over the market; on
2 days at the market, and on 8 days there were no offers. A study of this table is most
illuminating and absolutely refutes the statements, that the pools held their wheat above market prices.
It was also claimed that because of this supposed antagonism against the pools they were unable to sell their fair share of wheat in Great Britain and in other markets. What are the facts? At page 261 evidence will be found to this effect. The total Canadian exports to Great Britain are given, and the pools' share of those exports. In 1926-27 the total of Canadian exports was 62,979,000 bushels; the pool's share was 50,152,000 bushels, a percentage for the pool of 79-8. In 1927-28 the total Canadian exports were 67,430,000; the pool's share was 36,181,000 or a pool percentage of 53-7 per cent. The 1928-29 total was 69,895,000 bushels; the pool's share was 34.665.000, a pool percentage of 49-8. The 1929-30 total was 43.214,000, the pool's share was 22,980,000, a percentage of 53-2.
I hope, Mr. Chairman, that with those facts before us the charge that the pool has been holding up prices and has refused to sell and has antagonized foreign buyers will be disposed of for all time.
I am in favour of Bill No. 98, to establish a Canadian grain board, but I would have much preferred to have seen sections 9, 10 and 11 as part of the bill rather than to become operative only by order in council. Those clauses 9, 10 and 11 are of course the ones which it was claimed would put the grain exchange out of business, and that there were compulsory features in connection with them. It was claimed that the farmer would lose a great deal of his freedom. I think, Mr. Chairman, that the farmer fully understands this question, and that so far as his freedom is concerned it is very limited. So far as prices are concerned, the farmers all know that prices are sent out twice each day, formerly by telegram but now by radio, and it is upon these prices that the farmer is paid and the same price is sent to all elevators. So far as taking away liberty is concerned there was nothing in those clauses had they become operative to prevent a farmer selling wheat any day he liked, to any elevator he liked. The competition in services would have been the same. Talk about the farmer's freedom! About the only freedom he has left is to draw his grain to the elevator and there his freedom ceases, and when his grain has been dumped down the chute he kisses it good-bye so far as he is concerned.
The producers feel that speculation on the market is not in his best interests. I would like to read a quotation from E. A. O'Neal
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which is found at page 185 of the evidence, but time does not permit. Mr. O'Neal appeared before the agricultural committee in the United States and dealt with this question very effectively. He points out that it appears that the Exchange can only carry on when special licence is given to what he calls the big boys, and while speculation may boost prices it also depresses prices.
It has been admitted that the futures market cannot carry on without the speculator, but to-day the ^peculator is gone; that is the small speculator that is necessary to carry on this market. It has been admitted on all sides, and evidence before the Stamp commission also brought out the fact that the majority of these speculators lost money. I want to ask this question: Is it fair to encourage these people to speculate when they are sure to lose their money? From what I know of the farmer I would say that he does not want to get a price by this means if in so doing he is robbing those who can ill afford to lose. It is an unsound foundation upon which to base prices. It is common knowledge to everyone that in this futures market bear raids are sprung periodically, and the small speculators of limited means are closed out and mans- of them ruined. In addition a lot of farmers' grain is sold on these severe drops in the market. That is not only a serious thing to the farmer, it is a serious thing to the country. As I stated earlier in my remarks, a farmer has only one crop of wheat in a year and he depends upon the return he receives from that crop to carry him through. When he is forced to sell on a low spot it means a reduced standard of living for the rest of the year.
A lot of people think that the wheat market is similar to the stock market. I have no objection to a man speculating in mining stocks or in shares of other concerns. When the price of automobile shares, for instance, goes up on the market there is no change in the price of automobiles or the rate of wages paid. A speculator on the wheat market is permitted to sell future wheat without owning or controlling one bushel while a speculator on the stock market can sell only shares which he has borrowed from the owner and which he can deliver when called upon to do so. The price of foodstuffs of the world should not have to depend upon speculation in futures. I cannot imagine a manufacturer standing for a situation whereby hundreds of automobiles could be dumped on the market by speculators who did not have one automobile and the price depressed. Yet that is the situation with which the farmer is confronted.

It has been said that there is no public opinion for a national wheat board, a compulsory wheat board or anything of that nature. I have not time to quote all the resolutions which have been passed in this connection but the attitude of the organized farmers of Alberta is well known and was placed on Hansard a few days ago by the hon. member for Acadia (Mr. Gardiner). I would refer hon. members to the Western Producer of June 20, 1935, which contains a whole page giving particulars of resolutions which were passed by various organizations in favour of a wheat board during the period from 1930 to 1935. The first I will quote refers to a resolution passed on April 14, 1931, by the Manitoba legislature, not a farmers' organization, and reads:
The Manitoba legislature unanimously approved formation of a wheat board similar to that of 1919 last Tuesday. Without a division the legislature went on record as favouring such a board, which would set minimum prices and carry the western farmer through the present period of depression.
J. R. Griffiths, government member for Russell, moved that the legislature favour the forming of a wheat board along the lines of the 1949 board. There was no debate on the motion and immediately after Mr. Griffiths' motion was introduced it was unanimously approved.
The next article refers to Saskatchewan and reads:
Falling in line with recent action of North Battleford, the Saskatoon city council on January 30 approved a resolution suggesting to the federal government that it give consideration to a request from argieultural interests to establish a national wheat marketing board.
The next article is dated March 9, 1933, and reads:
Delegates to the annual convention of the Saskatchewan Association of Rural Municipalities passed a resolution, unanimous but for two votes, asking the dominion government to set up a national marketing board on which producers would be adequately represented, to control sale of Canada's entire 1933 crop.
The next is dated March 30, 1933, and
reads:
The report of the special committee on agricultural relief was received by the Saskatchewan legislature and referred to the government. Among the committee's recommendations was one supported by all the members favouring establishment of a national marketing board.
The next is dated March 7, 1935, and reads:
The Alberta legislature last week unanimously adopted a resolution welcoming Premier R. B. Bennett's announcement that a national wheat board is to be formed.
By an overwhelming vote of 53 to 1 the Alberta legislature endorsed government's support of the federal marketing legislation.

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We must recognize that this action is necessary because of changed conditions. Every important wheat producing country in the world has had to adopt measures of a similar nature. It has been said that the refusal of the pools to sell wheat has lost us our markets, but I should like to refer to the evidence of Mr. Melvor, which appears on page 376 of the proceedings, as follows:
Let us examine the situation in France, Germany and Italy. From 1924-25 to 1928-29 these countries imported an average of 215 million bushels annually. From 1920-30 to 1933-34 these countries imported an average of 95 million bushels- an annual reduction of 120 million bushels in the latter period as compared with the former.
Let us look at the situation last year. France, Germany and Italy imported a total of 20 million bushels. Germany, in fact, became a net exporter of approximately 5 million bushels. What has this situation meant to Canada Assuming that we received 40 per cent of the imports of these three countries prior to 1929-30 (a moderate percentage) a market was afforded for about 85 million bushels of Canadian wheat. Last year if we had secured the entire market of these three countries (and we did receive a very large share) we had an outlet for only 26 million bushels. This is one phase of the export problem which must be realized.
The former demand for our wheat does not exist. We might as well be frank about this matter. Mr. James Richardson stated in his evidence that last year he visited all the important countries of Euiope and after visiting Germany he decided that there was very little business to be done. He said that he secured his money but that others who had sold later had not yet been paid, and that there was practically no market for our wheat in either France or Italy. I want to take this opportunity of saying that I believe that the stabilization efforts earned on by Mr. McFarland have been of tremendous benefit to the farmers of western Canada. I think the government should receive some measure of congratulation for supportiflg Mr. McFarland. All the witnesses who appeared before the committee admitted that if there had not been some form of stabilization, prices would have been very much lower. Last October 18 million bushels of wheat were dumped on the market inside of three days. The president of the grain exchange was not as frank as we would have expected in. giving evidence in this connection as upon cross examination he could not remember anything about this incident although it was a very serious event in the life of Canada. I think it is safe to say that most of the papers carried headlines on this matter, and nearly everyone was familiar with it, yet .after referring to it in a written statement the
president of the grain exchange could not remember anything about it when he was being cross examined.
There is one other point to which I should like to refer. It is sometimes thought that low prices mean increased consumption, but I should like to refer to the evidence of Mr. Melvor, as appears on page 363 of the proceedings. Mr. Melvor, quoting from a speech made by Mr. McFarland before the Canadian Club of Winnipeg on April 11, 1935, said:
The lowest price in over 499 years occurred in the season 1932-33, and Stanford university shows the world consumption of wheat in that year of record low prices was less than in either of the two preceding years, and was only a few million bushels greater than the disappearance of last year, which is clear evidence that record low prices did not increase world consumption. It is also a proof that there is a saturation point, even for the most essential product.
There is one important fact which many people appear to overlook and that is, "Exports increased by reason of price sacrifice," do not all go into immediate consumption, but also go to create increased reserve stocks, visible and invisible, in some other country.