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


James Layton Ralston



about 75,700,000 bushels. In January we bought 1,000,000 bushels; in March we sold
4.000. 000 bushels; in April we sold 1,200,000 bushete and bought 600,000 bushels, leaving a net sale of 600,000 bushels. So it appears that in March and April the net sales were 4;,600,000 bushels. That leaves an amount on hand as of April 22, of 72,000,000 bushels.
Then from April 22 to June 24, 1933, the amount on hand was practically constant, there being just one sale inside of those two months. That was a sale of 850,000 bushels; and there was one purchase of 640,000 bushels, so that for these two months the quantities on hand remained practically constant. Prices at that time were stiffening considerably. From July 1, to July 19, 1933, there were various substantial sales. Twenty-nine miflion bushels were sold1 between those dates. Then, from July 20 to August 12, there were purchases of 34,500,000 bushels leaving a net result on July and August operations of 77,000,000 bushels on hand. During the fall there was purchased 56,000,000 bushels of wheat, so that the total special wheat as of December 31, 1933, stood at
133.000. 000 bushels, phis the pool wheat standing at 76,000,000 bushels.
Then, from January to the middle of June, 1934, we sold 38,000,000 bushels of wheat, and there were very substantial liquidation operations. For the two months from the week ending June 16 to that ending August 11, there were no sales, and prices were still going up. In fact there was a purchase of
3.000. 000 bushels. From August 11 to December 31, 1934, we purchased 61,000,000 bushels, and up to May 31, 1935,-the end of the present year-we sold 6,000,000 bushels, leaving a total, as I have said, of 152,000,000 bushels of special wheat phis 76,000,000 bushels of pool wheat.
With those -figures before the committee here was the situation which presented itself: What appeared to be the position was that although there may not have been a misunderstanding, it did seem as though there had been a misunderstanding or some misapprehension as to the task which the Canadian Cooperative Wheat Producers Limited should carry out. In any case what had happened was, as is shown by the figures, that from time to time the Canadian Cooperative Wheat Producers Limited not only did not sell wheat but in fact went into the market and bought it. These figures are given in more detail in the report of the committee. That wheat was bought not necessarily from producers but it was bought on the market and from the public at large. As was stated by Mr. McFarland before the banking and commerce
fMr. Ralston.]
committee of last year the purchases in the latter part of July, 1933, were purchases back from speculators who had taken wheat and whose hands, I presume, were regarded as being too weak to hold it. The result was that about 34,000,000 bushels was bought back.
That is the situation the committee found. And as a result of recognizing that situation and the danger in connection therewith the committee has made the first and I believe the most important restriction appearing in the bill. I believe the restriction about which I shall speak represents the most important difference between the bill sent to the committee and the one now reprinted and before us. Provision has been put in the bill stipulating that the Canadian grain board is absolutely prohibited from purchasing wheat from anybody but a producer. I repeat, the grain board is prohibited from purchasing wheat from anybody but a producer. In other words, it is no longer possible for the grain board to go on the market and with whatever idea they may have in mind-either of stabilizing or supporting a market or purchasing wheat and holding it for a higher price- buy wheat from anybody but the producer. I believe the committee was unanimous in feeling that that provision was quite necessary. At least if it were not made it seemed to us, I believe to all members of the committee-I am speaking at least for the hon. members associated with me-that a Canadian grain board would get an entirely wrong impression of its job, and that we might again witness a series of operations in purchases and sales which might result in a further accumulation of wheat purchased from other than the producer.
What appeared w'as this, that somehow or another the Canadian Cooperative Wheat Producers Limited, backed by government guarantees, had failed to appreciate the magnitude of the task undertaken by it, in attempting to stabilize and support the market, or to carry on the operations they were carrying on. What I mean by that is this: The
real object I think of this House of Commons and of the people of this dominion was to endeavour to see that through these times of stress and strain it might be possible for the producer to get a fair price for his wheat. It was the producer the country had in mind in connection with the legislation, and it was hoped that it would be the producer that would be had in mind in connection with this whole transaction. But no matter what the motive was, what turned out was this, that in the endeavour let us say to assist the producer, or in the endeavour to support the market, or in the endeavour to stabilize the

Grain Board
market, or in the endeavour to bring out the financial transactions on the right side of the book, the result has been that the Canadian Cooperative Wheat Producers Limited instead of dealing directly with the producer and paying him so much money for his wheat has felt that the only way they should operate was by acting almost as Atlas and attempting almost to support the world price by operations on the Winnipeg grain exchange. That may be one way of doing it, but it has turned out to be I think a disastrous way.
Let me give a reference from a memorandum that was read by Mr. Mclvor to indicate to the committee the magnitude of the task which seems to have been undertaken. Mr. Mclvor who is assistant sales manager I think of Canadian Cooperative Wheat Producers Limited said this:
In stabilizing the futures market as he has done Mr. McFarland has been required-
Note this:
-to stabilize not only the wheat in Canada being delivered by the farmers, but the flour in Canada, the flour in the United States, the flour afloat, the flour in the British Isles and foreign countries, Canadian wheat in United States in transit, and in non-reporting mills and feed plants in bond, wheat out of bond, wheat on ocean passage and in British and foreign ports, wheat in non-reporting mills in process of grinding, other grains hedged in wheat futures and spreads with other markets.
That is a pretty colossal task, and regardless of the sincerity with which the task was approached it seems to me that the task as set out there was a task too great for any organization, and particularly too great for any one man. The way it appears now-some may say this is hind-sight-it would seem that the best way to endeavour to get the best price for the producer would be to deal directly with the producer. It will be agreed by members of the committee generally that the plan which is now provided in the bill now submitted to this committee of the whole is largely along the lines of the Argentine plan; that is to say, where the board stands by, is ready to purchase from the producer at a minimum price, but at the same time permits the ebb and flow of commercial transactions so long as the producer is assured that he has that back log at all times if he wants to approach the board as a purchasing agency dealing with the producer, and not attempting to assist the producer by supporting the structure of world prices. Because after all it is a pretty big job even with Canada's proportion of the supply of wheat in world markets for Canada to attempt to regulate the whole structure of world prices. So that is the first and I think perhaps the greatest improvement
that has been made by the committee in the bill as it is now presented to this committee of the whole. No longer will we have to support world's markets. It may be that the board will have to take a loss in its operations ; that is to say, in selling its wheat. That is another matter. But so far as the producer is concerned the board deals directly with him.
What is the next change? The next change is in the 'matter of sales policy. I feel satisfied from what was said 'before the committee that there was some misunderstanding of the method at least which was to be adopted in connection with the handling of this transaction. As I endeavoured to point out on the committee the orders in council would seem to me to plainly provide for the marketing of the 1930 crop, and the operations which were to be conducted subsequently seem to be ancillary and supplementary to that first job. But quite a different idea was held by Mr. Mclvor. That was apparent from the transactions as disclosed to the committee, the high lights of which I have given to this committee of the whole this morning.
What seemed to be wanting, and what has been remedied I think by this bill, is the matter of a sales policy. The original bill, it will be remembered, provided that the board should undertake the orderly marketing of wheat, ibut it gave unlimited power to buy and sell. This bill, as I have pointed out, gives only the power to buy from the producer, and this bill expressly contains provisions indicating parliament's desire and direction that sales shall foe made.
Many of the witnesses who were heard before the committee felt that the lack of what they called a sales policy was one of the principal causes of our difficulty at the present time, operating as it did to cause the carry-over which we have to-day. One witness, Mr. Smith, at page 155 of the evidence, spoke of the operations of the Canadian Cooperative Wheat Producers Limited and said he would continue the policy of handling this business through the open market in the same way that Mr. McFarland had done, "with the addition of a definite sales policy which apparently has been lacking." It seems to me that that was the whole core of our problem. A sales policy had been lacking in connection with the operations of the Canadian Cooperative Wheat Producers Limited. The same witness at other places in the evidence spoke of the same thing, and other witnesses spoke of it as well. What has been assured in this bill is that what we tell this board is that they are to sell, and not to buy except from the producer.

Grain Board

What has been the result of this lank of sales policy? Well, there is some difference of opinion with regard to it, and I do not propose to enter upon the controversial stage of it 'this morning because I think this bill represents what has been referred to in the press and around the corridors as more of a compromise, and I am hoping a helpful compromise in order to deal with a very serious problem.
It has 'been pointed out repeatedly in the country, and I feel that the committee should have this before them, that the result of not having a sales policy, that the result of not selling, has not been beneficial to our market. Some of the witnesses were not prepared to agree with that. Some of the witnesses suggested 'that it was after all a cold-blooded business, that you sold to a man if you offered him the goods at the lowest price. I have here Broomhall's weekly letter of April 10, 1935, and this is what he says with respect to Canada's sales policy:
Canada has sold more wheat in the past week, but her prices are too high to enable her to get a good share of the international trade, and this applies to the buying of British millers and still more to be continental trade, although official returns of exports, indicate that Canada's trade with the continent is not so stagnant as it often appears from market reports. Canadians are hound to recognize that they are not selling sufficient to reduce their stocks to anything like a normal quantity by 31st July next-as we said in our review of 26th March we are doubtful if the total shipped during the current season will reach our estimate of 30.690.000 quarters, especially as we hear that some British millers recently made a further reduction in the percentage of Canadian in their gristing mixture-
The committee will note that:
*-especially as we hear that some British millers recently made a further reduction in the percentage of Canadian in their gristing mixture, being encouraged to do so by the better gluten content of this season's Plata- we recently published a letter from a Liverpool miller suggesting that Canadian wheat, in view of its high price, ought to be quoted per fine ounce.
Which was a bit of biting sarcasm. Broom-hall's letter of March 27 says:
If any country puts its wheat out of the reach of buyers, that country loses trade and its shipments fall short of our estimate. Canadian prices recently have been held so high that continental countries have gone without ir bought elsewhere, and United Kingdom millers are using as little as possible of the relatively dear Canadian northern grades. We do not apologize for our estimates, but put the blame upon whom it belongs.
And on the next page of the same letter:
It is. however, a very debatable point as to whether Canada's best interests are served

by a policy of splendid isolation. If Mr. McFarland were to approach the trade in a spirit of friendly cooperation, and adjust his prices to a reasonably competitive level, it is quite probable he would be agreeably surprised at the amount of business waiting to be done.
As I pointed out in the committee and as I wish to emphasize here, apparently the result has been that we have been losing our place in the British market to the Argentine. The point has been made repeatedly that Canada is maintaining her percentage of British imports of wheat, that is so but the point I wish to make here, and as I indicated to the committee, is that while Canada is maintaining her percentage of British imports, the United States has lost her place in the British market and that place has not been taken by Canada but by the Argentine and other countries. I have a table here I should like to present to the committee.

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