Voluntary Report - public distribution

**Date:** 12/31/2003

**GAIN Report Number:** CA3088

CA3088

**Canada**

**Agricultural Situation**

**This Week in Canadian Agriculture, Issue 47**

**2003**

**Approved by:**

![](media/image1.wmf)Gary Groves

U.S. Embassy

**Prepared by:**

Matthew Cahoon

**Report Highlights:**

Canfor Does A U-Turn On Softwood Lumber Proposal \* Canada Pleased With
WTO Interim Report On Softwood Lumber \* NDWC Charges "Completely
Hypocritical" Says CWB \* Monsanto Canada Will Wait To Register GM Wheat
\* Mandatory Grain Variety Eligibility Declaration Use Ruled Out By CGC
\* Grain Commission Proposes Wheat Quality Assurance Strategy \* CWB
Wheat Pool Deficit Elicits Mixed Reaction \* Canada, U.S. At Odds Over
Interim WTO CWB Trade Ruling \* CWB Announces Premium-Priced Market
Development Contract Program

Includes PSD Changes: No

Includes Trade Matrix: No

Unscheduled Report

Ottawa \[CA1\]

\[CA\]

This Week in Canadian Agriculture is a weekly review of Canadian
agricultural industry developments of interest to the U.S. agricultural
community. The issues summarized in this report cover a wide range of
subject matter obtained from Canadian press reports, government press
releases, and host country agricultural officials and representatives.

*Disclaimer*: Any press report summaries in this report are included to
bring U.S. readership closer to the pulse of Canadian developments in
agriculture. In no way do the views and opinions of these sources
reflect USDA's, the U.S. Embassy's, or any other U.S. Government
agency's point of view or official policy.

CANFOR DOES A U-TURN ON SOFTWOOD LUMBER PROPOSAL: According to a
December 19 article from the *Vancouver* Sun, Canadian forest giant
Canfor, the biggest corporate opponent of the new Canada-U.S. softwood
lumber accord said it is now tentatively ready to sign on, saying that
it\'s willing \'to consider an interim quota\' to end the softwood
lumber dispute. \"While we have consistently indicated that Canfor does
not favor a quota system that restricts Canada\'s shipments to the U.S.
in the absence of a better alternative, we have indicated a willingness
to consider an interim quota \... while policy changes are being
implemented across Canada,\" Canfor Corp. CEO David Emerson said.
Emerson attributed his company\'s change in attitude to a call to
industry from Prime Minister Paul Martin\'s new international trade
minister, Jim Peterson, \"to find a way to make the U.S. proposal
work.\"

Emerson said on December 18, \"Canfor would accept its pro rata share of
the required shipment reduction for the country as a whole, but we have
been unwilling to sacrifice hard-won customers by agreeing to accept a
disproportionate reduction in shipments while others accept a less than
proportionate reduction.\" He said federal or provincial governments may
want to modify quota allocations and offer to acquire them at fair
market value. \"Quota volumes acquired by government could then be
\'sold\' to companies on whatever basis they determined to be
appropriate,\" Emerson said. \"Under this method, those companies that
have invested in and grown their customer base could elect to sell or
not sell quota volumes.\"

CANADA PLEASED WITH WTO INTERIM REPORT ON SOFTWOOD LUMBER: In a December
19 news release from the Canadian Department of Foreign Affairs and
International Trade (DFAIT), International Trade Minister Jim Peterson
said he is pleased with the WTO interim report on softwood lumber. \"We
have consistently maintained that countervailing and anti-dumping duties
imposed by the U.S. on Canadian softwood lumber exports violate
international trade rules,\" said Minister Peterson. \"We are pleased
with today\'s interim report.\" The release states that the Canadian
government will continue to work with the provinces and industry on our
two-track strategy of litigation before NAFTA and WTO panels and
negotiations to find a lasting resolution to this dispute. This latest
WTO panel finding will be an important element in Canada's ongoing
consideration of the U.S. proposal for a settlement.

NDWC CHARGES "COMPLETELY HYPOCRITICAL" SAYS CWB: In a December 19 news
release, the Canadian Wheat Board (CWB), in response to a media release
from the North Dakota Wheat Commission (NDWC), responded that farmers of
Western Canada operate in a commercial environment and the government
guarantee on CWB payments is not an export subsidy. \"These charges
demonstrate the hypocrisy of the NDWC,\" said Ken Ritter, chairman of
the CWB\'s board of directors, who farms near Kindersley, Saskatchewan.
\"They denounce the potential trade-distorting effects of an \$85.4
million deficit in the wheat pool, the first in 12 years, when the U.S.
government has paid out \$3.7 billion in marketing loans and deficiency
payments to wheat farmers in that country over the past five years
alone.\"

\"As we have stated on many occasions in the past, this is plainly a
case of the pot calling the kettle black,\" said Ritter. Ritter also
firmly rejected NDWC accusations that the CWB had artificially inflated
its Pool Return Outlook (PRO) for wheat in the fall of 2002 in order to
attract votes for pro-single desk candidates in the CWB director
elections. The CWB states that it is committed to greater dialogue with
its counterparts in the U.S. In the meantime, however, the CWB will
continue to fight to remove the tariffs that have been imposed by the
American administration on spring wheat and to re-establish full access
to the U.S. wheat market.

MONSANTO CANADA WILL WAIT TO REGISTER GM WHEAT: A December 18 article
from *Reuters (Winnipeg)* reported that Monsanto\'s Canadian division
will not ask an annual industry meeting in February 2004 to recommend
its genetically modified wheat be registered in 2004, according to a
company memo Reuters obtained. Instead, Monsanto will continue to test
its wheat until it becomes more accepted by the industry, the company
said.

Under Canadian rules, Monsanto could ask an industry body, the Prairie
Registration Recommending Committee for Grains, to review its agronomic
data. The committee is responsible for advising the federal government
on what varieties of grain should be registered for commercial use in
Canada. \"However, Monsanto does not intend to bring forward any of our
current lines for recommendation at the 2004 annual meeting,\" wrote
Curtis Rempel, who heads the GM wheat project for Monsanto Canada, in a
memo to the committee, which is scheduled to meet February 24-26, 2004.
The Canadian government regulators who reviewing food, feed and
environmental safety data on GM wheat have not yet approved the crop for
release. The decision to hold off asking for registration \"has no
commercial impact on this project,\" Rempel said in the memo, noting the
company remains committed to selling GM wheat when it can prove it can
be kept separate from traditional wheat and has customers lined up to
buy it.

MANDATORY GRAIN VARIETY ELIGIBILITY DECLARATION USE RULED OUT BY CGC:
Mandatory grain variety eligibility declarations (VED) will not be used
in the grain handling system because potential costs to producers
outweigh foreseeable benefits, the Canadian Grain Commission (CGC)
announced in a December 19 news release. \"Based on extensive
consultations and independent cost and benefit studies, we believe a
mandatory variety eligibility declaration system would not serve the
interests of producers and other key stakeholders in the grain industry
at this time,\" said CGC Assistant Chief Commissioner Terry Harasym.
Harasym continued: \"I emphasize that our decision applies only to a
legislated VED system. Based on current practice, it seems likely that
variety declarations will increasingly be used in private, commercial
transactions. Eventually, they will form an integral part of the
Canadian grain production, marketing, and handling system.\" The VED
concept was proposed to address two grain quality assurance issues: (1)
Visually indistinguishable non-registered wheat varieties, often of U.S.
origin, potentially compromising the quality of premium milling wheat
shipments; (2) The constraints kernel visual distinguishability (KVD)
imposes on developing and handling non-milling wheats, such as high
yielding feed varieties. \"We remain committed to resolving the issues
the VED proposal was intended to address, which is why we are proposing
a wheat quality assurance strategy,\" Harasym said.

CGC PROPOSES WHEAT QUALITY ASSURANCE STRATEGY: From the same news
release, the CGC noted that it is advancing a Wheat Quality Assurance
Strategy composed of three elements: (1) Development of rapid,
affordable variety identification technology \-- this will require the
cooperation of producers, handlers, marketers, and government. The CGC
will act as a catalyst in mobilizing resources and moving a technology
strategy forward in a collaborative fashion. (2) Increased CGC
monitoring of rail and vessel shipments for non-registered wheat
varieties and downgrading shipments if they contain non-registered
varieties in excess of grade tolerances \-- declarations may form part
of contracts between producers, the Canadian Wheat Board and grain
companies, but these would not be required by the federal government.
(3) Development of a proposal to restructure the western wheat classes
to enable the development, registration, and handling of non-milling
wheats, such as high-yielding feed varieties \-- this proposal will
involve collaboration with producers and other grain industry
stakeholders.

CWB WHEAT POOL DEFICIT ELICITS MIXED REACTION: The December 18 edition
of *FarmAssist.ca* reported that when it comes to the Canadian Wheat
Board's (CWB) 2002/03 wheat pool deficit, opinions in the western
Canadian grain industry range from frustration and displeasure to
acceptance and relief. The C\$85.4-million shortfall, which will be
covered by the Canadian federal government, has been attributed to a
combination of factors, including the unexpected strength of the
Canadian dollar and drought-reduced domestic crop that reduced Canada's
market share. The deficit "was expected, but it is still unacceptable,"
said Ted Menzies, former vice-president of the Grain Growers of Canada,
who pointed out that Australia - whose currency also strengthened on the
year - didn't have a deficit.

According to Menzies, there wouldn't be a deficit if western Canadian
farmers were allowed to market their own grain. He said he was
frustrated that in a year that saw some of the highest wheat prices in
recent history, Canada was unable to sell its grain. While he did not
like to see a deficit in any of the pool accounts, Stewart Wells,
President of the National Farmers Union, said he understood the
unpredictable events of last year, and appreciated the safeguard
provided by the government guarantees. Ahead of the December 15
announcement of the shortfall, most people in the grain trade were
expecting a deficit of between C\$30 million to C\$100 million.

CANADA, U.S. AT ODDS OVER INTERIM WTO CWB TRADE RULING: The December 23
*Globe and Mail* reported that Canada and the U.S. are both claiming
victory in the wake of a confidential World Trade Organization (WTO)
ruling on the legality of the Canadian Wheat Board (CWB). In a report
delivered to Canada and the United States, the WTO ruled that the
government-controlled wheat-trading agency is legal under global trade
rules, Canadian officials said. \"The WTO rules have shown that members
have a right to establish and maintain \[State Trading Enterprises\],
and in that regard, I think Canada\'s international obligations are
met,\" a trade department official told Reuters. But a U.S. trade
official insisted that the ruling, which won\'t be made public until
February 6, contained \"good news\" for U.S. wheat and grain farmers.
Responding to media inquiries, the official said the WTO dispute
settlement panel found that the CWB \"unfairly discriminates\" against
U.S. wheat and grains in world markets. The official also said the
report calls for a \"level playing field by agreeing that Canadian wheat
farmers should pay fair market value for transporting Canadian wheat and
stop discriminating against U.S. wheat.\" Neither side would provide
further details.

CWB ANNOUNCES PREMIUM-PRICED MARKET DEVELOPMENT CONTRACT PROGRAM: On
December 19, the Canadian Wheat Board (CWB) announced the Market
Development Contract Program for wheat and durum varieties eligible for
premiums ranging from \$2.50 per tonne to \$10 per MT in 2004/05. Under
the program, farmers get a premium for production contracts that allow
the CWB to test market new varieties among potential customers and
provide buyers with quantities to meet their processing needs once the
variety has been established. Varieties eligible for Market Development
Contract Programs as of August 1, 2004 are: 5700PR - Canada Prairie
Spring Red wheat (\$5 per tonne premium); AC Navigator - extra strong
Canada Western Amber Durum wheat (\$2.50 per tonne premium); Snowbird
and Kanata - Canada Western Experimental Hard White wheat (\$7.50 per
tonne premium); and AC Bellatrix, AC Readymade, AC Tempest, CDC Buteo,
CDC Osprey, McClintock and Norstar - Canada Western Red Winter Select
wheat (\$10 per tonne premium). \"These varieties represent significant
breeding advancements in their classes,\" said Gord Flaten, director of
market development. \"In addition to earning a premium for their crops,
farmers who enter into these contracts are also helping to ensure that
the wheat and durum varieties grown in Western Canada continue to meet
the needs of our customers.\"

\"The Market Development Contract Program also allows buyers to test
their milling and end-use qualities, which increases the potential
market for the high-quality grains grown by western Canadian farmers,\"
he added.

**Find FAS on the World Wide Web:**

Visit our headquarters' home page at http://www.fas.usda.gov for a
complete listing of FAS' worldwide agricultural reporting.

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