The head of Grain Growers of Canada rings in on pulse trading with the EU and their joint commitment to sustainability.

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While the European Union may not be buying up Canadian pulses at the same insatiable rate as India, the EU market has remained vital for years. In 2012 the North American country exported 271,830 MT, 6% of its total pulse exports, to Europe, according to Pulse Canada.

The market is bolstered by the fact that pulse production in the EU has been declining in recent years, dropping 15% annually on average between 2004 and 2008. This is primarily due to a gradual shift in production from France, the EU’s main supplier, to Canada and the U.S.

A new set of policies may help to bring pulse production back to the EU, however. In June, the European Parliament, the EU Council of Ministers and the European Commission reached an agreement on a set of green reforms to the EU’s Common Agricultural Policy (CAP) designed to encourage sustainable farming practices and land use.

One of the stipulations requires farmers to designate 5% of their land to crops of ecological interest, which include pulses such as peas and beans. Failure to comply would result in the loss of up to 30% of a farmer’s direct payments subsidized by the EU.

Meanwhile, the Canadian pulses industry has been watching these developments closely as negotiations over the Canada-EU Free Trade Agreement continue. Europe’s proximity to key Middle Eastern markets gives it a competitive advantage in the pulse trade, so an increase in production—albeit government-driven—could have consequences for the Canadian industry.

Richard Phillips, the Executive Director of Grain Growers of Canada, is a prominent voice on the subject and one who speaks for his fellow grain producers. When asked by The Western Producer about the recent reforms to the EU’s policy, Phillips noted:

“What’s of interest to Canadian farmers is how they’re restructuring some of the payments and what they’re tying it to. It’s interesting where this is going and whether or not it becomes a trade issue.”

Phillips spoke to IFT recently about the Canada-EU pulse trade, sustainable agriculture and the future of the pulses industry.

IFT: What is Canada’s relationship generally with the European Union in terms of pulse trading?

Richard Phillips: We’re relatively collegial with the European Union, not just with pulses but for all grains. Over the last four years, the agriculture sector in Canada has been very engaged with the EU as a result of ongoing negotiations surrounding the Canada-EU Free Trade Agreement. That’s helped to bring a lot of us over to Brussels quite a bit more often and meet with people from all the agricultural industries. So I think it’s opened our eyes to the realities of the European market and it’s been very educational for both sides.

IFT: How has this relationship evolved since Canada started becoming a major pulse producer?

Richard Phillips: There’s nothing like a free trade agreement to get you more engaged. One of the first things you do is say, well, we’re agreeing on 95% of all tariff lines going to zero immediately on signing. But when everyone gets in there, well, what does that mean? What are the tariffs on pulses or wheat or pork or beef or whatever? And at that point in time you also look at what the non-tariff barriers might be. So like pulses in India, for example, face some phytosanitary challenges. Wheat in certain countries faces some phytosanitary challenges. People look for weed seeds or disease issues their country doesn’t have. Whether it’s real or not, it gets put up on the wall to be negotiated away. I think over the last four years there’s been a deepening of the understanding of the production on both sides of the fence and the agronomic challenges as well

IFT: What do the recent changes to the EU’s Common Agricultural Policy mean for the Canadian pulses industry?

Richard Phillips: I think everybody’s watching this really closely to see how many more actual acres might go into the ground there because, if they can produce the same quality of pulses, certainly their distance to market is substantially shorter than ours, especially for the Middle Eastern market. It remains to be seen whether the growers over there will actually seed more pulses or whether they’ll put the acres into grass or trees to meet their 5%, the mandatory amount of land per farm set aside for biological or ecological reserve. It’s yet to be determined whether people who have quite a bit of land already just designate it that way; tree stands, stream beds and stuff like that. Or are they actually going to take the time to change current production and put into that program. In most cases I think farmers, if their philosophy’s much like a grain farmer in Canada, if they have a chance to seed a different crop they’ll probably seed the different crop rather than actually keeping the land out of production if it’s good soil. So there’s certainly potential there for more pulse production. Again it’s another country’s policy though and it’s not like you can actually do anything about it other than watch and observe.

IFT: What can the European market learn from the Canadian market?

Richard Phillips: I think what has made the Canadian market so successful is the entire value chain pulled together through Pulse Canada. So you’ve got the actual exporters, the actual processors, and the actual growers. And then you have the industry people supplying, you know, the seed and fertilizer companies. You’ve got the whole value chain plugged in there. And I think if Europeans are going to do that, if they want to be as successful as Canada, they should have a really good look at the model that we’ve put in place. Of course it’s much easier because Canada’s just one country and over there you’ve got 27 countries, so to try and form a body would be very challenging for them I think. I don’t anticipate they will get to the same place Canada has gotten in terms of that sort of coordination.

IFT: Do you foresee similar green reforms happening in Canada any time in the near future?

Richard Phillips: Well actually Pulse Canada has provided a lot of leadership in Canada on sustainability. They’ve put a lot of money into research on trying to define sustainability and the measures that define sustainability. They’ve gone through and shown how sustainably we are farming wheat, canola and pulses in different rotations with the minimum tillage that we practice in Canada. Canada comes out looking pretty good in all of this. And so in some ways we’re a little bit ahead of the curb. Now our beef people and pork people are also looking down that road. Just in early July we had our first national sustainability summit in Canada where we pulled together all of the sectors to talk about sustainability and get a working group together to go forward on that, to try and set some definitions of sustainability before the private sector does all of it for you or the activists drive it too hard on you. So I think that Canada’s well positioned. The European Union is spending a lot of time on this as well. So we may be going down slightly different paths but the end result is the same.

IFT: How would you describe the general attitude of farmers towards implementing environmentally responsible practices, even if it affects their bottom line?

Richard Phillips: Well the short answer is, of course, we ought to get paid for it [laugh]. I think the reality is if it means continued market access, then farmers will adapt to new things. The fact is that sustainability is coming and so if you are Unilever or Walmart or the European Union buying, you simply want to be able to trust someone who says, you know, this is sustainably produced wheat, or sustainably produced canola, or sustainably produced pulses. They want to know what the auditing procedures are—how do they know that you’re not just saying that? And so that traceability is going to come right back down through the system. I think the progressive farmers will understand, look into the future and see where all of this is going. They will adapt and they will do the necessary paperwork. I know we have vegetable growers who have four or five different sustainability programs on their vegetable greenhouse operations. Each different company requires different paperwork, and they’re doing that already because at the end of the day, that’s where you’re making your sale. Either that or the customer’s always right.

IFT: Have you noticed much enthusiasm in Canada for low-impact controlled farming methods, such as Controlled Traffic Farming?

Richard Phillips: In the last two years we’ve had more people coming from Australia, talking about some of these new ideas in farming, the potential yield and savings. This is something that’s just in the very forefront and something that farmers are looking at, but there’s yet to be adaptation here. You need a few leaders in every community to do it first. The early adopters have to do it and show that they’re making money out of it and the rest of the herd will follow. It’s like you need a bell cow in every herd. We’re not quite there yet, but it looks interesting, like I said. I sat through a presentation a year ago last February by an Australian farmer. It looks very, very interesting. To some degree Canadian machinery is still growing in size and some of these systems actually require you to have almost a fixed size because you’re going to be setting more permanent tramlines all the time and not disturbing the other land. And I don’t know if most of our guys here have reached that optimal size of their machinery to say, okay, my 120-foot sprayer is actually where I want to stay—or is it going to be 140 feet next year? I think there’s still a little bit of growth in our farming yet.

IFT: How do you see the future of pulses in Canada and in the world? Do pulses stand a chance against big cash crops like corn and soybean?

Richard Phillips: I think what’s probably going to make pulses successful will be not the competition with corn and soy. It will be the competition against meat for people to get their protein. You see a growing world population and I think the question will be how beef can be sustainably produced. I think pulses have a chance there against meat proteins—that will be the driver more so than making the first priority competitiveness with corn and soy. The reality is there’s simply not enough research invested in pulses and pulse yields to keep up with the corn and soy complex. That would require massive, massive investments in seed research to improve yields to catch up there. Even the wheat complex is really struggling. The U.S. wheat growers, Canadian wheat growers, and Australian wheat growers are going “man, is anybody going to grow wheat anymore?” at the rate corn and soybeans and canola are getting money. Pulses will be the same as wheat that way except wheat actually has to compete with corn and soy for acres. I think if they can market pulses as a sustainable protein over beef then there might be a whole new segment of consumers that would look at that.

IFT: How important is crop diversification for the future of farming? Is Canada doing anything to promote crop diversification as it is required to by the new CAP reforms?

Richard Phillips: Well, I actually grow pulses on my farm in Canada. We like growing pulses, just because it puts nitrogen back in the soil and it’s a nice break from other crops, but we’re far enough north that we don’t grow corn and soy. So where I am, from a personal perspective, we already have a lot of diversification on my farm. We’ve had oats, and we’ve got wheat and canola, and there’ll be peas and barley. I have quite a bit of diversity already.

But, to answer your question, I think we’re a fair ways away from any policy like that in Canada. I think a lot of farmers are growing them because they make economic sense in their rotations. That’s what’s been driving it so far. You just make money growing pulses. And so they compete on their own two feet, and they compete strongly against any of the cereal grains. Canola is still probably the number one profitable crop in Western Canada for sure. In eastern Canada probably corn is their number one. Those are the number one crops, but once you get past that, then you see soybeans competing on the east and you see peas, lentils and chickpeas being able to compete very well with wheat, barley and oats in the west. And I think from a grower’s perspective we like to see that because it’s always nice to base your farming decisions on the market signals and not government drivers forcing you to grow certain crops. That would be the last motivator we’d want to see in the marketplace.