Agriculture Committee on Feb. 29th, 2012

[Rick Culbert]

I think that's a potential, yes. There are economies of scale. We're just in the process right now of gearing up our production facility. Of course, our cost of production to date is calculated on what our production yields have been. We're not manufacturing 50 million doses per year or enough for $59 of sales. I think it's a very fair question. Yes, it could go down.

More importantly, should any licensed E. coli vaccine come on the market, I wouldn't expect any government program to mandate one specific vaccine. Any one of those could be used. What I'm getting at is that with competition comes pressure on price. I also know that technology-wise, we're now looking at potentially second- and third- generation vaccines. Part of their appeal is they're going to have lower costs of production, so I think it's fair to expect that the cost would ultimately come down.

[Malcolm Allen, NDP, Welland, ON]

Mr. Johnston, my friend Mr. Lobb and I both come out of the auto sector. I know what he's talking about when it comes to an industry standard and getting into the industry standards.

He quite correctly pointed out that he could be considered a young farmer if he got into farming. I couldn't be, on the other hand. I've been in the auto sector for a long time. I remember the 1970s and 1980s, when the auto sectors had a multiple layer of programming that nobody could get their head around, especially the suppliers. The tier one, tier two, tier three suppliers were doing exactly what you are today, so your sector reminds me of the 1984 auto sector, quite frankly.

I know what the auto sector went through, because we got to the ISO standards much later. The late 1990s and early 2000s were when we really got to a standard that the whole industry accepted. Then the suppliers could actually say, "That's the standard I've got to meet. Fine. I'll do that." Before that, they were racking their brains trying to figure it out.

If we set a standard—in other words, if the CFIA said to you and the Walmarts and the Loblaws, etc. what the the Cadillac or platinum standard was and mandated it and had everybody comply with it, which means the only thing that might be different among Walmart, Loblaws, etc., would be the cosmetics of how they wanted it to look versus what the safety standard was, would that be helpful at all to you?

[Ted Johnston]

That's fundamentally what one of the major issues is. Again, safety is not a marketable issue. They can do their own marketing thing in whatever format. It's that one single standard, and we'd prefer that it be the CFIA standard at the appropriate level so that we can comply once. The problem is spending the $3 million to do one, needing another $1.5 million to do the second, and another $1 million to do the third; the economics just aren't there.

[Malcolm Allen, NDP, Welland, ON]

Okay.

About the investment in automation, you're absolutely right. The only reason there is an auto sector, besides the bailout that we entered into a number of years ago, is the high level of automation that went through that sector. I use these examples because the food processing industry is following along, albeit about 15 to 20 years behind. You said 20 years, and I would agree with you.

That being the case, if we were to modernize it similarly to what the Netherlands did—and we're looking at a substantive amount of capital—are we talking about creating jobs through this type of investment? I don't mean direct jobs in the process. The plant I came out of in St. Catharines has 1,550 workers in it. In 1992, it had 9,400, but there are more engines coming out of the St. Catharines plant in 2012 than there were in 1992, simply because of automation. That's why it's still there. I'm not looking at the direct jobs per se right inside that processor.

What do you see coming out of that real investment of capital that actually drives jobs and keeps processors working? Quite frankly, I don't have any left in the Niagara region. The last canner closed up five years ago, and that's the end of that, which means there are no peach trees for cling-free peaches. They're all thrown out on the ground now.

[Ted Johnston]

There are no soft-fruit processors in Canada. They're gone.

First let me make one point. We're not talking about a bailout here. We're not talking about a handout. We're not talking about grants. What this industry needs is a loan program, and that's fundamentally what we're talking about. As I said, if you had taken the biofuels initiative five years ago, that $2 billion—there's not a lot of that left—and if you had done the same thing and put it into modernizing this industry, today you'd be 60% to 70% of the way down the road. We'd be competitive, and you'd probably have $1.89 billion of it left, because it would be being paid back.

We see that on a smaller scale in Alberta with AFSC. As the president of the AFSC will tell you, the people in the processing sector are the ones who pay back the best. Of the portfolios that default, the fewest come from the processing side. That's what we're talking about.

The impact would be that it would keep Canadian industries that are here today.

I have one anecdote: one of my members got some support to automate a line, and he took 10 people off that line and replaced with them with two. Those two people were highly trained technicians instead of basic hourly-wage workers. Doing that met our labour strategy because the rest of them actually were needed immediately in other jobs within the plant, so that achieved a whole number of things.

We've had multinationals withdraw from this country. At our round table, the Canadian head of PepsiCo Frito-Lay indicated that they had made an investment in Canada in Alberta because of the financial program that was there for support. I would suggest that having a program of that nature in place would also encourage foreign multinationals to invest in facilities in this country as well, because we have the great agricultural base here to draw upon.

[The Chair, Conservative, Larry Miller]

Thank you very much.

Mr. Storseth, you have five minutes.

[Brian Storseth, Conservative, Westlock—St. Paul, AB]

Thank you, Mr. Chair.

Mr. Johnston, you're basically talking about an interest-free loan, I believe, as being one of the most needed things to help the automation—the lack of automation—in your sector right now, but there must be different needs at different levels. I mean, you represent an extremely large number of processors, some of them quite large and some of them quite small. What are we talking about for the smaller guys? Do they have the same needs? Clearly they do not. What kind of dollar figures are we talking about?

[Ted Johnston]

They essentially have the same needs, although the very small ones, the “fives”, don't. They need some help. Their primary issue is related to meeting safety standards versus putting in significantly larger plants.

As an example of the others, the gentlemen I referred to as the largest gluten-free baker is now opening up European marketplaces. He's going to need to do a significant expansion to be able to do that. That's going to be totally capital-intensive. His challenge will be to come up with the capital to be able to do that kind of expansion. As well, in Ontario today significant plants are having great difficulty just trying to make the changes to the facility that are required to meet these multiple safety standards, and they cannot get financing support to do that.

[Brian Storseth, Conservative, Westlock—St. Paul, AB]

I don't mean to be rude, but we just have five minutes. Predominantly what size are you talking about that will benefit from the loan?

[Ted Johnston]

Do you mean in terms of companies?

[Brian Storseth, Conservative, Westlock—St. Paul, AB]

Yes.

[Ted Johnston]

All sizes would benefit from it.

[Brian Storseth, Conservative, Westlock—St. Paul, AB]

Even the small businesses would?

[Ted Johnston]

Even the small businesses, because—

[Brian Storseth, Conservative, Westlock—St. Paul, AB]

They would be the ones who would be accessing—

[Ted Johnston]

If you want to go from being small to medium-sized, you need to be able to go into that kind of a jump. Again, we have Alberta. We have a lot of things in place out there. We have this business incubator. We have the development centre. We built the business incubator so that people could move into development to get to production, the theory being you could build orders and then go out and build your plant.

The problem is how to finance building the plant. I've proven that I can make this product and that I can make it in volume, but now I have to come up with the millions of dollars to be able to put that plant in place. That's the other thing that API does not do. It does not deal with start-ups and it does not deal with safety.

[Brian Storseth, Conservative, Westlock—St. Paul, AB]

What would the cost to the taxpayer be?

[Ted Johnston]

At the end of the day, it's whatever the defaults were—

[Brian Storseth, Conservative, Westlock—St. Paul, AB]

What would your costs be?

[Ted Johnston]

—and the time value of the money.

[Brian Storseth, Conservative, Westlock—St. Paul, AB]

But there are some start-up costs, so what is the total dollar value you're looking for?

[Ted Johnston]

As I said, it's whatever.... It's the loan pool we're talking about here.

[Brian Storseth, Conservative, Westlock—St. Paul, AB]

So what are we talking about?

[Ted Johnston]

In that loan pool, I would suggest you're probably looking at somewhere between $800 million and $900 million to take us significantly down that road, and you could continue to reinvest it. The other downside with API is that API money coming back in will not be reinvested in that program; it's going back into general revenues.

[Brian Storseth, Conservative, Westlock—St. Paul, AB]

You made the comment that Canada is falling off the shelves because of “Product of Canada” label requirements that were changed to 98%. This deals directly with consumer demand. Where are you seeing that? Is this something you're seeing in jams predominantly, or are you seeing it across the board?