Evidence of meeting #33 for Agriculture and Agri-Food in the 41st Parliament, 1st Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was supply.

A recording is available from Parliament.

On the agenda

MPs speaking

Also speaking

  • Matthew Holmes  Executive Director, Canada Organic Trade Association
  • Albert Chambers  Executive Director, Canadian Supply Chain Food Safety Coalition

3:30 p.m.

Conservative

The Chair Larry Miller

We'll call our meeting to order.

I'd like to welcome our witnesses today. Mr. Chambers I believe is here, and by video conference, we have Mr. Holmes from the Canada Organic Trade Association.

Mr. Holmes, please go ahead, for ten minutes or less.

3:30 p.m.

Matthew Holmes Executive Director, Canada Organic Trade Association

Thank you, Mr. Chair, and honoured members. It is a pleasure to appear before your committee again. My name is Matthew Holmes and I am the executive director of the Canada Organic Trade Association, or COTA, as we're called.

I also serve on a number of advisory bodies to government, as regulatory chair of the organic value chain round table and as a member of the industry advisory group to the Senior Market Access Coordination Committee of Agriculture Canada, DFAIT, and CFIA.

I believe COTA is an interesting organization given today's topic of supply chain. We are a national membership organization for the organic business community in Canada, and as a result, we reflect the full Canadian supply chain. We represent primary producers and producer umbrella organizations. We have organic livestock and dairy producers; commodity traders; exporters and marketers; and food, feed, and non-food manufacturers; as well as retailers of organic products.

Additionally, we serve those that play a critical role in our sector's infrastructure and value chain: organic inspectors, consultants, and organic certification bodies. In many ways the history of the organic sector's growth has been one of a well-connected value chain. We have always had the need to maintain an identity-preserved supply within a limited pool of downstream users. The downstream manufacturers or retailers of organic products have always oriented their businesses to the concerns and expectations of the final consumers, filtering information back to the growers and producers through our organic principles and standards. Even the organic standards themselves are written and defined within a consensus model that involves representatives throughout the value chain. Producers, processors, retailers, and consumers all have an active voice in establishing what organic means in Canada for both domestic and imported products.

Thus the organic sector is acutely aware of consumer preference and concerns related to the integrity of the food chain, production practices, and traceability. Our sector has worked within the limits of those concerns established by our consumers and with the latest agronomic science to develop innovative production and processing that minimizes the use of costly external inputs, synthetic materials, and additives, and reduces the use of energy and fossil fuels, while maximizing the natural release of nutrients to plants, integrating pest management techniques, and increasing the biodiversity and resilience of essential plant, bird, and insect populations such as pollinators.

In many senses organic products are already value-added products. It is simply about establishing systems that will not compromise that unique identity, while communicating the value and integrity of that system to the marketplace.

Perhaps the best descriptions of the power of the value chain come from examples within our current membership in the sector itself. So I will describe three examples from my membership to you today, all of which have value chain intentionally built right into their business structure. These three examples span the traditional to the novel in terms of their organization, and all three have attracted the attention of investors targeting innovative, environmental, and social organizations oriented towards growth, agriculture, and a strong marketplace.

Organic Meadow Co-operative and Organic Meadow Incorporated market over 60 organic products in Canada on behalf of 100 family farms throughout Ontario and Manitoba. They produce and market organic milk, dairy, eggs, and frozen vegetables. Their website features interactive maps where you can meet the farmer families who own and govern their cooperative. The careful management of their brand and their commitment to transparency and to their local production supply chain has paid off with impressive growth and consumer loyalty.

In August 2010, Organic Meadow and Steen's Dairy announced a joint partnership, and the opening of a 20,000-square-foot dairy processing plant—the first new independent dairy processor in Canada in 20 years. As a result, this facility will now process organic and conventional dairy products and help to ensure a critical link for the SME value chain for decades to come.

My second example is Manitoba Harvest, one of Canada's 100 fastest growing companies in four of the last five years. The company has brought a speciality crop, which couldn't be grown in the country just a few years ago, to a wide variety of innovative products that rival flax and chia seed for their protein, fatty acid, and omega profiles. Today, Manitoba Harvest is the largest vertically integrated hemp food manufacturer in the world, with products distributed globally. The company is involved in every part of the supply chain for its products from contracting directly with organic growers to crop storage to on-site QA labs to food processing to packaging and distribution, creating a closed-loop sourcing system and distribution model that has benefited the company greatly.

Meanwhile, my third example, Organic Central is a project in the final stages of development and financing organized by Homestead Organics in Berwick, Ontario. The concept will bring together a number of distinct organic businesses, one of the biggest independent organic distributors in eastern Canada, a warehouse, a test kitchen, a business incubator, and other partners organized along the vertical value chain. It will be positioned to easily access and serve the Montreal, Ottawa, and Toronto markets.

Resident businesses will benefit from access to shared space and resources as well as common staff and areas, allowing SMEs to benefit from efficiencies that are typically available only to businesses of a certain scale. This project has been developing its business case and marketing plan thanks in part to federal involvement through the Community Futures Development Corporation and the Eastern Ontario development program.

Historically, organic has had to maintain a closed-link system in order to ensure its rigorous standards and integrity, and to maintain transparency and traceability for consumers. Therefore many organic companies have chosen models that maintain very close relationships with their supply chains, their local growers, and their local processors and handers, and all have grown together as a result. In many cases doing so has also been of tremendous value to the sector at large, and has contributed to the strong market position it enjoys today.

Global organic sales are now worth $59 billion a year. Canada is the fifth-largest organic market in the world and is valued at approximately $2.6 billion in annual consumer sales. Canadian producers also enjoy more trade recognition for organic products than does any other country in the world, with access to 96% of world markets through our trade agreements with the United States and European Union, but our value chain does face some serious challenges in Canada. One is risk mitigation and the loss of market access or organic product designation through the commingling of organic with non-organic, especially with genetically engineered crops or those grown with intensive chemical inputs.

Organic's segregation system is what gives it value and what consumers expect, but it is also one of our areas of risk to all points along the value chain, and one that is not recognized or addressed under our system of risk management and crop insurance for farmers, or under management practices used by other production models that can harm us the most.

One of our other challenges is now supply. The market has grown about 160% in Canada since 2006, but our production has remained fairly static. In fact our latest figures, which we have analyzed with our partners at Canadian Organic Growers, show that organic producer numbers in Canada fell by 4.5% from 2009 to 2010 and that this loss was particularly acute in the Prairies. In Saskatchewan alone we saw a drop of as much as 16% in producer numbers. In British Columbia, Quebec, and Ontario, we saw the producer numbers actually hold their ground or even grow by as much as 10% with increases in organic acreage as well. B.C., Quebec, and Ontario all have small processors, often with closer linkages between the producers and what they grow, and the consumers and what they eat.

Commodity agriculture is a good business and has been for years, but as many of you know, it is also often a lonely business and our prairies, in particular, do not have many links along the value chain.

To conclude, ironically Canada has some of the best conditions for organic agriculture in the world—our land, growing conditions, relatively low pest pressure, progressive trade agreements, and one of the highest-demand growth markets in the world. But our producers and our value chain, in general, are still facing an upward climb, and our market demand is often met by imports that we, in turn, could be supplying ourselves.

While other countries support the transition to organic farming, organic farmers in Canada face costly investments of their own for the inspection and certification costs of our system, as well as the demands of retraining and extension support linked to a different way of producing.

Some provinces have chosen to invest in this, but it's very piecemeal across the country and is an area where the federal and provincial governments could partner more.

We may also soon face a new tax, or user fee, to access and update our own organic standards in Canada. Our competitors in the United States and Europe do not face any such costs for maintaining their systems.

Finally, the organic value chain, as is the case for any segregated system, needs protections to guarantee its integrity, and investments to develop the hubs and links needed to grow.

As we've seen in the examples I have used, with the right conditions and the right supports, the rewards and the demand are unquestionably there, Mr. Chair.

3:40 p.m.

Conservative

The Chair Larry Miller

Thank you very much, Mr. Holmes.

Now from the Canadian Supply Chain Food Safety Coalition, we have Mr. Chambers. You have 10 minutes, please.

3:40 p.m.

Albert Chambers Executive Director, Canadian Supply Chain Food Safety Coalition

Thank you very much, Mr. Chairman and members, for inviting the Canadian Supply Chain Food Safety Coalition to appear during your hearings on the supply chain.

An understanding of the role of the food supply chain in Canada is important for many reasons, two of which are directly related to the mandate given the coalition by its members: food safety and emergency preparedness.

However, prior to discussing these, I would like to take a minute to introduce our organization.

The coalition was formed in December 2000 and incorporated in 2007 to act as a single strong voice for industry along the food chain, with the public and government, on industry-wide food safety issues. Our membership is composed of national, provincial, and regional associations involved in the agrifood industry and of individual companies that provide services to the industry.

At the start of the year, the coalition had 27 national associations as members, three provincial or regional associations, and five companies as allied members. These organizations represent businesses at every link in the supply chain, from input suppliers through primary production, transportation, processing, manufacturing, distribution, and importing to final marketers at export, retail, and food service.

Our vision is that Canada’s agriculture, aquatic, and food industry will have a world-class reputation for producing and selling safe food. Our mission, as the coalition, is to facilitate, through dialogue within the food industry and with all levels of government, the development and implementation of a national, coordinated approach to food safety to ensure credibility in the domestic and international marketplaces.

Over the past 11 years, we have been actively involved in consultations with ministers and with officials at all levels—provincial, federal, and territorial—and in intra-industry discussions about the future shape of Canada’s food safety system. Several years ago, because we are the only Canadian organization that includes members from all segments of the food supply chain, the members assigned the coalition a role in pandemic, emergency, and critical infrastructure planning. Your review of the supply chain should probably explore this facet as well.

To meet its members' needs, the coalition undertakes monitoring and analysis, with a particular focus on Canadian and international trends; policy development, either with its members or with governments; advocacy; and special projects, such as our current project on food safety auditor qualifications and competencies.

From our perspective, the supply chain is defined very broadly indeed. It includes, for us, service producers, which are businesses that work with the supply chain in key areas such as pest control, quality and food safety consulting, or audit and certification; input suppliers, which are businesses that manufacture, import, or distribute farm chemicals, animal health products, seeds, fertilizers, food additives, and other chemicals used in processing, packaging materials, and equipment manufacturers; primary producers, including farmers, aquaculture producers, the fishing industry, and even those involved in niche sectors like wildcrafting; processors, further processors, and manufacturers that transform those products into food or feed ingredients or ready-to-consume food; transporters that play a key role at every link of the chain and cover all modes as they move ingredients and finished products along the chain and to every community in Canada; importers that handle inputs, ingredients, feed, and food; distributors of all sizes that provide the logistical system that ties the chain together; and final marketers, including retail and food-service establishments, institutions, exporters, and yes, even food banks, that provide our goods to the consumers here in Canada and elsewhere.

As I've noted above, the coalition has members from all these key segments of the supply chain. Why? Because they all have a strong common interest in providing Canadians with a safe food supply.

Mr. Chairman, when we appeared before your Subcommittee on Food Safety in June 2009, we made a number of recommendations based on a set of four principles that our members had strongly supported earlier that year.

Principle number one is that food safety is the shared responsibility of all participants in the supply chain, all governments, and consumers.

Principle number two is that governments at all levels, the agrifood industry, and other stakeholders should foster and facilitate the development of an integrated, coordinated, and national approach to food safety policy and regulation, based on sound scientific risk assessment and risk management principles, and on international standards.

Principle number three is that industry and government food safety initiatives should encourage the implementation of HACCP and/or HACCP-based food safety systems by businesses all along the supply chain.

Principle number four is that food businesses, governments, and other stakeholders have a responsibility to adequately resource, proactively manage, update, maintain, and continually improve their individual and collaborative food safety systems and food safety initiatives.

Your subcommittee endorsed these principles.

The coalition members were particularly pleased that the subcommittee, on page 4 of its report, adopted our recommendation for a national food safety strategy by stating that:Governments at all levels, the agri-food industry, and other stakeholders should be invited to participate in and facilitate the development of an integrated, co-ordinated, and national approach to food safety policy and regulation based on sound scientific risk assessment and risk management principles and on international standards.

We were also pleased that the subcommittee restated our declaration that Canadians, no matter where they reside or purchase their food, are entitled to the same level of assurances about its safety—assurances that should be based on common standards and expectations. A corollary of this statement is that agrifood businesses within each link of the supply chain should be asked to operate according to common standards and expectations within and amongst responsible jurisdictions. Our expectation of imported food products should be, as a matter of course, the same as we would expect from our national system.

In the three years since the subcommittee reported, some—but not enough—progress has been made to realize this key objective. Industry furthered its discussions. Federal, provincial, and territorial ministers and committees of officials have continued to meet, and industry-government sessions have championed the idea. Most recently, it was a key recommendation of a national food safety forum in Edmonton, sponsored by the Alberta government in January of this year. However, substantive discussions involving all the stakeholders have yet to begin.

We cannot overemphasize the importance of moving forward now to develop a national food safety strategy. It should be the foundation of the modernization of Canada’s food safety legislation and regulations at both the federal and the provincial-territorial levels.

Over the past decade or so many of our trading partners—developed and developing countries alike—have established new food safety strategies and implemented major changes in food safety legislation and regulations. I believe you have a copy of my brief in front of you. You can see there's quite a list there of those that have dealt with it in the past decade. I think it's fair to say that of the OECD countries, Canada and New Zealand are now the last two to proceed with the modernization of their food safety legislation and regulatory systems. Legislation is currently before Parliament in New Zealand.

All these legislative initiatives are based on a full supply chain, farm-to-fork approach, and incorporate at their core the requirement that all food businesses implement preventive controls using HACCP or HACCP-based requirements.

The U.S. initiative is particularly important. Yes, they are our biggest agrifood trading partner, but this is not the only reason. The new U.S. approach to food safety will push their requirements well beyond their borders. Initiatives respecting preventive controls, food defence, traceability, registration, importer responsibilities, third-party certification, etc. are now putting great pressure on Canadian agrifood exporters and will have ramifications in our domestic market for years to come.

In their December 2011 response to the Weatherill report, the Minister of Health and the Minister of Agriculture and Agri-Food indicated that a new federal food safety bill would be forthcoming. In correspondence with the coalition earlier this year, the ministers have also clearly stated that consultations with stakeholders would precede its introduction into the House. As well, there was a reference in last week's budget.

These statements are all good news.

The promised consultations will provide an opportunity for the elaboration of a national strategy, and the introduction of a bill, perhaps even a separate food act, will provide a mechanism for modernizing the federal food safety regime. These consultations should also provide an opportunity for serious discussions about how industry and governments respond to the international challenges identified above.

One of the key mechanisms for meeting this last objective is the industry-led food safety programs that members of the coalition and other industry associations, working closely with governments, have developed and implemented for almost every segment of the supply chain. We now have 20-plus national HACCP-based, commodity-specific, on-farm food safety programs covering 99% of primary production.

For other segments of the supply chain, industry associations have developed, or are in the process of developing and implementing, national programs covering: input suppliers, like feed mills; specific food products, such as bottled water, or ice manufacturing—one of the latest ones deals with kosher products; distribution, for example, fresh produce at the wholesale level, grain handling, retail distributors, and warehouses, even retail stores and food banks; and then services, including trucking, packaging, and water and waste water.

Industry-led food safety systems and the national on-farm and post-farm food safety recognition programs established by governments are now an integral part of Canada's food safety approach. They are a necessary complement to the capacity of governments at all levels to engage in direct inspection and auditing activities. And they are a clear example of the supply chain working together in a pre-competitive way to meet an important societal need: food safety.

Looking ahead, in terms of future investments, our 2009 strategy document and the subcommittee's report both strongly endorse continued investment by agrifood businesses, their associations, and governments, to ensure that these systems are implemented and adequately resourced, proactively managed, updated, maintained, and improved.

Ministers and officials are discussing new program and funding arrangements for the agrifood sector under a Growing Forward 2 framework. Farmers and others have been consulted. The coalition strongly believes that food safety must have a priority role in this framework. Food safety cuts clearly across major policy objectives outlined in the 2011 Saint Andrews Statement. It's essential for competitiveness, for innovation, and for the assurance of our infrastructure.

Growing Forward 2 should commit both levels of government to a set of clear food safety objectives. We would recommend the following as some examples of what these should be: development of a new national strategy; modernizing and harmonizing FPT food safety legislation and regulations; creation of new national food safety decision-making mechanisms to ensure ongoing harmonization; continued funding for all segments of the supply chain—but in particular for micro-, small, and medium-sized enterprises—for food safety system development and implementation; formal agreements by the FPT ministers to finalize the national on-farm and post-farm food safety recognition programs for the strengthening of Canada's surveillance capacity; and adequate resourcing for FPT initiatives.

In conclusion, the coalition would like to thank the committee for asking it to make this submission. An understanding of the role of the supply chain is essential to understanding the Canadian agrifood industry, including, we would again emphasize, the fishing and aquaculture parts of the chain.

Food safety, as we have stated, is viewed by the participants in the supply chain as a pre-competitive matter, a scenario where all segments must work together. It's also an area of significant and continuous change. All stakeholders, industry, and governments need to collaborate to ensure that we have a world-class reputation for producing safe food.

Thank you, Mr. Chairman.

3:50 p.m.

Conservative

The Chair Larry Miller

Thanks very much, Mr. Chambers.

I'll move to questions.

Mr. Allen, you have five minutes.

3:55 p.m.

NDP

Malcolm Allen Welland, ON

Thank you, Chair, and thank you to both for being with us today.

Mr. Chambers, you referenced the subcommittee's report. I thank you for that, as one of the few members here who actually sat on that committee for the entire period of time. You're right, not all of the things have been done. Hopefully, the government will eventually get to them.

In your view, you seem to be indicating there are a number of issues. I'll take out the “for granted” piece we all agree on, which is that we want safe food. There isn't anybody who doesn't. That becomes the non-partisan, non-political piece. We all agree we want safe food, or as safe as humanly possible, obviously.

I'm interested in this piece. You talk about this competitive piece, of other places having standards that may indeed be beyond what ours are when it comes to safe food, and how that impacts on our chain as far as being able to access those markets. You've referenced it.

I want to get a sense. Is this imminent? Is it already there or is it something in the future? And how quickly do we need to act?

3:55 p.m.

Executive Director, Canadian Supply Chain Food Safety Coalition

Albert Chambers

Thank you, Mr. Allen, that's a very good question.

The challenge has been coming for a number of years, and I certainly don't want to leave the impression that Canadian farmers and processors and other participants in the supply chain haven't been moving ahead very quickly to try to meet what they've seen for some time as the new paradigm in terms of food safety. Governments in Canada have also led the way.

What we are bringing to your attention is that the legislative and regulatory environments have changed in most of our trading partners. In some of those countries now, take India or China, that change is on paper and it's going to take a very long time to happen in terms of reality on the ground for a great many firms in those countries.

In Europe that change has been happening for not quite a decade, in many respects. So in some parts of what we're looking at, they're further ahead. What's happening in the U.S. is going to happen relatively quickly. The legislation was finalized and the President signed it a year and a bit ago.

They're behind on some of their regulatory processes, but we're expecting some major pieces of regulation, some major regulatory initiatives still to be announced this spring that will bring the U.S. into line with what many other countries—the EU, Australia, New Zealand, etc.—have been experimenting with, which is mandatory requirements for all participants in the food chain for preventive controls, as an example. New uses of third-party auditing is another example. Different approaches to dealing with imports is another example.

So the environment has moved ahead. Are we behind? Not yet, significantly, but I think we have an opportunity now to learn and to put into practice quite quickly a lot of the initiatives that others have been experimenting with over the past decade to bring us up to par with where they will be at.

3:55 p.m.

NDP

Malcolm Allen Welland, ON

We've heard from other witnesses at an earlier time about different groups requesting—and to use names like Walmart and others—other standards that are beyond the basic standard that CFIA may ask for, which is fine. But the difficulty for suppliers and the supply chain is that if you've got Walmart you're dealing with—I'll use my own name—Allen's and we're all different standards, how do they define...?

Am I wrong to suggest we need to find where that standard is, where all of them would basically say that's a good standard, so it becomes a regulatory piece and those who are feeding the supply chain can say, “You know what, I now know which one it is and I can go do that”?

3:55 p.m.

Executive Director, Canadian Supply Chain Food Safety Coalition

Albert Chambers

I think in the ideal world that would be a very good place to be. It's not going to be easy to get there. Those standards move much faster than regulatory standards can. We see a number of initiatives globally where the private sector's trying to harmonize and bring some control over that variation.

We have two excellent examples of that here in Canada, and they are the recognition programs that industry has negotiated with the federal and provincial governments for the recognition of on-farm food safety programs and for post-farm food safety programs. If you did an analysis of what's been happening with those programs and what's been happening with some of the private sector global initiatives, I think you would find a great deal of correspondence between what the process steps are and what the requirements are. So we've been moving ahead quite well that way.

What we haven't done is package all of our initiatives into a clearly articulated strategy that will carry us forward. The last strategy that governments put together dates from 1994, and that was a federal-provincial-territorial one and with a certain amount of industry input.

So in effect, what we're saying with our recommendations here is that, given all this other experience around the world, it's time to now step back, and then take that step and define where we want to be going for the next five to 20 years, and set it out quite clearly so we all know what the rules are going to be. Then move ahead with legislation federally and with the other changes that may be needed at the provincial level to modernize our system and bring it up to speed.

4 p.m.

Conservative

The Chair Larry Miller

Thank you very much.

Mr. Hoback, you have five minutes.

4 p.m.

Conservative

Randy Hoback Prince Albert, SK

Thank you Chair and thank you gentlemen, both on video and in the room, for being here.

Mr. Holmes, I'm going to maybe start with you and talk a little about the supply chain on the organic side of things. I just want to get an understanding in my mind of how you're finding the retail markets—for example, shelf space, accessibility, and that end of it. If you could just give us an overview. We have Loblaws, Sobeys, and Metros, for example, here in Ontario.

How do you find it for organics as far as getting that shelf space? How competitive is it? Are there any hidden fees or anything else to be part of that shelf space?

4 p.m.

Executive Director, Canada Organic Trade Association

Matthew Holmes

Certainly it's a competitive market, but it's a growing one. So there's continually more room opening up. If you're looking at some of the private-label brands, which are held by the retailers, those are approximately 21% to 22% of Canadian organic sales now. So the retailers are definitely the front line. They see the information first before anybody else does, and they're certainly responding by introducing new organic products in the marketplace faster than anyone else is.

There's a great amount of growth at the retail level from what we can see. We see, certainly, other examples in the U.S. This is the case with the Whole Foods chain that's also moved into Canada. Also the Safeway chain has developed a brand of organic called the “O” brand, which they've recently taken outside of their own chain. They've started selling it as a brand itself to other retailers. That, again, is speaking to the potential and the growth in the marketplace.

We're seeing some of the challenges along the links to get there. Organic is certainly still a very small player relative to the food sector in general. It's approximately 2% to 4% of food sales in Canada. So what we see is that we may have hubs that are very successful in going right from producer through to the retailer, but there are other areas where there might be gaps.

The typical ones we've heard about in the past are in the livestock sector. There could be great challenges in finding, for example, a slaughterhouse that has the right certifications in place.

Similar to what Mr. Chambers was just saying, we've seen, in the history of the development of the organic sector, the issue of the private certifications that come in. Retailers are often the first movers in this. They respond to either what they see as a way to differentiate themselves from their competitors, or perhaps to consumer demands. They introduce a new system of certification and verification. Many of today's food safety requirements are based on what the British retail council introduced as a collective—

4 p.m.

Conservative

Randy Hoback Prince Albert, SK

Sorry I only have five minutes, so I just want to.... What I really want to tie into is that you're talking about these grocery stores having 21% of the labels. With them having the label and the store, is that preventing non-grocery-store labels from getting market space and getting access to that shelf space? Is that actually a barrier or is that actually relevant in the organic sector?

4 p.m.

Executive Director, Canada Organic Trade Association

Matthew Holmes

You'll hear different sides to that story. We haven't seen a specific linkage. It's kind of the old four gas stations on an intersection actually pull more business. You could see that, with the growth of shelf space, there's going to be that desire to differentiate and create a variety of products. Some consumers choose a value brand and that's important to have on offer—

4:05 p.m.

Conservative

Randy Hoback Prince Albert, SK

Yes, but I guess what I'm trying to get at is that when the grocery stores have the shelf space and then they also have their own label, how do I, as Mr. Randy Hoback, and my organics get in and compete with that shelf space? How accessible is it?

I'm kind of curious what the margins are like at the grocery store with my own label versus the private label or the grocery store label. Do you have any knowledge on that?