moved that Bill C-280, an act to amend the Bankruptcy and Insolvency Act and the Companies’ Creditors Arrangement Act (deemed trust – perishable fruits and vegetables), be read the second time and referred to a committee.
Mr. Speaker, we are really excited tonight for fresh fruit and vegetable farmers across Canada. It is an honour to finally have the opportunity to speak to the financial protection for fresh fruit and vegetable farmers act, Bill C-280. This bill proposes to amend the Bankruptcy and Insolvency Act and the Companies’ Creditors Arrangement Act to support Canada's fresh produce farmers and sellers through the establishment of a deemed trust.
My community of York—Simcoe is home to the Holland Marsh, known as the “soup and salad bowl” of Canada. It produces more carrots, celeries, onions, lettuces and greens than any other single region in this country. We would love to see members at Carrot Fest this summer. Every time I look out over the rich, dark soil in the low-lying fields of the Holland Marsh and survey the endless rows of green vegetables growing there I see opportunity, the opportunity to have Canada become even more competitive as an agricultural leader in global fruit and vegetable exports; the opportunity to ensure fresh, sustainable Canadian produce is more accessible and more affordable than foreign imports for every Canadian family; and the opportunity to support the innovation and grit of our hard-working farmers right across Canada.
Sadly, in the marsh, and across the country, in the fields and greenhouses in places like Leamington, Kentville, Morrell, Brookfield and elsewhere, this opportunity is being limited by the considerable risks associated with the growing, harvesting, packing, marketing and distribution of fresh fruits and vegetables, risks that routinely threaten their farms and livelihoods. Overhead and capital costs are significant. The margins in the sector are thin, normally between 3% and 5%. The return farmers receive from their product is often delayed until it is sold and payment is only collected long after they have passed on their product for sale, far along the supply chain or well after consumers have eaten it.
The worsening recession, inflationary pressures, increased prices, tax hikes and the lingering impacts of the COVID–19 pandemic have only increased the vulnerability of the produce sector. This is underlined in the lack of critical financial protections available to Canadian produce-growers for the losses they suffer as a result of an insolvent buyer. While the existing mechanisms within the Bankruptcy and Insolvency Act may be suitable for the wider agriculture industry and other sectors, they do not provide a workable mechanism for when fresh produce buyers become insolvent. Currently, the act allows suppliers to recover their product after bankruptcy, but has no provisions to protect them in the event their produce has been resold, is no longer identifiable or is no longer in the same state. Given the perishable nature of fresh fruits and vegetables, how quickly they spoil and how many products are highly processed and mingled with other ingredients to make food, it is very uncommon that produce can be repossessed during these bankruptcy proceedings.
There also exists a “super priority” provision for farmers in the act, which is supposed to allow them to get paid ahead of other creditors during bankruptcy proceedings. However, to access this, the product must have been delivered within 15 days of bankruptcy or the appointment of a receiver, which fails to account for the payment schedule of 30 days or more that typically exists within the produce industry.
In practice, these deficiencies in Canada's bankruptcy laws means that Canadian produce farmers are faced with significant, and sometimes insurmountable, losses in the event of a purchaser bankruptcy. They have to line up along with all of the other creditors to seek payment. Otherwise, they must simply walk away from the outstanding debt owed to them. This can lead to further bankruptcies and sunk costs across the entire sector and can jeopardize our domestic food security.
Sadly, the lack of financial protection for the produce industry has real world consequences. In January of this year, 2023, Lakeside Produce Incorporated, a large-scale commercial greenhouse based out of Leamington, Ontario, filed for bankruptcy. This was a family-owned company that grew cucumbers, peppers and specialty tomatoes for 75 years, with extensive operations that included conventional and organic greenhouses, warehouses, packhouses and distribution centres right across North America.
At the time of its bankruptcy, it owed $188 million to suppliers across the produce sector, including other greenhouses, and logistics, packaging and brokerage firms. There are 17 produce companies across Canada among Lakeside's creditors, which account for $1.7 million in unsecured claims. The owner of one of these companies, a farmer also based in Leamington, wrote to me regarding this bill.
He said, “the inadequate protection for suppliers of fresh fruits and vegetables...most recently resulted in my farming operations sustaining a loss of $907,840 due to the bankruptcy of Lakeside Produce. I have devoted my entire life to the [produce] business but I, nor anyone else who is part of the fresh fruit and vegetable industry, can continue to afford these risks.”
In addition to the Canadian creditors, there are 45 companies based outside Canada, primarily in Mexico and the United States, that are owed another $4.9 million. The highly integrated nature of the fresh produce industry means that these losses will impact Canadian growers even further.
The lack of financial protection available to fresh fruit and vegetable farmers in Canada also affects their competitiveness and capacity to trade with the United States. Currently, produce growers cannot access food protections that exist in the United States without incurring significant financial costs.
This was not always the case. Previously, Canada was the only country in the world that had preferential access to the dispute resolution mechanisms within the United States' Perishable Agriculture Commodities Act. It is known in the industry as PACA. However, the United States revoked this access in October 2014 due to a lack of a reciprocal mechanism in Canada. Now, Canadian sellers must post a significant bond worth double the value of their shipment just to initiate a claim through PACA. This severely disadvantages Canadian produce businesses, given the high volume of produce sold to buyers in the United States.
The need is clear. We need to protect Canada's food security. We need to support the Canadian fresh fruit and vegetable industries against the impact of bankruptcies. We need to work toward restoring preferential access for Canadians to the United States' dispute resolution mechanism.
To do this, Bill C-280 proposes to address the deficiencies in existing sections of Canada's bankruptcy and creditor laws by establishing a limited deemed trust to provide financial protection for Canadian produce farmers. These are the changes Canadian produce farmers require. They have been vocal in their support of establishing a deemed trust through Bill C-280.
Bill C-280 is endorsed by hundreds of farms, the Canadian Federation of Agriculture, the Canadian Produce Marketing Association, the Fruit and Vegetable Growers of Canada and many other national, provincial, regional, and industry-specific organizations.
This matters. From farm gate to dinner plate, the fruit and vegetable industry is a major contributor to Canada's GDP and creates thousands of jobs from coast to coast, right across this great country.
The financial protection established by Bill C-280 would reduce losses in the sector and lead to increased economic activity in Canada of $200 million to $235 million per year, increased value added in the Canadian economy of $104 million to $122 million per year, increased employment by more than 1,200 full-time jobs, and increased wages for Canadian workers by $59 million to $69 million per year.
Bill C-280 would also lead to a reduction in costs for Canadian consumers, which is just what we need right now, by as much as 5% to 15%. This would save Canadian families between $300 million and $900 million on their annual fresh fruit and vegetable purchases, improving their overall health. After eating so many carrots in Bradford, these eyes are still 20/20. It is unbelievable.
Unfortunately, the position of the Liberal government has been that the Bankruptcy Act, with its existing mechanisms, works just fine for its produce sellers. However, this is clearly not true. A cucumber, last I checked, is not the same as a sheaf of wheat. It makes no sense to treat these products and these sellers the same. Bankruptcies in the produce sector are substantially higher than other agriculture industries. They happen twice as often as they do for those in livestock, and over 10 times as often as they do in the highly regulated grain and poultry sectors.
After all, the produce industry is as unique as the fruits and vegetables they grow. It is very complex, with numerous producers and sellers involved, and with considerable integration within Canada and with our neighbours to the south, the United States. This unique sector requires a unique solution to the issues they face. Bill C-280 is the solution, a solution that would give Canadian produce farmers the certainty they deserve.
When I look out over the green, growing vegetables in the rich soil of the Holland Marsh, I see opportunity. I hope members of Parliament in the House see the incredible opportunity today, the opportunity to support Canada's fresh fruit and vegetable farmers, to stand up for Canadian consumers and to protect our country's food security. With Bill C-280, we could ensure that fresh produce farmers are paid for the food that they grow. Let us get behind them.