Agriculture Committee on Oct. 29th, 2009

[Jennifer MacTavish]

We do.

[Mark Eyking, Liberal, Sydney—Victoria, NS]

So it's not necessarily the compensation; it's dealing with the predators as their populations increase.

[Jennifer MacTavish]

Compensation is quite complex. In order to get compensation, you have to provide the carcass, and the predators don't often bring the carcass back when they're done. It's very difficult to get compensation.

We're looking more at mitigation. Most shepherds assume they're going to have x percentage, 1% or 2% loss per year, but when we have five guard dogs and we're losing the battle, there's something wrong.

[The Chair, Conservative, Larry Miller]

Thank you, Mr. Eyking.

Mr. Bellavance, seven minutes.

[André Bellavance, Bloc, Richmond—Arthabaska, QC]

Thank you. I will be speaking French.

Are you getting the interpretation?

Mr. Chairman, you should explain this because I am forced to do it every time. I would like you to explain the system to the witnesses.

[The Chair, Conservative, Larry Miller]

Translation is only coming to me in French.

That's better. Is everybody okay?

Go ahead, Mr. Bellavance.

[André Bellavance, Bloc, Richmond—Arthabaska, QC]

Is everything alright? Thank you. Perfect.

I wish to address Mr. MacKay.

[The Chair, Conservative, Larry Miller]

If you would just turn the dial....

[André Bellavance, Bloc, Richmond—Arthabaska, QC]

Mr. MacKay, you spoke rather at length about problems relating to safety and security at retail outlets. You talked about ad hoc standards and I imagine that when these standards are provided to you, you must adapt to them quite quickly.

Are you faced with overlapping standards, in other words municipal standards, provincial standards and federal standards?

You talk about a certain amount of contradiction. I would like you to explain that further. You mentioned certain solutions, but what exactly is it that should be changed with regard to these standards? More particularly, how do we ensure that the safety of users and consumers who go to their agri- retailers will be preserved?

What solution could we suggest to the government in the end? Safety standards must be established; we all agree on that. There must be some logic behind the implementation of these standards. I believe that you are the best people to advise us in this regard.

[David MacKay]

Yes. I, too, think we can provide you with sound advice. It's an excellent question, and our advice would be that, yes, first of all, there are regulations that do not harmonize well. They don't even have to be crossing provincial-federal barriers. Often they are even federal or industry-related codes that don't harmonize well with federal regulations. The common sense approach, the more efficient, businesslike approach, would be to try to harmonize as much as possible, obviously.

The government seems fairly good—at least in my perception of Transport Canada, anyway—at reaching out to the industry to have experts and specialists engage in either multi-departmental task forces or some type of industry working group that advises and consults with the government on what are practical, cost-effective solutions that would not be detrimental to the operations of agri-retailers.

We get that opportunity with Transport Canada. With CSA B620, for example, we actually helped write the regulation to make it palatable for our industry. That hasn't translated to other regulations, however. For example, on the Transportation of Dangerous Goods Act, actually the bill was passed, but we don't know what is going to be in it as far as the regulations are concerned, so we fear we won't have an ability to consult with the government on that. I will backtrack. Part of our problem is that we don't know which department should be working with us. Intuitively you would think it would be Public Safety, if you are dealing with matters of products that have security issues, but we've been passed over to Agriculture to deal with this issue. I think even Agriculture is a little bit uncomfortable as to why they have to be the department to deal with this. They tell us so.

A multi-departmental task force would be the approach to take in advance of any regulations, and to foresee 10 years down the road--not do it product by product, as we are today, but anticipate the products that we will want to regulate in the future. We know urea is eventually going to be targeted. Urea has an explosive potential, but it's not currently regulated under the restricted components regulations. We know it is coming, so why would we want to fence today and then you'll tell us tomorrow we have to work on our urea and fence it? It will be impractical and not cost-effective. So let's anticipate where we're going to be in 10 years and secure everything in a single crop input security protocol that makes sense for the citizens of Canada, for the government, and for us from a business perspective.

[André Bellavance, Bloc, Richmond—Arthabaska, QC]

With regard to the imposition of these standards, you seem to be saying that there is a bit of improvisation. From what I understand, you would prefer to see greater coordination between the various levels of government and the various departments. You have no idea where to turn to.

[David MacKay]

That's correct. The government is not even improvising. They are not doing anything at all right now. There has been nothing proactive from the government in terms of how to approach this. We should be doing risk assessment studies.

The Americans have this down pat. I've watched it in process. It's amazing how they've done it. The industry cooperates with government in the U.S., and they actually appreciate the process. It's very proactive and there is no criticism back and forth whatsoever. We need to get there. We're not even being engaged. For three years we've been bounced around the Hill. We don't even know who owns this issue. That's amazing that in three years I can't tell you who is engaged with us on this issue. It is Agriculture Canada to some degree, but they should clearly be going to other departments to be able to solve this problem.

[Ken Clancy]

If I can add to that, this process has been a three-year process where we've been trying to get government support for this initiative on security. We basically had the support of this committee in June 2008, the support of the Standing Senate Committee on Agriculture, but we actually haven't had an answer from government. We've been told to go and talk to this department, go talk to that department, go talk to that department, and what we are seeking is an answer. If the answer is no, then so be it. If the answer is yes, obviously we'll be very happy with that.

I think the solution for how this can be better for us and for government is in this document you have, the security protocol.

[André Bellavance, Bloc, Richmond—Arthabaska, QC]

Have you done an estimation of the amounts of money that are devoted to safety? In the end, these funds are expended uselessly. Could you provide an estimation of what the amount would be if there were harmonization, leadership and if standards were applicable, concretely? How much could you save?

Given that it is ad hoc, I imagine that this involves new obligations and therefore new expenditures in order to be in compliance. After a certain amount of time, other standards come into force and new investments must be made. And there is not even a guarantee that these investments will cover the next five or ten years. I would like to know if you have done an estimation of the costs that all of this involves?

[David MacKay]

That is certainly our fear, there's no question. We wouldn't' dare come before you if we hadn't costed this out. We have worked with the Canadian Fertilizer Institute to get a consensus on what the cost would be to perform and execute the infrastructure required for this security protocol. It's in the document I'm holding, which I can provide to you at the end of the meeting, if you don't have a copy already. This is our cost-sharing security protocol proposal.

The cost to do this properly is $100 million across 1,200 sites in Canada. You have to average the acreage per agri-retail site. Let's say that to do it properly, an average two-acre site has to invest somewhere between $60,000 to $80,000 in infrastructure for both fertilizer and chemical security. We've analyzed what's required. I can tell you the type of infrastructure that's needed: fencing, lighting, cameras, software, etc., and $100 million is the cost. Parts of our industry have already adopted the infrastructure required and have implemented security strategies and infrastructure, but not many—maybe 10% of the industry. We still have another $90 million to go, perhaps.

Who has implemented it? It is generally the larger companies that are publicly traded and that have access to capital to do it. The smaller independents have not gotten to the point of being able to afford security at their sites.

[Ken Clancy]

What is in the protocol we think meets or exceeds the regulatory burden that's in front of us right now. The concern is that we want to make sure, in the event that there is an incident in which, for instance, ammonium nitrate fertilizer is stolen and used for some kind of nefarious purposes, that we're set up and secure before it happens, so that we don't have what would then be just a really impossible regulatory burden handed down upon us.

[David MacKay]

The best way to think of it is this. If fencing were required and there were five different kinds of fertilizer to fence, rather than fencing five times—one for granular, one for anhydrous, one for liquid, one for chemical, etc.—can you imagine the cost savings if we could do it just once, and the utility of scale for that, rather than having to fence it five times, which is what we're doing in this process of a onesy, twosey, product-by-product, piecemeal approach?

[The Chair, Conservative, Larry Miller]

Thank you. Your time has expired.

Mr. Atamanenko, you have seven minutes.

[Alex Atamanenko, NDP, British Columbia Southern Interior, BC]

Thank you, and thank you for being here. I apologize for arriving late, but I have your brief here.

This question is to the two gentlemen. When we look at your industry, there seems to be a snowball effect: the more consolidation takes place, the more you folks go out of business. It becomes harder on the farmers, and everybody loses except the big guys.

We see on the other side of the border a government that appears to be proactive. They're going so far as to even introduce country-of-origin labelling and protectionism. You've mentioned the agri-business security tax credit. We've seen it in the slaughterhouses. Our slaughterhouses aren't getting help for our SRM disposal. They're not getting help for competing. It's almost as if we're dealing with a hands-off approach from government here and intervention amongst our competitors. As one pork producer said in his plea to us, help us compete against foreign governments.

I've seen it in my community. In the pulp and paper industry, when the black liquor was first put on the pulp mills, it took a long time for us to finally get some help, when our mills were competing. I don't know what it is. We've somehow slid into this, and I'm not sure who's to blame. I think we're all probably to blame over the years. We've slid into this non-intervention and said we'll let the market decide. The government, to its credit, is trying to open up new markets, but at the same time we don't seem to intervene to help you folks compete and to maintain small businesses that maintain vitality in our rural communities. I'm not sure what the answer is, except what you ask.

There is a precedent. The marine security contribution program is there. It's not as if it is something new to us.

I feel frustrated by hearing this again from you folks and seeing what's going on. I wonder whether you have any comments to add.

I still would like to ask a question of Madam MacTavish.

[Ken Clancy]

It may be worth noting that we all believe, I think, and our membership believes, that our situation related to these products is highly unique in the country. There's probably no other sector in Canada that sells on a retail basis products such as ammonium nitrate fertilizer. We're not here looking for a handout; we're not saying we need government money to survive as an industry. We're saying that we have a very real problem and are not going to be able to meet it as effectively as it should be met unless government helps us.

[David MacKay]

To add a further comment to that, Mr. Atamanenko, I think what it really comes down to is that it's all about risk management—the risk in terms of legal liabilities, the risk of potential future incidents, and regulatory compliance. Everything is about risk management, and that comes at a cost.

There has been a steady downloading of risk and liability from the manufacturing sector right through to the retail sector. And what is the retail sector? We're a flow-through. We buy and then sell, and hopefully in that process there's a margin to survive on and feed our kids with. That's all we're doing. But if we have to bear all the risk, that's dysfunctional and not possible.

The answer for many of my members is going to be no, that they will not assume that risk. You can't demand that they assume that risk or be the only place where the buck stops. That's why they exit and hand the keys to their manufacturers. That's why they walk away, why they drop the product. This is why it's happening.

If we think that's acceptable, then let's continue doing what we're doing, which is nothing. We're not the type of sector that is looking for the government to literally babysit us and every time we get a scratch to put a band-aid on us. I don't think we've ever come to you with anything, other than this issue, for three years. We have warned you of the consequences. They are unfolding and are happening.

So we're not playing the boy who cried wolf. I think we're bringing you a highly credible problem that is now playing out in front of us, just as we predicted.

[Alex Atamanenko, NDP, British Columbia Southern Interior, BC]

Thank you.

Ms. MacTavish, what is the percentage of imported lamb versus domestic lamb in our country?

[Jennifer MacTavish]

Currently we supply 41% of our demand, so 59% is being imported, from New Zealand, Australia, and then “other”. As I said earlier, New Zealand's and Australia's flocks are constricting, so the supply will start constricting. If we look at who might be knocking on the door to supply us, I'm guessing it will probably be a South American country, such as Uruguay or Paraguay or even Mexico, if it's not us. And there's really no reason we can't do it.

[Alex Atamanenko, NDP, British Columbia Southern Interior, BC]

So there is room for your sector to expand?

[Jennifer MacTavish]

There is huge potential for our sector to expand.