Agriculture Committee on Feb. 8th, 2012

[Debbie Zimmerman]

The bill that is before the House with regard to interprovincial trade barriers, as I understand it, is for personal use, and there is no limitation on what type of wine you can bring in. It's not limited to domestic. We're not afraid of the opportunity, though, to be able to showcase our wine in another province.

[Pierre Lemieux, Conservative, Glengarry—Prescott—Russell, ON]

At the agriculture committee we've done some travel in some of our studies, and I remember that in British Columbia—and this is going to be the same in Ontario—there are internationally recognized Canadian wines that win very prestigious awards, and they're locked into the province. They could be sold internationally, but other Canadians do not derive the benefit of those fantastic wines.

[Debbie Zimmerman]

No, they don't. Exactly.

[Pierre Lemieux, Conservative, Glengarry—Prescott—Russell, ON]

Then again, there is a bill that is trying to address that, and of course we hope that more things will follow from that.

I'm trying to focus a bit more on the international markets and on what efforts are being undertaken to penetrate foreign markets.

[Debbie Zimmerman]

I think that's a good question for all of us. I would say from my perspective of growing grapes in Ontario that our whole focus has been not to drop a grape on the ground in the province of Ontario because we're not able to sell our grapes to the people who are making wine in our own province.

In 2008 we dropped 8,000 tonnes of grapes on the ground because we didn't have a market in our own province.

[Pierre Lemieux, Conservative, Glengarry—Prescott—Russell, ON]

Oh, I didn't realize that. So you're saying that production of grapes is far beyond what the actual market requires.

[Debbie Zimmerman]

Absolutely. That's why we're looking forward to national standards right across the province and the country.

[Pierre Lemieux, Conservative, Glengarry—Prescott—Russell, ON]

Okay, thanks.

[The Chair, Conservative, Larry Miller]

Thank you very much.

We'll now move to Mr. Valeriote, for five minutes.

[Frank Valeriote, Liberal, Guelph, ON]

Thank you all for appearing before the committee today.

I only have five minutes, so I can't ask all of you questions. I'm going to focus on Ms. Zimmerman, Mr. Lemaire, and Mr. Harry, in the first instance.

We've heard time and time again from everybody coming before committee about innovation and commercialization, and really the lack of funding for it. We know that the business expenditure on research and development has gone down considerably in the last six years. We are below average. The average in the OECD countries is 1.6% of GDP. We're at 1%, and that's very disconcerting, almost alarming.

In the agriculture industry, as I understand it, you need to be like Apple is in the tech industry. You have to create what people want and need. You talked about it, whether it's traceability, new products, methods of farming, and any number of other things.

In the “Saint Andrews Statement”, I think a word was mentioned about innovation and commercialization—not very much was given to it—and that is the structure for the moving forward, and the discussions on Growing Forward 2. Can each of you—Mr. Lemaire, then Mr. Harry, and then Ms. Zimmerman—express to me how vital that is and whether you have concerns about the absence of investment in innovation and commercialization?

Mr. Bacon, you can be thinking about the next question, which is in regard to the railway performance review. You said that things have changed in the last two years. I'll tell you, it was pretty bad before. I'd like to know what those changes are, and what more can be done and needs to be done in the rail industry specifically?

Mr. Lemaire.

[Ron Lemaire]

Thank you.

On innovation, when you start looking at fresh produce specifically, the margins are so very tight. Input costs, as we heard, and other variables that impact what a producer can sell on a competitive level, force the industry to really look towards innovation to be competitive. So what new product am I putting out? What components or elements of that product am I putting into the market? I mentioned taste as being fundamental. What do we need to look at to try to drive and support...? Well, innovation can support competitiveness, not only domestically but internationally. Learning from some other innovative activities that are happening on a global level and leveraging those back within a domestic level are key.

The other challenge we get back to in produce is that we have 700 SKUs at retail and in over 150 different commodities across the country. So when you start looking at that volume of product and how you can take innovation relative to the various commodities, you need to sit down and really start looking at the best opportunity for innovation within each area. That one-commodity approach may not work. You have to look at it as a whole level and work individually.

[Frank Valeriote, Liberal, Guelph, ON]

Mr. Harry.

[Martin Harry]

Research is a long-term investment, and I'm glad you recognize that the research percentage is down. I deal a lot with public sector breeders, university, and AAFC. Most of the public researchers are over retirement age and are not being replaced—I'm talking about this government's public researchers—and the universities are cutting back.

I deal with new varieties. It's a ten-year-plus, long-term investment, but it's not fancy. It's not glorified. It's not “health benefit”. It's not “food additive”. It's not the buzzwords. It's basic research. That's what's suffering. If we could say, “We can put soybean in the car tomorrow”, then we could get all kinds of funding, because it's fancy, and it's a buzzword. But it's not basic research.

When we get into food quality of soybeans with the Harrow AAFC—they do world-renowned quality analysis for soybeans—we cannot sell any varieties overseas without having them to back it up. They're recognized the world over. So we need to keep that going.

Yes, research is very important, but it's not the fancy stuff; sometimes it's the basic stuff.

[Frank Valeriote, Liberal, Guelph, ON]

It's the basic stuff, yes.

Ms. Zimmerman.

[Debbie Zimmerman]

I think one of the important things is that people don't realize that we are solely dependent on a market for our vines from another country. We need to be able to grow our own rootstock in this country based on the climate we have.

As I think I emphasized right in the beginning, a bottle of wine grown in this country brings a lot more value than a bottle of wine that's brought into this country. That's not to say that we're against imports; we're prepared to compete with them. But at the end of the day, when we can have a reliance on a marketplace and a market for our own product here in Canada, and have rootstock that we're growing here....

That was one of the things we wanted to see addressed in here, obviously, in Growing Forward 2. We actually applied for funding to develop a national rootstock program with our four regions of Quebec, Ontario, Nova Scotia, and B.C. We were turned down. The other component is that we went to FedDev, and we were turned down.

So what we want to be able to say is open up the parameters for this Growing Forward so that it actually means what it says: growing forward. We believe the Ontario and Canadian grape and wine industry will have huge benefits for everybody, and growing it at home is important to us.

Innovation, obviously, and research in new varieties are both key. It's the same issue: lots of people are retiring—it's the demographics today—and we need researchers in this sector as well.

[Frank Valeriote, Liberal, Guelph, ON]

Mr. Bacon, on the railway.

[Gordon Bacon]

Some elements of rail performance have vastly improved. Other elements we'd like to see some improvement in.

With regard to transit time variability from certain shipping points to port, we're still seeing some very highly variable transit times, which, in a very complex supply chain, makes it difficult to know.... It's like trying to make a connecting flight when you really don't know if the flight time from Ottawa to Toronto will be 43 minutes or two hours and ten minutes because you're circling.

We also need to see improvements in things like container rollovers, where, because of poor performance in the entire system, we're seeing steamship lines that overbook by 40%.

We just need to have the key measurements identified and keep the focus on them so that we're not being swayed by specific statistics that might say an element of the system is working better when the system in its entirety is not.

[Frank Valeriote, Liberal, Guelph, ON]

Right.

Thank you.

[The Chair, Conservative, Larry Miller]

Thank you.

Mr. Lobb, you have five minutes.

[Ben Lobb, Conservative, Huron—Bruce, ON]

Thanks, Mr. Chair.

The first question is to Mr. Harry or Mr. VanderLoo.

I think everybody here understands the importance of trade, and trade deals. You mentioned the TPP in your document.

I just wondered if you could talk about, for the committee and for people who will read this report, some of the over-quota tariff percentages you guys face when you're trying to compete with the United States, say, in the South Korean market. Perhaps you could give the committee an idea of some of the over-quota tariffs we face, because that is a huge issue.

[Martin VanderLoo, Treasurer, Canadian Soybean Exporters' Association]

Well, as most of you are aware, the U.S. has recently come to an agreement with the South Koreans with regard to some trade liberalization there. The Korean government has some tremendous import tariffs. In the case of soybeans, it's 487%.

What's ironic is that some private industry there is looking to import some Canadian soybeans because of the quality we have and because of the characteristics of our beans. They're actually willing to pay those kinds of tariffs and duties.

So anything that can be done to try to come to some sort of terms or trade deal with South Korea would certainly be welcomed by our industry, and I'm sure by others as well.

Again, it's really quite interesting to see that some of the end users in South Korea are willing to pay those kinds of dollars just to have access to Canadian soybeans. I say Canadian soybeans, but it's not only Canadian; they certainly import from the U.S. as well.

There's a move afoot for a quantity of U.S. soybeans—I don't recall the exact number—to be allowed into South Korea duty-free this coming year. Apparently there will be a gradual progression to allow that to increase. Our concern is that we'll be shut out of that market, for the most part, if Canada is not part of some of those negotiations ongoing.

[Ben Lobb, Conservative, Huron—Bruce, ON]

In addition to that, all countries, all currencies, and all businesses are obviously keeping a pretty close eye on the world economy and on Europe. This is having impacts on people's purchasing, which I guess further compounds the importance of certain trade deals getting done in a reasonable amount of time.

Mr. VanderLoo, can you tell the committee about some of your findings from your recent trip to Japan and about what the sentiment is over there right now?

[Martin VanderLoo]

Yes, certainly.

I was travelling to Japan. I returned a week and a half ago. I would say that for this trip—over the last 15 to 17 years I've gone on this annual jaunt, so to speak—we've come home with less business than we traditionally do, for a couple of reasons.

Firstly, on the economy over there, Japan in particular has been suffering for some time. They're actually currently experiencing some deflationary times. There has been a slight oversupply in the food grade soybean business as well.

But interestingly enough, when I was talking to the business people in Japan two weeks ago, time and time again they alluded to their nervousness about the global economy and what the European situation might do to the marketplace. They're reluctant to make any kind of long-term contracts.

The other issue is that they talk about the challenges they face globally and what kind of effect that will have on commodity prices. They're very reluctant to step up to the plate and make any kind of long-term decision at this point.

[Ben Lobb, Conservative, Huron—Bruce, ON]

Mr. Harry, in the presentation, on one of the pages near the beginning, you mentioned the importance of developing innovation and agri-products and the agri-innovations program. You did mention lead times being a decade to get the next bean the consumer wants. Can you stress how that's important for government funding, or at least, in your opinion, the importance of that moving forward so we continue to get the right soybean for the right customer?

[Martin Harry]

In the marketplace in this country today, and more so in the U.S., a lot of the private sector companies have gone to GMO because they have a return on investment. The conventional farmer's right and privilege to keep his own is an issue, so you don't always get returns.

There is in the world.... In North America, we have a large percentage of the conventional soybean business breeders. We have four. That's it. The U.S. has a lot of public breeders, but their percentage is so small, so we have European countries coming to us looking for conventional soybeans because they're restricted with IP.

But again, in regard to the way research has changed in my 30 years in the agriculture business, and in four years of university before that, we have fewer researchers at the university levels. We're having fewer bodies. It's just a sign of the times. Agriculture Canada is no exception—right or wrong—but we have less research all the time.

One of our breeders at the Ridgetown college campus in southwestern Ontario died two years ago. He was a very renowned breeder—world renowned. It has taken me two years to work with the university to get him replaced. It was just posted 10 days ago, knock wood, and we may have a new breeder in place by spring.

But that kind of lag time and slowness.... It's because they couldn't find the funding, even though industry is putting a lot of money into that program. My organization alone is putting half a million dollars a year into the University of Guelph on royalties and levies to keep breeding going, because that's how we survive in the public sector.

So it's infrastructure. It's lack of bodies. It's retirements not getting replaced. It's just getting harder for these guys to do it. And that's just the basic research. That's not the value-added stuff to see what the traits are going to bring or all this kind of stuff. Fortunately in this country, in southwestern Ontario we do have a good team. At Agriculture Canada there are still two breeders, and at the University of Guelph there is one and a new breeder coming.