Agriculture Committee on Feb. 27th, 2012

[The Chair, Conservative, Larry Miller]

I call our meeting to order.

I'd like to thank all of our witnesses for being here today.

We have one PowerPoint presentation. We'll do that one first, in case we have any technical problems.

We have Ms. Sayara Thurston from Humane Society International/Canada for 10 minutes or less, please.

[Sayara Thurston, Campaigner, Humane Society International/Canada]

Thank you.

Humane Society International/Canada is very pleased to be presenting here today as part of Growing Forward 2. This presentation will highlight the incredible changes that have taken place in recent years thanks to growing consumer demands for improvements in animal welfare in agriculture.

Indeed, given the worldwide trends toward higher welfare standards for animals in agriculture and the increasing role these standards are playing in trade relations and corporate policies, it is our hope that this area will be given the full attention of the committee in this and all future agricultural policy reviews.

HSI/Canada is the Canadian office of Humane Society International, the largest animal protection organization in the world, representing over 12 million members globally, including tens of thousands in Canada. Our organization works on a broad variety of issues, including wildlife protection, companion animal welfare, farm animal welfare, and emergency response.

In September 2011, HSI/Canada assisted the Government of Quebec in carrying out the largest seizure of dogs from a commercial breeder in Canadian history. In the wake of this seizure we were inundated with expressions of support from all over Canada. We received thousands of calls from compassionate individuals wanting to know what they could do to make sure such cruelty never happened again—

[The Chair, Conservative, Larry Miller]

Ms. Thurston, we're here about meeting consumer demands as far as food and what have you are concerned.

[Sayara Thurston]

I'm aware of that. This is relevant to that. Thank you.

[The Chair, Conservative, Larry Miller]

Okay. Perhaps you can stick to that topic, as I discussed with you beforehand.

Thank you.

[Sayara Thurston]

These calls surely show that Canadians care about the treatment of animals.

Our work to protect farm animals primarily focuses on the use of intensive confinement systems such as battery cages for laying hens and gestation stalls for breeding sows. As you'll see in the presentation, Canadians truly care about the treatment of farm animals in these systems. Indeed, polling confirms that the majority of Canadians want farm animals to be well cared for.

A 2008 report by the Commission sur l'avenir de l'agriculture et de l'agroalimentation québécois stated that consumers are increasingly concerned about animal welfare and want nothing to do with products from mistreated animals. The same report specifically noted the possibility of European countries taking action if Canadian agriculture failed to meet improved welfare standards.

A report filed with the commission, l'Ordre des médecins vétérinaires du Québec, emphasized that Quebec needs to improve farm animal welfare in order to avoid future trade ramifications. This point is particularly relevant for the $3 billion Canadian pork industry, which exports over 50% of the pork it produces. An investment of funds from Growing Forward 2 to assist producers in transitioning to group housing for breeding sows would avoid potential trade losses for failing to move away from the industry's use of intensive confinement systems.

We know that consumers want more information on how farm animals are raised. Mandatory labelling of cage eggs is already used in countries around the world. These labels, mandatory in parts of Australia since 2010, have increased sales of cage-free eggs by 90% in some stores. In the European Union, mandatory labelling of eggs with the method of production used was required from 2004 to January of this year when a ban on the use of battery cages came into effect. In the United States, mandatory labelling has been proposed as part of the Egg Products Inspection Act amendments of 2012, which were presented to the United States Congress last month, jointly supported by the United Egg Producers and our partner association, the Humane Society of the United States.

This is a labelling system that has been successfully trialled by a Canadian grocery chain that is currently taking steps to introduce the labels in all of their stores. In the first two months alone, sales of cage eggs fell by almost 4%, whereas cage-free and certified organic sales increased by 7% and 14% respectively. Importantly, the signage did not have a negative impact on total egg sales, which increased by 1.2%.

In the United States we see a similar concern for farm animal welfare amongst consumers. A national phone survey conducted on consumer preferences for farm animal welfare found that 95% of people belive that farm animals should be well cared for.

In a study conducted by Technomic, a food industry research body, animal welfare was rated as the third most important social issue amongst restaurant patrons, 58% of whom said that animal welfare was important to them. Animal welfare ranked ahead of environmental issues, fair trade, local sourcing, and the use of organic products. What this survey tells us isn't that these issues aren't important to consumers, because we all know they are; what it highlights is the extent to which consumers believe that treating animals humanely matters. Consumers care about animal welfare because they know it's wrong to keep animals in cages so small that they can barely move.

This is a barren battery cage for laying hens.

In gestation crates, breeding sows are likewise kept in intensive confinement.

Consumers care deeply about these issues, but are they hopeless cases? No. Systems exist and are successfully used all over the world that offer laying hens and breeding sows much higher levels of welfare than are currently used on most Canadian farms.

As alternatives to gestation crates, group housing systems allow breeding sows the chance to move around, interact with other animals, and generally enjoy more freedoms. This is not an idyllic pasture environment, but it is a huge step up, and consumers agree that it should be the bare minimum standard afforded to animals in agriculture.

Likewise for laying hens. This is a free-run system. The hens are housed indoors in a barn environment. Just taking the hens out of these cages without any access to the outdoors changes the lives of these hens completely, and consumers know this, and they're prepared to pay more.

It isn't only consumers who believe that it's important to treat animals right. Scientists, animal welfare experts, and public figures all agree. Amongst others, the Dalai Lama, the Pope, and Oprah Winfrey have all spoken out against the intensive confinement of farm animals.

Dr. Temple Grandin, probably the most famous animal welfare expert in the world today, has said that gestation stalls must be phased out.

The Pew Commission on Industrial Farm Animal Production, a review conducted by a prestigious group of scientists, veterinarians, animal welfare experts, environmental experts, and others, recommended the phase-out of all intensive confinement systems.

The New York Times condemned intensive confinement as being cruel and senseless.

Last year The Globe and Mail reported on increasing consumer concerns for the welfare of farm animals and the changes these concerns are bringing to industry practices and also to companies.

Indeed, thanks to support for improved animal welfare from consumers, scientists, and public figures, and also because it is the right thing to do, companies are changing.

All of these major restaurant chains, food providers, supermarkets, travel companies, and brands have taken steps to improve their animal welfare policies by increasing their use or sales of cage-free eggs and/or crate-free pork.

In the U.S., major supermarket chains Walmart and Costco have switched their home brands to exclusively cage-free eggs, and Loblaws has recently committed to doing the same in Canada.

Well-known brands such as Kraft, Sara Lee, Barilla, and Krispy Kreme have increased their use of cage-free eggs.

Travel companies and food providers are also part of this movement, including Compass Group, the world’s largest food provider; Hyatt hotels; and Virgin America airlines.

Restaurants are leading the way in this consumer movement. Burger King, Subway, Starbucks, IHOP, Wendy’s, and Quiznos all use cage-free eggs in their products. Just this month the largest restaurant chain in the world, McDonald's, announced that in addition to their use of cage-free eggs, they will be phasing out the use of crated pork in their supply chain, stating:

McDonald’s believes gestation stalls are not a sustainable production system for the future. There are alternatives that we think are better for the welfare of sows.

Kraft has publicly acknowledged that their motivation for improving their animal welfare policy is to meet the expectations and address the concerns of their consumers.

Unilever, the world’s third-largest consumer goods company, promotes the need for the more ethical sourcing of eggs on their website. In addition to acknowledging the improved welfare that laying hens experience in cage-free systems, the website notes that their consumers prefer the taste of products made with cage-free eggs.

Unilever and their customers feel so strongly about this issue that one of Unilever’s products, Hellmann’s mayonnaise, is being advertised to the public based on the use of cage-free eggs. The cage-free egg symbol also appears on the product itself, featured on Hellmann’s jars.

La fédération des producteurs d'oeufs de consommation du Québec recently announced that in order to meet Hellmann’s demand they are launching a pilot project, allowing an additional 25,000 layers to be raised cage-free in Quebec.

American restaurant Sonic summed up the current sentiment amongst so many corporations best when they said that preventing abuse to animals was not only a part of corporate responsibility but was simply the right thing to do.

Thank you very much.

[The Chair, Conservative, Larry Miller]

Thank you very much.

We'll now move to the Canadian International Grains Institute.

Mr. Newkirk, for 10 minutes or less, please.

[Dr. Rex Newkirk, Director, Research and Business Development, Canadian International Grains Institute]

Thank you very much.

Honourable members of Parliament, let me begin by congratulating you on holding hearings on the important topic of meeting consumer demands in this great country of Canada, and by thanking you for the invitation to present today. We very much appreciate this opportunity.

Canada has a reputation for producing the highest-quality food ingredients in the world. The Canadian International Grains Institute, CIGI, is proud to have worked with the industry for the last 40 years to ensure consumers' demands are met when they use Canadian products. As a result of our partnership with farmers, the Government of Canada, the Canadian Wheat Board, and many other organizations in the Canadian grain industry, we have witnessed the development of a brand that is known and recognized worldwide for delivering a product that consumers desire.

What I'd like to talk about today is CIGI's approach to meeting customers' demands and the importance of the Growing Forward 2 program to address these needs. CIGI is actively and personally engaged with customers of Canadian crops on a daily basis and has provided training and support to 35,000 customers from 115 countries. This has been facilitated by support through federal funding programs as well as direct marketing support provided by Agriculture and Agri-Food Canada.

The initial and very uniquely Canadian approach to meeting consumer demands began in 1972, when Agriculture and Agri-Food Canada, the Canadian Grain Commission, and the Canadian Wheat Board chose to form an independent institute that would provide marketing support before and after the sales of wheat. This independent institute was tasked with addressing customers' needs so that they can in turn produce products that meet consumers' demands. This institute has become a model of how to meet customers' demands. It is recognized all over the world, and it has expanded to apply this model to all of Canada's field crops.

This institute, of course, is CIGI. We are solely focused on understanding customers' needs and working to address them.

We believe CIGI's success in helping the industry address consumers' needs and in developing a well-recognized brand is directly related to its strategy to meet these demands. This includes four key components: development and maintenance of long-term trusted relationships with global buyers, processors, and food manufactures, creating products for consumers and their countries; supporting Canadian producers by providing them with an understanding of their customers' needs and requirements; provision of the highest-quality, unbiased technical support before and after the sale, which creates buyer loyalty; and finally, application of research resulting in innovations that create more profitable opportunities for the entire value chain.

Meeting customers' needs is a challenging task, and it is only truly possible if the entire value chain is involved. Canada's success is based on a spirit of true collaboration that brings the required expertise to the table in a highly efficient manner. To meet consumer demands for Canadian crops, CIGI works actively with many companies and organizations across the country.

The Government of Canada has been and continues to be one of our largest partners in this effort. CIGI works closely with the trade commissioners in the various posts around the world, as well as with many other staff in the market and industry services branch of AAFC, to deliver the support the buyers require. AAFC has been a significant financial partner, and has provided CIGI the resources to ensure that Canada's products are well understood and used to their fullest potential.

Without this funding and support from the various government agencies, Canada would have lost market opportunities, and the brand of Canada products would likely not exist today. AAFC has supported approximately 50% of the costs of addressing market needs, and it is essential that this continues in the Growing Forward 2 program. The investments to date have paid large dividends for Canada and will continue to do so in the future. Last year saw $1,733 in sales for every dollar that AAFC invested in market development and support through CIGI—a very wise and financially responsible investment.

CIGI actively engages with companies and individuals from across the supply chain to ensure the resources are available to assist Canada's customers. Not only does CIGI develop long-term relationships with buyers and processors as a result of our training and support, but agencies, farmers, and grain companies are given the opportunity to develop these relationships as well.

This is a uniquely Canadian approach, and CIGI is proud to be leading this effort. Support from the Government of Canada provides the opportunity for this to be of the greatest benefit for all of Canada and Canadian producers and processors.

Consumer demands are constantly changing, and it is essential that our industry is able to adapt to meet these needs. CIGI believes it is only through innovation in ingredient applications that many of these demands can be met, but it takes a conscious effort to ensure that the innovation pathway is effective.

CIGI approaches its role in farmer and industry goods with the attitude that the good ideas we generate from our research should be used to their maximum extent to improve the market opportunity for Canada's field crops. At CIGI, we see research and innovation as taking a product, a good idea, or a need, and creating profitable market opportunities that meet consumers' needs. We believe this will drive many of the opportunities in the future.

It is CIGI's sole objective to see innovation applied to ensure that consumers' demands are being met. Being an active member of Food Tech Canada, an organization that coordinates the efforts of the many Canadian food development centres, helps us achieve that goal. These food centres are highly capable and work diligently to meet consumers' needs and drive innovations to market.

However, at this time CIGI is the only member of Food Tech Canada that is directly supported by the Government of Canada, and as such we strive to ensure that national interests are considered by the various centres. We believe this type of collaboration on innovation and product development is in the best interests of Canada and its consumers, and we therefore suggest that the Growing Forward 2 program should support these efforts.

In conclusion, it is CIGI's hope that the Growing Forward 2 programming will form the backbone of AAFC's next five years of industry market development support, that it will be focused on developing long-term relationships with customers, that it will support the commercial implementation of innovations that create profitable opportunities by meeting consumers' demands, and that it will continue to support the strong brand Canada has developed.

Thank you.

[The Chair, Conservative, Larry Miller]

Thanks, Mr. Newkirk.

Now, from the Canadian Restaurant and Foodservices Association, we have Justin Taylor and Christine Moore.

[Justin Taylor, Vice-President, Labour and Supply, Canadian Restaurant and Foodservices Association]

Thank you very much, and thanks for having us here today.

Canadian Restaurant and Foodservices Association is Canada's largest hospitality association, with more than 30,000 members across the country. Our members represent the full spectrum of restaurants, from small independents to some of Canada's most recognizable chain brands. We're present in every region of the country, employing more than one million Canadians, and with total food purchases of $22 billion each year, restaurants are one of the largest buyers of Canadian food and beverage products.

We're here today to talk to you about Growing Forward 2 and the future of agricultural policies in Canada.

In the St. Andrews Statement, ministers laid out a framework to achieve an agrifood industry that is market-responsive, that anticipates and adapts to changing circumstances, and that is a major contributor to the well-being of Canadians. Our comments today will focus on our concerns with supply management and how in its current form it is not compatible with these stated objectives and has resulted in a number of unintended consequences.

We know that supply management can be an emotional and sometimes controversial subject, and some argue that if it ain't broke, don't try to fix it. We believe that in many ways it is broken and we cannot continue to turn a blind eye to the problems with supply management. We believe it's time to work towards a made-in-Canada solution that is fair and transparent to farmers, processors, restaurateurs, and consumers.

Our first set of concerns relates to the dairy industry. Currently, the board of directors of the Canadian Dairy Commission sets the price for the milk used to make cheese and other processed dairy products in Canada. Of the three-man board, two members are current dairy farmers with a direct financial interest in the price of milk. The newly appointed CEO of the CDC is the immediate past president of Dairy Farmers of Canada, the national dairy lobby. While the cost of producing milk, as calculated by the CDC's own figures, goes up and down, the price set by the CDC has never decreased. In fact, even in years when the cost of production decreased, the CDC has given price increases. Between 1994 and 2008, the price of industrial milk climbed eight times faster than the CDC's own calculated cost of production, driving up the cost of cheese and other dairy products in Canada.

One element of milk pricing that outrages restaurateurs is class 5A milk. Milk is priced differently depending on its end use, and there are currently 18 different prices for milk in Canada. Frozen pizza manufacturers in Canada can buy their Canadian mozzarella cheese at a steep discount to help them compete with American frozen pizza imports that enter the country duty free. Your local pizzeria gets no such discount, but competes every single day with frozen pizzas marketed as “just like delivery”. Pizzerias wonder why the federal government is giving price breaks to multinationals at the expense of local pizzerias.

Chicken also comes with its own set of problems. Domestic prices consistently track around double the price of chicken in the U.S., and restaurants often struggle to obtain the right product, to the right specifications, at a price the consumer is willing to pay. Furthermore, each province gets a share of the national chicken production, no matter how demographics have shifted over time. For example, booming provinces such as British Columbia and Alberta cannot raise more chicken to meet the demand of their population because eastern producers are holding on to their guaranteed allocation. Prices to producers are guaranteed, with built-in profit margins no matter how high feed costs climb. This means that the players down the supply chain, such as processors and restaurateurs, must take on all the risk of squeezing margins.

Finally, while the Farm Products Council of Canada is supposed to oversee supply managed sectors, it does not have the necessary powers to impose or even encourage solutions to the very problems it has identified over the years. Even in eggs, we're being presented with new challenges. The National Egg Marketing Board is trying to force through major price increases for processed eggs, which will drive up the costs of those breakfast sandwiches that Canadians have grown to love over the last year or two.

I'd like to ask my colleague Christine Moore to talk to you about how these challenges are affecting local franchisees in your communities, who are themselves small business owners.

[Christine Moore, Vice-President, Supply Chain, Unified Purchasing Group of Canada Inc., Canadian Restaurant and Foodservices Association]

Thank you, Justin.

Being accountable for the food cost to the franchisees who operate the thousand-plus restaurants under the Pizza Hut, KFC, and Taco Bell banners across Canada, I spend a large part of my time managing supply management, from the producer—who is a grower—to the processor to the restaurant.

The following are key points that impact my stakeholders.

First, for poultry, the availability of fresh chicken that is within our allowable size range is an ongoing challenge. In part because of the allocation process that was mentioned earlier and the fact that the producers are incented to grow larger birds under the existing pricing model, they elect not to grow the KFC-size bird, which falls into the small bird category. The lack of sized birds can lead to a number of obstacles: the producer, capping the amount of product we can purchase, thus limiting my opportunity to sell; having to develop logistics networks to move products from one market to another, which adds cost for the transportation and handling of the products and impacts the shelf life at store level.

Second, there is an unfair advantage given to the frozen pizza makers through the class 5A program. This is approximately a 30% difference in cost—and for what? It's the same raw material, just at a different delivery point and a different point of application.

Third is the higher cost of both chicken and cheese in Canada compared with the U.S. and other leading industrial nations. As global brands, we work on maximizing our marketing successes in other countries, but unfortunately, because of the cost structures in Canada, we cannot replicate them here or, because of tariff controls, import them.

Finally, for the farmer, chicken and milk pricing may be inelastic, but at the restaurant level it is not, as the restaurants cannot continually pass costs on to the consumer. If they did, they would price themselves out of the consumers' price tolerance level and push them to our competitors in the non-supply managed focused categories.

Overall, the added complexities and cost of chicken and cheese, because of supply management and the marketing boards, impact the ability of restaurants to run efficiently and profitably. With their average profit of only 4.4% of operating revenue, as reported by Stats Canada, the profitability of restaurants, particularly the ones that are centred on supply managed ingredients, needs equal consideration to the profitability of farmers and the processors, if they are to succeed and grow.

[Justin Taylor]

Thanks, Chris.

Canada's supply management system faces a number of challenges, both internal and from external forces. Instead of trying to limit production, close borders, and fight over shrinking Canadian market shares, we believe it's time to boldly address the problems in the system and come up with a made-in-Canada solution before change is imposed on us from the outside.

Thank you very much.

[The Chair, Conservative, Larry Miller]

Thank you.

We'll now move to Consumers'—

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

I'm sorry, Chair, may I just raise a point of order?

With due respect to our witnesses, we're in the process of studying Growing Forward 2 and consumer demand. I know the committee in the past has had difficulty sometimes with having witnesses stick to the subject matter, so within the framework of Growing Forward 2.... We had the same problem at the last meeting, which Jean raised. It's easy for the committee to get off topic.

I think it's very important for witnesses to focus their remarks. That's why we're paying to have them come here in front of committee. That's why they're getting time in front of committee. We're trying to write a report that's going to deal with Growing Forward 2—the next iteration, of course, of the Growing Forward plan that's in place right now. There have been a number of witnesses who have their own message to deliver to committee. That's fine. I'm just not convinced that this is the right venue or the right time.

I just want to raise that. I've allowed the witnesses to make their presentations, but I don't feel it's a good use of the committee's time when we're trying to focus on a particular report. I think there is always latitude during discussion whereby MPs might want to explore different aspects, perhaps, with a witness who is in front of committee, but when they are coming to give their presentation I think it's important that they remain focused on what the committee is trying to accomplish, because we're the ones who launched the study in the first place.

Thank you, Chair.

[The Chair, Conservative, Larry Miller]

The point is well taken.

Mr. Atamanenko.

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

I just want to react to what Pierre was.... I understand what you're saying.

The topic, consumer demand, is quite a large topic. In analyzing what the folks have been saying so far, in my opinion, it does fall within the parameters of what consumers want and of consumer demand and the cost to consumers. I think we have to be careful that we don't constrain our witnesses. These are legitimate concerns that they have, and I think we should listen to them and pose the questions when we have our turn to ask the questions and zero in on issues that we think are important.

That's just one comment that I want to make.

[The Chair, Conservative, Larry Miller]

I respect the comments here from both. I guess I have to point out that while witnesses can have their different points of view and it's nice to have them answer questions accordingly, it does cost a lot of money to bring them here. I just reviewed what the clerk sent out. They knew in advance what the topic was, and we just want to stick to that.

Ms. Thurston's remarks probably would have been better suited to the topic of animal welfare, but they're here today and we'll go from there.

This is about meeting consumers' demands.

Mr. Eyking.

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

I think the people who came here—it's very fitting.

I don't agree with you, but I think it's good that you came.

As a committee we need to have a full debate on where we're going. I hope this committee will bring in the other side to make their comments. Then we can make a judgment.

I think it's good that these witnesses are here, even though I don't agree with them. We might as well hear about where they see consumers going. But I also hope this committee will bring in the other side of the picture so that we can judge accordingly.

[The Chair, Conservative, Larry Miller]

When you say “the other side”, I presume you mean supply management.

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

Yes, SM5—and some dairy producers or hog producers to tell us why they feel their animals are treated humanely.

I'm not a member of this committee. This is just a suggestion so that you have a balanced report.

[The Chair, Conservative, Larry Miller]

Yes, we will.

Mr. Lemieux.

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

I think that's my point. We're not studying animal welfare today. Animal welfare is not part of Growing Forward 2 in the way we're looking at it.

At the beginning of our study we all agreed that we wanted to study Growing Forward 2 and provide useful input to the government as they were putting it together to help them in their consultations. We all agreed that we would actually partition the study into segments. For example, for the research and innovation segment we're going to call in witnesses to talk about research and innovation. Then we won't shoot off into 100 different directions and get point/counterpoint on things that don't really concern Growing Forward 2.

I think we started off really well in this regard, and we've worked our way along. Now we're falling off the rails when it comes to our witnesses staying on target. The committee sets its own goals. If we didn't agree to this at the beginning, fine, but we did, and we did very well for the first four modules. It's only in this fifth module that all of a sudden everyone's scattering to the four corners. I think if we go with Mr. Eyking's comments, the counterpoint doesn't belong in the study either.

My concern is that we're trying to stay focused. No one infringes upon an MP's ability to ask questions and for a witness to answer those questions. But when it comes to the opening testimony...I know the clerk has been vigilant in expressing the will of the committee on why we're inviting this witness and what the presentation should focus on. Otherwise it could focus on 100 different things, and I don't think that's what we're after.

Anyway, that's my point. I just wanted to comment on what Mr. Eyking said. If the whole thing is off topic, it just exacerbates the problem to bring in someone to give the counterpoint on something that's off topic.

[The Chair, Conservative, Larry Miller]

That is exactly how I'm going to deal with this. It's not about trying to even the score. I am going to be very vigilant about keeping the witnesses on subject today. We're not here to talk about animal welfare or supply management, for all intents and purposes. We're talking about meeting consumers' demands when it comes to agriculture and agrifood.

Mr. Allen is next, and then Mr. Eyking. Then we'll go to our last witness.

[Malcolm Allen, NDP, Welland, ON]

I agree with Mr. Lemieux that we had an agreement at the beginning of this to look at Growing Forward 2, but I don't remember any agreement from this side that said, ”Here's the rubber stamp, bash me on the forehead, and I accept what you're doing”.

It says “Orders of the day, Growing Forward 2 (Meeting Consumer Demands)”.

Mr. Taylor, do you work for the restaurant franchisee association?

[Justin Taylor]

I work for the Canadian Restaurant and Foodservices Association.