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.