Agriculture Committee on March 14th, 2012

[The Chair, Conservative, Larry Miller]

I call the meeting to order.

I'd like to welcome our witnesses. Mr. Tierney from Agriculture Canada is here in the first half. In the second half of the meeting, we will have representatives from CFIA.

I'd just remind everybody that I understand bells will go off at about 5:15. Maybe at approximately 4:25 or something like that, we'll recess and let Mr. Tierney leave and let CFIA come in to balance out the time, if that is okay with everyone.

Thank you very much.

Mr. Tierney, go ahead.

[Steve Tierney, Assistant Deputy Minister, Market and Industry Services Branch, Department of Agriculture and Agri-Food]

Thank you, Mr. Chair.

Good afternoon, everyone.

I'd like to take this opportunity to thank the committee for inviting me to provide a general overview of the agriculture and agrifood supply chain, and the work the department undertakes to enhance revenues and reduce costs all along the chain.

The agriculture and agrifood system includes the farm input and supplier industries; producers; food and beverage processors; exporters; food distributors; and retail, wholesale, and food service industries. In 2009, it provided one in eight jobs in Canada, employed two million people, and represented 8.2% of GDP. Over 40% of Canadian agricultural products are processed in Canada and supply approximately 77% of all processed food and beverage products available in the country.

The food processing sector is Canada's largest manufacturing sector, with 2011 shipments worth $92.8 billion. It employs 270,000 Canadians and accounts for 17% of total manufacturing shipments. The key to supply chain success is to enhance the revenue all along the chain with the participation of suppliers, producers, processors, distributors, exporters, and retailers.

The department works with the supply chain primarily through value chain round table processes, often called VCRTs. These were originally put in place to establish international market development strategy for the various sectors, but have taken on the broader mandate of creating overall chain competitiveness.

Since 2008 the number of VCRTs has grown from six to 11. There are now VCRTs for beef, pork, sheep, horticulture, grains, pulses, special crops, seeds, organics, seafood, and food processing. We have prepared information on each of the VCRTs, their members, and co-chairs, which is included in the information package that has been submitted to the clerk.

Included in this package is the overview of the agriculture and agrifood system in 2011, including an economic review. The 2012 version will be released on the department's website on Monday, March 19, 2012. We'll provide the address for that to the clerk.

The development and integration of value chains is part of a fundamental strategy for improving the agribusiness environment through better customer-driven information sharing and analysis; alignment of goals, objectives, and systems; and investment in innovation, which is so important to production and efficiency. Such an agribusiness environment builds trust in business-to-business relationships and helps to overcome competitive barriers and make adjustments according to market dynamics.

As a bit of a background to this, the value chain round tables were launched in 2003 as part of a shared vision between government and industry to enhance Canadian market success by bringing together key industry leaders with the federal and provincial governments.

All VCRTs are organized along commodity lines with two exceptions: organics, which covers all organic crops and livestock; and food processing, which includes all food processors from small to large. Including the critical players of each sector ensures that each round table is capable of responding to the various issues and crises that may arise.

For instance, in 2003 the Canadian and U.S. cattle industries were hit with the first of several BSE cases that shut down international borders. With the help of the beef round table, the beef industry's reputation was restored, and Canada became one of the first nations to which China reopened its borders following that crisis.

In terms of their work and how they work, one of the requirements of a successful round table is the engagement of all the key players, as no one segment of the chain is suited to respond to all demands. That takes a collaborative effort.

For example, the pork round table includes the pig genetics industry, feed companies, producers, processors, exporters, and Canadian retailers. The round tables use an industry-government co-chair model, and the industry co-chair leaders usually own and run their own businesses.

The government co-chairs are senior departmental staff at the director general level. I'm sure the round table co-chairs would be willing to provide you with a view of the value, limitations, and successes so far of these round tables.

Actual round table meetings are held approximately twice per year; however, there are active working groups that are mandated to achieve progress and priorities in between meetings. The round tables have maintained a high level of departmental commitment: Minister Ritz has attended various round tables, and in November 2011, Minister Paradis presided over the food processing round table.

Deputy Minister Knubley meets annually with the round table co-chairs and invites his fellow deputies from departments and agencies that have an impact on the agriculture and food industry.

Health Canada, the Canadian Food Inspection Agency, Transport Canada, Human Resources Development Canada, and other departments are just some of the participants who have attended past meetings. Mr. Knubley also regularly attends select VCRT meetings, as does Associate Deputy Minister Carrière, who is now the government co-chair of the food processing round table.

In terms of its activities, I'll give you just a few examples. The horticulture VCRT is developing a system where producers can post availability of fresh produce online to permit retailers to access more Canadian-produced fresh produce in their stores. The pork VCRT is leading on the implementation of traceability, good animal-care practices, on-farm food safety, and biosecurity measures to position Canadian pork as meeting both foreign and domestic consumer requirements. The seafood VCRT is looking at why exports from other countries of the same species are often able to obtain higher value for their product, and to develop an action plan to enhance the value of Canadian product through modification of harvest, preserving, processing, and marketing.

AAFC, through the AgriMarketing program, and pork and beef legacy funds, provides funds to assist the industry, such as the pork and seafood VCRTs, to put their plans into action to develop markets and expand sales. At the initiation of the beef round table, the industry has added value to the use of the traceability system that was built to manage animal health emergencies. Beef processors are now reporting carcass information back to feedlots and cow-calf producers, so that cattle producers can have an improved view into how their live animals translate into meat. The government has invested in this system, called the beef information exchange system, or BIXS.

The horticulture round table is developing a water strategy to secure access to water, adoption of best practices, and confirmation of sustainable use of water throughout the supply chain. This will cover field and greenhouse production, washing and packaging, processing, and the retail industry.

Pulse producers, through the VCRT, are working with processors to ensure that the product they provide can easily be utilized as an ingredient in processed food products.

The organic round table developed an innovation strategy that was then leveraged to attract business funding into a joint partnership with AAFC through the research cluster program.

The grains round table is currently working on the development of a draft low-level presence policy, which could be used to advocate to other countries as a possible import mechanism.

Lastly, the food processing industry round table was formed in 2008 to examine the challenges affecting the growth of this sector. Although food processors are members of each of the sector-based round tables, there are opportunities and challenges that are common to all food processors, no matter what product they produce. The food processors VCRT is looking at how to deal with a stronger Canadian dollar, rising energy and raw material prices, as well as strategies to foster innovation and productivity. To complement this work, AAFC introduced the AgriProcessing initiative, designed to provide food processors with a source of funds to adopt innovation.

Many AAFC programs provide benefits through the full chain. For example, the Canadian Agricultural Loans Act, CALA, supports the food chain by guaranteeing repayable loans to farmers for the establishment, improvement, and development of farms, but is also open to agricultural cooperatives for the processing, marketing, or distribution of the products of farming.

The department and minister have found that the VCRTs are valuable for purposes that cross the tables themselves. As a result, all of the VCRTs were consulted during the Growing Forward 2 process. We've utilized the VCRTs to develop, implement, and modify the research clusters under the brand initiatives, and we've collaborated with the VCRTs to establish the Agri-Subcommittee on Food Safety, which includes members from the Canadian Food Inspection Agency, Health Canada, the Public Health Agency of Canada, plus a member from each of the VCRTs. More recently, the crop logistics working group was struck to examine a crop logistics system to identify approaches to improve logistics.

In terms of further work, the industry has confirmed that they wish to continue the process of round tables to work on industry-identified competitiveness issues, with one area of priority in the future being regulatory modernization. CFIA has engaged with the beef and horticultural round tables on this issue, and this exercise will be extended to all of the other round tables in the near future.

Biofuels and bioproducts also offer new market opportunities for the agriculture sector, and will require the development of new supply chains with sometimes unfamiliar end-users, in the energy and manufacturing sectors, for example.

Thank you for your time today. I look forward to your questions.

[The Chair, Conservative, Larry Miller]

Thank you very much.

Before questions, I just want to remind committee members that witnesses from the department can address only implementation of policy and that kind of thing, not how policy is made.

With no further ado, Mr. Allen, five minutes.

[Malcolm Allen, NDP, Welland, ON]

Thank you, Mr. Chair.

Thank you, Mr. Tierney, for that enlightening overview.

Clearly this is huge. Supply chain is a mammoth piece. We're talking about starting at the producer level and getting it to my dinner plate. It's a challenge unto itself to actually get good stuff on my dinner plate sometimes, but maybe that's a personal choice rather than what's out in the marketplace.

What I hear locally is that folks are trying to figure out and trying to find a way outside of the local markets, of which we have a lot in the Niagara region. We can go to a market any day in the week in the summer. We're very lucky that way. How do folks in the supply chain recognize what is a local agricultural piece, so they can actually do that?

Let me reference a piece back to a grower who was here—I can't remember if it was last year or the year before—who talked about potatoes because that was his crop. By the time his potatoes came back to the local store, they had actually moved about a thousand kilometres, which doesn't make a lot of sense in a lot of different ways.

If you could speak to the sense of how we help the folks, the consumers out there who are trying to work in this supply chain, which moves in different hands and mysterious ways.... How do we help them help farmers in a lot of ways, and especially Canadian farmers, because the consumers actually want to get Canadian product?

We've had the labelling issue. We all agree that the labelling issue is such that most products can't be labelled product of Canada. So how do you find Canadian product in this supply chain?

[Steve Tierney]

Thanks very much for the question.

When it comes to horticultural or fruit and vegetable products, quite frequently provinces have their own branding programs, such as Foodland Ontario, for example. Quebec, I believe, has similar programs. So there are those branding programs that are focused on the regional, local market.

As well, there's the Canada brand program, although domestically it has not been picked up so much by the horticultural sector as it has by the processed food sector. It is possible to label things, such as manufactured in Canada, or manufactured with 100% Canadian strawberries, ignoring the fact that the sugar or parts of the container may have come from elsewhere.

We've been working with the food processing sector on how to make it more clear that their product is Canadian manufactured, or has a high Canadian content of one or more ingredients.

[Malcolm Allen, NDP, Welland, ON]

I hope you are successful. I wish you well in that endeavour. One of the things we hear from processors is that they don't like to have to make up a gazillion labels. They want standardization, etc., so Mr. Tierney, I hope you win that persuasive argument. I think the Canadian consumer would actually be very happy to see that.

Let me throw to you the example of Sobeys. It sells fresh seafood with a traceability piece in it that talks about how it can actually lead you back to the captain, the ship, and the area where the fish was caught, which isn't a regulation that we have in this country, but it's a marketing tool that a store, such as Sobeys, has used, and I think quite effectively, to be honest.

Since that's a voluntary piece, is it something that we should look at in the supply chain? I live in the province of Ontario, and we have the Ontario branding piece. We have some decent retailers that will put pride of local product at the front of their store, but it takes a bit of education.

Is that something that we should be looking at? Rather than a hodgepodge marketing piece, is it something we should look at, not as a regulation per se, but at least as a suggestion to retailers or the processors that this, perhaps, is a good thing to do, and let them run with it?

[Steve Tierney]

Far be it from me to suggest what the committee should do, but I would certainly be appreciative of hearing the kinds of ideas, and so on, that the committee came up with, and the kind of example you gave with Sobeys and the fish.

In Alberta, a group of local beef farmers went down to the grocery store. They stood beside the meat rack, and explained to people that the meat came from their animals that they killed. They introduced them to their kids and their family, so it made the meat seem like it was really quite locally produced. That did, supposedly, give an uptake of about 30% in sales for the next month or so. It tailed off afterwards.

There are probably lots of innovative examples that people could share with the committee. This is a great way to get those out there.

[The Chair, Conservative, Larry Miller]

Thank you very much.

Mr. Zimmer, you have five minutes.

[Bob Zimmer, Conservative, Prince George—Peace River, BC]

Thank you, witnesses, for coming.

I had a general question. You did talk about the department somewhat but I wanted to know if you could explain, for the benefit of the committee, the specific top marketing priorities of the department.

[Steve Tierney]

There are different ways of answering that but I'll take one, the Canada brand initiative that was put in place by the minister a couple of years ago.

In looking at markets where government and industry could best work together, after working with about 42 industry associations it was decided that South Korea, Mexico, Germany, and Japan were the four key markets for using the Canada brand initiative because the opportunity and the potential were maximized for those kinds of commodities and processed food products.

While obviously a key market for us, industry is well entrenched in the United States, so they didn't think that work with government was necessary.

[Bob Zimmer, Conservative, Prince George—Peace River, BC]

To follow up on that a little, without sounding too repetitive of a colleague who just asked a question similar to this, my constituents have talked about concerns with the country-of-origin labelling, etc. With this Canada brand in mind, I wanted to know what the department is doing to alleviate the country-of-origin labelling concerns. Can you give us an overview of how that's being rolled out?

[Steve Tierney]

One of the problems with the country-of-origin labelling is its mandatory nature. There are a bunch of others, but branding your product as Canadian, American, or Mexican is voluntary. Country-of-origin labelling is typically mandatory and hence the distinction.

[Bob Zimmer, Conservative, Prince George—Peace River, BC]

With a lot of new products on shelves now, especially in Walmart, we often don't know where they're coming from. What is the department doing to alleviate those concerns?

[Steve Tierney]

I believe those are more inspection type of issues, and probably my colleague who follows me will be better placed to respond.

[Bob Zimmer, Conservative, Prince George—Peace River, BC]

That's okay. I have another one for you. You talked about beef producers and traceability. We all know what happened with BSE and we never want to see that happen again. In terms of marketing and the strategy, what is the government doing....

We have beef traceability now, we can trace it right back to the farm. Are we marketing that fact to other countries that want our product, and if so, how?

[Steve Tierney]

On the beef side certainly the minister, when he is talking both to other ministers and to industry at round tables, uses that as part of the Canada brand. That's a very powerful thing for getting access.

I believe Canada Beef Inc., the new export marketing arm for the beef and cow industry associations, is also making use of traceability, along with other things like the way our cattle are fed and everything else you guys know about.

[Bob Zimmer, Conservative, Prince George—Peace River, BC]

Perfect.

[Steve Tierney]

Full traceability is not quite in place across the country.

[Bob Zimmer, Conservative, Prince George—Peace River, BC]

Can you explain that?

[Steve Tierney]

We have been working with the cattle industry to have a phased-in approach and working with provinces of course, because it's joint jurisdiction. So while we have a good part of traceability, the instant traceability that you think of is not yet in place right across the country.

We can trace animals back, it's just the length of time it takes.

[Bob Zimmer, Conservative, Prince George—Peace River, BC]

So it's not something that we can put on an ear tag and scan. My understanding was we could scan that and trace it immediately. You're saying that isn't in place?

[Steve Tierney]

Ear tags are in place in the system, but sometimes they fall out and how you take advantage of it afterwards is different.

[The Chair, Conservative, Larry Miller]

Thank you.

Mr. Valeriote, you have five minutes.

[Frank Valeriote, Liberal, Guelph, ON]

Thank you, Mr. Tierney, for your time today.

I'm hoping the questions I ask you are in your jurisdiction to answer. I'm not quite certain.

You talked about the round tables. You said they meet about twice a year, and I guess that is in each of the sections. How long do they meet, and how many people would come to one of these round tables?

[Steve Tierney]

It depends on the nature of the round table. I believe the beef round table is probably the largest, there would be 60 people and they would meet for two to three days.