Thank you, Mr. Chair, and honoured members. It is a pleasure to appear before your committee again. My name is Matthew Holmes and I am the executive director of the Canada Organic Trade Association, or COTA, as we're called.
I also serve on a number of advisory bodies to government, as regulatory chair of the organic value chain round table and as a member of the industry advisory group to the Senior Market Access Coordination Committee of Agriculture Canada, DFAIT, and CFIA.
I believe COTA is an interesting organization given today's topic of supply chain. We are a national membership organization for the organic business community in Canada, and as a result, we reflect the full Canadian supply chain. We represent primary producers and producer umbrella organizations. We have organic livestock and dairy producers; commodity traders; exporters and marketers; and food, feed, and non-food manufacturers; as well as retailers of organic products.
Additionally, we serve those that play a critical role in our sector's infrastructure and value chain: organic inspectors, consultants, and organic certification bodies. In many ways the history of the organic sector's growth has been one of a well-connected value chain. We have always had the need to maintain an identity-preserved supply within a limited pool of downstream users. The downstream manufacturers or retailers of organic products have always oriented their businesses to the concerns and expectations of the final consumers, filtering information back to the growers and producers through our organic principles and standards. Even the organic standards themselves are written and defined within a consensus model that involves representatives throughout the value chain. Producers, processors, retailers, and consumers all have an active voice in establishing what organic means in Canada for both domestic and imported products.
Thus the organic sector is acutely aware of consumer preference and concerns related to the integrity of the food chain, production practices, and traceability. Our sector has worked within the limits of those concerns established by our consumers and with the latest agronomic science to develop innovative production and processing that minimizes the use of costly external inputs, synthetic materials, and additives, and reduces the use of energy and fossil fuels, while maximizing the natural release of nutrients to plants, integrating pest management techniques, and increasing the biodiversity and resilience of essential plant, bird, and insect populations such as pollinators.
In many senses organic products are already value-added products. It is simply about establishing systems that will not compromise that unique identity, while communicating the value and integrity of that system to the marketplace.
Perhaps the best descriptions of the power of the value chain come from examples within our current membership in the sector itself. So I will describe three examples from my membership to you today, all of which have value chain intentionally built right into their business structure. These three examples span the traditional to the novel in terms of their organization, and all three have attracted the attention of investors targeting innovative, environmental, and social organizations oriented towards growth, agriculture, and a strong marketplace.
Organic Meadow Co-operative and Organic Meadow Incorporated market over 60 organic products in Canada on behalf of 100 family farms throughout Ontario and Manitoba. They produce and market organic milk, dairy, eggs, and frozen vegetables. Their website features interactive maps where you can meet the farmer families who own and govern their cooperative. The careful management of their brand and their commitment to transparency and to their local production supply chain has paid off with impressive growth and consumer loyalty.
In August 2010, Organic Meadow and Steen's Dairy announced a joint partnership, and the opening of a 20,000-square-foot dairy processing plant—the first new independent dairy processor in Canada in 20 years. As a result, this facility will now process organic and conventional dairy products and help to ensure a critical link for the SME value chain for decades to come.
My second example is Manitoba Harvest, one of Canada's 100 fastest growing companies in four of the last five years. The company has brought a speciality crop, which couldn't be grown in the country just a few years ago, to a wide variety of innovative products that rival flax and chia seed for their protein, fatty acid, and omega profiles. Today, Manitoba Harvest is the largest vertically integrated hemp food manufacturer in the world, with products distributed globally. The company is involved in every part of the supply chain for its products from contracting directly with organic growers to crop storage to on-site QA labs to food processing to packaging and distribution, creating a closed-loop sourcing system and distribution model that has benefited the company greatly.
Meanwhile, my third example, Organic Central is a project in the final stages of development and financing organized by Homestead Organics in Berwick, Ontario. The concept will bring together a number of distinct organic businesses, one of the biggest independent organic distributors in eastern Canada, a warehouse, a test kitchen, a business incubator, and other partners organized along the vertical value chain. It will be positioned to easily access and serve the Montreal, Ottawa, and Toronto markets.
Resident businesses will benefit from access to shared space and resources as well as common staff and areas, allowing SMEs to benefit from efficiencies that are typically available only to businesses of a certain scale. This project has been developing its business case and marketing plan thanks in part to federal involvement through the Community Futures Development Corporation and the Eastern Ontario development program.
Historically, organic has had to maintain a closed-link system in order to ensure its rigorous standards and integrity, and to maintain transparency and traceability for consumers. Therefore many organic companies have chosen models that maintain very close relationships with their supply chains, their local growers, and their local processors and handers, and all have grown together as a result. In many cases doing so has also been of tremendous value to the sector at large, and has contributed to the strong market position it enjoys today.
Global organic sales are now worth $59 billion a year. Canada is the fifth-largest organic market in the world and is valued at approximately $2.6 billion in annual consumer sales. Canadian producers also enjoy more trade recognition for organic products than does any other country in the world, with access to 96% of world markets through our trade agreements with the United States and European Union, but our value chain does face some serious challenges in Canada. One is risk mitigation and the loss of market access or organic product designation through the commingling of organic with non-organic, especially with genetically engineered crops or those grown with intensive chemical inputs.
Organic's segregation system is what gives it value and what consumers expect, but it is also one of our areas of risk to all points along the value chain, and one that is not recognized or addressed under our system of risk management and crop insurance for farmers, or under management practices used by other production models that can harm us the most.
One of our other challenges is now supply. The market has grown about 160% in Canada since 2006, but our production has remained fairly static. In fact our latest figures, which we have analyzed with our partners at Canadian Organic Growers, show that organic producer numbers in Canada fell by 4.5% from 2009 to 2010 and that this loss was particularly acute in the Prairies. In Saskatchewan alone we saw a drop of as much as 16% in producer numbers. In British Columbia, Quebec, and Ontario, we saw the producer numbers actually hold their ground or even grow by as much as 10% with increases in organic acreage as well. B.C., Quebec, and Ontario all have small processors, often with closer linkages between the producers and what they grow, and the consumers and what they eat.
Commodity agriculture is a good business and has been for years, but as many of you know, it is also often a lonely business and our prairies, in particular, do not have many links along the value chain.
To conclude, ironically Canada has some of the best conditions for organic agriculture in the world—our land, growing conditions, relatively low pest pressure, progressive trade agreements, and one of the highest-demand growth markets in the world. But our producers and our value chain, in general, are still facing an upward climb, and our market demand is often met by imports that we, in turn, could be supplying ourselves.
While other countries support the transition to organic farming, organic farmers in Canada face costly investments of their own for the inspection and certification costs of our system, as well as the demands of retraining and extension support linked to a different way of producing.
Some provinces have chosen to invest in this, but it's very piecemeal across the country and is an area where the federal and provincial governments could partner more.
We may also soon face a new tax, or user fee, to access and update our own organic standards in Canada. Our competitors in the United States and Europe do not face any such costs for maintaining their systems.
Finally, the organic value chain, as is the case for any segregated system, needs protections to guarantee its integrity, and investments to develop the hubs and links needed to grow.
As we've seen in the examples I have used, with the right conditions and the right supports, the rewards and the demand are unquestionably there, Mr. Chair.