Evidence of meeting #75 for Agriculture and Agri-Food in the 41st Parliament, 1st Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was ontario.
A recording is available from Parliament.
Conservative
Conservative
Bob Zimmer Conservative Prince George—Peace River, BC
Perfect.
I have a last question, Hans. What do you see as some of the new trends for your industry, especially in B.C.? Where do you see the future going? You talked about other markets interprovincially, but do you have any other things that are coming on the horizon that are positive for vintners?
Chair, British Columbia Wine Grape Council
The quality of B.C. wine has increased dramatically over the past 10 or more years, so the market segment where we think we need to be is in high-quality product, which does fetch a little bit of a higher price. On average, I think a bottle of B.C. VQA wine is around $18, which is quite substantially above what you pay for cheaper Australian or American imported wine. We have, to some degree, managed to build loyalty from a segment of the consumers, but this is a bit of a problem for us because there is also a growing perception within B.C. that B.C. wine is too expensive. This is a serious challenge that we are facing. There are a few reasonably priced products on the market, but in general these are basically not making any profit for the winery. There's really no way we can sustain this part of it.
Liberal
Frank Valeriote Liberal Guelph, ON
Thank you, Hans and Arthur, for coming up to see us today and giving us your valuable time.
Art, I'm looking at your presentation and I see a number of problems in the industry. I can't help but reflect on a meeting I had with a fellow from Global Orchards or Global Fruit, I think. He showed me this incredible device that he uses to spray pesticide on the apples. They've devised a new apple tree that looks more like a grapevine than an apple tree, and it enables him to really confine the spray and prevent overspraying.
My question to you is this: what's the role of innovation in your industry? How might innovation help you deal with a lot of the issues that you've raised in your presentation? And to what degree will innovation adequately replace the business risk management programs that have now lost close to $425 million in support from the Canadian government?
Chief Executive Officer, Ontario Fruit and Vegetable Growers' Association
I'll try to answer your question. I'll probably forget some of it, so if I don't answer it all, shoot it back at me.
First off, innovation has been critical in our industry. We look at what's happened in B.C. wines, and the same thing in Ontario wines. There's been a tremendous transition from old types to new types. There's been all sorts of research on varietals. Our growing techniques have changed. We were slow because, quite frankly, we didn't know how to grow them. In the seventies and even into the early eighties, we were told we could never have a vinifera industry in Ontario. Innovation has moved that forward.
Research is critical. Our problem is this. In the document, I said that we produce over 125 different crops. If you look at the grain sector, and whether it's the Monsantos or Syngentas of the world, which do seed breeding and so on, there have been tremendous increases in yields. Well, if you took one penny for every bushel of corn that was grown in Ontario, or every bushel of wheat, you'd have quite a pile of money. If you took one dollar for every [Inaudible--Editor] of strawberries, you'd probably have a million dollars. So the level of the funding becomes a critical issue.
I said we produce 125 different crops, so what you'd do on tomatoes or on strawberries or on peaches has absolutely no relevance to any other crop. That's a huge problem for us. It's that critical mass of dollars.
Also, as Hans mentioned, there is a critical need for long-term research projects. If you don't have this—if you don't have a commitment to a plant breeder, as an example—for more than four years or five years, you're not going to attract the greatest of the plant breeders. Unfortunately, at least in Ontario, OMAFRA has gone away from extension services and the research services. From the 1980s, through attrition, we have lowered and lowered the amount of research that has been going on, and that has had a tremendous impact.
Today, with the federal and provincial governments and Growing Forward 2, there's more emphasis on innovation, and also “skin in the game”, if you will, or grower dollars. That's where we struggle. As an organization, we have had some programs over the last few years. We allowed our farmer members, our association members, access to a pot of money that we had to do research. Then this past year we didn't because we had a issues of our own. So that's critical.
On the innovation side—and this is my biggest single concern—with Growing Forward 2 we have seen the loss of $475 million from the business risk management 1 component. We have seen the major change in AgriStability, from the 85% tier as the trigger point, down to 70%. What that really means is that you would have to drop below 85%—and now 70%—of your reference margin before you would trigger a payment. If you are in a single crop, whether that is grapes or cherries or hogs, you will have these fluctuations in the marketplace. All of the programs, Growing Forward 1 and 2, were designed to kick in with these commodities that tended to do that. However, if you look at most of the fruit and vegetable sector in Ontario, in tender fruit the farmer will probably have some cherries, peaches, and pears. He'll have a number of crops, and that was a necessity just for the labour practices.
Because of that diversity, you've already taken a lot of that fluctuation out of it. It's like the stock market: if you diversify there, you moderate the ups and downs. Yet, the program itself is designed for the major ups and downs. That is a problem for us. Moving forward in Growing Forward 2, we were opposed to it, but we have what we have today.
The other issue that I think is critical, as I said, is the move away from the loss of $475 million and putting it into the non-BRM component and saying we have to innovate.
This industry has been tremendously innovative. You talked about Global Fruit and some of the stuff they're doing in growing apples on trellises. It's great. It's labour-consuming. There are a lot of things going on, but they probably invested $45,000 an acre to do it. Now, it may not have been quite that much, but back when I was on the grape board in Ontario, to do that with an acre of grapes cost about $25,000, and that's going back about 15 years. It's an expensive process.
The other reality is that if you want to compare grain versus horticulture, grain is done on very, very large farms, especially in the west. They have huge tractors. They have huge combines. Every time you need to get more efficient, you put a bigger piece of equipment in. In tender fruit, you have trees in the way. You can't put a bigger tractor in; you can't put a bigger disk in or anything else. More important is labour. In the tender fruit industry, labour makes up about 65% to 70% of the annual variable expense of operating that farm.
Till now we have not developed a robot or piece of equipment that can select the peach that needs to be picked and gently pick it off the tree and put it in the basket, or whatever. That hasn't been developed. I suspect we're not that far away from that, but it may be 25 years. We are working on innovation of the easier things.
If we look at the grape industry, in the 1960s the grape harvester was developed. It was a simple machine inasmuch as it went through and took everything off. It didn't select but left the leaves on and the branches or canes, but took the fruit. Cherry harvesters did exactly the same: they took everything. In much of it, if you're talking about peaches, there is selectivity that's key. We haven't developed that equipment yet. We will see it. My fear is that as we move away from the business risk management component of it and say we're going to replace that over here and that it's going to be the solution to the problems, it won't. It will take way too long.
The other reality, historically, at any rate, is that people who innovate—and everybody does—benefit from that for the first four to five years. If we look at the grape harvester as an example, when that came on stream, when you did production costs and whatnot for negotiations, the old hand-picking cost was the cost. If you had a mechanical harvester, you could do it for much less, but after about five years they got rid of this one and this became the cost.
What happens is that technology then becomes the norm. Once it becomes the norm, there's no advantage to the individual who innovated. The disadvantage goes to the guy who didn't. If you understand that, there's that shift.
Innovation in and of itself is required, it's necessary, but is not going to be the panacea that a lot of people think, unless of course no one else innovates globally.
Conservative
Pierre Lemieux Conservative Glengarry—Prescott—Russell, ON
Thank you, Chair.
Actually, I'd just like to pick up on that last train of conversation, because I think it's important to have that conversation about technology and how it can help farmers. Although there were changes to BRM, there certainly was increased funding given to science and innovation.
I was reading in your brief—and having listened to Hans as well—that one of the challenges our farmers have is that the cost of production can be higher than in other countries.
For example, when you're talking about advances in machinery to help with harvesting, I would see that it would be advantageous to Canadian farmers. What I hear you saying, and perhaps you can correct me, is if a number of farmers buy that, then they lose that edge on the technology. That might be within the Canadian market, but in terms of being more competitive internationally, other countries may not have the wherewithal to have that technology. You're becoming more competitive because your cost of production is dropping for the average Canadian farmer, which makes them more competitive on exports.
Certainly this ties together with our trade agenda because it's a multi-faceted approach. Not only are we investing in science and innovation, but we're also doing it to make Canadian farmers more competitive, more competitive to sell internationally, and we're putting in place favourable trade agreements for Canadian farmers to sell their product internationally.
There are a lot of initiatives that work. They don't just fall under agriculture, but they're meant to work together to allow our farmers to be more competitive in selling their product, be it domestically or internationally.
I'm wondering if you would have any comments on that, and what you think of these trade agreements. Do you see those as being of help to your sector?
Chief Executive Officer, Ontario Fruit and Vegetable Growers' Association
First, on the technology side, you're absolutely right. We start by trying to innovate to reduce our costs here. Innovation, whether it's a grape harvester or a grape pruner or whatever that technology may be, will cross the border pretty quickly. If there is an issue in Chile with labour and you have a labour-saving technology, it will move there; it probably won't move there as quickly, because they don't have the same labour costs as we do.
So there will be some adjusting in there. There's no question about that.
What was the other half of your question?
Conservative
Pierre Lemieux Conservative Glengarry—Prescott—Russell, ON
It was about international trade, and it being perhaps favourable to making our farmers more competitive in that they would have reduced tariffs and duties on Canadian product arriving in the country with which we have a trade agreement.
Chief Executive Officer, Ontario Fruit and Vegetable Growers' Association
Only a number of Ontario-grown products, and that's all I can speak to here, are exported in any major way. We do have apples that still go to Great Britain and elsewhere.
We have the greenhouse industry in Ontario, which is the largest greenhouse sector in North America. It exports about 79% or 80% of its product. It has gone through tremendous growth and is still growing.
Over the last couple of years the sector has come into some real difficult times around pricing. Some of that could have been as a result of the Canadian dollar. Two years ago it was a result of Belgian peppers being dumped into Canada because they'd been shut out of other markets. Last year there were pricing issues that lasted throughout the spring. My understanding is that they're right back into the same thing this year. They're also dealing with competition coming from Mexico, which is also problematic. So it's a number of things.
I think we need to have access to it. Relative to foreign markets, it's a significant part when we measure it in dollars and cents. It's a small part when we measure it across the variety and diversity in horticulture and numbers of crops.
As I said, there are apples that move over—
Conservative
Pierre Lemieux Conservative Glengarry—Prescott—Russell, ON
Yes, and I find that interesting. We'll often hear a concern that American apples come into Canada, but then we also sell Canadian apples into the U.S. I find it interesting that apples are moving both ways.
Chief Executive Officer, Ontario Fruit and Vegetable Growers' Association
They move both ways.
Conservative
Pierre Lemieux Conservative Glengarry—Prescott—Russell, ON
Yes, they move both ways, which is interesting.
It brings me back to the science and innovation and competitiveness theme. If we make our farmers more competitive, even here in North America, that would help us with exports, to the U.S., for example. We're already selling into the U.S., so obviously the obstacles are not insurmountable. It's a question of gaining an edge and then keeping the edge, either through the application of science and technology or by always moving ahead with science and technology so that we're always at the forefront of it.
Conservative
Alex Atamanenko NDP British Columbia Southern Interior, BC
Thank you very much.
Thank you to both of you for being here.
Mr. Buchler, in his presentation Mr. Smith was quite adamant that the new container size regulations could have a devastating effect not only on the industry but on the communities and on farmers.
We had Dan Paszkowski, the president of the Canadian Vintners Association, here last week. I asked him about that when we had a little chat afterward—we didn't have a chance to talk about it in committee—and he said that he felt it would also have a negative effect on the wine industry.
I seem to remember him saying that now we have those boxes and they're four litres, and we have these standard sizes of wine. This would allow us to import wine in 5.5 litres or 4.5 litres, for example, in non-standard sizes that could hurt our wine industry, just as the importation of products in non-standard sizes would hurt our other industries.
Yet you said today that you didn't think it would have an effect. I'm just wondering if you could clarify that, please.
Chair, British Columbia Wine Grape Council
Well, I wouldn't say that it will have no effect, but I think the effect will not be all that enormous in the wine sector. The consumer is primarily still looking for the 750-millilitre bottle of wine. I think for the near future this will probably still be the standard, even if you open up the packaging sizes to be larger.
I think one of the concerns is that there will be an opening for 10-litre and maybe even 20-litre containers. In that case, then, you are almost entering the bulk wine market. That would be a bit of a concern, because price-wise that would be very, very competitive in the marketplace. That could become an issue, but otherwise....
And I'm not sure whether this would actually be considered. I think in the U.S. you can buy up to approximately 10-litre containers. I'm not sure whether anything bigger is on the market yet. But if you completely open this up, then of course....
I mean, who is to say that you can't all of a sudden ship a 50-litre container of wine? I'm not saying this is going to happen, but I would be concerned about it.
NDP
Alex Atamanenko NDP British Columbia Southern Interior, BC
I don't have much time, so I'm going to stop you.
I'd like to talk a little about Summerland. You mentioned the importance of the role that the Summerland research institute plays. I'm wondering what the feeling is on the ground. I know that in the past I've talked to folks in the cherry industry, and others, who have said that people are retiring and not being replaced. Is the feeling good on the ground? Do we need more scientists? Are there positions open? Is the institute able to service your needs adequately?
Chair, British Columbia Wine Grape Council
There certainly are positions open, and there are positions that have been abandoned through attrition.
Summerland has been advocating filling the position of plant physiologist for almost six years, and it appears that there may be some movement on that front. There is still a huge concern that there seems to be a bit of a direction—I'm not sure if it's a plan or whether it's simply happening by happenstance—toward abandoning support for federally funded research. That would very seriously concern us. That would have a huge impact, not only on the grape sector but on all the other fruit and berry sectors in B.C. as well.
I would expect that the same would hold true across the country. You see a lot of federally funded research stations that have closed recently.
NDP
Alex Atamanenko NDP British Columbia Southern Interior, BC
Thank you.
Once again referring to what Mr. Paszkowski said last time regarding the current tax on Canadian content in blended wines, the vintners' institute would like the tax to be repealed. The Canadian content of blended wines wouldn't be taxed, as it currently is, to fall in line with the VQA. I'm wondering what your feelings as a grower are on that.
Chair, British Columbia Wine Grape Council
As I mentioned, the situation in B.C. is a little bit different. There is very little B.C. juice going into a “Cellared in Canada” wine. There is the odd one that is being blended, but I think it wouldn't really be possible for B.C. growers to produce for that market segment, simply because of price issues. The products or grapes cellared in Canada are usually bought at the value of about $350. It's shipped here in a form of wine or must. It comes from countries where $350 per tonne is probably quite typical. The average price for grapes In B.C. is around $2,000 per tonne.
You can see the price differential there makes it almost impossible for us to service that segment, even in the long run with better procedures and higher yields. There is a link between yield and quality that is a huge barrier in this regard. Before 1989 with hybrids, we used to produce about 10 tonnes to the acre, and now it's down to 3.5 tonnes to the acre. In the end, the grower still needs to make money, so I don't see this making any huge changes for B.C.
I don't foresee a big growth in that market segment, because of price issues.
Conservative
Conservative
LaVar Payne Conservative Medicine Hat, AB
Thank you, Chair.
I needed to correct a statement made by Mr. Smith. There is actually sugar grown in Canada, in my riding. There is a sugar manufacturing facility in that same community of Taber. There is Canadian sugar available right across the board if they want to buy it.
Thank you, Chair.
Conservative
