Agriculture Committee on May 5th, 2014

[The Chair, Conservative, Bev Shipley]

If we could get started again, I would very much appreciate that.

Members, for our second hour we have with us, from Semex Alliance, Jacques Chesnais, senior geneticist. Welcome, Jacques.

By video conference from Winnipeg, Manitoba, we have from Pulse Canada, Peter Watts, the director of market innovation. Welcome, Paul.

I will start with you, Mr. Chesnais. You have seven minutes for your opening remarks, please.

[Dr. Jacques Chesnais, Senior Geneticist, Semex Alliance]

Mr. Chair, thank you in particular for inviting Semex to appear before the committee.

We have three specific recommendations from Semex to bring to the committee, but before turning to them, I'd like to first explain what Semex is and then talk about the environment within which Semex is working in terms of research and innovation.

The Semex Alliance was created about 30 years ago to market Canadian dairy genetics. It is owned by three organizations, le Centre d'insémination artificielle du Québec, Eastgen in Ontario, and Westgen, which is based in British Columbia.

Semex markets dairy and beef genetics in more than 100 different countries. It's mostly bull semen and embryos. We have been quite successful. Our market share outside of Canada has been increasing in recent years. We have about 70% in Canada and 20% worldwide.

We benefit from the fact that Canada has a very good reputation in livestock genetics throughout the world. Besides export, I should mention too that genetic improvement is a key for the dairy industry, because it accounts for 60% to 70% of productivity gains over the long term. Genetic improvement is slow, but it has a huge impact on our industry.

Semex relies a lot on research and innovation. We invest in research in particular for genomics, genomic evaluation methods, resistance to disease, and reproductive technologies. I've provided in the brief a few examples of success stories for the research that we've undertaken. In particular, we have been one of the pioneers in the application of genomics in dairy cattle.

We invest in research directly or we invest through the Canadian Dairy Network, which is a consortium of organizations that are interested in dairy cattle genetic improvement. Then we fund some NSERC projects, NSERC being the Natural Sciences and Engineering Research Council. We also support positions in universities.

For us, research is essential, because without it, I don't think we could keep ahead of the competition. We have research partners both in Canada and outside of Canada, but for this presentation I would like to talk about our Canadian partners, which are primarily governments and universities.

In terms of government, there is very little left in the research branch of Agriculture Canada in this crucial area of livestock genetics and genomics. The branch considerably reduced its involvement in livestock genomics over the last 20 years, particularly in 1994 and 1995 but also since then, with the expectation that the Canadian universities would pick up the slack.

Last year, in fact, the research branch cut the positions of two scientists working with the industry, including one scientist who had just received a prestigious international award. So there is relatively little left in the research branch in our field.

On their side, Canadian universities have been in a financial bind, apart from a few exceptions. In fact, we are facing a brain drain in the area of livestock genetics research in Canada, contrary to what we had maybe 15 years ago, when scientists came from all over the world to universities such as Guelph, for example.

I have given some specific examples of this brain drain that has appeared in the last five years. As a result, the ability of the industry to do research in Canada has dwindled. This is a problem for two reasons. In order to participate in international research consortia you need to bring something to the table. The other reason is that it's difficult to have an edge on the competition with something unique, if the only research you do is in cooperation with other countries. You want to have something different in order to do well in the market. So we need some domestic research capability.

On the positive side, the industry has been able to take advantage through Dairy Farmers of Canada—you just heard Bill Emmott—of the dairy cluster research program, which is part of the Growing Forward 2 initiative. The program will allow the industry to initiate research for new traits in genomics for the next four years, but it's still very far from what is required to compete with our main competitors in the U.S. and Europe. That's where our main competitors are located, and the lack of scientists available in Canada to carry out these projects is really a big handicap.

Finally, Genome Canada, to their credit, contributed in 2004 to the international bovine sequencing project, and that was a very good decision; however, since then they have supported very little in dairy cattle genomics. We are concerned by this lack of support, because we think that in the longer term it will reduce our capability to innovate.

We have three recommendations to make to the committee.

The first one is that Genome Canada should start again to invest in dairy cattle genomics research in cooperation with the industry, particularly in research for novel traits, such as feed efficiency, greenhouse gases, cow health, and properties of milk for human health. All of these areas are very important for the future of the industry, and there is a great potential to make progress in them with genomics.

The second recommendation is that there should be some joint planning between industry, universities, and governments to ensure long-term funding of livestock genetics and genomics research and to stop, stem, or reduce the existing brain drain.

Finally, in our opinion, the federal government, in cooperation with provinces, should put as much emphasis on programs to help attract, hire, and retain high-quality personnel for research and teaching in Canadian universities as it does on programs to support bricks and mortar in those universities. Although there is nothing particularly wrong with doing that, it would be useful to have a better balance. Perhaps university access to Canada Foundation for Innovation grants, for example, could be tied to a university's maintaining or increasing the research staff necessary to take full advantage of the new infrastructure. This doesn't necessarily mean more money, just a better balance between infrastructure and grey matter.

I thank the committee for having me here as a witness. I'd be happy to answer any questions you may have.

[The Chair, Conservative, Bev Shipley]

Thank you very much. I appreciate your presentation.

Now we will go to Pulse Canada, Mr. Peter Watts, for seven minutes, please.

[Peter Watts, Director, Market Innovation, Pulse Canada]

Good afternoon. I'm Peter Watts with Pulse Canada, the national association representing the growers, traders, and processors of pulses, that is, peas, beans, lentils, and chickpeas in Canada.

Thank you for inviting Pulse Canada to speak to the committee today. I would be happy to answer any questions you have after my presentation.

It's not an overstatement to say that the ingredient, food processing, and food retailing sectors in Canada, in North America, and in fact globally are undergoing a revolution of remarkable proportions. For many years the global food manufacturing sector relied heavily on tried and true products that often contained high levels of fat, sugar, and salt. These foods have been central to the epidemic of such diet- and lifestyle-related illnesses as obesity, heart disease, and diabetes. Today nearly 10% of Canadians have diabetes or pre-diabetes, and that is true for many countries around the world. In addition to health issues, the environmental “food print” of the food sector has come under scrutiny. Together, health and environmental issues have pushed governments, the health industry, food manufacturers, NGOs, and consumers to look carefully at the foods that are offered to consumers on grocery store shelves and at food production systems.

While governments have responded with important legislation aimed at tackling some of these issues, such as the ban on trans fats, today's consumers want to know exactly what's in their food and how it's made. They read nutrition labels like never before. Even cornstarch that is modified raises eyebrows these days. When they see something they don't like, consumers now have the power, through social media, food bloggers, or online petitions, to force companies to pay attention.

Today's consumers are opting for foods that are healthier, such as those with higher levels of protein and fibre, or products with the absence of something perceived as negative, such as gluten- or GMO-free foods. In addition to all of this, consumers want foods that are deemed sustainable, fair trade, and ethically produced. All of these consumer demands have forced the hands of the food sector to introduce healthier and more sustainable foods, either in the form of new products or reformulated versions of the existing foods.

The challenges for the food sector are many, and eventually these challenges make their way back along the food value chain to the production and primary processing levels. This is where Canada faces some of the biggest challenges and also opportunities. The agrifood sector in Canada has to respond to the wants and needs of its customers, including food companies and consumers, if it wants to stay competitive.

In the pulse industry over the last eight years we have been focused on addressing these opportunities and needs through knowledge creation and knowledge dissemination. Under knowledge creation, we are focused on consumer drivers of nutrition, health, and sustainability, as well as the needs of the food manufacturing sector to better understand processing and utilization techniques and technologies. This type of work has been supported by such initiatives as AAFC's agri-innovation and science cluster programs.

In the area of health, with support from AAFC funding, Canada's pulse industry has been investing in human clinical trials that have shown the benefits of pulse consumption in relation to cholesterol lowering, satiety, and blood sugar control. Pending further research, the industry will move to secure health claims in these areas in Canada as well as in the U.S. and Europe. Official health claims are highly sought after by food companies, so this work is creating value and important market opportunities for pulses.

In the area of processing and utilization, the pulse industry just completed a four-year research program at the Canadian International Grains Institute in Winnipeg, funded collaboratively with AAFC, where researchers looked at how to mill pulses into flours that will be functional in food applications. The addition of pulse flours will help companies boost the nutritional profile of foods and reduce their environmental footprint, paving the way for product labelling claims.

Through another initiative at Pulse Canada, we are leading a consortium of stakeholders in the Canadian agricultural sector that is developing a sustainability calculator tool to allow farmers to measure and quantify their environmental footprint in relation to carbon emissions, energy use, soil quality, and soil-use efficiency.

Once new knowledge has been created, to have value it has to be disseminated to such end users as food companies, retailers, and consumers. For these initiatives, the pulse industry has relied on matching support provided by AAFC under the agri-marketing program and other programs such as agri-flex.

Outreach to the food industry through conferences, symposia, face-to-face meetings, technical journals, and print, web, and social media have allowed the pulse industry to communicate and promote the findings established through our research and development initiatives.

How do we know we're on the right track? We have some good evidence. Today, major food companies, from General Mills and Kraft to Campbell's, President's Choice, PepsiCo, and others, have dedicated teams focused on developing foods with pulse ingredients. If you ask these companies if they've heard of Pulse Canada, my guess is that they will invariably tell you yes.

In summary, Canada's pulse industry has benefited enormously over the years from programs such as AIP, the science clusters, agri-flex, and AMP, all of which have provided support to allow the industry to develop and disseminate knowledge, creating value for the sector, particularly in higher-risk pathfinding areas where producers in the primary processing industry are not comfortable investing, or at least not on their own.

This support is coupled with a world-class research infrastructure in Canada, where scientists are looking at new ways to process Canadian agricultural products that meet the wants and needs of food companies and consumers. With these programs and this infrastructure, Canada has the resources and expertise to be the world's preferred supplier of agrifood products.

Support for R and D through AAFC, including programs such as the AIP, the science clusters, and the agricultural marketing program provide much-needed support for research, innovation, and marketing for Canada's agrifood sector. Governments in Canada should ensure these programs continue to be well funded, as they allow the Canadian agriculture sector to innovate, to adapt new techniques and technologies, and ultimately to be competitive in an increasingly complex and demanding global food marketplace.

Two years ago, Galen Weston called pulses the “food of the future”. At Pulse Canada, we firmly believe this is true, and with the Canadian government as our partner, Canada's pulse industry can move confidently into the future to create value and profitability for our sector.

Thank you.

[The Chair, Conservative, Bev Shipley]

Thank you very much, witnesses, for your presentations.

Now we will move to questions from our committee.

We'll go first to Madam Raynault, please, for five minutes.

[Francine Raynault, NDP, Joliette, QC]

Thank you, Mr. Chair.

My question is for Mr. Chesnais.

In the April 2nd edition of La Terre de chez nous, it says your company is one of the top three in the world. That's wonderful. Congratulations.

You said that, in Canada, the dairy market is protected, but not the genetics one. Could you kindly explain why the genetics market isn't protected in Canada?

[Dr. Jacques Chesnais]

Genetics is completely open to competition. In fact, Semex competes with everyone, the Europeans, the Americans and so forth, because there's no quota restriction in place for genetics. Semen and embryos are very exportable and easily shipped from one country to another. The market is fully open to competition, which is fierce, so we have to be very competitive to be successful.

[Francine Raynault, NDP, Joliette, QC]

That isn't always easy.

[Dr. Jacques Chesnais]

It isn't always easy, but we try. For a country our size, you'd be shocked at how well we've done in the dairy genetics market relative to our cow population. We have 1 million cows out of a total population of about 10 million in Canada. In Europe, they have even more, but nevertheless, we have 20% of the global market. So we're managing quite well, as you can see.

[Francine Raynault, NDP, Joliette, QC]

Semex's board of directors has four members from Quebec. The La Terre de chez nous article also mentions the fact that you have to make some incredibly difficult decisions when it comes to divvying up the genomic semen of young bulls between Canada and other countries. Could you please elaborate on that?

[Dr. Jacques Chesnais]

Today, thanks to genomics, instead of selling only the semen of proven bulls, we also sell the semen of young sires whose genomic selection is based on the genotyping of 50,000 DNA markers. This was a fairly fast-moving development in dairy cattle.

Young bulls don't produce a lot of semen because they're young, so we have to make a choice. When we have the best bulls, there's tremendous competition for them, because both Canadian and foreign farmers want their semen. So we have to decide who gets the semen of the best bulls. And that means we have to make decisions that don't necessarily make everyone happy. We do try, however, to give our owners, the CIAQ, WestGen and EastGen, priority.

[Francine Raynault, NDP, Joliette, QC]

Agriculture and Agri-Food Canada has significantly reduced its involvement in genetic research over the past 20 years. The thinking was Canadian universities could be relied on to fill that gap and do the research, but they have financial troubles as well and are victims of the brain drain.

How do you see the future in this field?

[Dr. Jacques Chesnais]

That is indeed a problem for us, and we've tried to tackle it. Agriculture and Agri-Food Canada opted to work on plants and decided that universities would deal with animal genetics or genomics. But it's not that easy. The fact is a good many universities have cut their capacity, including the University of Guelph, which had long been a pioneer in the field. It cut its faculty size by 30%. The situation isn't good, with senior researchers leaving Canada. Some have left the University of Alberta for New Zealand. Others have gone to Australia and so forth.

On the research front, our situation isn't what it was five or ten years ago. Semex is trying to combat the problem. For instance, industry decided to hire the researcher whose position had been cut by Agriculture and Agri-Food Canada. In situations like the University of Guelph's, where positions were not renewed, we try to offset that through financial investments, but we would still like to see things working on both ends.

[Francine Raynault, NDP, Joliette, QC]

What is the biggest reason for our researchers wanting to work in New Zealand, for example?

[Dr. Jacques Chesnais]

In my view—but I could just as easily talk about “our view” since we have a consensus on this at Semex—a more comprehensive and long-term policy on research is needed. If we want to attract leading researchers, they need to feel they will have long-term support, either from Agriculture and Agri-Food Canada or from universities. We need to build critical masses in research.

Research is paramount to us. The committee is studying innovation, and in the world of animal genetics, things move along quite quickly. When research leads to practical technologies that can be implemented profitably, progress happens fairly fast. In genomics, for example, back in 2008, we were able to start applying research findings we'd obtained that same year. A year later, Canada had formal genomics testing practices. It all happened pretty quickly.

On our end, the problem has more to do with research than innovation. We have a pretty solid tradition of innovation when it comes to dairy cattle genetics.

[The Chair, Conservative, Bev Shipley]

Now I'm going to go to Mr. Hoback, for five minutes, please.

[Randy Hoback, Conservative, Prince Albert, SK]

Thank you, witnesses, for being here this afternoon.

I'm confused and hope you can help me out.

I look at the amount of money we've put into the clusters. We have the beef cluster, and the dairy cluster. The beef cluster has received a 61% increase in funding. It went from $8 million to $14 million, and the dairy cluster went from $7 million to $12 million.

Why aren't the clusters grabbing these people? Why aren't they funding these projects through the university? Why isn't that happening? What are the clusters doing with this money?

[Dr. Jacques Chesnais]

In the case of the cluster, part of it was used for genetics and genomics; some of it was used.

[Randy Hoback, Conservative, Prince Albert, SK]

But Genome Canada received some $65 million.

Of course, Genome Canada and the clusters, again, you have to keep in mind—

[Dr. Jacques Chesnais]

We feel that Genome Canada should actually try to invest in our industry because that's an industry that has done very well in terms of using genomics. In fact, that's one of the leaders in livestock.

[Randy Hoback, Conservative, Prince Albert, SK]

Again, the process there isn't to come to government; it's to go to Genome Canada with a proposal that basically it's time to get together to pick priorities and where they're going to go.

Wouldn't it be better to let scientists...? That's what the idea behind the cluster was. That's why a lot of farm organizations wanted to go the cluster route; they wanted to have more hands-on control. If we take the money and we put it into the clusters....

You say you lost two positions, but you gained some $26 million in research dollars. So do you want the two positions or the $26 million? You have control. You have the cluster. The money is yours. Why are you letting this happen?

[Dr. Jacques Chesnais]

Essentially, out of the cluster, the dairy cattle breeding industry was able to.... We put in $600,000 and Agriculture Canada put in $1.8 million. That's a total of $2.4 million over five years, which is not that much to do research on all the topics I've mentioned, particularly feed efficiency, animal health, and so on.

Research in genomics is relatively expensive because you need to do the genotyping, which is still fairly expensive, and you also need to collect data on these new traits. This is relatively expensive.

[Randy Hoback, Conservative, Prince Albert, SK]

Again, as a taxpayer because I'm spending taxpayers' dollars, I look at what the taxpayer is putting in for this research, and that's fine, but who is getting the end benefit? In your situation, you're selling the semen around the world, so you're putting in some research dollars. I know that when I worked for Flexi-Coil and Case New Holland there would be tax credits and offsets, but the research was ours. We put in the money for all the research. Where's the private sector in all of this?

[Dr. Jacques Chesnais]

Whether it's in the clusters, NSERC projects, or the Canadian Dairy Network, there's always industry money. In fact, we always participate in research projects. There's no research project where we don't put in industry money, so—

[Randy Hoback, Conservative, Prince Albert, SK]

Okay, so the percentage on your part is—