Agriculture Committee on May 7th, 2014

[The Chair, Conservative, Bev Shipley]

I'd like to call the meeting to order, as we move through our review on innovation and competition.

I apologize to all the witnesses. We had votes that came up, so we are a little late starting.

We have four witnesses. We're going to have all of them make their presentations, and then we will go through a round. Each party will get at least one round of questions in.

I am going to take the liberty of welcoming, from the Canadian Food and Wine Institute, by video conference from Niagara-on-the-Lake, Marc Nantel and Nigel Corish. I'm likely going to ask them to start off. From Food and Consumer Products of Canada, we have Carla Ventin, vice-president of federal government affairs.

Then I'll move down to what would have been the second hour. From the Canadian Fertilizer Institute is Clyde Graham, senior vice-president, strategy and alliances. By video conference from Taber, Alberta, is Gerald Third, executive director.

I'd like to start with you, Marc and Nigel, from the Canadian Food and Wine Institute, for seven minutes, please.

[Dr. Marc Nantel, Associate Vice-President, Research and Innovation, Canadian Food and Wine Institute]

Thank you very much.

I appreciate the opportunity to speak with you today along with Nigel Corish, who's our research project manager in the food and beverage innovation sector.

At Niagara College we do applied research on many different subjects. The idea for us is to take our faculty infrastructure, students, and equipment and bring them to bear on the challenges and the desires of industry, SMEs mostly.

Typically we like to focus on the region of Niagara, but because our funding is national and provincial, we have a wider scale of—[Technical Difficulty—Editor]

[The Chair, Conservative, Bev Shipley]

We'll take a minute here and hopefully we'll get him back.

Sorry about that. Could you continue, please?

[Dr. Marc Nantel]

Sure.

I guess I was saying that we do technology projects, including product development and all that, but also commercialization projects. When a company comes to us and asks, “Could you please develop a new product? We think it's going to be popular on the market”, we also ask them, “What is your market? What is your competition? How are you going to get it to market?” If they don't quite know the—[Technical Difficulty—Editor]

[The Chair, Conservative, Bev Shipley]

We can hold.

I'm going to Taber, Alberta. From the Alberta Sugar Beet Growers, Mr. Gerald Third, if you could start and then we'll hook back up with the Niagara guys a little later. Thank you very much.

Oh, there's something not working that well here today.

I'm going to ask Carla from the Food and Consumer Products of Canada to present. You have seven minutes.

Thank you very much.

[Carla Ventin, Vice-President, Federal Government Affairs, Food and Consumer Products of Canada]

Excellent. I'm ready.

Food and Consumer Products of Canada welcomes the opportunity to contribute to the Standing Committee on Agriculture and Agri-Food study on innovation competitiveness. FCPC is the largest national industry association in Canada, representing companies that manufacture and distribute food, beverage, and consumer products. Our member companies have facilities in 170 federal ridings across the country. Our industry is the largest employer in the manufacturing sector in Canada, with approximately 300,000 Canadians working in 6,000 manufacturing facilities in every region. We are a truly national industry, providing value-added jobs to both rural and urban Canadians in every province and territory. We support farmers by providing them a market for the food they grow, and we meet the needs of Canadians consumers, who enjoy the safe and high-quality food available on grocery store shelves.

The government can encourage innovation and competitiveness in our industry by, one, making regulatory modernization a priority; two, encouraging capital investment; and three, pursuing meaningful access to international markets. I'll go through each of these items.

First, with regard to regulatory modernization, the most important way the government can support innovation and competitiveness in our industry is to rapidly modernize Canada's food regulations. Regulations must continue to be based on science and prioritize product safety. Our regulatory framework, governed by Health Canada, has not been updated in a meaningful way since the 1950s. Food regulations have not kept pace with changing technologies and the development of new products, and backlogs for product approvals persist. Canada's food and beverage manufacturers require a more predictable and responsive regulatory framework, which would encourage companies to maintain and grow their operations in Canada. For consumers, regulatory reform is needed to provide more product choice on grocery store shelves.

We have seen some progress in food regulatory reform at Health Canada. This was achieved because Agriculture and Agri-Food Canada provided $17.4 million over five years to Health Canada to address food regulatory reform. In Growing Forward 2, however, this funding was no longer made available. As a result, food regulatory modernization is stalled. Health Canada's limited resources are regularly diverted away from food to pharmaceuticals, as both sectors compete for resources in the regulation of the Food and Drugs Act. Our regulatory recommendations are therefore twofold: one, reinstate the $17.4 million to Health Canada for food regulatory reform; and two, create a separation of funds between food and drugs in Health Canada, to ensure more predictable and balanced allocation of resources.

I'll go onto my second item, capital investment. Food and beverage manufacturers recognize that they require state-of-the-art facilities to be productive and competitive in both Canada and abroad. Many, however, are facing challenges related to aging infrastructure and equipment in facilities. More incentives are required to encourage manufacturers to reinvest in their Canadian plants, expand existing operations, or open brand new modern facilities. Other countries are fiercely competing for these investment dollars, and Canada needs to be in the game if we want to keep value-added jobs here in Canada.

Our recommendations, therefore, include making an accelerated capital cost allowance permanent, expanding the advanced manufacturing fund outside of Ontario, and creating a new capital investment fund to support investment in Canada's manufacturing facilities.

My third item is international markets. Our member companies understand they need to export in order to grow and compete in both Canada and abroad. We therefore fully support meaningful access to international markets, and commend the government for its ambitious international trade agenda. While many companies are interested in taking advantage of these export opportunities, there is a growing need for more support outlining the steps required and market insight to become export ready. Furthermore, having this information in a one-stop portal would make this accessible to companies.

As we know, our industry is highly integrated with the U.S., and our success depends on the free flow of goods with our top trading partner. We are therefore very concerned about the government's proposed retaliatory tariffs on our industry, in response to the ongoing country-of-origin labelling dispute with the U.S. If implemented, these tariffs would affect every product category on store shelves.

Canadian families would be subject to a vast increase in their grocery bills and significantly less product choice in stores. For a typical shopping trip, purchasing 10 items including staples such as breakfast cereals, juices, potato products and rice, for example, would increase from $40 to $75.

An increase in tariffs on ingredients would also have a negative impact on domestic sales, exports, and jobs. Decisions relating to innovation in R and D would be cancelled. Many Canadian manufacturers would be at extreme risk of closures and others would significantly scale down their Canadian operations, and Canadian farmers would be forced to find new markets.

The uncertainty created by the proposed retaliatory tariffs on our industry is not conducive to competitiveness or innovation. Our recommendations are therefore, one, to develop a one-stop portal of information to help companies become more export ready, and two, resolve the country-of-origin labelling dispute in a manner that does not increase tariffs on our industry.

I'd like to leave you with one final thought. As you know, food manufacturers and Canadian farmers are interdependent and we all work together to ensure the safe and high-quality food available on grocery store shelves. In order to drive innovation and competitiveness, the views of both farmers and manufacturers must be given equal consideration in policy development by this committee and by the department. This opportunity provided to me today is therefore very much appreciated.

Another positive step would be to include food manufacturers and their issues on the agenda of every federal-provincial-territorial agriculture ministers' meeting.

My final two recommendations, therefore, are to provide equal consideration to farmers and manufacturers in policy development, by this committee as well as by Agriculture and Agri-Food Canada, and to ensure equal weight in the agenda for farmers and food manufacturers at all upcoming federal-provincial-territorial agriculture ministers' meetings.

Thank you.

[The Chair, Conservative, Bev Shipley]

Thank you very much for your presentation.

Now we'll move back to Taber, Alberta, and Mr. Gerald Third.

[Gerald Third, Executive Director, Alberta Sugar Beet Growers]

Good afternoon.

[The Chair, Conservative, Bev Shipley]

It's good to have you back.

[Gerald Third]

It's great to be back.

I'd like to begin by thanking the committee members and chair for inviting me to speak to you about innovation and competitiveness in the Canadian agriculture sector on behalf of the Alberta Sugar Beet Growers.

We're a smaller agricultural industry in Canada, representing about 250 producers who annually generate about $40 million in production value. I think, as a smaller industry with very specific value-added demands, we can provide some unique insights into the opportunities and challenges that confront Canadian agriculture in terms of innovation and competitiveness.

I would like to focus my comments on a critically important aspect of the innovation continuum, and that is the commercialization of research into specific value-added opportunities for producers. As we continue to open global markets and export opportunities, we're becoming increasingly integrated into the global commodity markets. We, as an industry and as a country, need to focus on the value-added side in order to provide a buffer from this volatility and to ensure that there are new markets for a wide range of Canadian farm products.

The growers have, for decades, supported research into better sugar beets, developing beets that produce more sugar or have other enhanced characteristics. We have spent millions of dollars on this research, all to our own detriment. Why to our detriment? Because as the amount of sugar produced by a tonne of beets has increased, it has meant the acreage required has dropped. In simple terms, the growers have funded research programs that benefit processors but hurt growers, so the benefits of crop research do not always accrue to the growers.

Our industry is at a crossroads. We can sit idly by and watch it disappear or we can try to do something about it. Now, our growers are very industrious, innovative, and entrepreneurial so they have chosen to be proactive. In an effort to survive and become self-sufficient, our growers have been seeking new, innovative uses for their crops and they want to invest in a value-added entity that will use their crops as a feedstock. We envision a facility that produces a high-value bioproduct. The growers will have a material ownership stake in the operation and the benefits to Canada would be fantastic, commercializing a new technology, tens of millions of dollars in new investment, new jobs, more taxes being paid, and farmers who share in the value-added benefits derived from their crops.

But there are challenges. The road we are travelling is very expensive and full of risk. The growers are willing to shoulder a lot of that burden, but government support is critical. In my brief time here I would like highlight a few of the challenges our industry is facing and I'll try to shed some light on how important they are to our future competitiveness.

The first is the timeliness of obtaining approval for government grants. As an organization that has been actively involved with Growing Forward, both 1 and 2, I can say that we see a lot of potential in the programs but we have found the timeliness in receiving approval for funding to be quite frustrating. These delays have a direct and significant negative impact on our ability to move our projects forward. Adding to the frustration is that, once you submit your application, it seems to go into a black hole. There often is no government-initiated communication about where your application is in the process, who is involved in accessing the application, or when a decision is expected. I know from discussions with other organizations and around the CFA table, that we are not alone in our frustrations here.

I would remiss if I didn't mention one last challenge we faced. ASBG was encouraged to work towards the creation of a national promotion and research agency. This would have allowed us to charge a research levy on imported sugar, a levy identical to the one all sugar beet growers in Alberta currently pay. This would have provided us with much needed revenue while at the same time helped to level the playing field relative to the cost of imported sugar. We spent considerable time, effort, and money pursuing this only to find that, because of the way the legislation is structured, the number of voting board members is based on the volume of sugar sold. The two major sugar importers would have complete control of this agency. As a result, we had no choice but to abandon this initiative as it seems very unlikely sugar importers would vote for a levy on the foreign-sourced sugar they are importing.

Lastly, I would like to highlight that, as a result of all we have learned and the many challenges we have faced over the past three years, we've developed a pre-commercialization road map that outlines a process that can be followed, potential traps, legal arguments required, intellectual property, sources of capital, etc. While there has been much written and developed respecting research methodology, there is no comprehensive work outlining the numerous challenges associated with the pre-commercialization aspects associated with research development.

We often described this process as the valley of death, as this seemed to be the place that most research projects went to die. We created this road map to help others who may want to travel a similar path. It is one way we hope to give back. The road map has been provided to many grower groups in Alberta, Alberta Agriculture staff, Canadian Federation of Agriculture staff, and to each member of the bio-industrial value chain committee. If any of you are interested in a copy, we'd be happy to provide you with one.

Following the outlined challenges our growers are up against, we are working very hard in an effort to save our industry, but we could use some help. I would now respectfully like to make three recommendations for your consideration.

First, government should ensure there is a reasonable balance between funding for research and funding that supports commercialization.

Second, it would be incredibly helpful if those administering government grants were required to move at the speed of business. Staff should understand this and be assessed based on their ability to respond to applications in a timely fashion. This should become embedded in the culture of those working in roles that impact the timeliness of responses to applications from industry.

Third, a review of the promotion and research agency legislation should be completed to determine if it contributes to the outcomes envisioned when the agencies were created.

On behalf of the 250 sugar beet growers in Alberta, and on behalf of the Alberta Sugar Beet Growers, I thank you all again for giving me this opportunity to speak. I look forward to answering any questions you may have.

[The Chair, Conservative, Bev Shipley]

Thank you very much, Mr. Third.

We'll go back to the folks from the Canadian Food and Wine Institute.

Marc, I believe you were speaking, you have about four minutes left.

[Dr. Marc Nantel]

Thank you very much. I'm glad we have another four minutes.

At the Canadian Food and Wine Institute, we do a lot of projects and develop a lot of products. The main thing that seems to be a challenge for small companies trying to put some new products on the shelves is the actual mesoscale development. That is, going from a prototype in the lab all the way to a decent-size scale of production before going to full-scale production.

We heard the term “valley of death” earlier on from one of our co-witnesses. This is where it is for us. It's going from a university or college or research centre doing a small batch for prototyping purposes, to going to the co-packer who's going to make it in the hundreds and thousands of litres. We need a mesoscale there, something in between where the product is good enough to be sold, and to be shown to potential investors, and to be put out there on the shelves at least in the specialty stores. It's often the way new products start when it comes to small and medium enterprises. So we see a great need in the middle that is not necessarily being addressed.

Nigel, do you have anything you'd like to add?

[Nigel Corish, Research Project Manager, Food and Brevage Innovation, Canadian Food and Wine Institute]

Yes. Thanks, Marc.

In terms of the challenge, and meeting that challenge, the SMEs in the food and beverage sector that we see typically lack the resources and capabilities to scale up production, as Marc mentioned. The way that Niagara College, and the Canadian Food and Wine Institute at Niagara College, can really advance the food and beverage sector across Canada and locally is to expand on our ability to develop products with industry and move towards the more commercialization side of things. We already do commercialization; however, there is a gap in terms of production.

We are proposing a flexible food and beverage processing facility, and flexible is the key. It needs to be modular. It needs to be flexible and allow different companies to access the technology to produce at a mesoscale of production during the ramp-up and commercialization phase.

Typically, what we see with small and medium-sized food and beverage product producers is that we can develop a product with them here, we can make a small batch for them here, and then we have to jump right to a co-manufacturer, which has a minimum quantity order, which is oftentimes too risky and expensive for those SMEs. We are now looking at something that would fill the gap between that.

At Niagara College and at the Canadian Food and Wine Institute we feel that, paired with all of our learning enterprises and resources here, and the expertise, we could build and develop this type of facility that would enable the SMEs in food and beverage across Canada to be able to make that leap successfully, without taking on the additional risk and without taking on the massive cash investment that typically comes with this type of product development.

This will only lead to, as an outcome, food and beverage innovation and competitiveness. It will enable the product development to occur at a rapid pace. It will enable more SMEs to come out of the woodwork and to take risks, without having the great burden financially. Also, we're training students here, and the opportunity for us to be able to inject these students into a world-class facility that is dealing with real-world industry gives us the opportunity to train a workforce which is, quite frankly, from what I've been told from multiple discussions across industry, undereducated in many ways on the processing side. How does Niagara College play a role in ensuring competitiveness? It's through this type of training initiative that would come with the innovation side of it in product development.

At the end of the day, we require an investment to be made. We require the funding necessary to be able to develop this type of facility here at the college, to really raise all boats across Canada and regionally here in food and beverage processing.

Thank you.

[The Chair, Conservative, Bev Shipley]

Thank you very much, Mr. Nantel and Mr. Corish.

Now I will move to Mr. Clyde Graham, from the Canadian Fertilizer Institute, please, for seven minutes.

[Clyde Graham, Senior Vice-President, Strategy and Alliances, Canadian Fertilizer Institute]

Thank you, Mr. Chair and members of Parliament. My name is Clyde Graham. I'm the senior vice-president of the Canadian Fertilizer Institute.

CFI is a not-for-profit association. We represent manufacturers, wholesalers, importers, and retail distributors of nitrogen, phosphate, potash, and sulphur fertilizers. With facilities located across Canada, our growing industry contributes over $12 billion to Canada's economy and employs over 12,000 Canadians.

I'm pleased to be here today to speak to this committee about the innovative program that the fertilizer industry and Canada's farmers are implementing across the country. 4R nutrient stewardship is an innovative approach to improving profits, protecting the environment, and meeting society's goals on Canada's croplands. From the north Kensington watersheds in Prince Edward Island to the Peace River district of Alberta, farmers are changing the way they make decisions about fertilizer application to be more efficient and sustainable.

Today I would like to highlight three points. First, 4R nutrient stewardship is an innovative best management practice system with four integrated strategies for fertilizer application: the right source, the right rate, the right time, and the right place. Second, we can protect our soil, water, and air for society through sustainable actions. We can enhance the productivity and profitability of our farm customers, and we can ensure the future of our industry. Balancing social, economic, and environmental goals are key. Third, the federal government and in particular the Department of Agriculture and Agri-Food has a continuing role in integrating 4R nutrient stewardship into its scientific research programs, management policies, and extension with farmers, researchers, provinces, and other governments.

4R nutrient stewardship helps farmers and the public understand how best management practices for fertilizer improve farm profitability while reducing losses of nutrients to the air and water.

The 4R nutrient stewardship program is being implemented in provinces across the country. Over the past two years CFI has developed regionally specific partnership programs with farm groups, provincial governments, and environmental groups in Prince Edward Island, Ontario, Manitoba, and Alberta, and is planning to expand into Saskatchewan and New Brunswick. For example MOUs in Manitoba and P.E.I. recognize and promote 4R practices on farm fields. CFI is providing financial support of $150,000 over three years for extension, communications, research, and incentives for 4R demonstration farms in both Manitoba and in Prince Edward Island.

CFI has also developed online 4R training courses on its GrowZone website for farmers and certified crop advisers who advise those farmers, and supported the development of the nitrous oxide emission reduction protocol to reduce on-farm emissions of nitrous oxide using the 4Rs.

Farmers in Alberta are helping to mitigate climate change while improving their bottom line. This year over 150 producers representing more than 500,000 acres participated in the program that provided the training farmers need to implement 4R nutrient stewardship and NERP into their farming practices. CFI has recently signed separate agreements with Lakeland College, ARECA, and Capital Power in Alberta to further integrate NERP practices, again based on the 4R principles.

The Canadian Fertilizer Institute's science cluster is funding research into reducing greenhouse gas emissions by using 4R nutrient stewardship on Canadian farms. The science cluster is providing $200,000 a year in funding support for scientific research projects in Ontario, Manitoba, Saskatchewan, and Alberta to verify the effectiveness of the 4Rs in the field in reducing greenhouse gas emissions from fertilizer application.

More is coming. An additional $1 million has been allocated to Canadian projects under the new North American 4R research fund over the next five years.

Through sustainable actions, we can protect our soil, water, and air for society, enhance the productivity and profitability of our farm customers, and ensure the future of our industry. Agricultural sustainability is all about farm best management practices that keep crop producers profitable, while protecting the environment.

A recent study conducted by the George Morris Centre determined that implementing 4R practices on farm fields is good for the bottom line. The increase in profits is estimated to range from $9 to $87 per acre in Alberta using NERP principles. That's aside from any offset payments that would come from reducing greenhouse gas emissions.

The program's effects are not just in yield increases however, as implementation can result in a 15% to 25% decrease in nitrous oxide emissions. Nitrous oxide is the most powerful of the greenhouse gases.

Environmental stewardship and sustainability are not new ideas for our industry, nor for the farmers who have long embraced the principles of best management practice in their operations. What is new is the integration of source, rate, time, and place BMPs while addressing economic, social, and environmental goals. As we move forward on the path to sustainability, it is increasingly important to both demonstrate our success in measurable ways and to identify areas where we continue to improve our performance.

Canada's crop producers have a critical role in meeting the world's food demand, and fertilizer is a key ingredient in making that possible. We are confident that 4R nutrient stewardship is an important tool in meeting Canada's agricultural and environmental goals to grow crops sustainably.

The Government of Canada and in particular the federal Department of Agriculture and Agri-Food can go further in integrating 4R nutrient stewardship into its research programs, nutrient management policies, and communications with farmers, researchers, provinces, and other governments. We believe the federal government has a continuing role in supporting soil science research and 4R nutrient stewardship programs.

I just want to note that we do have a grant of over $700,000 right now from Agriculture and Agri-Food Canada for extending 4R practices on greenhouse gases and we're very appreciative of that.

In 2013 CFI, the Fertilizer Institute in Washington and the International Plant Nutrition Institute developed a North American 4R research fund, which provides resources for multi-year research efforts aimed at measuring and evaluating the economic, social, and environmental impacts of 4R nutrient stewardship. The fund supports Canadian and U.S. projects in partnership with land-grant universities, watershed stakeholders, and government agencies as well as through industry initiatives.

Last year the North American industry pledged $7 million over five years to fund this multi-year research effort. The allocation of that is about 20% in Canada.

In conclusion, I want to remind the committee of our three points. 4R nutrient stewardship is an innovative best management practice system with four integrated strategies for fertilizer application: the right source, rate, time, and place. Through sustainable actions we protect our environment and enhance the productivity and profitability of farmers. Balancing social, economic, and environmental goals are key.

Lastly, the federal government, particularly AAFC, has a continuing role in integrating 4R nutrient stewardship into its programs and we're eager to work with them to achieve that.

Thanks very much for the committee's attention.

[The Chair, Conservative, Bev Shipley]

Thank you very much, Mr. Graham.

Now we'll move right into our questioning.

I'll go to Madame Brosseau for five minutes, please.

I'm going to try to stick really close because we want to get through as many of the witnesses' questions as we can.

[Ruth Ellen Brosseau, NDP, Berthier—Maskinongé, QC]

Thank you, Chair.

I'd like to thank our witnesses for still being with us even after the votes. I'd like to thank you all for your presentations. They were very interesting and I really enjoyed a lot of the recommendations. They were hard to follow. I have a page and a half of notes.

I would just like to start my questions and perhaps you can all answer and we'll go around that way.

We've had witnesses come to committee and say that in the programs out there right now, five years is not enough and we need to have a longer-term vision for research and innovation. I wonder if you can comment on the need for perhaps a long-term vision instead of programs that are so short. Also perhaps comment on the agri-innovation program and whether it is working.

On sugar beets, Mr. Third, you mentioned that we need to a more timely response to the applications. I wonder if you would all comment on that, please.

[The Chair, Conservative, Bev Shipley]

Why don't you start, Mr. Third?

I know you're on video conference so we're going to start with Mr. Third and then go to the Canadian Food and Wine Institute.

Remember that everyone has five minutes.

[Gerald Third]

I believe that a five-year time span on these programs is more than adequate. We are in an ever-evolving global economy and things do change.

One of the detriments of that program, though, is timeliness of project approval. If those things could be sped up then I think we would see a better and more significant use of that particular program and there would be far more value to it.

[The Chair, Conservative, Bev Shipley]

Thank you.

Let us hear from Canadian Food and Wine.

[Dr. Marc Nantel]

Thank you. I appreciate the question.

I agree with Mr. Third that often, to move at the speed of business it's a question of having faster turnaround time on funding requests.

As for our view on the five-year aspect, agricultural research has typically a longer timeframe than other types of research. I could make a case that five years is a bit short, in the sense that by the time you've gone through a few crops of something, all of a sudden the project is ended. If there is a field in which longer timeframes for research projects and programs might make sense, it certainly is agriculture, viticulture, and greenhouse-type stuff.

[Clyde Graham]

I think five years is fine, but certainly the delays in approval or even rejection of projects is difficult.

I would like to see the department move to a more iterative process in which it is more open in its discussion with applicants about what they would like to do. I think they would get better projects approved, and it would be less frustrating for applicants.

[Carla Ventin]

I don't have much to add here, but five years seems reasonable. The timeliness of approvals is a huge issue—and the transparency of approvals.

Reiterating what Clyde said, being able to have government and industry work together to say whether it's even worth the effort to make the application and spend the time on it is really helpful. That kind of open, transparent process would be very useful.

[Ruth Ellen Brosseau, NDP, Berthier—Maskinongé, QC]

Do I have another minute?

[The Chair, Conservative, Bev Shipley]

You have now one minute.