Agriculture Committee on June 18th, 2018

[John Barlow, Conservative, Foothills, AB]

I found it interesting when you mentioned that you've had $2 million in government funding for this project over the last decade—almost.

[Glen Metzler]

Yes.

[John Barlow, Conservative, Foothills, AB]

It seems odd that two levels of two different governments have invested in this but have blocked you from commercializing it. Can you expand on that? It seems counterproductive to me.

[Glen Metzler]

The Canadian agricultural adaptation program provided $450,000. In that agreement that we signed with the federal government, we were required to build a poppy industry. That was what we were told to do. We're in a position now where we're trying to fulfill the rights of the contract that we've signed with the federal government, but we can't move forward because the federal government won't give us the exemption so that we can fulfill the rights of the contract. We're caught.

The other program, IRAP, has been outstanding. They were the first to the table, in a very much similar situation. They came in and they saw the opportunity and they put some cash in. The $450,000 we received from CAAP helped us on our first raise. Based on that investment, we raised $3 million as a company, so it was key for us in going forward.

I think the agriculture department has done a great job with that program in seeing opportunity, but we need to somehow translate that right through to the end of the process so we can actually go commercial.

[John Barlow, Conservative, Foothills, AB]

It's frustrating, I'm sure, for our farmers in that area who are looking at this as an opportunity. You've mentioned that the United Kingdom, France, Australia, and Portugal all have thriving industries with this.

Mr. McAlpine, maybe we can talk about front-of-package labelling in a bit, but what are some of those countries doing? What are their regulatory regimes? What are they doing that works and that we aren't?

[Glen Metzler]

Europe doesn't even require licensing for poppy cultivation. Anybody can grow it, wherever they want. In fact, the U.K.—

[John Barlow, Conservative, Foothills, AB]

I've been around France, and it's growing there.

[Glen Metzler]

Yes. There are about 6,000 hectares grown about an hour north of France. The Czech Republic was at about 40,000 hectares. There is no licensing requirement in any country. Australia does have some licensing. The U.K. grows poppies, and you're not required to have any licensing unless you're going to process it into narcotic products.

In Canada, again, we're in a situation where there are very few countries that actually look at the seed market; they don't consider it an issue because you're not even going into the pharma side. Also, most countries that grow it on the pharma side don't even have regulations, because until you process that product and try to extract the alkaloids from the poppy they don't see it as an issue either.

[John Barlow, Conservative, Foothills, AB]

That's right.

[Glen Metzler]

We're really caught in this framework where it's seen as a risk, whereas I'm sure the people in the rest of the countries are scratching their heads and laughing because we're losing this opportunity.

[John Barlow, Conservative, Foothills, AB]

I only have about 30 seconds left, but maybe, Mr. Mercer, you can mention what the opportunity is that we are missing here on the farm side. What is this commodity worth if we are able to finally get this done?

[Ryan Mercer]

We jump at the opportunity to add another crop into our rotation, whether it's a spice, a pulse crop, or an oilseeds crop. Speaking personally, at Mercer Seeds we have a seed-cleaning plant on the farm. We clean, package, and export various pulses and oilseeds to Asia, the U.S., and Europe. I know that a lot of my colleagues do the same thing.

I think that's what's really exciting for the new generation that's taking over the farms: to see the optimism and the opportunity in Canada and to see what has happened. We have really been on the forefront of these things, but after a decade of trying to grow poppies, it seems very frustrating. We've put money, time, and multiple trips to Ottawa into this. It's very frustrating, but I think there's a lot of opportunity, and if we can have Agriculture's full support, we can move forward on this.

[The Chair, Liberal, Pat Finnigan]

Thank you, Mr. Mercer.

Before we move on, I want to welcome the Honourable Peter Kent, who is replacing Monsieur Berthold.

Welcome to our team.

Mr. Longfield, you have six minutes.

[Lloyd Longfield, Liberal, Guelph, ON]

Thanks for your three very interesting presentations.

I want to pick up on a comment that Mr. McAlpine made on the automotive industry. I've worked in Maple Leaf plants in different parts of Canada on automation applications. I worked on the old Canada Packers plant. The Canada Packers head engineer once said that I should think about the plant as a disassembly plant instead of an assembly plant, and figure it out from there. Starting on the fourth floor you have a cow, on the bottom floor you have hot dogs, and in-between you have steaks and other things coming off the line.

We've looked at automotive assembly plants as a key industry in Canada, and we haven't paid the same attention to meat processing. In terms of the factory of the future, “Industry 4.0”, where does Canada sit in terms of introducing new technologies to disassembly plants versus assembly plants?

[Rory McAlpine]

There's a lot in that question.

[Lloyd Longfield, Liberal, Guelph, ON]

I know.

[Rory McAlpine]

I guess the first point I would make is that the critical ability to move to that factory of the future and apply the industry 4.0 technologies is to have competitive-scale plants. We do, in the case of our Brandon slaughter plant, as an example. Meat processors such as Cargill and Olymel also have fairly large plants. In our case, in our Brandon plant we've begun a whole project of application of IoT, the Internet of things, such as putting in sensors to better monitor yields and even water and energy use and that sort of thing.

There is a limit, though, because at the end of the day, at least with current technology and robotics, there is only so much you can do with a live animal through to ground meat. A lot of hands-on labour is required. We've applied more of that at the front end, but the fine trimming and the deboning in meat processing is really where the value comes in. The more you can portion, cut, trim, and cut something to spec, now you have real value.

At the moment, our biggest challenge in getting there is labour. Yes, we'd like to automate more, but in those functions, at least with current technology, it is very hard. The problem is that you apply the labour and the technology as you can at the front end, and you leave undone that value-adding in the latter stage of the process, which is where the profit most often can be found. There are a number of challenges in that. As I say, it's a question of adapting technology, but it's also about making sure we have adequate labour. That's the trouble.

[Lloyd Longfield, Liberal, Guelph, ON]

This committee travelled to Guelph and went to the Cargill plant. We saw the finishing line and how labour intensive it was. We saw the numbers and numbers of people working on that line. You could tell that there were a lot of people from outside Canada: new Canadians, with different languages being spoken.

What we didn't see was the kill line. We didn't see the conveyor system and the management of the conveyor, and the process for dehorning and de-limbing. There are some processes that are highly automated on the other side of the line.

[Rory McAlpine]

That's right.

[Lloyd Longfield, Liberal, Guelph, ON]

Is that something we've tapped out, or is there an i4.0 that we could apply to the top part of the operation?

[Rory McAlpine]

There are probably more things to do even in terms of digital, monitoring, and adjusting the process to the varying changes in the animals as they come into the process, but I guess the one comment I would make is how capital intensive this is. Part of what I was trying to argue in my opening comments was to say that while we want to go further into the future—the bleeding edge of technology, if you will, in the Internet of things, robotics, vision grading, or what have you—you need to have scale and competitive plants to be able to do that.

[Lloyd Longfield, Liberal, Guelph, ON]

That's right.

[Rory McAlpine]

That's where we're falling short. The capital required to build a scale plant today in Canada in food is enormous, and it is absolutely 25% higher to do it in Canada versus in the U.S., and we have to do it in a completely free trade environment. That's the stress that's killing us. We want to go further, but we have to be able to be competitive before we can be innovative.

[Lloyd Longfield, Liberal, Guelph, ON]

Thank you. That's interesting, particularly in terms of the conversation with Mr. Wallener beside you.

You're starting up and you have the same issue of scalability and getting into scale. You mentioned IRAP, Mr. Wallener, and Mr. Metzler also mentioned IRAP. There's new IRAP programming that we introduced in the latest budget, which will take funding up to $100 million instead of $10 million, to try to get us through the valley of death and through the scale-up. InnovationCanada.ca is there to try to help you access funding; I'm not sure whether you've worked with or recognize Bioenterprise in terms of helping you get connected to funding.

How is that whole infrastructure now working for you? Is there any change in the last year or two?

[Damir Wallener]

That's interesting. Actually, could I just touch back on something that Mr. McAlpine mentioned in his response in terms of vision grading?