Thank you, Mr. Chair.
Good afternoon and thank you for the opportunity for Vegpro International Inc. to appear before this committee studying PACA, the Perishable Agricultural Commodities Act.
My name is Jocelyn St-Denis and I am the director of Finance at Vegpro International. Our company is located in Sherrington, south of Montreal, in Quebec. The shareholders of our company are five family farms that decided to coordinate their production and pool their marketing. As the employee of an agricultural producer, my main objective will be to acquaint you with our reality as farmers.
Whether we are talking about a small family farm, a co-op or a larger enterprise, the challenges are many in 2016. We must grow a quality product, sell it at a good price and receive payment for it. This allows us to live from our work, invest in maintaining our production capacity and comply with all of the increasingly numerous regulations, be it in the area of health and food safety, or the environment and sustainable production, in addition to a phenomenon we cannot control, the weather.
Vegpro produces iceberg head lettuce, and romaine, young shoots of the spring mix type, and baby spinach. We also produce onions, carrots and several other vegetables on a smaller scale. We also package and market these products for other small farms in our area who do not have warehouses or packing equipment.
Most of these fruits and vegetables are highly perishable and when they are ready for harvest, they must be sold. All of that can be organized, but we all know that the weather has the last word. All you need is a warmer period, a rainstorm, and suddenly you have twice the anticipated crop.
Every day, every producer has to sell his or her produce because if they do not do so, they run the risk of losing it. So, early in the morning, we assess the quantities of produce to be harvested and we do our sales work. Everything has to be sold before noon, because our produce has to be shipped that very evening. Sometimes we have to sell to clients we do not know, and our decisions have to be made quickly or otherwise we lose the product.
Since the product is perishable, we are at the mercy of the market, and at Vegpro International Inc., we deal with that reality. I will give you a few examples.
A client may refuse to pay if he feels that the quality was not satisfactory, and we will realize that 21 or 30 days later when the invoice remains unpaid.
It happens that market prices drop suddenly below the agreed-upon price, and the client will refuse to pay without concluding a new agreement.
A client may refuse the product at his door, five hours away from us. Then we must find another client for that product rather quickly, because the carrier has another client to serve when he returns and he has to empty his trailer. We accept the first client who wants to buy the product, and we assume the risks. It also happens sometimes that a client simply refuses to pay for no reason, or he may have gone out of business or gone bankrupt.
Vegpro, its shareholder farms and other producers in Quebec have suffered losses following several bankruptcies over the years, such as Michel Desjardins Ltée, Les Produits Golden Touch, Fruits Atlas International Ltée, The S. Baizer company, Fruits Botner Ltée, Gérard Viau Inc., National Fruits Inc., who were all distributors. For some time now, fruit growers in Quebec have been seeking bankruptcy protection, the most recent ones being Les marchés 4 saisons, La Fruiterie de l'Outaouais, the Groupe Épicia and Les Jardins Valmont. When a client of the industry refuses to pay or goes bankrupt, more than one producer suffers, because that client usually had several suppliers.
The industry has put in place a dispute settlement organization, the Fruit and Vegetable Dispute Resolution Corporation, whose representatives are here today. When there is a conflict, both parties must agree to use its services. Even if it is shown that the client is in the wrong and that he must pay, we have no legal way of obliging him to do so, and we cannot recover or seize our product, as opposed to a manufacturer who makes tables or chairs.
In the United States, there is the PACA. I will not do a presentation on how that legislation works, but on its results.
The American government and the industry put it in place because they recognized the financial risks the farmers faced as well as their high losses. An American farmer who sells his product in the United States is automatically protected against bad practices or his clients' bankruptcies, because under the law he has rights and he can recover the money that is owed him. In addition, those who purchase agricultural products have obligations under the PACA. The consequences of bad practices are considerable and can even lead to their losing the right to continue to do business.
In Canada, the farmer has no protection and has even less than those who work in other sectors of activity, because his or her product is perishable and is consumed quickly. When someone goes bankrupt, even though the law is the same for everyone, we no longer have access to our product.
Moreover, aside from bankruptcy, some people refuse to pay. An average-sized farm—usually a family farm—does not have many clients and is at the mercy of blackmail. What happens when there are financial losses? The producer cannot pay his suppliers and cannot reimburse his credit line. It is harder for him to maintain his infrastructures and equipment. The banks should view protection for farmers favourably, because this will make loans more secure.
In addition to the financial losses incurred by farms, the fact of not having a PACA in Canada has led some Canadian producers to prefer to sell their product in the United States, because it is less risky for them. Moreover, some American producers are refusing to sell in Canada, or, when they do so, they won't necessarily sell us their best product. In certain cases, this forces Canada to source produce in other countries where the food safety risks are higher.
Our situation got worse in 2015 when the United States abolished protection for Canadian farmers that was equivalent to what American producers have. Before that, when we sold our produce to the United States, we had the same rights and the same protection under the PACA as American producers had. They took away that privilege because Americans who sell to Canada do not enjoy equivalent protection.
In order to benefit from the protections afforded by the PACA, we have to deposit twice the value of our claim with our complaint. A truckload of fruit or vegetables may be worth between $10,000 and $50,000. Given the funds they must find and immobilize for a certain period of time, a lot of small farmers give up and take the losses, because they are unable to deposit the required sums. As of now, we are even beginning to see Canadians who choose to invest and settle in the United States rather than in Canada.
In Canada we have never had any protection, and we have for a long time been asking for a system comparable to the American one. The PACA allowed Vegpro to recover more than $100,000 when a single American client went bankrupt, but we saved much more than that. We were protected from losses due to unfair practices on the part of American clients because we had rights and they had obligations. Henceforth, those rights are much more difficult to access and many farmers consider them inaccessible.
Canada has to protect its food sovereignty, and in order to do so it must ensure that farms of all sizes that feed the Canadian population continue to be in business and to produce quality fruit and vegetables that can be consumed safely.
I thank you for your attention, and for your interest in our situation.
