Agriculture Committee on Nov. 24th, 2016

[The Chair, Liberal, Pat Finnigan]

It will cut into the other one. Do you have a quick question?

[Bev Shipley, Conservative, Lambton—Kent—Middlesex, ON]

We don't want to cut into anybody's time. I just want to say thank you.

I have some other questions that maybe I'll talk to you about personally.

Thank you very much, Mr. Chair.

[The Chair, Liberal, Pat Finnigan]

Thank you, Mr. Shipley.

I want to thank the panel. I'm glad to see younger farmers pushing us older ones. I'm glad to see you guys there to keep that 58 number down.

For the organic producers, if we could take that $140,000 an acre and move it to a 3,000-acre farm out west, we'd have it made.

Thank you so much for appearing today.

We will suspend, for one or two minutes, and then we will continue with the other panel as soon as we can, because we are a bit tight on time.

Thank you.

[The Chair, Liberal, Pat Finnigan]

Welcome to our second hour of the committee on agriculture.

Today we have Mr. Keith Kuhl, from the Canadian Horticultural Council. We had a great reception last night. We also have, from the Dairy Processors Association, Mr. Jacques Lefebvre, president and chief executive officer.

Thank you both for being here.

I will hand it over to Mr. Kuhl.

You have up to 10 minutes.

[Keith Kuhl, President, Canadian Horticultural Council]

Good morning, Chairman and committee members. I wish to thank you for the opportunity to appear today to discuss the next agricultural policy framework.

The Canadian Horticultural Council is a national association that represents producers across Canada who are primarily involved in the production and packaging of more than 120 fruit and vegetable crops. Members include provincial and national horticultural commodity organizations as well as allied and service organizations, provincial governments, and individual producers. Since 1922 we have worked collaboratively with our members and government to advocate on issues and policies that are important to the Canadian horticultural sector. We represent members on such key issues as crop protection, access to a consistent supply of farm labour, food safety and traceability, fair access to markets, research and innovation, and government programming that ensures a more innovative, profitable, and sustainable industry for future generations.

The horticultural sector is one of Canada's largest agrifood industries. Today farm-gate sales with additional processing, supply chain, and induced impacts create an economic footprint of over $11.4 billion in real GDP. With over 27,500 horticultural crops in Canada covering close to one million acres of land and providing over $4 billion in annual direct farm cash receipts, horticulture farming is a valuable sector within Canadian agriculture. It has a direct positive impact on rural economies across the country and further positive impacts across industry as a whole.

Members from the horticultural sector have been in Ottawa this week having discussions with members of Parliament on some of the key issues facing the industry. We thank you for the meetings we've had with many of you. We are grateful for the support and interest shown in our meetings.

To allow time for discussion, I will focus my presentation on some of the key areas that will support our sector as we move forward.

The next policy framework must help position Canada's produce sector for success by ensuring that policies and programs are well informed, practical, and beneficial to the produce supply chain. Business risk management programs are very important to our producers, and need to be effective and responsive to help manage the impact of severe events on operations and incomes.

The AgriStability program is designed to provide support when experiencing a large margin decline. It has now been three years since funding was reduced for this program, and savings achieved by these cuts have exceeded targets. This is an important program for our sector. We need to see the level of coverage offered through AgriStability returned to the levels that preceded Growing Forward 2. We would like to see the AgriStability trigger threshold restored to 85% of the producer's reference margin, up from the 70% level under Growing Forward 2.

In the next policy framework, we would also like to see changes to the AgriInvest program, a self-managed producer-government savings account that allows producers to set aside money that can be used to recover during small income shortfalls. This is a simple and low-cost program to administer, with high uptake by producers. We are requesting an increase in the basic contribution rate for matching contributions to 4.5% of the allowable net sales on eligible commodities, and an elimination of caps on government payments. Producers also need more flexibility on removing their own funds first on pre-approved investments.

Innovation is critically important to producers. The next policy framework must include increased support for research and innovation with an enhanced commitment to the produce sector. This is vital to ensure that Canada maintains its reputation as an agricultural leader. This includes expanded research and financial support to biotechnology, paying particular attention to good pest management practices while reducing long and complex regulatory processes that negatively impact competitiveness.

The AgriInnovation program has provided the horticultural industry with nearly $7 million in support of industry-led research, with an additional $2.6 million in industry contributions. Under the next policy framework, there is strong industry support to continue cost-shared funding at the current 75% government and 25% industry levels.

The horticultural industry has had great success within the Canadian agri-science cluster for horticulture 2. Collaboration among industry, private research, universities, and Agriculture and Agri-Food Canada researchers has demonstrated successful partnerships and has helped move industry priorities forward. The shift to cost-shared research has resulted in researchers being more engaged with industry to find priority areas for research.

The CHC supports the broadening of the number of projects approved under the horticulture science cluster that receive support. We would also like to see open consultation with industry on the nature of funding and associated restrictions with respect to eligibility at the onset of the future agri-science cluster programs.

With regard to the environment, our sector understands that climate change is a global challenge facing industry and government. Climate change impacts many areas of production, such as access to water, pest management, and energy sources. The horticultural sector plays a significant role in ensuring a sustainable sector as well as a secure food supply. We recognize that the federal government has been taking steps to address the challenge.

The CHC asks that climate change measures not place the horticultural sector at a competitive disadvantage. In the next policy framework, we want to ensure that there is federal funding that will address adaptation programs and ensure adequate support towards the resilience and environmental sustainability of the industry.

Public trust is a collaborative effort between government and industry. We must continue to build trust and have programs that best support industry in meeting the increasing demands of consumers and retailers seeking quality assurance and access to markets. This will require continued financial support for innovation to ensure the integrity of domestic food safety and working with our trading partners to achieve food safety outcomes that are comparable to the Canadian level of quality. It will also require improved alignment and integration of federal and provincial food safety assurance systems to make them more scalable and sustainable.

I am pleased to let you know that I have been nominated to be part of the steering committee to work on public trust and social licence.

The horticultural sector benefits enormously from trade. In 2014, 52% of Canadian fruit and vegetable production was exported, representing a farm-gate value of over $2.1 billion. We continually look for opportunities to increase markets for our high-quality produce. The next policy framework must facilitate growth in exports, remove barriers to competitiveness, and work on improved integration regarding plant health, customs, and food safety systems.

I am again pleased to inform the committee that I've been asked to be part of the steering committee to develop the plant and animal health strategy.

I would like to briefly touch on the issue of labour. As committee members know, labour is an ongoing challenge in agriculture. The horticultural sector is significantly impacted when you consider that horticulture represents 50% of the labour gap in agriculture, which translates into a gap of 29,000 workers. Growers always seek to fill vacancies with Canadian workers first; however, with the increasing demand to meet production targets and avoid fruit and vegetable rot on farms, temporary foreign workers play a critically important role in our sector.

The federal government must continue to work with industry to ensure an accessible and reliable workforce. It is important to note that temporary foreign workers generally come for about six months. Most Canadians are looking for full-time employment. Also, our studies have shown that, for every foreign worker we bring in, two full-time Canadian jobs are created within the value chain.

These are some of the key areas that are at the forefront of the horticultural sector as the federal government develops their plan for the agriculture sector for 2018 and beyond. We look forward to continuing the dialogue on these important challenges and opportunities as we work towards a more innovative and sustainable industry.

Thank you very much.

[The Chair, Liberal, Pat Finnigan]

Thank you, Mr. Kuhl.

I will now give the floor to Mr. Jacques Lefebvre, president and CEO of the Dairy Processors Association of Canada.

You have 10 minutes, Mr. Lefebvre.

[Jacques Lefebvre, President and Chief Executive Officer, Dairy Processors Association of Canada]

Thank you, Mr. Chair, Mr. Parliamentary Secretary.

committee members, I want to thank you for inviting me to present DPAC's perspective on the next agricultural policy framework. I'll make my presentation in both official languages and will entertain your questions in French or in English.

First, I would like to take a moment to speak about my organization, the Dairy Processors Association of Canada. Our membership is made up of medium and large processors whose business models vary from multinational, publicly traded companies, to cooperatives and companies with closed capital.

Our processors purchase more than 85% of the total milk produced in Canada.

The economic footprint of the dairy processing sector is significant in Canada. Dairy processing has a material presence in every province, with a revenue exceeding $17 billion in 2015. Dairy processing directly generates $3.7 billion in gross domestic product. When indirect and induced effects are considered, the Canadian dairy sector generates a total GDP of nearly $18 billion. We support over 23,000 direct jobs, with an aggregate payroll of over $1 billion annually. When taking into account direct, indirect, and induced jobs, the dairy processing sector is the bedrock for over 211,000 jobs in Canada, with wages and benefits of about $9.6 billion.

More important is where the dairy processing jobs are located. Many of the plants are in rural areas where there are few other opportunities of employment. Although we may not be able to assign and add value to that factor, for the communities where those plants are located, they know the value.

With the next agricultural policy framework, Canada wants to ensure that it can have a vibrant agrifood sector for generations to come. For this to happen, agriculture and food processing must be in lockstep. In the dairy industry, dairy farmers and processors operate in a supply management system. Most recently, we have concluded an agreement in principle with dairy producers, which will result in the modernization of supply management here at home. This sets the stage for both sectors of our industry to tackle opportunities, but also face threats. I'd be remiss if I didn't talk about some of those threats.

Although we, too, await the promises of the comprehensive economic and trade agreement, CETA, the threats that come with it are real. The import tariff-free of some 18,000 tonnes of European cheese will likely displace cheese produced here at home. According to our estimates, absent of mitigation measures, the potential loss to our economy is $720 million annually and some 2,900 jobs. That said, the dairy industry in Canada is resilient. We'll roll up our sleeves, and we'll find a way to adapt under the new environment created by CETA.

Let me be clear. It's first and foremost our responsibility to adapt, but we will need some support from governments. The recent announcement by the Minister of Agriculture and Agri-Food of a fund for the modernization of the industry was seen as a positive first step. However, before you can prepare for the future, we first need to mitigate our losses. This is why the allocation of new cheese tariff rate quotas, an integral part of the CETA negotiations, represents the next step for government to take in helping the industry adapt.

Both dairy processors and producers share the opinion that these licences should be assigned to dairy processors. We're the only sector in the supply chain, other than dairy producers, for whom losses are real. Others see this as a new business opportunity, but in reality, they have no skin in the game. We're counting on the Minister of International Trade to make the right decision.

Your work as part of the next agricultural policy framework is crucial in charting the course for the future of the dairy industry in Canada. As part of the stakeholder consultations, we have heard officials and participants highlight the importance of innovation. In this area, dairy processors are committed to innovation, be it as part of a sustainable development approach, improving processes, developing new products or through efforts that go beyond our sector. I look forward to speaking about innovation at greater length during the question period.

Currently, investment in food processing innovation within Agriculture and Agri-Food represents about 5% of the total budget of the department. This historical trend must be redressed if the overall sector of food processing, including dairy, is to thrive and further contribute to the job market in Canada and the overall economy. Although some have suggested that the food processing sector would be better represented under the Department of Innovation, Science and Economic Development, we're still reflecting on the implications of such a recommendation.

Notwithstanding, DPAC recommends that the Government of Canada, pursuant to the mandate letter of the Minister of Agriculture and Agri-Food and the Calgary statement, formally recognize farmers, ranchers, and processors as the foundation of the Canadian food sector. Accordingly, that should grant a higher priority to the food processing sector in the next agricultural policy framework.

We also believe there is a need to have a broader food strategy that rests, in part, on the need for a robust food processing sector, including dairy. The broader strategy is necessary in order to have an integrated approach throughout the industry.

Furthermore, establishing the framework and a broader strategy is only part of the job that lies ahead. While we recognize the importance of ensuring value for dollar for taxpayers, many programs are plagued by administrative burdens, offered through a patchwork of programs and regulations, and frankly, are not user-friendly. These hurdles stand in the way of moving from policy to successful implementation and ultimately reaping the full-value potential of the food industry. Often, the administration of programs is such that they seem oblivious to the competition that exists for international investment dollars.

In this area, DPAC's recommendation is that the federal government include a “one-stop shop” approach to the delivery of its programs in the agriculture and agrifood sector. In other words, our sector has demonstrated that it is willing to invest here at home. We're asking for your support to make it easier for us to do so. I encourage you to mobilize the sector as well, in helping government design the criteria for future programs.

I will take a moment to talk about three programs that were part of Growing Forward 2: Agrilnnovation, AgriMarketing and AgriCompetitiveness.

First, I'll talk about AgriInnovation. Although we're supportive of the objectives of the program, red tape and its financial design prevent it from fully leveraging the opportunities of the sector. Beyond the administration of the program, DPAC recommends adjusting the envelope of the program to be more in sync with the costs of R and D and improving flexibility in the design of contributions associated with the program. Furthermore, the existing food processing science cluster under this program excludes dairy processing. We recommend that a cluster be created specifically for dairy processing.

As for the AgriCompetitiveness and AgriMarketing programs, we recommend that they be reconducted. In the case of the latter, we would offer that the market development stream should allow companies with more than 250 employees and annual sales exceeding $50 million to be eligible.

Finally, the dairy industry faces a growing concern with access to talent and skills. As part of the new framework, we recommend developing an AgriSkills program which would leverage the expertise of dairy processors, producers, and the Canadian Dairy Commission, and fund initiatives such as expanding co-op programs in universities and colleges, internship programs, and food processing programs in colleges and universities.

Mr. Chair, there is much to say about our industry and the dairy processing sector and leveraging its full potential as part of Canada's economy. I look forward to pursuing the discussion during the question period.

Thank you.

[The Chair, Liberal, Pat Finnigan]

Thank you, Mr. Lefebvre.

We'll move into our question period.

Mr. Anderson, you have six minutes.

[David Anderson, Conservative, Cypress Hills—Grasslands, SK]

Thank you to the witnesses for being here today.

Mr. Lefebvre, I want to go the top of the page where you talk about two recent announcements and the establishment of a nutrition and nutraceutical-grade dairy ingredients hub.

What are you looking to see in the future in terms of innovation and in terms of nutraceuticals, bioproducts, biochemicals, bioplastics, that kind of thing? What do you see coming out of the dairy industry? It's always been interesting to follow this tremendous innovation that takes place in agriculture, so I'm wondering what you see in those areas in the future.

[Jacques Lefebvre]

As one of my members put it to me recently, the sky is the limit for the industry. There is an approach that says “from cradle to cane”. We often think of dairy in the context of food, but there are also supplements. There is also a component in regard to pharmaceuticals, where dairy ingredients can be used in developing future products.

I say that the sky is the limit, because the creation of the hub is exactly for that, to foster innovation in the industry, in regard to the traditional association of milk and consumption products, but also beyond that.

[David Anderson, Conservative, Cypress Hills—Grasslands, SK]

Is that just beginning in Canada? Is it at the idea stage, or are there some products you can talk about that you think will be important in the future?

[Jacques Lefebvre]

Again, this announcement by one of our members.... The creation of that hub is really to foster that innovation. It is to create a platform through which we can look to the future and fully exploit the potential of dairy in Canada in food, but also in other areas, including pharmaceuticals.

[David Anderson, Conservative, Cypress Hills—Grasslands, SK]

Thank you.

Mr. Kuhl, where does the majority of your funding for research and innovation come from? Is it provided as a percentage, or do you find your members doing their research independently?

[Keith Kuhl]

Are you talking about the research that was done jointly—

[David Anderson, Conservative, Cypress Hills—Grasslands, SK]

I'm talking about your industry generally. Do you rely on that formula with the government to do research and innovation? Where is your impetus for research and innovation coming from?

[Keith Kuhl]

If you look at the industry, you'll see research and innovation all the way across the industry. There is research being done on many of the farms. There is also association research being done at the provincial level. There is work being done with universities, with provincial governments, and of course through the science cluster. In the horticulture industry, there is research at every level.

[David Anderson, Conservative, Cypress Hills—Grasslands, SK]

This is a different question.

Yesterday there was an announcement made by the government that they are going to be restricting or banning the neonicotinoids here in the future. Do you know if your industry was consulted prior to that announcement? I know other associations said they were not. On a conference call, they admitted they hadn't done any type of cost analysis on that. Were you consulted?

[Keith Kuhl]

No, we weren't. We were caught off guard on that, although there is a 90-day consultation period prior to its coming into effect. I believe the announcement indicated that the change would come into effect in three years.

[David Anderson, Conservative, Cypress Hills—Grasslands, SK]

I guess I was surprised that the first approach wouldn't be to try to get the levels down to the thresholds rather than an outright ban. I don't know if you want to comment on that any further.

[Keith Kuhl]

I have one comment on that. One of the first things we will do is enter into a discussion with the crop protection companies to determine what products we have coming in for registration that could replace some of the products that are going to be removed. Products like Admire are very significant for us in our industry, and it's absolutely crucial that we have replacements before we remove the old tools.

[David Anderson, Conservative, Cypress Hills—Grasslands, SK]

With announcements like this, is it hard to see yourself as an equal to the government? I think one of the things about the APF is that we want to see industry coming in, and some sense that they are being listened to and heard, and then things like this happen.

[Keith Kuhl]

The Minister of Agriculture has indicated on an ongoing basis that the current government wants to be very consultative, and we would really encourage, on issues like this, that we enter into the discussion prior to the announcement so that we can work together with the government to find solutions. We are absolutely willing to enter into these discussions on an ongoing basis.

[David Anderson, Conservative, Cypress Hills—Grasslands, SK]

There is another discussion that I think was a surprise to some in your association, which was the carbon tax. Medicine Hat is not in my riding, but Redcliff and Medicine Hat have a lot of greenhouses. They are just panicked about what carbon taxes are going to do to their industry. That's just another example where a consultation hadn't taken place ahead of time.

[Keith Kuhl]

As I indicated in my presentation, we realize that climate change has to be looked at. Let's sit down at the table, work together to find the solutions, and put together the plans.

[The Chair, Liberal, Pat Finnigan]

Thank you, Mr. Kuhl, and thank you, Mr. Anderson.

Mr. Breton now has the floor for six minutes.