Thank you very much.
Good afternoon, honourable members of the Standing Committee on Agriculture. I am speaking today with Mr. Ray Keenan from United Potato Growers of Canada.
Our organization has been in existence since 2006 and was created to help growers improve profitability by sharing data based on the economic principles of supply and demand. We are funded by a per-acre levy from growers across the country, from Prince Edward Island to British Columbia. We would like to thank you for inviting our organization to share our thoughts on how this pandemic has affected the Canadian potato industry.
First of all, we must look to see how the potato industry was doing before this pandemic began in the second week of March. Simply put, it was doing very well. We did have some harvest issues last fall, particularly in the provinces of Alberta and Manitoba, but overall our supply was fairly well matched with demand. If anything, it was a bit short, creating a need to import potatoes from our neighbours in the United States.
Our fresh sector saw strong demand and resulting good prices. Our processing sector, based largely on pre-season determined contracts, was in an enviable position, responding to increased demand for the insatiable taste for french fries. Export markets were growing and domestically, plant expansions in the province of Alberta by Cavendish Farms, in Manitoba by the J.R. Simplot Company, in Quebec by Saint-Arneault, and in New Brunswick by McCain Foods all required additional supplies of potatoes for 2020. The seed potato sector was increasing as well largely to service the needs of the expanding processing sector.
However, on Monday, March 16, after our country began to self-isolate, we saw immediate changes in our potato markets, beginning first of all with table potatoes. Demand for fresh potatoes increased substantially and packers were challenged to keep shelves stocked, as consumers, now staying home, stocked up on staple nutritional foods like potatoes. It was commonplace to see produce managers in grocery stores moving empty pallets as they waited for new skids to come into the store. Demand for table potatoes is still strong and has become more stable in recent weeks as consumers have learned to cook again and enjoy the experience. Potato chip producers also saw increased sales, as consumers selected their favourite comfort food for the pandemic.
It did take more time for the processing sector to react, but eventually, with the sit-down portions of restaurants closed and only the drive-throughs open, the large volume of processed potatoes that enter the food service side of the industry was affected. French fry companies quickly realized that their freezers were becoming full from the factories that are designed to run 24 hours a day, seven days a week. Fryers began by taking downtime and shift layoffs to mitigate the effects but had to eventually close plants at various times.
The excruciating pain for growers then began as french fry companies began calling and advising that they would not be buying all of the potatoes that they had earlier contracted from them. Growers were advised to sell those potatoes to another market. In the following weeks, the situation became even worse with fry companies advising growers that they would be cutting volume for next year's crop. Cuts are dependent on what market each one of these factories supplies but range anywhere from 10% to 35%. The COVID-19 pandemic has had similar effects on french fry sales in the United States and in European countries like Belgium and the Netherlands.
Seed potato growers in Canada became the final victim of this COVID-19 pandemic as they began to receive calls from growers cancelling their seed orders due to 2020 crop volume cuts from the processors. It is difficult for any segment of the supply chain to react to market adversity, but it's definitely hardest for seed growers as they are at the bottom of the supply chain. In addition, many of these growers had started multiplying varieties three years ago that are only now reaching the commercial stage.
Our organization has the difficult task of trying to determine what supply of potatoes is needed to feed our country and export to others in the coming year. We can run several models, but we need to know two important input factors that are right now unknown: When do we start and how long will it take us to get back to pre-COVID-19 consumption levels? It will perhaps not return to what we know as historical consumption.
In the meantime, our growers need assistance. Planting time is now here for the 2020 crops, so there is a real sense of urgency.
The United Potato Growers of Canada supported the Canadian Potato Council in a letter of April 23 to the Honourable Marie-Claude Bibeau requesting assistance to deal with the effects of COVID-19 and preserve food security in Canada.
On May 5, the Government of Canada announced an industry support program, of which an initial $50-million fund would be used to purchase unsold inventories, such as potatoes, poultry and other agricultural products. There are no details yet as to how this program will work. However, our organization thanks Prime Minister Justin Trudeau and Agriculture Minister Bibeau for acknowledging in that announcement that our sector needs help. At this time, it is clear that it falls short of our urgent needs, unfortunately.
Specific to our industry, the Canadian Potato Council has contacted each province in Canada and identified the surplus potatoes on Canadian farms to be valued collectively at $105 million. The components of this big pile of potatoes include processing potatoes valued at $92 million and seed potatoes valued at $13 million. Converted to pounds, this pile is about 760 million pounds. This is a massive quantity of potatoes to move in a short time.
These surplus potatoes have a shelf life, so action must be taken now.
UPGC has looked specifically into the option of running more of these potatoes into the fresh market, but unfortunately, that market is now approaching saturation levels, in addition to our difficulty in locating sheds with additional run times.
Dehydration would also be an option, but our three plants in Canada are currently running at full capacity and their markets have been hit by food service restrictions as well. Cattle feeders are another possibility, but basically they only return trucking costs to the potato growers.
Food banks are an attractive option to avoid food waste, but logistically require extensive time to organize transportation, delivery and receiving. We simply do not have the infrastructure to handle the volume that must move. Many of our growers do support food banks now and are familiar with some of these difficulties.
The final option for these surplus potatoes would be composting or burial, both of which need to meet environmental and plant health guidelines.
All of these scenarios point to a series of options that growers cannot handle at their own risk and expense. Outside help is needed to begin removing this product now, with completion over the next three months to avoid environmental and plant health risks to the 2020 crop. We need help now, not in three months' time.
Your input and assistance as the Standing Committee on Agriculture and Agri-Food is critical to the future food security of Canada. Given all of the negative situations created by the COVID-19 pandemic, one positive has been a greater appreciation of the food produced in Canada and an increasing desire of consumers to support the producers who put it on their tables.
Thank you for the invitation and the opportunity to address you today.