Agriculture Committee on May 27th, 2020

[Yves Perron, Bloc, Berthier—Maskinongé, QC]

You suffered a loss that wasn't anticipated, and this comes on top of everything else.

You referred earlier to the tariff rate quotas resulting from the agreement with Europe. Over half of these quotas have been allocated to non-dairy agents, distributors, not to mention any names.

Can you explain the negative impact of this situation? What could happen if the same mistake is made in the agreement with the United States?

[Mathieu Frigon]

This was announced in 2017. Looking back, we saw that it created a great deal of instability in the market. Often, cheeses are imported specifically to compete with cheeses already produced in Canada, which leads to this instability.

Of course, our members will make the decision to import based on dairy market conditions. They're involved in it, so to speak. They're well aware of market conditions and stock levels. The stakeholders outside the dairy industry aren't naturally inclined to look at these parameters or factors such as production or stock levels. In the past few years, we've seen that allocating this to external stakeholders creates a great deal of instability in the market. Obviously, there has been the volume impact, but also an impact on the entire structure.

[Yves Perron, Bloc, Berthier—Maskinongé, QC]

Mr. Frigon, if tariff rate quotas, or quotas, aren't allocated overwhelmingly to processors, this increases the losses for the industry. This will increase the need for compensation in a different way. You also need compensation, and you also want a time frame.

Is that right?

[Mathieu Frigon]

That's exactly right. This will increase the need for compensation.

There's currently a great deal of instability, as my fellow producers have said, because of COVID-19. The announcement of the premature entry into force of CUSMA created even more instability. This is probably the worst time to create more instability. That's why we're saying that the tariff rate quotas must be allocated to the processors.

[Yves Perron, Bloc, Berthier—Maskinongé, QC]

Have you received any commitments in this area so far, or do you have no sound, image or news?

[Mathieu Frigon]

No. A process is under way and the decision should be made very soon because, as I said, July 1 is fast approaching.

[Yves Perron, Bloc, Berthier—Maskinongé, QC]

The committee members fully understand the tremendous importance of being sensitive to this request in order to minimize the impact on the industry.

I think that my time is up.

Thank you for coming to speak to us. I can tell you that we appreciate your arguments. We hope that the people in the government will appreciate them as much as we do.

[The Chair, Liberal, Pat Finnigan]

Thank you, Mr. Perron.

We'll now give the floor to Alistair MacGregor.

Mr. MacGregor, you have the floor for six minutes.

[Alistair MacGregor, NDP, Cowichan—Malahat—Langford, BC]

Thank you very much, Chair, and good afternoon to all of our witnesses. It's good to see you on my Zoom panel.

I'll start with the Dairy Farmers of Canada. I was one of the members of Parliament who received a technical briefing on the act to amend the Canadian Dairy Commission Act to give the commission increased borrowing authority.

During that technical briefing, the officials let us know that dairy farmers had been forced to dump 30 million litres of milk. I know that must have pained your members greatly because of the pride you have in our supply-managed system. When I heard that figure, and when we see all the foreign dairy products on our shelves, I kept on wondering about that. Would that have ever been necessary if we hadn't given away so much of our domestic market share?

I really appreciate your comments on how supply management, because of our ability to manage production, has allowed us to weather this storm we're in. Going forward, what kind of a commitment do you want to see so that we can build resiliency into our supply management system so it's there for future generations and we can withstand further shocks like this in the future?

[David Wiens]

It's a good question.

First of all, for the Canadian Dairy Commission, the ability to increase the storage is important for us, because it does help us. When we had surplus in the beginning, they could put it in storage for a time, as we now have reduced production.

Certainly the trade agreements in the past have exacerbated the situation, because we have already lost production from where we would have otherwise been.

Another important factor is that as we go through this pandemic and come out the other end, we are not going to get to the same place anymore, because by then CUSMA will have taken effect and we will have lost further market share.

Part of what we're trying to emphasize here is that with supply management, we can handle things like downturns, although this one was extreme. We have never experienced something like this. That has tested us to our limits. What supply management cannot handle is the continuous undermining of our foundation. Whenever we allow further access to the Canadian dairy market, that is in fact what is happening. Every time there is more access given, it weakens us, and then it makes it more difficult for us to withstand the kinds of challenges we've seen with this pandemic. It is a real concern that in the future it will make us a little bit weaker. That foundation we have, which supply management rests on, makes everything else happen.

As we move toward that 18% foreign access to our Canadian dairy market, that access overall undermines our ability to weather the kind of storm we have faced with this pandemic.

[Alistair MacGregor, NDP, Cowichan—Malahat—Langford, BC]

Thank you very much for that answer.

In my remaining time, I'll turn to the dairy processors.

I think all of us on this committee agree that agriculture and agri-food are going to be a central part of Canada's recovery to this crisis.

Regarding the TRQ, the tariff rate quota allocation, I understand the arguments for why our processors need to have more TRQs to give in-depth understanding of the local markets and make sure our domestic supply of dairy products is not interrupted by foreign imports.

However, can you give me a sense, if we do get that increased TRQ allocation secured for you, what that's going to mean in terms of an economic shot in the arm that will help your processors lead in your regions, as part of our economic recovery to this crisis?

[Michael Barrett]

I appreciate the question. Certainly it is fundamental to ensure the TRQ allocations to those who have bricks and mortar within the country. There have been billions of dollars spent in investing in Canadian processing capacity and capabilities, and when you talk about the shot in the arm, what it's going to do is reaffirm that continued investment. Certainly the CETA allocation of TRQs was not a shot in the arm for Canadian dairy processors being able to invest in cheese manufacturing in Canada.

Looking at that investment or that TRQ that is allocated—and we're asking for north of 90%—the shot in the arm gives us the ability to understand the stability of the marketplace, to build on what Dave Wiens was talking about, because you have to have stability on the supply side, but you also have to have stability on the capacity side.

It's not surprising that we're both sitting here together, because there's no sense in producing if you have no processing. What we need as a shot in the arm is stability in return. Our members are seeing a 30% to 50% decline in sales and a 80% decline in EBITDA. That type of COVID impact is going to have a considerable impact.

It may not be the shot in the arm, in the sense of a punch in the shoulder, but maybe an adrenaline shot that allows us to see stability in the market.

[Alistair MacGregor, NDP, Cowichan—Malahat—Langford, BC]

Thank you for that. I appreciate it.

[The Chair, Liberal, Pat Finnigan]

Thank you, Mr. MacGregor and Mr. Barrett.

That concludes our second panel.

I want to thank our witnesses today. From the Dairy Farmers of Canada, we had Mr. Pierre Lampron, president, as well as Mr. David Wiens and Mr. Bobby Matheson. Thanks for being here. Also, from the Dairy Processors Association of Canada, we had Mr. Mathieu Frigon and Mr. Michael Barrett. Thank you so much for being here.

[Richard Lehoux, Conservative, Beauce, QC]

Mr. Chair, this isn't a point of order. I just want to draw attention to something.

[Richard Lehoux, Conservative, Beauce, QC]

Thank you, Mr. Chair.

Since next Monday is World Milk Day, I would like us all to raise our glasses, at least those of us who have a glass nearby. On June 1, everyone should raise their glasses of milk and tip their hats to the Canadian dairy industry and to the producers and processors.

[The Chair, Liberal, Pat Finnigan]

Sure.

[Yves Perron, Bloc, Berthier—Maskinongé, QC]

Once again, we agree, Mr. Lehoux.

[The Chair, Liberal, Pat Finnigan]

Mr. Lehoux, thank you for your comments.

On June 1, we'll raise our glasses of milk, take a picture and post it on social media.

Thank you for reminding us of this date.

Just as a last note to members before we leave, as you know, Motion No. 7 has been passed, and we have permission to continue to sit beyond Friday. I will reach out to the vice-chairs and we can start a discussion about how we want to proceed, what kind of themes to have and so on. I will reach out before the end of the week, if that's okay with you. You can start to talk among yourselves, and we will find a way for how we are going to move forward.

If there's nothing else, I again want to thank everyone. We shall see you on Friday.

The committee is adjourned.