Evidence of meeting #13 for Agriculture and Agri-Food in the 43rd Parliament, 1st Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was market.

A recording is available from Parliament.

On the agenda

MPs speaking

Also speaking

Benoît Fontaine  Chair of the Board, Chicken Farmers of Canada
Jeff Nielsen  Chair of the Board, Grain Growers of Canada
Erin Gowriluk  Executive Director, Grain Growers of Canada
Dave Carey  Vice-President, Government and Industry Relations, Canadian Canola Growers Association
Michael Laliberté  Executive Director, Chicken Farmers of Canada
Jean-Michel Laurin  President and Chief Executive Officer, Canadian Poultry and Egg Processors Council
Joël Cormier  Chair of the Board, Canadian Poultry and Egg Processors Council
Rory McAlpine  Senior Vice-President, Government and Industry Relations, Maple Leaf Foods Inc.
Paulin Bouchard  President and Chief Executive Officer, Fédération des producteurs d’œufs du Québec

3 p.m.

Liberal

Kody Blois Liberal Kings—Hants, NS

It's definitely a testament to the strength of supply management and what that system means.

I have one more question for you. We've talked about the cost to farmers of losing their bird population if they have to depopulate. Can that cost be recovered as part of the cost of production study? I know, like dairy, the poultry industry would consider the farmers' costs. Could that be incorporated into the cost of production down the line?

3 p.m.

Chair of the Board, Chicken Farmers of Canada

Benoît Fontaine

That could not be included in the cost of production because we are talking about the COVID-19 pandemic. This is something we have never seen before, we wouldn't have been able to predict it, and we never want to see it again. AgriRecovery covers the costs related to depopulation, but not the costs related to goods.

Canada's poultry producers need the value of goods in terms of birds when depopulation occurs to be covered because factories are operating at a slower pace. As I said earlier, a number of elements explain that slowdown, including employee absenteeism and the physical distancing directive.

3 p.m.

Liberal

Kody Blois Liberal Kings—Hants, NS

I appreciate that, but just quickly, because I want to move on to another group, do you have an estimate of what depopulation has cost farmers and producers?

3 p.m.

Chair of the Board, Chicken Farmers of Canada

Benoît Fontaine

That simply has to do with market value. Costs are related to transportation for euthanasia from the processing plant. As euthanasia on the farm has not yet taken place, I cannot answer your question.

3 p.m.

Liberal

Kody Blois Liberal Kings—Hants, NS

Thank you very much.

I want to turn to the Grain Growers of Canada.

Mr. Nielsen, you're from Olds, and I know, being a junior hockey player, the Olds Grizzlys are a long-time franchise.

Ms. Gowriluk, you talked about getting rid of the 85% reference margin. For my benefit, is that the cap or do you mean we should be supplying up to 100% of the 85% reference margin?

3 p.m.

Executive Director, Grain Growers of Canada

Erin Gowriluk

It's both, in that we're seeking an increase from the 70% to 85%, and we're seeking removal of the reference margin limit as well. As I said in my remarks, that one is fairly consistent among all sectors across the industry.

3 p.m.

Liberal

Kody Blois Liberal Kings—Hants, NS

The Grain Farmers of Ontario have put out certain messaging on their concerns about empty shelves in grocery stores. Is that something you as an organization expect?

3 p.m.

Executive Director, Grain Growers of Canada

Erin Gowriluk

When we look at it from the perspective of our members, in terms of what we grow and the commodities we represent, the vast majority of what we grow goes overseas, because we have the luxury of growing more than we can consume in this country with respect to grains, pulses and oilseeds. We do rely to a certain extent on international markets as well.

3 p.m.

Liberal

Kody Blois Liberal Kings—Hants, NS

We hear a lot about business risk management and AgriStability. Of course, this was a program that was cut back in 2013. Is that something that right since 2013, Grain Growers of Canada pushed the government not to do? Did it continue this advocacy all along in terms of that changing from when the Conservative government cut this program?

3 p.m.

Executive Director, Grain Growers of Canada

Erin Gowriluk

Certainly through the AGgrowth Coalition, which Jeff Nielsen, our chair, co-chairs, that's been an ask on the books for just over a year now. Farm circumstances across the country have changed over the last five years. As a result, we really feel the need now to see an increase of the 85%.

3 p.m.

Liberal

Kody Blois Liberal Kings—Hants, NS

Thank you very much.

3 p.m.

Liberal

The Chair Liberal Pat Finnigan

Thank you, Mr. Blois.

That ends our first panel.

I would like to thank Mr. Fontaine and Mr. Laliberté, the representatives of Chicken Farmers of Canada, as well as Mr. Nielsen and Ms. Gowriluk, representing Grain Growers of Canada.

Also, from the Canadian Canola Growers Association, Mr. Carey, thank you very much for joining us today.

We shall suspend for five minutes. We'll be back in five minutes with the next panel.

Thank you so much.

3:10 p.m.

Liberal

The Chair Liberal Pat Finnigan

We now resume the meeting.

During the second hour, we are hearing from Joël Cormier, chair of the board, as well as Jean-Michel Laurin, president and chief executive officer, both from the Canadian Poultry and Egg Processors Council.

We will also hear testimony from Rory McAlpine, second vice-president, government and industry relations, Maple Leaf Foods, as well as from Paulin Bouchard, president and chief executive officer, and Denis Frenette, assistant director general, both from the Fédération des producteurs d'oeufs du Québec.

Welcome, everyone.

We will begin with opening remarks. Speaking time for each group is seven minutes.

Mr. Cormier or Mr. Laurin, go ahead. You can share your speaking time if you like.

3:10 p.m.

Jean-Michel Laurin President and Chief Executive Officer, Canadian Poultry and Egg Processors Council

Good afternoon, Mr. Chair and members of the committee.

My name is Jean-Michel Laurin, and I'm president and CEO of the Canadian Poultry and Egg Processors Council, CPEPC, or CCTOV in French. I'm joined today by our board chair, Mr. Joël Cormier, who is also senior vice-president, chicken division, at Exceldor co-operative.

Thank you for inviting us to appear before the committee to brief you on our industry's response to COVID-19 and the challenges we need to overcome. Before I turn it over to our chair, Mr. Cormier, I'd like to say a few words about our association.

CPEPC represents Canadian hatcheries, egg graders and processors, chicken and turkey processors, and further processors. Collectively, our membership represents 179 establishments, both small and large businesses, and covers every province.

Two things our members have in common are that they compete against one another in an open market, and they also purchase their primary inputs—chicken, turkey, eggs and hatching eggs—from supply-managed producers. Our members fall outside supply management. Overall they process over 90% of the poultry and egg products raised by Canadian farmers. The large majority of our members' production goes to feed Canadians through the retail food service and restaurant sectors.

I'd now like now to invite our chair, Mr. Cormier, to make introductory remarks on behalf of our association.

3:15 p.m.

Joël Cormier Chair of the Board, Canadian Poultry and Egg Processors Council

Thank you, Mr. Laurin.

Mr. Chair and honourable members, thank you for giving us the opportunity to appear before you today to brief you on our industry's response to the COVID-19 crisis and on what we are doing to meet the expectations of the government and Canadians.

I want to begin by saying, on behalf of all of our members, that we are taking very seriously our role of industry designated as an essential service, immediately following health and safety services.

Since the beginning of the crisis, two primary objectives have guided our actions as industry. The first is ensuring the health and safety of people who work in our facilities. That includes not only our employees, but also all Canadian Food Inspection Agency inspection staff who must be on site at all times in our slaughterhouses.

Our second major objective is to keep our factories operating, so that Canadians can continue to purchase eggs, chicken and turkey, despite all the market disturbances. Canadians are counting on us to provide them with food to eat and feed their families, and egg and poultry producers are also counting on us to process their products. We take those responsibilities very seriously. We play a key dual role of ensuring constant food delivery to consumers and, at the same time, avoiding a break in the supply chain, which consists of living animals.

Responding to the COVID-19 pandemic and making sure we meet the two objectives I just outlined has not been without its challenges for us. I would like to focus your attention on three of those challenges.

The first one is the significant costs our members have incurred to keep operating during this crisis. The second is the rapid deterioration of market conditions as demand and prices fall, especially from the food service sector. The third is that the combination of these two elements puts our sectors in an unsustainable and vulnerable position. This is why we have asked the government to adapt their measures to help us overcome these challenges.

To expand a little bit more on the first point, keeping our workers safe so we can continue to operate our plants is having a significant financial impact on our sector. For all CPEPC members just in March and April, we're talking about more than $87 million in unbudgeted costs, or a little over $3,000 per worker. Despite taking these measures, some plants have had to shut down production shifts and sometimes their entire plants for several days to ensure workplace safety.

On the second point, we had to rapidly adapt to an unprecedented level of market disruption. We've seen an overall decrease in market demand, in large part due to a massive drop in demand from our food service sector and the institutional segment. Over one-third of our production was going to that sector. Even if this market collapsed, we still had to process those poultry and egg products as if the market were still there, because we are dealing with a live product. Because of the severe market correction in the poultry sector especially, wholesale prices have also dropped significantly since the beginning of the crisis.

On the third and final point, what we want to stress is that this perfect storm creates vulnerabilities within our supply chain. Under normal circumstances in a business, cash flow drives business investment. Right now that is not the case. We have to make significant investments to keep our plants running despite COVID, but the reduction in demand and the deterioration of market conditions are putting strong pressure on our financial sustainability. For this reason, and because most of our members don't qualify under existing programs, we have been reaching out to governments to adapt and target their support measures to the unique reality we are facing.

We hear that there is $1.6 billion available to producers through business risk management programs. In our sector the impact of COVID is largely being felt by our members—hatcheries, graders and processors—but those programs are made available only to producers. We have been asking both levels of government, provincial and federal, to expand one of those programs, the AgriRecovery segment, so that the extraordinary costs incurred by processors can be eligible.

Another idea we share is to expand the Canada emergency wage subsidy using a sliding scale approach so that processors with a 15% to 30% reduction in net income could qualify.

We also welcomed the emergency processing fund and the surplus food purchase program announced a few weeks ago, and we have made recommendations on how these measures should be applied to help our industry.

I should also mention that poultry and egg processors were promised financial support to mitigate the impact of CUSMA and CPTPP. More specifically, we ask that this support focus on capital investments and on allocating the majority of import quotas to processors and further processors. Having the government follow through on its commitments is more critical than ever.

In closing, we hope we can work with you to overcome the challenges we described today—additional costs, lost revenues and an unsustainable financial situation that is resulting from this. By working together we want to ensure that we get back to a sustainable position as an industry, and that we can ensure a long-time presence for the benefit of customers and consumers.

Thank you.

3:20 p.m.

Liberal

The Chair Liberal Pat Finnigan

Thank you, Mr. Cormier.

Now we'll go to Maple Leaf Foods Inc., for up to seven minutes.

Go ahead, Mr. McAlpine.

3:20 p.m.

Rory McAlpine Senior Vice-President, Government and Industry Relations, Maple Leaf Foods Inc.

Thank you very much, Mr. Chair and committee members.

It is a great pleasure to represent Maple Leaf Foods and to provide our point of view on the impact of COVID-19 and on the future.

You've heard from many witnesses, and I could of course give you a great deal of information about how the crisis has impacted our business and the sector broadly, and about our direct experience in the crisis management response of our industry and government partners collectively. I'll be happy to answer any questions on those issues, and I've shared a longer document that gives a bit of context for what I wanted to say, but I really wanted to focus more on the future, on what needs to happen for our sector to recover and on what are some of the processes and understandings we should have to make the most use of that, because, as we all know—I think it was Winston Churchill who once said it—you should never waste a crisis.

In the months to come, we owe it to Canadians to take a careful forensic look at our food system and reflect critically on what needs to change operationally and strategically to make sure that we are better prepared in the future. I have some immediate thoughts.

First, there needs to be at least one inclusive evidence-based post-mortem or lessons learned exercise on the agri sector crisis response as a subset of the national inquiry that will presumably be led by Public Safety Canada. The federal government must be willing to put the review in the hands of one or more independent bodies, such as the Canadian Agri-Food Policy Institute or the Arrell Food Institute, both of which in fact have been thinking about this and have already announced a joint process to undertake such an inquiry. Leaders from government, agriculture, the CFIA, Health Canada and the Public Health Agency and so on, along with their provincial counterparts, should be directed to participate fully and transparently in such a process.

Second, it needs to be asked why Canada did not have a cross-agency business continuity plan for the agri-food sector similar to the U.S. food and agriculture sector-specific plan, which was last updated in 2015, and also, if we build one, what will be done to actually exercise one.

Coupled with this should be a serious examination of integrating federal, provincial and industry interests into a more cohesive crisis governance model that's capable of making informed, timely decisions. We could look at models in other countries. We need to ask whether plans and structures to deal with agri sector specific crisis events, such as African swine fever, are up to the task, and whether in that case a group like animal health Canada could be launched in 2020.

Third, there needs to be careful consideration of what COVID-19 has fundamentally taught us about the resilience of the Canadian agri-food system and what we need to change, both to better manage the forward risks and to seize the commercial opportunities in a time when other Canadian industries may be permanently damaged. The areas of specific focus, in our view, need to be the following.

The first is the economic health of subsectors of Canadian agri-food going forward, at least until there is a COVID-19 vaccine. This is important, since some farms and businesses will be bankrupt, food service sales may remain impaired for a very long time, workplaces will operate with higher absenteeism, operating costs will be higher with some production lines running more slowly and food prices will have to rise, etc. Some useful literature has already been published by the academic community on this.

The second area is the future state of global agri-food policy and trade and the implications for Canada’s agri-food trade and investment strategy. We are a trade-dependent sector, so this matters a lot. The OECD has already begun to examine this and, given our export dependence, Canada should participate fully in that work. Canada must align with like-minded countries to beat back protectionism and highlight Canada’s export capacity as a key contributor to sustainable food production and global food security. To do this, we also need to fix our relations with China.

The third issue, while taking full account of the difficult fiscal circumstances facing all Canadian governments, is the design and scope of programming under the federal-provincial Canadian agricultural partnership, which expires in 2023.

In our view, there needs to be a top-to-bottom review to ensure that it is appropriately mitigating business risks for the agri-food supply chains, not just the farm sector, while making the right investments in research, sustainability, animal and plant health, export market development and so on. Commitments on regulatory modernization and solutions to the labour crisis should be brought within the CAP framework.

Next, we need to look at the appropriate design, funding and governance of the food policy for Canada that was announced last year. The need for a joined up whole-of-government food policy has been made very evident throughout the pandemic, but many priorities will likely have to be rethought, not least because of the new fiscal circumstances. Health Canada’s regulatory agenda for the food sector also needs to be brought into the food policy framework and, in our view, be less activist-driven.

Finally, there's the issue of food insecurity in Canada and what needs to be done to prevent it from getting worse. This is something that Maple Leaf Foods cares deeply about, and our Maple Leaf Centre for Action on Food Security could help in this area of investigation.

In conclusion, the Canadian agri-food sector has a huge contribution to make to Canada’s post-COVID-19 recovery, perhaps more than any other sector of the economy. The pandemic has demonstrated that for many social, environmental and economic reasons, the sector matters more than ever, and Canadians see that. Under the right set of conditions, the sector has the ability to attract investment and create employment at a faster pace. It has immediate employment opportunities for thousands of unemployed Canadians. It is also experiencing an IT-enabled technology revolution that plays to another major area of strength for Canada. In the aftermath of COVID-19, there's an opportunity to pivot business models and government thinking towards the priorities of resilience, risk prevention, sustainability and innovation-driven growth. Where the crisis demonstrated that certain legacy structures and decision-making processes—whether within government or between government and the agri-food sector stakeholders—got in the way of better, quicker decisions—

3:25 p.m.

Liberal

The Chair Liberal Pat Finnigan

Thank you.

3:25 p.m.

Senior Vice-President, Government and Industry Relations, Maple Leaf Foods Inc.

Rory McAlpine

—or where the rules were bent with no ill effect, there should be a strong appetite for reform and culture change.

Thank you.

3:25 p.m.

Liberal

The Chair Liberal Pat Finnigan

Thank you, Mr. McAlpine. We have to move on to the next witness.

Next is the Fédération des producteurs d'oeufs du Québec, for seven minutes.

3:25 p.m.

Paulin Bouchard President and Chief Executive Officer, Fédération des producteurs d’œufs du Québec

I would also like to thank you for extending the invitation to the Fédération des producteurs d'oeufs du Québec. This is the first time I have had an opportunity to participate in this committee, and I am happy about that.

This afternoon, I will talk to you about how our sector has had to adapt since the beginning of COVID-19. Those adaptations have been possible essentially thanks to our supply management system. Fortunately, despite the pandemic's numerous impacts, our system has helped us a great deal, at the end of the day, to mitigate the repercussions and circumvent the challenges we have had to address over the past few weeks.

I will briefly introduce our federation. In Quebec, we produce 1.9 billion eggs annually, and 160 producers that account for approximately 6 million laying hens. Our industry is split into two markets: the market referred to as “table eggs”, which is related to grocery stores and restaurants; and the processing market, which accounts for about 25% of our markets.

The stakeholders are, of course, the farmers who produce those eggs, the graders who wash them and package them for sale, and our processors, represented this afternoon by Mr. Laurin and Mr. Cormier, who handle product processing.

In the first two or three weeks of the crisis—and you have probably heard about this—we had to quickly make a transformational shift concerning our markets. The closing of restaurants has resulted in our graders having to redirect a major portion of the production toward grocery stores. You will understand that packaging is not really the same in that case. We have also had to adapt our marketing. You have heard about empty shelves in grocery stores. We were something of a victim of what is called the “toilet paper syndrome”, where people would grab products in large quantities in fear of running out. When the shelves were emptied, vendors quintupled their orders. They were ordering five times more eggs than the previous week, which posed a major challenge for our graders. We worked together, we communicated and we overcame that stage.

The second event that followed soon after is the aftermath for meat processors. Plants and slaughterhouses also had to adapt. We were told that our spent fowl, our spent chicken at the end of their life, could no longer go through traditional slaughterhouses, as the staff could no longer meet the demand. We had to provide our producers with guidance on slaughtering or euthanasia on the farm. Supply management enabled us to to spread the cost out across industry and avoid causing disproportional impacts on some of our producers.

The good news is that we are now experiencing something of a return to normalcy. We can reassert the value of those carcasses through existing slaughterhouses and turn them into chicken broth. So the situation seems to be relatively resolved.

Finally, let's talk about the third adaptation. In the beginning, the restaurant market experienced a huge drop, while the table egg market was growing. The processing sector was relatively stable. However, after a month, we saw nearly 70% of the processing market collapse. There was no longer any place for eggs. We could no longer send them to processing because they were not needed on the table egg market. To avoid waste, we had to make donations to the tune of 84,000 dozen eggs. We had to spread out those costs to be able to donate the eggs.

We are now at the stage where we have to decrease production by prematurely slaughtering flocks that should have been slaughtered two weeks later in order to prevent us from throwing away our products or producing needlessly. That leads to costs, but the entire sector can share those costs to avoid any bankruptcies or disappearances of small farms in our regions to the benefit of other larger players.

Supply management, combined with programs that were already somewhat planned or are already set up, enables us to stabilize the sector and take care of supply. Our next challenges mainly have to do with U.S. imports. In Canada, we are prematurely slaughtering about 2 million laying hens. In Quebec, we are preparing to send 400,000 laying hens to valorization and processing earlier. We would not want to see U.S. products arriving on our market at the same time, as that would exacerbate the issue right now.

Fortunately, we have solid communications with our importers, graders and so on. However, we also need government assistance to make import rules more flexible. Some flexibility has been added by the Canadian Food Inspection Agency in terms of identification on packaging, which is appropriate. That has been well received. It's a good thing. We would have liked the agency to take things a bit further to give us more flexibility in terms of grades. We wanted Global Affairs Canada to cooperate with producers, importers, graders and processors when it comes to import management.

Currently, we are being told that trade rules require imports. We would like there to be better cooperation and better round tables to minimize the impact. We are not against trade. We don't want to create a war between the United States and Canada. We just want industry, producers and the government to implement the best possible procedures to minimize the impact.

3:35 p.m.

Liberal

The Chair Liberal Pat Finnigan

Thank you, Mr. Bouchard.

We will go to questions and answers now.

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

May 29th, 2020 / 3:35 p.m.

Conservative

Richard Lehoux Conservative Beauce, QC

Thank you, Mr. Chair.

I also thank all the witnesses for joining us this afternoon.

My first question is for Mr. Cormier and concerns the emergency fund for assistance for processors, which was implemented in the context of COVID-19. You said earlier that, in the beginning, your organization had to absorb additional costs of $87 million to adapt to the situation. The program that was launched provides $77 million. My understanding is that not all data is currently available, but what is the extent of this? I have already put the question to other producers from the agrifood sector, who have also had to incur significant costs.

Will parameters related to spreading out that $77 million result in you having enough money? Will you have to absorb the rest of the costs?

What is your take on that, Mr. Cormier?

3:35 p.m.

Chair of the Board, Canadian Poultry and Egg Processors Council

Joël Cormier

That's a good question, Mr. Lehoux. The $77 million that is allocated to the entire agri-food industry is clearly not enough, given the $87 million that we mentioned for the poultry sector alone.

I heard this week about some parameters that will guide the allocation of the $77 million. Large companies would only be entitled to 25% of their expenses, and in those expenses, the costs paid to buy disposable masks, for example, would not be allowed. For a company with 3,500 employees like ours, buying washable masks to qualify for the expense makes no sense. If I have my mask washed, I will never get my own mask back. Would anyone want to wear a mask that has been washed and worn by someone else?

If what we have heard this week from some of the agencies consulted on these parameters turns out to be true, the 25% percentage granted to large companies is not enough. We are aiming for an assistance program that would reimburse 50% of our expenses. The protective measures used, such as disposable masks, for example, must be made eligible. In the agri-food processing industry, washable masks are not a feasible solution.

3:35 p.m.

Conservative

Richard Lehoux Conservative Beauce, QC

So that is a really important point.

Mr. Laurin, do you have something to add?