Agriculture Committee on June 19th, 2020

[The Vice-Chair, Conservative, John Barlow]

Welcome back, everyone.

The clerk highlighted a lot of the issues. This works very similarly to a committee meeting, and I know many of you have presented at a committee meeting before, although obviously, we're on Zoom. He did highlight the language icon on the bottom. It's very important for our interpreters that you are on the language that you are speaking. That will ensure that we can move smoothly and that we have as much time for questions as possible. When you're not speaking, please ensure that your microphone is on mute. We want to ensure that we have good sound for our translators.

I would like to welcome our witnesses for the second half of our meeting today.

From the Canadian Horticultural Council, we have Brian Gilroy and Jan VanderHout.

It's good to see you both back at committee.

From the Canadian Ornamental Horticulture Alliance, we have Andy Kuyvenhoven.

From the Prairie Oat Growers Association, we have Jenneth Johanson and Chris Rundel.

Thank you very much for being with us today and giving us the opportunity to hear your testimony. You have seven minutes for your presentations, and they will be followed by questions and answers from members of the committee.

We'll start with the Canadian Horticultural Council. You have seven minutes.

[Jan VanderHout, Vice-President, Canadian Horticultural Council]

Thank you for the opportunity to present to the committee on behalf of the Canadian Horticultural Council, representing the growers of over $5.7 billion in farm cash receipts for produce annually.

Canada's agriculture industry is primed for immense growth, as identified by the advisory committee on economic growth in 2017 and reinforced in the 2018 report of the agri-food economic strategy table, which set ambitious growth targets for our sector.

Navigating an unstable and unpredictable business investment climate as well as trying to manage risk beyond our control, such as pests, weather and disease, makes it increasingly difficult for us to sustain our family farms, let alone expand them. The onset of the COVID-19 pandemic and its impacts have shown the cracks in the current ineffective business risk management tools and have greatly compounded risks to our growers.

Despite following the necessary health and safety and quarantine requirements, there have been a number of outbreaks of COVID-19 on fruit and vegetable farms. Our first concern in these instances is the health and safety of everyone involved, especially workers and growers. From the perspective of a farm's capacity to produce food, the consequences of an outbreak can be devastating due to the impacts on the farm's ability to perform essential activities like planting, maintaining plant life, harvesting crops and packaging produce.

In the event of an outbreak, workers must isolate, and crop maintenance, harvesting and packing cannot occur, leaving essential work undone, causing product and crop loss that cannot be recovered. An ad hoc safety net program should be considered to see farmers through these extraordinarily difficult circumstances when a farm is in need.

The federal government has signalled to the provinces that labour shortages can be deemed an eligible risk for the horticultural sector under the AgriInsurance program. Unfortunately, we have not seen an uptake across the provinces, and there are a number of commodities, such as greenhouse vegetables and berries in some provinces, that cannot access crop insurance, so this announcement does not go far enough to addressing the need.

CHC requests that the government work with industry to ensure that BRM programming is diverse enough to include the various regions, crops, schedules and farm sizes. It must also provide the stability farmers need to grow, maintain, harvest and pack this important part of Canada's food supply, both this year and for years to come.

For many farmers of edible horticultural products, their season is at the mercy of unpredictable and sometimes downright brutal weather. Climate change will continue to exacerbate this, and pest and disease infestation can wipe out entire crops. In recent years, growers have experienced increasing market and trade risks due to trade disruptions and non-tariff barriers in many key markets. There were more extreme climate-related events, such as last year's floods, hurricane winds, heavy rains, early snowfall and frost across Canada.

Costs have increased rapidly, while farm receipts stagnate.

I'll hand it over to you, Brian.

[Brian Gilroy, President, Canadian Horticultural Council]

Thanks, Jan.

It is clear that the business climate for fruit and vegetable growers has never been riskier. To mitigate some of the risks that our growers take on year after year, the Canadian Horticultural Council is pleased to provide its recommendations for improving the federal suite of BRM programs.

First and foremost, changes to the AgriStability program would have the most meaningful and far-reaching impact for growers. We recommend that the AgriStability program be amended as soon as possible to raise the coverage level to 85% of reference margin, and the compensation rate to 85¢ on the dollar of loss beyond this trigger, and eliminate the reference margin capping.

Secondary measures, such as ensuring that federal, provincial and territorial governments increase their share of the AgriInvest contribution, and program caps need to be increased to reflect the current realities in agriculture.

The effectiveness of the AgriRecovery program needs to be improved. Where catastrophes with long-term business impacts are concerned, the program should be streamlined to provide a timelier response. Narrowing the gap between AgriRecovery compensation and that of other business risk management programs will also help growers effectively recover from disaster situations.

Additionally, the federal government must examine options for enhancing access to production insurance for commodities that currently do not have traditional insurance programs, such as greenhouse growers. Some other crops have available production insurance programs but very low participation rates, and enhancements are needed. CHC has been proactive in working on a concept of recognition of risk mitigation. Many growers actively spread the risk or, in other words, diversify their operations through growing a variety of different crops, multi-season harvests, or growing in different geographic areas. These are just some examples.

Currently, under a whole farm program like AgriStability, diversified farms may not receive adequate coverage for a drop in the value of one or more of their crops if the value of one or more of their other crops has increased in the same program year, in other words, offsetting the risk.

Product diversification and having farms mitigate their own risks should be encouraged rather than penalized through program design. We therefore encourage the government to establish comprehensive and equitable insurance coverage by considering the individual risk profiles of farms.

CHC has submitted a proposal under the AgriRisk programs to explore developing a whole farm, grower paid, top-up insurance product for horticulture growers, which would address the gap in coverage and serve as a complement to AgriStability and AgriInsurance.

To ensure the long-term stability and growth of Canada's agricultural sector and edible horticulture in particular, a stronger partnership between the federal government, provinces and territories, and industry experts is needed to develop meaningful business risk management programs for growers. It is time for the Canadian agricultural partnership to become more than words.

Current funding envelopes hinder imaginative discussions to changing program policies and structures. If the Canadian government is serious about prioritizing agriculture as a key economic driver, then it needs to be prepared to make program changes based on demonstrated needs and gaps, rather than limiting itself to small adjustments with rigid existing funding allocations.

We look forward to working with the federal government on solutions for our sector. The agricultural sector plays a critical role in Canada's economy, and we believe it can be a big part of the economic recovery.

Thank you.

[The Vice-Chair, Conservative, John Barlow]

Thank you very much, Mr. Gilroy. We appreciate that.

We will now move to the Canadian Ornamental Horticulture Alliance.

Mr. Kuyvenhoven, you have seven minutes.

[Andy Kuyvenhoven, Past President, Canadian Ornamental Horticulture Alliance]

Thank you, Mr. Chair and committee members, for this opportunity to address you this afternoon.

My name is Andy Kuyvenhoven. I own and operate a flower greenhouse farm in Ontario. I serve as a director on the board of the Canadian Ornamental Horticulture Alliance and I am a past president of the organization.

As a citizen of this great country, we are thankful for the work our elected officials and public servants continue to do during these extraordinary times in keeping us safe and doing their best to improve what is happening in our economy.

I would like to address what ornamental horticulture is. Our products include trees, shrubs, turf, potted plants and cut flowers. You can buy our products in garden centres, at florists and large retail stores across Canada.

How important is our sector to the Canadian economy? Let's review key facts about the vital role ornamentals play in Canadian agriculture. The figures I am citing are taken from a publication of Agriculture and Agri-Food Canada entitled “Statistical Overview of the Canadian Ornamental Industry, 2018”.

Our sector had a farm gate value of $2.3 billion across Canada. Every province in Canada contributes to our sector. Our sector had exports valued at $543 million, primarily to the U.S.A. Our sector directly employs over 26,000 people at the farm gate level, and as many as four times that in the activities after farm gate, such as roles in retail and landscaping services.

Why should we care about ornamental horticulture in Canada? Its value has been particularly shown during the past two months when millions of Canadians were confined to their homes due to the risk of the spread of COVID-19. One activity that Canadians could safely pursue was gardening. Gardening is healthy for the soul and is food for the soul. Not only is it recreational, but it also allows amazing expressions of creativity. After early setbacks at Easter in April, when product had to be dumped and when market channels were closed, the demand for our products has been strong in May and in the beginning of June when Canadians needed and valued the great diversity of the plants we produce.

In addition to enhancing the aesthetic appeal of homes and workplaces, plants give us great value. Plants improve the quality of soil, air, water, help manage greenhouse emissions by taking carbon dioxide from the air, reduce soil erosion, provide living green infrastructure to manage heat waves in urban centres and reduce flood risk. They are essential to preserving and increasing biodiversity, providing a habitat for birds and insects.

Now that we have explained our sector of agriculture and why it matters, let's talk about the business risk management programs.

First of all, our sector is grateful to be in an advanced country like Canada where the government provides business risk management to our farmers. We operate a business that has unique risks—risks that our entire crop could be wiped out, or that an entire market might collapse. We appreciate the fact that the government has put in place programs to support us during such times of distress and crisis.

How could the current suite of programs be more responsive to our needs?

Let's first talk about AgriStability. As the scale of agriculture has increased, the fact that this program has a cap of $3 million as a maximum payout for losses incurred in a year is an issue. Our sector supports the recommendation made by the Canadian Federation of Agriculture to raise this cap to at least $5 million. Many of the producers in our sector, both nursery and floriculture farmers, have a highly seasonal crop that comes to market in the spring, the optimal time for planting for most ornamental plants. There's also a window for nursery in the fall. If product cannot be sold during this window, as happened at Easter, the losses to our sector are catastrophic. We threw out a large percentage of our Easter crop.

When COVID-19 hit our sector, we retained four CPA firms to analyze the worst-case scenario. If our highly seasonal product inventory had not been moved to market in April and May, what would the impact have been? Based on the sample of 12 farms, four nurseries and eight floriculture farms, five of the 12 operations would have capped under the current structure. The losses not covered by the program would have been so significant as to have caused major liquidity challenges leading to insolvency.

The loss of the largest farms in our sector would be devastating as they tend to be the most advanced in terms of technology deployment and export savvy. They are also the largest employers, another aspect of the program design that is crucial to ensure that the funds needed by growers flow to them when they are needed. For this reason, the interim payout needs to be raised to 75% permanently as part of the program design rather than being at the discretion of program managers.

Finally, with regard to AgriStability, the reference margin of 70% needs to be examined. In B.C. it's 80%, as a result of provincial government intervention. While our growers in B.C. appreciate the province's support, it would be good to get it to 85% across the entire country. A grower who lost 25% of the expected business would receive nothing when the trigger point is set at 70%. We request that the reference margin be raised to 85%.

On AgriRecovery, I will echo the comments of a previous speaker who said that under AgriRecovery, he would be paid to throw his product out, but that's the minor cost. The real cost would be the loss of product we have produced and that we need to throw away. That issue needs to be solved because that is our biggest cost.

In summary, our sector is composed of hundreds of small farm entrepreneurs who go about their business day to day. Our farmers have grown substantially over the years through generations. Our sector is not a major user of business risk management. However, during the COVID-19 time frame, we've learned that we do need it, and we've identified the aforesaid issues inside of the program.

We ask you to please re-examine all of that.

Thank you.

[The Vice-Chair, Conservative, John Barlow]

Thank you very much for your insight and your expertise. Thank you for giving me the big list of “honey do” stuff in my backyard this spring. I really appreciate that.

Now we will go to Ms. Johanson, from the Prairie Oat Growers Association. We also have a very large thunderstorm rolling through here, so I did warn my colleagues that I may black out here in a few moments if I lose power, but so far so good.

Ms. Johanson and Mr. Rundel, you have the floor for seven minutes.

[Jenneth Johanson, President, Prairie Oat Growers Association]

Thank you, Mr. Chairman.

Members of Parliament and observers, it is an honour to speak on behalf of the Prairie Oat Growers Association.

POGA represents about 90% of the oats grown in Canada. Our crop is worth approximately $1 billion annually and is a heart-healthy, nutritious crop. Canada is the world's largest exporter of oats, representing 70% of the global trade. We are very pleased to note there has been tremendous investment in domestic milling capacity, so we are working to add more value in Canada to those oats we eat here and abroad.

These past few months have driven home the importance of the agri-food sector, as farmers, ranchers, meat packers, millers and retailers have been on the front line of response. Agriculture truly is an essential service. In this light it is more important than ever that we improve the business risk management programs. AgriStability, AgriInvest and the cash advance program should help address risks due to issues such as weather, market access issues and other factors beyond our control. AgriStability can be difficult for producers to collect even when income falls below a sustainable level, leaving unmanageable risk for producers. In particular, the challenges with AgriStability fall in five areas: it's not transparent, it's not predictable, it's burdensome administratively, it's inadequately funded and it's hard to access. Farmers report AgriInvest is easier to use, with strong predictability, bankability, transparency and a low administration burden.

Oat growers support the call by many groups, including Grain Growers of Canada and the Canadian Federation of Agriculture, for the immediate injection of a minimum of 5% of producers' 2018 allowable net sales into AgriInvest accounts, which is one of eight actions outlined in our submission. These eight actions are needed to address immediate crises, not only caused by COVID, but also prior disruptions to trade in multiple countries, including China and Italy.

In the medium term, one, we suggest this committee consider recommending the following: increase the AgriStability benefit trigger level to 85% for the 2019-20 program year, and for the remainder of the Canadian Agriculture Partnership; remove the reference margin limit; increase the maximum payment to $5 million; allow for retroactive enrolment for the 2019-20 program year; and put systems in place to process claims more quickly, including requests for interim payments. These changes will give farms and financial institutions confidence to keep operating and to keep credit available.

Longer term, to address AgriStability's current challenges, we would propose the following.

First, reinstate the AgriStability reference margin to 85% instead of 70%. There have been significant cost increases since 2013, when the margin was reduced.

Second, align the reference margin with producers' tax filing methods and use the net profit as determined on taxes with the same allowable expenses to be included. POGA realizes this may require a change to the reference margin, but then it should be predictable and verifiable. Farmers would not apply if it were in a profit position. This would also lower the administration burden on both the government and producers, reducing costs.

Third, when a producer increases their production insurance, for example, to 80%, that insurance payout should not be allowed to be included in the reference margin for AgriStability because the producer has paid a fee to buy insurance, and they should not be penalized for that.

To be clear, POGA would prefer that AgriStability be increased to 85% and improved. Should 85% not be reached, POGA does not believe that AgriStability will meet farmers' needs, and for the subsequent cap period, BRM programs should be altered to consider the following options.

The first is to eliminate AgriStability and increase the AgriInvest percentage to a 5% match.

The second is to eliminate AgriStability and put 100% of those dollars to increased crop insurance coverage to greater than the current 80% maximum level, and/or reduce administration costs.

The third is to increase the interest-free portion of the advance payments program from $100,000 to $250,000. It should be open to all commodities. Several commodities, including oats, have been negatively impacted and need security loan programs. The move to $250,000 would be 25% of the $1-million maximum allowable, which is consistent with the ratio of interest-free to maximum allowable in prior years, which was previously $100,000 of $400,000.

These options would require additional considerations. POGA supports the increased interest-free amount for the advance payments program that was provided in 2019, but believes it should have been applied to all crops.

On applications for the APP, it is recommended that a lower administrative burden be implemented for loans of $250,000 or less. Currently every credit supplier and banking institution must sign a priority agreement, which is very time-consuming. For loans of $250,000 or less, it is suggested that priority agreements are needed from three creditors or 60% of the farm operations creditors, whichever is less.

Cut AgriStability, but increase crop insurance coverage percentage and allowable expenses to cover labour, depreciation, carbon tax, equipment, etc. Also, most farmers do not have off-farm jobs. Farming is their employment, and therefore it should be expected that they take a salary at a set amount per acre.

Cut AgriStability, but increase the amount paid for AgriInvest to 5% with no maximum. While this would, on paper, increase total dollars from the federal government, it would eliminate all risk for the government and put the responsibility on producers to save that money to use in tough years. This would also significantly reduce the administrative costs of the BRM programs, as AgriStability is very labour intensive.

In conclusion, functioning business risk management is critical for farmers and the country. BRM programs must be monitored for effectiveness, and there needs to be methods for refinement at more regular intervals.

Farmers and agricultural businesses are the backbone of Canada’s rural economy. Rural communities frequently see less investment in infrastructure, services and job creation than other areas. With this in mind, it is important to consider that business risk management is one of the primary ways the Government of Canada not only supports its farmers but its rural communities as well.

Thank you, Mr. Chair.

[The Vice-Chair, Conservative, John Barlow]

Thank you very much, Ms. Johanson. I appreciate your taking the time to be with us, and the outstanding background behind you beats every virtual background that I've seen on these Zoom meetings. I appreciate your finding a good Internet spot. You're not the first one who's come on who has been in the garage. I don't know what it is with Manitoba and Ontario that your Internet works much better in your garage. It's not the case in Alberta, but that's okay.

We'll now move on to the question and answer portion. For six minutes, we'll begin with Ms. Rood.

You have the floor for six minutes.

[Lianne Rood, Conservative, Lambton—Kent—Middlesex, ON]

Thank you, Chair.

I'll be splitting my time today with Mr. Lawrence.

My question today is for Mr. Gilroy or Mr. VanderHout. I understand this industry has faced a lot of challenges already so far this year, so my question is this. If the government does not respond to the issues your industry is facing right now, especially in light of COVID-19, do you foresee bankruptcies or losses of our family farms? They're the ones producing our fruit and vegetables, so do you foresee a loss or bankruptcies?

[Jan VanderHout]

Absolutely, there is risk of bankruptcy of fresh fruit and vegetable farms across the country. We are currently seeing farms with outbreaks of COVID-19, making it virtually impossible to maintain their crops, and if they're in the middle of harvest, then it's hard to get the harvest in. Some of the asparagus crop in Ontario was mowed because there was an absolute shortage of labour.

That said, there is also the potential that you may not have this type of situation on your farm if you don't have the COVID-19 outbreak at a critical time of plant maintenance or harvest. If you get your product to market when the prices are good, you could have a good year.

We need something that can address the risk, and it's not just a blanket payout; it's only when the farms are hit with the unexpected challenges coming from COVID-19.

[Lianne Rood, Conservative, Lambton—Kent—Middlesex, ON]

If we see a loss of these family farms—because a lot of them are family farms, and I come from a family farm that is a big potato producer—how is this going to impact Canada's food security, not only for this year but also looking down the road into the future?

[Jan VanderHout]

I hope you don't mind if I answer this one, too, Brian.

That's a really good question. I think altogether too often Canadians forget where their food comes from, and they think it comes from their grocery store. The reality is that all of our food comes from farms and food production facilities, and if those farms go into bankruptcy, the supply of fresh fruit and vegetables could be in jeopardy not only this year but for years to come.

As a consumer, this is a great concern for me. I have an abundant cucumber supply on my farm, but what about the rest of my groceries? It's of profound concern to me, and we, as Canadians, need to look at where our food will be coming from this year and for the years to come.

The things that are happening now with COVID-19 just put to a head the issues that farmers face, the challenges that they face in their daily routines and their production model. It really shows the need for a mechanism to sustain them and make sure they can continue to feed the population.

[Lianne Rood, Conservative, Lambton—Kent—Middlesex, ON]

That's great. Thank you.

Just out of curiosity, I have a quick question for our ornamental horticulture folks. Is AgriInvest something that is useful for your industry?

[Andy Kuyvenhoven]

In its present form, no, because the cap stops at.... I think I get $10,000 this year, or I got $10,000 last year. A good soil-mixing machine is worth $25,000 to $35,000, so it doesn't line up at all. If you remove a cap and have it endless, or to our maximum, then I think it would be useful, yes, but it does not address the hard issue that Mr. VanderHout was talking about, which is serving the needs of farmers in crisis versus those who are successful.

[Lianne Rood, Conservative, Lambton—Kent—Middlesex, ON]

Thank you.

I'll give my time over to Mr. Lawrence.

[Philip Lawrence, Conservative, Northumberland—Peterborough South, ON]

Thank you very much.

First of all, I have a quick question for you, Mr. Kuyvenhoven. What does your industry look like if there is a second wave? I'm curious about the ornamental industry. Obviously, it's been affected a little differently, I think, than some of the other horticulture sectors have.

[Andy Kuyvenhoven]

Yes. Our sector was negatively impacted strictly because our distribution channels closed down, both in the U.S. and in Canada. When the wave hit at the beginning of COVID, as you're all well aware, toilet paper took front stage, and so did purchasing non-perishable groceries.

What happened was that distribution channels stopped handling flowers for a period of time, and that coincided exactly with Easter. That was our catastrophe. During that Easter time, we couldn't sell an indoor flowering plant, and a lot of the floriculture products have a shelf life that's a lot shorter. When their shelf life is over, they land in the garbage.

We're not anticipating that type of intensity because we all have experienced the first wave. The only question is, what stays open and what doesn't stay open and how does that affect us? At this point, we're not absolutely sure, but my best calculation is that it won't be as bad as last time.

[Philip Lawrence, Conservative, Northumberland—Peterborough South, ON]

Okay.

Going back in time, is your industry more challenging or less challenging for you than it was in 2015? I'll go quickly to all three of you.

[Andy Kuyvenhoven]

Versus 2015, this is much more challenging with the whole area of COVID and the risks that were exposed with COVID-19. That being said, since we've opened back up, as I said in my report, the floral sector and the nursery sector have taken off, because people are staying home and making their yards beautiful and people like Mr. Barlow are getting “honey do lists”.

[An hon. member]

Oh, oh!

[The Vice-Chair, Conservative, John Barlow]

You've now filled my entire summer schedule, so thank you very much for that.

Thank you, Mr. Lawrence and Ms. Rood.

We now move to Mr. Louis.

The floor is yours for six minutes.

[Tim Louis, Liberal, Kitchener—Conestoga, ON]

Thank you, Mr. Chair.

Thank you to all the witnesses for being here. This is very informative as we're putting this report together.

I thought I might focus on you, Mr. Kuyvenhoven, because we haven't heard as much from your sector. In my riding of Kitchener—Conestoga, there are a number of nurseries and sod farms in the region. The nursery sector is obviously important. As was mentioned a number of times so far, the gardening sector is powered by the ornamental sector. Again, right now, people are gardening more than usual.

For the nurseries in my riding and throughout Canada, I know that for your association you mentioned briefly a study on flowers and the nursery impact and how that worked. You mentioned it off the top a bit, but could you elaborate on how that study worked with business risk management and also what some of the results and recommendations for BRM were out of that recent study you've done?

[Andy Kuyvenhoven]

On the study we did recently, three key points came out of that.

Number one was the cap, simply because the size of the businesses has increased to such a level that the cap is no longer a successful tool and it caps out the large growers.

The second point was the 70% trigger point. That would cause many farms to go bankrupt before they got a trigger. My easiest example is that if we have a 25% reduction in our sales, which could be a result of what happened at Easter, we're still not triggering a payout. The challenge with it is that the secondary part of it is that when you get a 70% payment on that, the amount of money isn't there.

The third part of that is the whole variety of expenses that are inside of our cost structure that are not allowable expenses inside of the AgriInvest claims, with two of the big ones, of course, being interest and capital costs.

[Tim Louis, Liberal, Kitchener—Conestoga, ON]

You did mention the cap, and you said $3 million was not enough. You said it wouldn't work for larger operations. Certain areas, let's say the Niagara region, have these large places that wouldn't do it.

What are your thoughts on having different maximums for different sectors, or maybe basing the maximums on the size of farms and production, having different maximums, or would you still say just one size fits all right now?

[Andy Kuyvenhoven]

My wife gets mad at me when I call myself a simple farmer, but being a relatively simple farmer, I sort of recommend that simplicity in systems is ultimately the best. The more complicated you make it, the more difficult it is for people to manage on both sides of the stream. Right now, when I look at the administrative costs of the present AgriStability suite, that's a lot of money to pay out. If you add complexities to it, you're going to have that one. That's the bigger complexity problem that I have with that.