Agriculture Committee on Feb. 27th, 2020

[The Chair, Liberal, Pat Finnigan]

Good afternoon and welcome, everyone.

Today, pursuant to Standing Order 108(2), the standing committee will have a briefing from the Department of Agriculture and Agri-Food.

We have with us from the department Ms. Kara Beckles, director general of the research and analysis directorate, strategic policy branch; Mr. Tom Rosser, assistant deputy minister, strategic policy branch, who has been here before; and Mr. Marco Valicenti, director general of the sector development and analysis directorate, market and industry services branch.

Welcome, lady and gentlemen. Thank you for being here with us today.

I don't know if you want a 10-minute statement between the three of you, or if each of you wishes to make a statement.

[Tom Rosser, Assistant Deputy Minister, Strategic Policy Branch, Department of Agriculture and Agri-Food]

Mr. Chair, I think a total of 10 minutes would be sufficient if we make our three presentations quickly.

[The Chair, Liberal, Pat Finnigan]

Okay.

So please go ahead.

[Tom Rosser]

Mr. Chair, thank you for inviting us to join you this afternoon to provide you with an overview of the agriculture and agri-food sector in this country. We have just circulated a document.

I'm going to turn to Kara and Marco to walk you through that very quickly, to allow as much time as possible for questions.

Before I turn the floor over to them, though, I would simply begin by acknowledging that we're well aware that 2019, and indeed, the early weeks of 2020 have been a difficult time for many in the agriculture industry for many reasons, ranging from uncertainty and volatility in global markets to unusual and extreme weather events, to disruptions in the country's transport system.

Notwithstanding those very real near-term challenges, when we, and many in the industry and many independent analysts, look to the medium and longer term, we are very excited about the potential of this sector to sustainably contribute to growth in the Canadian economy. When we look at projections for growth in global population, growing global wealth and what that will mean for food demand in the years and decades ahead, we share the view that these create very unique opportunities for a country with Canada's knowledge in this sector, as well as our endowment of resources such as land and water.

With that, perhaps, I will invite Kara to very quickly walk you through the first few slides of the deck.

[Kara Beckles, Director General, Research and Analysis Directorate, Strategic Policy Branch, Department of Agriculture and Agri-Food]

Thanks, Tom.

I'll start on slide 3. I probably won't touch on all of the slides, but we'll briefly go through a few of them.

Slide 3 demonstrates the agricultural sector's contribution to GDP. In 2018 it was $143 billion, making up 7.4% of total GDP. That includes the entire value chain, everything from input suppliers, such as fertilizer companies, all the way through primary and processing industries and including your restaurants and grocery stores.

We had a very strong decade in the agricultural sector leading up to 2018, setting income records for farmers in eight out of the ten years. Leading up to 2018, there was very strong global growth, we had good interest rates and exchange rates, and world prices were climbing pretty much the entire decade.

Leading into 2018, however, we saw a significant decline in farm income. That was due mainly to increases in expenses. Generally, every year we see some expense categories increase and other expense categories decrease. In that particular year they all increased, all at the same time. Despite the fact that we saw receipts on farms go up, expenses went up more significantly and led to an overall decline in income.

We don't have final numbers yet for the year that just finished, but for 2019 we are expecting to see a stabilization of farm incomes, and then, hopefully, a rebound leading into 2020.

Slide 4 goes into a little more detail, whereby you can see, across the board, those increases in expenses. There is no one expense that explains the overall increase; it really was spread across all categories of expenses.

Slide 5 shows the interconnected relationships along the entire value chain. I would also say here that the sector is very diverse. Depending upon the province or region you're in, different segments of the agricultural sector are more important, either in terms of products being developed or of whether that region is involved more in primary agriculture or in the processing sector.

Slide 6 shows a little bit of information about the department and how we function and indicates some of our priorities. I won't go through the slide in any detail, but it's there for your reference.

The case is the same with some of our minister's mandate letter commitments. Those can be found on slide 7.

In slide 8 we touch on our relationship with the provinces, as agriculture is a shared jurisdiction with the provinces. While the federal government has several levers to initiate change and to tackle various problems, we have to work in concert with the provinces, which have other levers. In going into changes to programs, for example, this is a relationship that's very important to maintain and build, in terms of both priorities moving forward and ways to tackle these matters.

With that, I'll switch over to Marco.

[Marco Valicenti, Director General, Sector Development and Analysis Directorate, Market and Industry Services Branch, Department of Agriculture and Agri-Food]

Thank you very much, Kara.

On slide 9, notwithstanding the challenges mentioned by Tom at the beginning of the presentation, many people in the sector see this sector as having significant potential for economic growth. About two years ago a business-led table formed under the Agriculture and Agri-Food economic strategy table defined five key specific areas that the sector should continue to work on.

Those were regulations; infrastructure; continuing to look at diversifying our markets; thinking about innovation, which is really important for our sector; and of course thinking about our labour and skill sets not just now, but also into the future.

We think about the context of additional real opportunities for the sector. We know on slide 10 that global food demand has been increased by 50%. We think we're ready for that.

We also have to take into account consumer interests and trends that we're seeing. We can certainly talk a little about protein and some of the things we're doing in the context of innovation and superclusters.

When we're thinking about science and emerging digital technologies we should think about big data, precision agriculture, and automation and digitization really taking hold in the sector. We think we're well positioned. We know that trade is a very important aspect of the agriculture sector, and we need to ensure that we're on top of that.

Of course, from a productivity perspective, we are looking at opportunities in climate change also.

Turning to slide 11, again I mentioned reliance on exports. One of the things I should mention that the economic strategy table talked about was to look at both the domestic market, taking advantage of our own market, and also at how we can diversify our own markets globally. Most of you know that we are the only G7 country with trade agreements with all other G7 members. That's really an important feature of our export strategy.

We certainly look at engaging our international standard setting bodies, including the WTO when required.

Slide 12 gives you a bit of a perspective on our export strategy and our exports to countries that we have FTAs with and that we don't have FTAs with. You will see the mix. Just over 75% of our exports go to countries with whom we have FTAs. It gives you a bit of a place marker on our export strategy.

Slide 13 provides some perspective to what that Tom mentioned with regards to some current market and production challenges that we see in the context of global trade. Certainly in some of the recent disputes, we have seen pork and beef prices fluctuate. We're also seeing those prices rebound over the last few months. Tom talked about the weather events that took place in late 2019 and early 2020.

On slide 14, to Kara's point, we are still seeing some underlying strengths. We are seeing exports continue to grow, reaching $67 billion in 2019. We did see significant growth in our food processing sector over the last few years, close to 12.5% until the end of 2018. While we did see some decline in canola exports, we certainly did see some increases in fish and seafood, beef and pork products.

Slide 15 provides a little perspective on our food processing sector. Looking at sales over roughly the last 10 years, again, we've had a steady increase, which is very nice to see. We think this is an untapped area. We certainly think we can do more in the value-added space as well.

Slide 16 provides a little perspective on the distribution of our food and beverage processing shipments. I think we do need to remember that the number one market for our primary agricultural products is the domestic market, representing 42% of primary production. It gives you a flavour of the percentages over 2018, from meat to seafood to baking and, of course, grains and oilseeds.

Next we have a bit of a perspective of the distribution of farms over the last 50 years. We've seen some changes. The average farm size has doubled. The farm value per acre has quadrupled. We have seen a consolidation of a small number of very large farms, with the largest 8% of the farms accounting for over half of farm cash receipts.

That gives you a flavour of the distribution and the breakdown from a farming size perspective.

Next are some demographics in the context of the next generation of farmers. One-quarter of the farm operators are 65 and older. And there are some statistics in the context of women operating farms, as of 2016.

We do need to continue to focus on new entrants to the agriculture community, for sure.

I'm sure the committee has heard of the labour challenges. We tend to look at the labour shortages not necessarily in the here and now, but also at the new skill sets that are going to be required. If you're thinking about technology and precision agriculture, automation, digitization, that will require a new skill set and so we want to make sure that those coming into the agriculture sector have, and can take advantage of, those new technologies in the workplace. That gives you a flavour of the use of automation.

With regard to temporary foreign workers, the government has made some changes. We've included some rural pilots that will, hopefully, help for both the processing and the primary sector.

I believe I will turn it back over to Kara on climate change.

[Kara Beckles]

I have a couple of final words on environment and climate change.

As you can see from slide 20, overall GHG emissions from the sector have been fairly static over time. This is despite the fact that overall production in the sector has risen over that same time period. We often talk about GHG emission intensity, which has declined fairly significantly, and this is through efficiencies in the sector and the adoption of new technologies and new practices over time that have led to more and more GHGs being sequestered in agricultural soils over that time period.

The challenge, though, has been getting the overall GHG emissions to start heading down, so that overall emissions go down at the time as we continue to increase production over time.

There are lots of challenges, but there are also some opportunities that come with climate change for Canada and agriculture. Some of the challenges are extreme weather events that we see more and more and the impact they have on both animal and crop production, as well as the increased incidents of pests and disease with warmer temperatures.

There have been some opportunities that have been taken advantage of, with longer growing seasons and the ability to start moving more production farther north. We have seen soybeans spreading from Manitoba and across the Prairies, and this is in reaction to slightly longer growing seasons as well as technologies allowing soybeans to ripen more quickly and be grown in Canada. This is a crop that we've taken advantage of, as well as other adaptations to grow different varieties and different types of crops that have increased the ability overall to increase income.

Canada is well positioned with our abundance of fresh water, which is really where climate change is having an impact around the globe on different countries' ability to produce various crops and animals.

I'll leave it there. I think we've touched on a lot of different topics across the agricultural sector. We probably could spend an hour on each of these topics, but that was a brief highlight.

Thank you.

[The Chair, Liberal, Pat Finnigan]

Thank you.

We will now go to our question round, and we'll start with Ms. Rood for six minutes.

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

Thank you, Mr. Chair. I will be splitting my time with Mr. Lawrence today.

Thank you very much for being here today. You have some great information here in your briefing.

I'm a young farmer myself and I'm very interested in some of the statistics you have in here, because as I see it—and I see this on an everyday basis—I don't see young people wanting to get into the business of agriculture anymore.

You have some statistics here saying that the farms have decreased by half, and yet there's an increase in production.

I'm wondering if you have statistics that break that down, not necessarily by commodity but by cash crops versus fresh fruit and vegetables. What I see—and I'm not sure if we do collect the data on that—is a lot of folks and young farmers getting into cash cropping or into livestock but I really don't see young farmers wanting to get into the fruit and vegetable sector. I foresee that 20 years from now we are going to have a major food security issue with being able to secure our own food here in Canada.

Can you speak to any of that?

[Tom Rosser]

Mr. Chair, thanks so much to the member for the question.

She's absolutely right—and Marco touched on this— that attracting the next generation to the sector is important and a priority. You'll notice that the relevant slide in the deck shows, from the most recent census of agriculture, a bit of an uptick in people under 35 entering farming. The challenge is twofold: first, to get people excited about careers in the sector, and then to help them get started.

In terms of a breakout of young farmers by farm type, Kara may know off the top of her head what the statistics show, but, if not, we'd be happy to look into what data's available and share that with the committee.

[Kara Beckles]

Off the top of my head, I don't necessarily know about farm type, but I do know that as more women farmers have gotten into the business, there's a tendency for them to get more into mixed farming and crop and greenhouse operations as opposed to the large crop or large animal-type farms.

We do have the statistics on that from the census of agriculture in terms of the breakdown on young farmers and the types of farms, but I don't have that information with me.

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

No problem.

Also, for the path forward, do we have some sort of long-term plan in place? Is that something you've been looking at through the years, so that we have a long-term plan to secure our own food and have food security and not have to rely on imports from other countries?

Also, with respect to food safety, as you know, Canadian farmers produce some of the best and safest food in the world. That is becoming something that even farmers who are in the business now are worried about for down the road.

Can you speak to that?

[Tom Rosser]

I'd offer a couple of thoughts.

Marco alluded to the work of the economic strategy table and its recommendations for growing the sector and what the priorities are in terms of infrastructure and skills and regulation. In terms of a blueprint or a plan for growing the sector, that has certainly been a bit of a guidepost for us in that regard.

That report talks about not only growing exports but also the opportunities at home, because in addition to being the fifth-largest exporter of agri-food products, I believe, we're also the fifth-largest importer, and there is economic opportunity to be had, to the extent that some of that domestic demand that is currently being met by imports could be met through domestic production. That would create some significant economic opportunities as well.

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

Okay.

I'll give the rest of my time to Mr. Lawrence.

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

Thank you.

Welcome, and thank you for being here.

I'd like to start off with the expenses over 2018. I see one expense that's not attributed or included, and which is relatively new to farmers, is the carbon tax. I don't see any statistics on that. The industry has published numerous statistics from agriculture, from Saskatchewan and Manitoba, and I don't see those here.

Do we have those numbers?

[Kara Beckles]

Any carbon pricing would be included in the energy expense in that chart. We have estimates for the cost of this. We do know, however, that the total GHG emissions from the sector come from numerous sources, some of which are from energy, but we also have some from animal production as well as crop production. However, those ones do not fall under carbon pricing. All of the carbon pricing within agriculture falls under energy, so they are captured within that expense.

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

That seems odd to me, because the carbon tax applies across the industry. There's obviously going to be an increase, I would think—maybe I'm incorrect—in seeds, in pesticides and in livestock purchases, because the carbon tax is layered in all of those things. Do we have any numbers for the actual costs of the carbon tax for the agriculture industry?

[The Chair, Liberal, Pat Finnigan]

Unfortunately, you are out of time. Perhaps you can ask that question later on.

Mr. Blois, you have six minutes.

[Kody Blois, Liberal, Kings—Hants, NS]

Thank you, Mr. Chair.

Thank you to the witnesses. You had so much good stuff I'm going to try to lead us through, so I'm hoping that you can be succinct in your answers.

First of all, can you just briefly touch on the advance payment programs at a high level?

[Tom Rosser]

I believe that our colleagues who will be joining the committee for the second hour are the experts in our business risk management programs. They're probably best placed to answer that. In the interest of time, I'll defer until they're here.

[Kody Blois, Liberal, Kings—Hants, NS]

Okay. I guess the next piece is talking about climate change. Ms. Beckles talked about the impact on the sector. In what ways can the Government of Canada help support that transition? There's been a lot of talk, of course, about the price on pollution. On farms specifically, can you give some examples of how we can help make that transition?

[Tom Rosser]

We have a number of programs. There are a number of things we can do.

Through our cost-shared programming with the provinces, we do have a number of measures in place called BMPs, or best management practices, where we provide incentives for on-farm reductions in the environmental footprint of producers. Through our scientific research, we're rolling out a concept called living laboratories. We're working collaboratively with producers to figure out how not just to reduce the environmental impact of agricultural operations, but also how to make that work best for farmers so that there's rapid uptake.

It's important, too, that we have programs to encourage the realization of opportunities in clean technology. Things like biofuels, bioplastics and products of that nature also create significant opportunities for agriculture.

Kara mentioned as well the good-news story of sequestration of carbon in soils. Beyond soil sequestration, there are also opportunities through shelter belts, permanent cover and other things to increase carbon sequestration on-farm above ground as well as in the soils.

[Kody Blois, Liberal, Kings—Hants, NS]

Thank you so much.

Obviously part of this is innovation, which you mentioned in your remarks. We know that's an important piece in agriculture. Can you speak to some of the particular research priorities of the department or in partnership with industry?

[Tom Rosser]

There's an understanding of the opportunities in soil sequestration and in nature-based solutions to both increase carbon sequestration and the environmental co-benefits. Things like shelters belts, for example, can contribute not just to sequestering carbon, but also have benefits for water availability, water quality and biodiversity. Understanding some of the interactions among different measures and how they can help to advance not just a single environmental good, but in some cases several, is an area of interest to us at the moment.

[Kody Blois, Liberal, Kings—Hants, NS]

The member opposite, my colleague Lianne, mentioned youth in agriculture and some of the different initiatives. Do you have some broad statistics? Can you talk about the need to ensure that we have new entrants? Can you speak to that?