Evidence of meeting #13 for Agriculture and Agri-Food in the 43rd Parliament, 2nd session. (The original version is on Parliament’s site, as are the minutes.) The winning word was processing.
A recording is available from Parliament.
Bloc
Yves Perron Bloc Berthier—Maskinongé, QC
This is primarily for future meetings, Mr. Chair. The tests could be done earlier. There may be an alternative.
Liberal
The Chair Liberal Pat Finnigan
For today's meeting, the members can submit a few questions to Mr. Davies, who will send his responses to the committee. We'll make sure that the responses are included in our study. We can decide whether we want to hold a meeting to discuss our work and put the topic back on the agenda, if you wish, Mr. Perron.
I want to thank our two witnesses today. Mr. Davies, everybody wanted to hear what you had to say, but unfortunately it didn't work out. Thanks for being here. Maybe we'll have a chance to bring you in on the next panel.
Also, Mr. Eikelenboom, thanks again for being here.
We'll suspend and be back with the next panel.
Liberal
The Chair Liberal Pat Finnigan
I call the meeting back to order, and I'd like to make a few comments for the benefit of the new witnesses.
Before speaking, please wait until I recognize you by name. When you are ready to speak, you can click on the microphone icon to activate your mike. I remind you that all comments should be addressed through the chair. Interpretation in this video conference will work very much like in a regular committee meeting. You have the choice, at the bottom of your screen, of floor, English or French audio.
We'll start our second panel.
We're joined by Ian Blenkharn, who will be speaking as an individual.
Welcome to our committee, Mr. Blenkharn.
We're also joined by Kathleen Sullivan, chief executive officer of Food and Beverage Canada.
Welcome, Ms. Sullivan.
We'll now begin. The witnesses will have seven and a half minutes each. Mr. Blenkharn will go first.
Go ahead, Mr. Blenkharn. You have seven and a half minutes. The floor is yours.
Ian Blenkharn Retired Business Executive and Farmer, As an Individual
Thank you for the invitation and opportunity to appear before this committee.
Briefly, my background, and the context for my comments today, is the result of 34-plus years working in the agricultural industry. I hold a Bachelor of Science degree in agricultural economics. I spent the first 13 years of my career as an agricultural banker for various lending institutions in five provinces across Canada, and the next five years as an agricultural finance consultant working closely with farmers. I have spent the last 16-plus years as a partner in a large broiler chicken, hatching egg and mink farm, as well as a business executive managing various poultry companies in Nova Scotia and Newfoundland and Labrador.
Based on my experiences over the years, I have the following observations, opinions and recommendations to present to this committee today.
The Canadian supply management system has been, and continues to be, a very positive marketing tool for the agricultural commodities fortunate enough to have this system in place. The ability to control imports and establish domestic production levels, along with the ability to set the producer price at a level that covers all costs and a return to investment, is the envy of many other farmers in Canada and around the world.
The poultry meat processing sector in Canada is generally supportive of supply management. However, there is a need for modernization of the system, as the strategy of supply management is only at the primary producer level. Once the primary production is sold to a processor, there is no supply management at that point and beyond. It is solely free market, driven by supply and demand. This fact has been creating increasing pressure on the stability of supply management over the years and is reaching a tipping point at this juncture. The current COVID-19 pandemic has brought the problem to a new level of importance. Given that producers ultimately control the amount of chicken grown in Canada per year, and processors are ultimately obligated to purchase this volume at a regulated price that guarantees the producer a profitable return regardless of what the consuming marketplace may demand or be willing to pay, it is a serious problem that is getting worse by the day in these COVID times.
As market demand has dropped over the past year, with restaurants being closed due to COVID-19, and the supply has continued to either rise or be maintained by producers, the supply of chicken now well exceeds demand, and the market price received by processors and further processors is at or below cost of production. This market distortion and lack of willingness by producers to react and understand that they are one segment in a much bigger industry is very problematic and troubling. It is extremely difficult for processors to consider existing reinvestment strategies, let alone consider expanding capacity for export under the current circumstances.
In my opinion, and that of many in the processing sector, the powers of the Farm Products Council of Canada need to be enhanced so that they can drive change and modernization of the supply management system.
One quick change that could be made in the case of the chicken sector would be to require the live price paid to producers to include a wholesale price component in the pricing formula. Thus, if the producers realized the negative consequences of oversupply through a reduction in their live price as a result of the low wholesale price, I expect they would be more responsive to establishing the appropriate domestic supply levels.
Another significant problem for processors in certain parts of the country is the fact that producers are free to ship their product to whichever processor they want and there is no system in place to backfill the losing processor with equivalent volume. In some cases, live birds are being transported for 10 to 12 hours to a competing processor instead of being processed at a processor that is minutes away from the farm. This is both a potential animal welfare issue and a major supply risk to the affected processor. How does a processor in this situation view future investment?
Recently, the issue of food security was seriously challenged in the Nova Scotia chicken sector. The only federally inspected poultry processor was shut down for two weeks by the provincial health department due to COVID-19. This put serious pressure on the supply of fresh local chicken. The problem was amplified by the fact that processors in the neighbouring province had limited ability to assist the Nova Scotia plant as their catching and transport systems were not compatible between plants. Fortunately, solutions were found and no birds were euthanized. However, it has highlighted the need for more uniformity between regional plants so that they can help each other in times of need to protect food security and animal welfare. This uniformity will have significant costs associated with it and require co-operation amongst competing processors.
Access to a reliable and reasonably priced labour pool is another limitation of many processors, as well as transportation regulations that are becoming increasingly restrictive on the movement of livestock to regional processors. Compensation for trade deals and assurance that TRQ will remain predominantly in the hands of processors are other factors that will affect processors' willingness and ability to reinvest in their industry or expand for export potential.
Until the supply management system is modernized and many other concerns I have raised are addressed by industry and government, I find it difficult to see major poultry processor investment for export markets. However, if the investment is to be considered, then export markets need to be expanded. The federal government needs to endeavour to increase market access for Canadian agricultural products, and expanded access to the Chinese market would be a good place to start.
You'll note from my comments that I never talked about the need for direct financial investment in industry by government. In my opinion, financial investment with public funds is not the key to increasing processing capacity in Canada. The key is providing the appropriate business-friendly landscape for private investment to occur. There's more than enough private money in the world looking for low- to medium-risk profitable businesses to invest in. However, that same money will also run from high-risk, unprofitable investments just as quickly.
In my opinion, government needs to focus on creating the appropriate environment for business to operate at low risk with stability and predictability. With this environment, entrepreneurs will surface, invest and achieve the goals that the Barton report aspires to.
Examples of changes in the landscape that I believe need to be addressed include easier and more reliable access to year-round foreign labour; more reasonable union laws that are conducive to business while not jeopardizing employee rights; changes to employment insurance guidelines so that employees are encouraged to find full-time year-round employment and to work when work is available, instead of claiming on an open claim; health and safety regulations that are more rational and put the onus on the employee to work safely; more reasonable environmental regulations that still protect the environment while allowing business to operate efficiently and profitably; and a simplified Income Tax Act with more access to investment tax credits to reward investment after it is made and is successful.
With respect to the farming community, I believe many farmers still need to improve their financial acumen. It has improved over the years. However, in my opinion there is more work to be done. Both federal and provincial governments can assist with this initiative. New farmers should be required to prove their understanding of financial statements and business planning principles before having access to credit. Just because a new farmer is the son or daughter of an existing farmer and has lived and worked on the family farm, that does not mean they have the financial skills to manage a for-profit business. I appreciate that farming for many is a lifestyle choice. However, it is also a for-profit business and needs to be operated and managed as such. The financial education should go beyond simply understanding financial statements and business planning. It should include topics such as production economics and supply and demand principles.
Liberal
The Chair Liberal Pat Finnigan
Thank you, Mr. Blenkharn. Unfortunately, we're out of time. We'll have a chance to ask questions later on.
Now we have Ms. Kathleen Sullivan, for seven and a half minutes. Go ahead.
Kathleen Sullivan Chief Executive Officer, Food and Beverage Canada
Good afternoon, and thank you for the invitation to appear today.
Food and Beverage Canada is a national association whose members include provincial food and beverage associations, as well as leading Canadian food and beverage processing companies.
Food and beverage manufacturers are at the centre of Canada's food supply. There are few Canadian agriculture products that make it to Canada's grocery store shelves without first being transformed by one of our almost 8,000 companies.
Food and Beverage is the largest manufacturing employer in the country. We employ almost 300,000 people, generate $120 billion in annual sales and supply much of the food that Canadians eat.
A strong and vibrant processing sector is critical to ensure Canada's food sovereignty, to support our primary agriculture sector and to continue contributing to the country's economic recovery and well-being.
Entering 2020, our sector was focused on the goals set by the federal agri-food economic strategy table—increasing domestic food sales and exports by 30% by 2025.
Canada has tremendous potential when it comes to agriculture and food. This is a sentiment we hear often, and one we often repeat, but we need much more than words to support Canada's agriculture and food-processing sectors. We need to put action behind those words.
Today I will focus on three priorities for ensuring recovery and growth for food and beverage processing: labour, worker health and retail concentration.
First off, on labour, entering 2020 our industry was already flagging labour as a crisis. Today we estimate the sector is short 30,000 workers, 10% of our workforce. By 2025, we expect that number to more than double. Why? It's due to increased retirements, a shortage of skilled workers, the seasonal nature of certain subsectors and the regionality of some of our businesses. COVID-19 has also led to additional absenteeism and challenges finding replacement workers.
This cannot continue. Without healthy, skilled workers, we cannot produce the food Canadians need and we cannot add value to the agriculture products Canada wants to export.
Over the last two years, we have repeatedly raised the alarm regarding the industry's labour issues, largely and very sadly to no avail. We understand labour is complex, but there are some simple things we can do to start.
First off, we need a simple assessment of current and future labour requirements for this industry—and I will say for primary agriculture as well—matched up against expected domestic labour supply. If there is a shortage—and industry says there is—then we need to address that.
Last year, we at FBC held a labour strategy session where we included government and identified three priority areas: addressing the shortage of skilled trades, ensuring we have access to qualified foreign workers, and supporting automation. We continue to invite the federal government to work with industry on these.
Second, I'd like to talk about worker health. With the outbreak of COVID-19, food and beverage processors took on the incredible challenge of managing worker health while meeting the imperative, as an essential service, of maintaining Canada's food supply.
Food plants are, first and foremost, manufacturing sites. They are designed for efficiency, for food safety and for occupational health and safety. They were never originally designed to manage a public health crisis. With COVID-19, manufacturers, literally overnight, had to implement new policies and protocols to protect workers from the virus—things like enhanced PPE, health screening tools, structural modifications and enhanced cleaning. We estimate that the industry has invested close to $1 billion so far to protect workers. Despite these measures, food plants are congregate settings. As well, no matter what we do inside our plants, we cannot protect our workers outside our walls.
Front-line food workers have made sacrifices so our food system can operate. We need to protect them by ensuring they have access, if they want it, to a vaccine. The national advisory committee on immunization recommended that essential workers, including from our sector, be prioritized for vaccine access, but these are only recommendations. I will point out that even last week the Province of British Columbia announced its vaccine rollout plan, and that plan fails to prioritize food and other essential workers, other than health care workers, over the general population. We encourage the federal government to utilize whatever levers it has to ensure that provinces follow the recommendations of the NACI.
Finally, I want to talk about retail concentration, a topic you've heard a lot about. As you know, the Canadian retail food sector is highly concentrated, with just five companies controlling 80% of the market. This leaves the food and beverage manufacturers with limited negotiating power. Please remember that there are almost 8,000 food processors in Canada, and 7,000 of them, 90%, are small and mid-sized businesses, companies with fewer than 100 employees.
Food retailers regularly impose arbitrary transaction costs, fees, and penalties on their suppliers, often without notice or retroactively. In addition, they regularly extend payment terms for months, often delaying payments and impacting the liquidity of their suppliers. This is absolutely no longer tolerable.
We are very pleased that at their November meeting the federal, provincial and territorial agricultural ministers committed to strike a working group to look at the issue. We continue to encourage them to prioritize this and to play a leadership role in ensuring that a grocery code of conduct is in place by the end of this year.
As a final note, I would like to touch on the cost impacts of COVID-19. Unlike many businesses, food and beverage processors were able to operate through the pandemic, which is, of course, what every business wanted to do. The cost of this, however, has been quite significant. As I said, it was close to $1 billion. We have asked the Department of Finance to consider a refundable tax credit for COVID-19 costs incurred by our sector and other essential services sectors, businesses that continue to operate through the pandemic and that have seen significant cost increases related to ongoing critical operations and to ensuring workers' safety.
I would like to thank you again, and I look forward to answering any of your questions.
Liberal
The Chair Liberal Pat Finnigan
Thank you very much, Ms. Sullivan.
Now we'll go to our question round. We'll start with Ms. Rood for six minutes.
Go ahead, Ms. Rood.
January 26th, 2021 / 4:55 p.m.
Conservative
Lianne Rood Conservative Lambton—Kent—Middlesex, ON
Thank you, Mr. Chair.
Thank you to the presenters today for their great presentations.
Thank you, Ms. Sullivan. I want to underscore your telling us that food processors employ some 300,000 Canadians and that there's a shortfall of 30,000 workers in the industry. I think that was a really important figure that we heard here today.
When you spoke of labour shortages, you mentioned the skilled trades in particular. Could you speak more to where the shortages are in the skilled trades and where they lie in your industry?
Chief Executive Officer, Food and Beverage Canada
Sure. If you think about skilled trades, that is, professions such as electricians and millwrights, there is an incredible shortage of skilled trades, not just for our sector but for manufacturing across the country. We are literally unable to fill all the positions we have. You can imagine that these positions are incredibly important in terms of actually keeping a plant operating and keeping equipment running, and we have a shortfall there.
As you may know, when it comes to skilled trades, these are largely mandatory skilled trades, so there is an apprenticeship period and a training period and it can take a long time to train somebody for the skilled trades. When we have an immediate shortfall, waiting five to six years for a new cohort of skilled trades to come through is an untenable solution to the problem.
Conservative
Lianne Rood Conservative Lambton—Kent—Middlesex, ON
Right.
Again, on the labour shortages, you also mentioned the need for access to qualified foreign workers. Could you tell us about some of the barriers to access and your thoughts on overcoming the barriers for this?
Chief Executive Officer, Food and Beverage Canada
When we use foreign workers in the food-processing sector—and primary agriculture would be very much the same—sometimes we use temporary foreign workers because the jobs are seasonal. If you think about canning tomatoes, for example, that's a seasonal job. Other times, we're bringing in foreign workers because there is simply a structural shortage of workers here in Canada.
The TFW system, as my colleague from Olymel pointed out, is a very cumbersome system. There are limits on the percentage of TFWs you can have in a company. The application for TFWs is very long, even though you're often bringing in TFWs, the same persons, year after year, and you're having to book six months out for the workers you need. There's absolutely a need to go in and look at the TFW system, modernize it and simplify it.
On the other side, we have permanent jobs and we're looking for economic immigrants to come to Canada to take on permanent, full-time, respectable jobs with us. There are many people who want those jobs. The way our immigration system works, though, is quite complicated. It's a point system and there are various streams. Very few of those streams, if any, as they award points, actually favour what we may think of as the blue-collar workers or the technicians who are coming to work in food plants.
We're dead before we start, if you will. We really have very few opportunities to bring in the workers we need, because the system has been designed not to favour the workers we require.
Conservative
Lianne Rood Conservative Lambton—Kent—Middlesex, ON
Another thing I heard you speak about was the challenges for food processing because of the pandemic. How have the measures to address food plants as congregate settings, such as social distancing, affected food-processing capacity and the reliability of the Canadian food supply?
Chief Executive Officer, Food and Beverage Canada
I think we've been very lucky here in Canada. We obviously saw shortages on the grocery store shelves early on last March. I think we saw some more in the fall, certainly where I live, with the second wave of the pandemic. I think Canadian companies have done an incredible job of keeping that food supply going, but it has been a Herculean effort.
As I said, food processing is a manufacturing business. You think of the equipment, the quintessential assembly line. When you have people who stand near each other on that assembly line, to accommodate social distancing you can put fewer people there, which means you have to slow down production. We have seen companies overcome this by adding other shifts. They're less productive on any given shift and have had to try to find new workers to work different shifts, adding an overnight shift, for example.
We also saw companies do things such as streamline their product line. If you were a chicken processor who perhaps previously offered 40 different products, you may have had to streamline that down to 20 to increase the efficiency of what was going through.
At the end of the day, it has added to worker bonuses, changes to the actual configuration of the plants, additional PPE and cleaning. As I said, last year we estimated it was $800 million. I'm guessing we're getting close to $1 billion just in the cost of trying to keep our workers safe while they're at work.
Conservative
Lianne Rood Conservative Lambton—Kent—Middlesex, ON
Thank you for that. That's a big cost.
You also mentioned the need for vaccines for workers in the plants. Could you tell us about the food-processing plants that should be prioritized?
Chief Executive Officer, Food and Beverage Canada
I'm sure many of you have been to a food plant, but a lot of people watching this haven't. When you drive down the highway and you see a big building that looks like a warehouse, there's a good chance it is some sort of manufacturing plant, including possibly a food plant. It's a closed building.
In Canada, there are almost 8,000 plants, and they range in size. There are certainly plants that can have a thousand people in the building for a particular shift.
Liberal
The Chair Liberal Pat Finnigan
Thank you, Ms. Sullivan. Unfortunately, that's all the time we have.
Thanks, Ms. Rood.
Liberal
Liberal
Kody Blois Liberal Kings—Hants, NS
Yes.
I think we put him on mute, and I don't know if he knows how to get off mute.
There you are, Mr. Blenkharn.
Liberal
Kody Blois Liberal Kings—Hants, NS
You're there.
I really enjoyed your remarks here in this committee.
First, you talked about supply management. We all know the importance of that program. I know that on the dairy side there's co-operation through the Natural Products Marketing Council with processors and producers, setting the stage on the retail level, as well. Can you explain a bit about how producers working in concert with processors can lead to better outcomes, including more investment on the processing side?
Retired Business Executive and Farmer, As an Individual
As I said in my comments, there needs to be an understanding from producers that they're one cog in the wheel and that they have to manage their supply to meet the demand so the whole industry stays viable, not just the producers.
Supply management is only at the producer level. Once the producer sells to the processor, the processor has to buy that product at the price the producer demands for covering its costs. Then that processor takes the risk as to whether the marketplace will buy at a profitable level. In the current COVID times, as I said, I've seen cases where a product that should be selling at three or four dollars a kilogram is selling for 50¢ a kilogram because there's just way too much product around. Some processors—
Liberal
Kody Blois Liberal Kings—Hants, NS
In a nutshell—I have only six minutes—it is essentially greater co-operation in terms of cost of production studies between producers and being realistic about the costs being passed off to processors.