Evidence of meeting #15 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 plants.
A recording is available from Parliament.
4:20 p.m.
Liberal
Tim Louis Liberal Kitchener—Conestoga, ON
Okay, thank you.
I would like to also speak to Monsieur Buy.
You mentioned that in Canada we have a small market with a large geography. You also mentioned that we are fragmented provincially. Can you talk a little about the interprovincial trade barriers that are created by these regulations and how they can affect—we've heard from time to time from witnesses that they can affect—transportation and processing as well?
4:20 p.m.
Chief Executive Officer, Agri-Food Innovation Council
On the internal trade barriers, this is well known. There are major issues that Canada needs to deal with. The agreement on internal trade was a first step. It is frustrating for people not to be able to move products as easily as they should. Transportation is an issue in the country, the grain having to travel across the country, etc., and various elements that get in there are also a problem.
In terms of internal trade, we are facing challenges. Canada, the federal government, has a key role to try to work on the leadership and work with the provinces. I mentioned incubators and the creation of more support for them. I also don't think we need an incubator for everything in every province, and that's a key issue in our country where one province has something and we absolutely have to have it in [Technical difficulty—Editor].
If I look at examples in France and Germany, on occasion, they have one development centre for one product nationally. In Canada, we often have to have 10 plus three territories, which means we have 10 weak ones.
4:20 p.m.
Liberal
The Chair Liberal Pat Finnigan
Thank you, Mr. Buy.
Thank you, Mr. Louis.
Mr. Perron, you have the floor for two and a half minutes.
4:20 p.m.
Bloc
Yves Perron Bloc Berthier—Maskinongé, QC
Thank you, Mr. Chair.
Dr. Mussell, earlier you mentioned the need for a code of conduct. There seems to be unanimous agreement on that.
Are there other things the government could do, in addition to this code of conduct, to address this imbalance or to help the market better regulate itself?
4:25 p.m.
Research Lead, Agri-Food Economic Systems, As an Individual
Yes, I think I got the question.
One thing we can do is this. If we map our supply chains better and really develop an understanding of where the bottlenecks and inefficiencies are in them, I'm pretty confident that people can work together, maybe with some support from government and in some cases some regulatory authority used by government, whatever means, to work those inefficiencies out.
Some of these, I believe, are manifested by demands that retail customers put on.
4:25 p.m.
Bloc
Yves Perron Bloc Berthier—Maskinongé, QC
With regard to the carbon tax or other processes in the country, you mentioned your concern that it is the producer at the grassroots level who absorbs the cost, rather than the other levels. Is there anything we can do about that?
In the same statement, you mentioned the importance of protecting borders and calculating the carbon footprint. This is a good way forward, which touches on the reciprocity of standards. I would like to hear what you have to say about this.
4:25 p.m.
Research Lead, Agri-Food Economic Systems, As an Individual
The worry on the carbon tax, of course, is if it's shared based on the same way that bargaining relations are in supply chains feeding into retail, then this will just get pushed back and back. The processor will bear some. Then they will try to take it from the producer, and then ultimately it all rests with the producer. That's not a situation that we should be comfortable with. We're going to have to find a way to equitably share those costs. The first thing is going to be to map the costs out and understand where they are, and then come to arrangements that they're shared equitably.
With regard to border taxes, my thinking has changed on this quite significantly. With regard to carbon, Canada has something to offer. Agriculture can be a big solution to some of our carbon challenges, but if we take on additional costs to meet that mandate, then we need border taxes that are going to protect us so we're not undercut from imports.
4:25 p.m.
Liberal
The Chair Liberal Pat Finnigan
Thank you, Dr. Mussell.
We'll now go to Mr. MacGregor for two and a half minutes.
4:25 p.m.
NDP
Alistair MacGregor NDP Cowichan—Malahat—Langford, BC
Mr. Buy, I have two questions for you.
I think you were cut off before you were going to respond to my earlier one. It was on the training aspect with regard to automation.
Was there anything you wanted to add?
4:25 p.m.
Chief Executive Officer, Agri-Food Innovation Council
I think we have several programs in universities and community colleges on automation that are doing a great job on this. I think we have to look at the success stories and move forward.
One key thing is also putting entrepreneurship in our training. One of the problems that we're seeing is people are having great ideas, great projects, and they're not able to bring them to fruition because they lack the knowledge. We need to do a little bit better on this.
4:25 p.m.
NDP
Alistair MacGregor NDP Cowichan—Malahat—Langford, BC
When you look at the motion that's guiding our study, our primary objective in this study is to ensure the stability and renewal of the value chain, but one of the other parts of our study refers to also supporting the goal of increasing local capacity to protect food security. You made mention of that in your opening statement.
Can you add anything to cover that particular aspect of our committee study?
4:25 p.m.
Chief Executive Officer, Agri-Food Innovation Council
Absolutely.
Two of the recommendations deal specifically with this increasing access to capital for local processing plants and manufacturing plants.
We need to look at the local aspect of this. I don't have the funding to support their activities on that front. The major international companies do and can make the investment, but the small and medium-sized enterprises don't. The government needs to support them on that. The government also should be able and should want to promote the investments in those facilities.
Those are two things that I think could help on this, and the NRC IRAP as well, which mainly deals with small and medium-sized businesses. The recommendation to enable capital funding within that program should be able to help as well.
4:25 p.m.
NDP
Alistair MacGregor NDP Cowichan—Malahat—Langford, BC
That's great. Thank you so much.
That will be it for me, Mr. Chair.
4:25 p.m.
Liberal
The Chair Liberal Pat Finnigan
Thank you, Mr. MacGregor.
This brings our first hour to an end.
I want to thank our panel, Dr. Mussell and Monsieur Serge Buy, chief executive officer at Agri-Food Innovation.
We'll break for a few minutes to change the panel.
4:35 p.m.
Liberal
The Chair Liberal Pat Finnigan
Welcome to our second panel.
For our second panel we have, from the Beef Farmers of Ontario, Mr. Rob Lipsett, president, and Mr. Richard Horne, executive director.
Welcome, Mr. Lipsett and Mr. Horne.
From the Dairy Processors Association of Canada, we have Michael Barrett, chair, and Mathieu Frigon, president and chief executive officer.
Welcome, Mr. Barrett and Mr. Frigon.
We'll start with the Beef Farmers of Ontario.
You have seven and a half minutes between the two of you. You can share that however you like.
4:35 p.m.
Rob Lipsett President, Beef Farmers of Ontario
Thank you.
Good afternoon. My name is Rob Lipsett and I'm a beef producer from Grey County, Ontario. I'm the president of the Beef Farmers of Ontario. Joining me today is BFO's executive director, Richard Horne. Thank you for the opportunity to appear before you today.
While the COVID-19 pandemic has heightened the focus on processing capacity, the beef sector across eastern Canada has had to contend with capacity challenges for some time due to a variety of factors that have led to periodic supply bottlenecks, significant negative pressure on farm gate prices and lost market opportunities.
Over the last five years, federally inspected processing utilization in eastern Canada increased from 71% in 2015 to 100% in 2020. In addition, Ontario provincial processing numbers are up approximately 20% over 2019 and the five-year averages. Some beef farmers must wait four to six months, and in many cases up to one year, to have their cattle processed at provincial facilities. CanFax estimates that shortages in beef processing capacity equated to $129 million in lost revenue in 2020 for farmers in eastern Canada.
To enhance processing capacity, we recommend four key areas of focus. They are strategic investment in the sector, addressing labour shortages, addressing regulatory differences between Canada and the U.S., and creating permanent tools to help mitigate processing disruptions.
First and foremost, continued government investment in the sector is needed. We need to simplify programming and ensure funding windows have enough runway to allow facilities sufficient time to plan and execute. Focus programs on outcomes and stop limiting what and how businesses can invest in capacity growth. Funding priorities should be placed on projects with the greatest ability to expand production capacity. A combination of cost-share funding, no-interest loans and non-repayable loans should be offered to assist with capital investments to spur production and improve efficiencies.
Between 2008 and 2017, Canada's agricultural exports grew three times faster than the Canadian average. Last year, Canadian beef exports grew 17% and opportunity for further growth remains. The sector's ability to maintain jobs through COVID-19 makes agriculture a priority for economic recovery. To capitalize on export opportunities, we recommend creating an industry export development fund to assist export diversification efforts and address trade barriers. For example, the fund could enable processors to apply for matching funding that would support enhanced capabilities to segregate eligible product, support modifications to food safety interventions to meet country-specific requirements or make strategic investments that spur growth and improve efficiencies.
Access to labour is another issue of concern. A study was done by Food Processing Skills Canada indicating that the meat sector had a job vacancy rate of about 13%, compared to other food companies that averaged 2% to 4%. In Ontario, this equates to approximately 2,400 vacant positions and $1.2 billion in lost productivity. A domestic strategy to attract, train and retain the workers by providing investments and supports in training and education is needed. A refocus of foreign worker programs into permanent programs is also needed. The agri-food labour pilot was a good first step, but we need to be doing more. There are dozens of countries with ample supplies of workers willing to come here and fill the jobs. Pathways need to be created to facilitate this.
I'll now turn it over to Mr. Horne to complete our presentation.
4:40 p.m.
Richard Horne Executive Director, Beef Farmers of Ontario
Good afternoon. Thank you, Rob, and thank you, Mr. Chair.
Another issue we wanted to touch on today that is contributing to processing capacity challenges stems from an ongoing trade issue with South Korea, which is having a negative impact on American packer interest in buying Canadian cattle. South Korea requires shipments from Canada be halted if there's another case of BSE found in Canada. Because the U.S. does not have this requirement, processors in the United States that would otherwise compete for our cattle here in Canada are hesitant to do so as they must segregate those animals and then process them during dedicated shifts. This is a cost that most U.S. plants are not willing to incur.
Canadian lawmakers need to push for a resolution with South Korea to have this requirement removed. While our preference is always to have Canadian cattle processed domestically, the issue with South Korea has reduced the availability of processing space and competition for our cattle.
We also need immediate revisions to Canada's specified risk materials removal requirements, also known as SRM. It's a relic from the BSE days. Canada's requirements have created a significantly unlevel playing field between us and the Americans for our producers and processors that is no longer supported by science. The current cost discrepancy between the two countries is significant. On average, Canadian processors remove about 58 kilos of SRM on animals over 30 months of age, whereas the U.S. removes approximately 900 grams.
The Canadian Meat Council estimates that this costs our sector over $30 million a year in lost value, and there are also other associated costs on other classes of animals that we market here at home. Meat that is lost in the removal of the spinal column in animals over 30 months of age in Canada can be harvested in the United States and then sold back to consumers in Canada, which adds to the disparity and lack of fairness between the two systems on top of the cost.
While we're pleased to see that discussions with CFIA to address this disparity have begun, the goal needs to be to fully align our SRM rules with the U.S. as soon as possible. This will have immediate benefits to the Canadian sector.
Last, I want to emphasize the need for continued access to set-aside programs, similar to the ones that were implemented this year under the AgriRecovery framework, in response to COVID-19. These programs help farmers manage supply bottlenecks caused by processing disruptions. If we need this tool again, we need to make sure that it can be quickly accessed this year. When the Guelph Cargill facility closed over Christmas, for example, due to COVID-19 challenges, we were able to quickly trigger that program, which was great to see.
This type of program should become a permanent tool to help mitigate disasters and reduce processing availability. Things like floods, fires, human or animal disease outbreaks and labour force stoppages could be better managed if we had access to this tool on a more permanent basis.
That concludes our recommendations. Thank you.
4:45 p.m.
Liberal
The Chair Liberal Pat Finnigan
Thank you, Mr. Horne. You're right on time.
Now we"ll go to the Dairy Processors Association.
You have seven and a half minutes. You can split your time if you wish.
4:45 p.m.
Michael Barrett Chair, Dairy Processors Association of Canada
Thank you.
Good afternoon, Mr. Chair and members of the committee.
Thank you for the invitation today to discuss dairy processors' views on our country's food processing capacity.
I'm the board chair of the Dairy Processors Association of Canada, as well as the president and CEO of Gay Lea Foods Co-operative. With me today is Mathieu Frigon, president and CEO of the Dairy Processors Association of Canada.
Dairy processing is the second-largest food processing industry in Canada. It contributes more than $18 billion annually to the country's GDP, supports the milk production of over 10,000 Canadian dairy farms and employs almost 25,000 Canadians in 471 facilities across this country.
For dairy processors there are two key areas where improvements could support renewal of Canada's dairy processing industry to restore investments and spur growth. The first is addressing the impacts of dairy market access granted under CETA, CPTPP and CUSMA through the development of a dairy processor compensation program. The second is addressing the unfair treatment of suppliers by Canada's largest grocery retailers through the creation of a grocery code of conduct.
As we have previously discussed with this committee, the dairy market access granted by trade agreements like CETA, CPTPP and CUSMA has created a climate of uncertainty, which has disincentivized investment and innovation in Canada's dairy processing capacity. At full implementation, access granted under these agreements will represent about 10% of the Canadian market or about $300 million in annual losses to net margin. This is the equivalent to Canada losing 15 to 20 medium-sized cheese makers. In addition, CUSMA will restrict our exports of certain dairy ingredients. Since the conclusion of CETA negotiations in 2013, dairy processing is the only food processing industry exhibiting negative GDP growth among the top 10 food processing industries on which data is collected by Statistics Canada, and trade agreements have a lot to do with that.
The Canadian government has made repeated promises of full and fair compensation for supply-managed sectors. Last week, significant compensation for dairy farmers began to roll out. Our industry is still waiting for any sign of the government's intention to announce compensation to dairy processors for their losses.
Supporting production at the farm but not taking action to support processing capacity is a failure to acknowledge that supply management is a system. Its long-term viability requires both its farming and processing industries to be healthy and growing.
A dairy processor compensation program is necessary to ensure that we continue investing in our future in the face of growing imports and that Canadian-made products customers want are available in the future. A compensation program, including tools like non-repayable contributions for investments and refundable tax credits, could improve competitiveness and support investments in processing capacity and modernization.
Compensation to processors should be viewed as not simply a support or a handout, but an investment in domestic processing capacity, Canadian jobs and economic growth.
I'll now turn it over to Mathieu.
February 2nd, 2021 / 4:45 p.m.
Mathieu Frigon President and Chief Executive Officer, Dairy Processors Association of Canada
Thank you, Michael.
The unfair practices of Canada’s largest grocery retailers are another major hurdle preventing not only dairy processing, but the entire food value chain from meeting its full potential.
There has been significant attention to recent announcements by large grocery retailers regarding new fees for suppliers, but this is part of a much larger and long-standing problem that has reduced investment and innovation and slowly erodes Canada’s food processing capacity.
It is estimated that the fees, deductions, and administrative costs required to simply get products onto shelves has grown at twice the rate of sales over the past five years. This is known as trade spend and it is significantly higher in Canada than in other countries. For example, in the United States, trade spend accounts for 18% of processors’ costs, while here it accounts for about 28%.
This stands as a major hurdle to expansion and growth, especially for small and medium-sized processors.
Money paid to large grocery retailers in the form of arbitrary fees and deductions is money that is not being reinvested in facilities, product innovations or new jobs. In the long run, this could have serious impacts on Canada’s domestic food production.
As others who have presented to the committee have noted, this is all possible because of the concentration in Canada’s grocery retail market. Five large retailers control over 80% of the grocery retail market. For comparison purposes, the largest food processor controls no more than 3% of any given retailer’s volume.
If we, as a country, are serious about improving local production and making our food system more resilient—and the pandemic has shown the extreme importance of having resilient systems—our food value chain needs to be rebalanced so that food suppliers are given a fighting chance. We believe this is where a Grocery Code of Conduct comes in.
4:50 p.m.
Chair, Dairy Processors Association of Canada
I was going to say one sentence and then conclude.