Agriculture Committee on Feb. 2nd, 2021

[Michael Barrett]

A code could encourage greater accountability and transparency in the retailer-supplier relationship, and create the balanced and competitive grocery retail environment necessary to support growth along the food chain.

We thank you for your time today.

[The Chair, Liberal, Pat Finnigan]

Thank you, Mr. Barrett and Monsieur Frigon.

Now we'll move to our question round. We'll start off with six minutes.

Ms. Rood, you have six minutes.

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

Thank you very much, Mr. Chair.

Thank you to the witnesses for appearing today.

I'm going to start with the folks from the beef industry.

I'm personally concerned about how this pandemic has affected the producers in my own riding and the processing capacity for these beef producers. It's my understanding that when there are delays for moving cattle to process into beef, they can translate into unexpected costs of feed, but it can also lead to problems in the internal supply chain of cattle operations.

I'm wondering if you could talk further about the financial impact to your stakeholders and how those delays affect their profit margin.

[Richard Horne]

I appreciate the question.

Yes, delays in getting animals processed create significant costs to producers, in the form of discounts at processors for overweight cattle. Obviously, the costs in feeding an animal for longer periods of time also has huge implications in the hundreds of dollars per head every day that the animal is delayed in getting to market. It is significant and there is little backstop that producers have to absorb or mitigate those costs.

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

Thank you for that, Mr. Horne.

I've also heard that some cattle operations in Ontario have had to ship their cattle as far away as Alberta for processing because of a lack of processing capacity in Ontario that's been made worse by the pandemic. As I understand it, about 90% of the beef processing market is controlled by two entities. You touched on that.

Do you see any short- to longer-term solutions coming on stream in the near future to help mitigate the problem that we have here in Ontario?

[Richard Horne]

I think some of that was touched on in our presentation.

Investment by the federal and provincial governments and private industry is huge in making sure that processors that are here and are operating have the tools that they need to expand operations, improve efficiencies and put plans together for growth domestically and to take advantage of huge market potential on the export front.

I think more work needs to be done for small and medium-sized players to increase their capacity, locally and at the provincial level and the federal level.

I'd welcome Rob to add anything there.

I think some of the regulatory things that we mentioned, SRM removal.... The issue with South Korea is very important as well, as is to open up processing access south of the border. That will also be critical in helping to address this problem.

[Rob Lipsett]

I might add that what we saw when the federal plants had a backlog of cattle in the processing sector was our provincial plants really stepped up to the plate to try to alleviate some of that backlog. Our numbers for 2020 showed that they had increased their capacity by close to 25%. They've now hit the wall and they've been asking questions about how they could access funding for infrastructure expansion, and access to labour and technology. I think all of those combine to make both short- and long-term solutions to our processing backlog.

I think if we could sit down and find a way to create some kind of funding, or labour immigration plans, or a work to permanent residency kind of pathway, it should help alleviate some of the stress that we feel at the farm level.

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

Are there any solutions coming on stream any time soon in Ontario, or is that still a work in progress?

[Rob Lipsett]

During the last CAP program that was announced before the new year, there was a shared program between yourselves in the federal government and our provincial government. I believe it was a $4-million program. We saw that money snapped up very quickly by all of the processors in Ontario.

That was positive, that they want to access the kind of funding, that they can do more.

We need to see more plans like that and they could ramp up production fairly quickly.

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

Thank you very much.

Mr. Barrett, you were talking about the grocery retail giants' fees, fines and special charges, which affect your stakeholders in particular. I know you touched on this, but I want to verify whether I'm right in thinking that dairy processors purchasing milk products are purchasing at a supply-managed price from producers.

[Michael Barrett]

That's correct. We are purchasing milk and it's supply managed, so it's at a set price based upon the end use of the milk product that you use.

We don't squeeze producers. I heard that mentioned in the last panel. Actually, the retailers squeeze us as the processor.

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

If dairy producers purchase milk product at a supply-managed price, am I right in thinking that when grocery retailers impose a new fee or a fine or a special charge, it goes directly against the processors' profit margin, and that you have no way of passing on those fees, fines or special charges to those whom you sell it to?

[Michael Barrett]

There's an irony. Yes, we don't have the ability to charge it back, because the very people who are levying the fees against us are the ones we go to for a price increase, so there is that—

[The Chair, Liberal, Pat Finnigan]

Thank you, Mr. Barrett and Ms. Rood.

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

Thank you.

[The Chair, Liberal, Pat Finnigan]

Mrs. Bessette, you have the floor for six minutes.

[Lyne Bessette, Liberal, Brome—Missisquoi, QC]

Thank you, Mr. Chair.

Thank you to all the witnesses for being here today.

My questions will be directed to representatives of the Dairy Processors Association of Canada.

According to a recent report by the Agri-Food Innovation Council, there is a lack of research and innovation, which hinders the growth of the processing industry and its international competitiveness.

In your view, what measures are needed in the long term to encourage innovation and technological advances in the industry?

[Mathieu Frigon]

I will respond first, and then I will let Mr. Barrett add his comments.

We are well aware of this report. However, the dairy industry was not consulted as part of this report.

In my opinion, the first step is the compensation program that we mentioned in our presentation. As we were saying, it’s not a matter of sending a cheque in the mail. We want a program that will allow the industry to position itself in the long term to encourage investments. I think that this first step is mandatory.

As we stated in our presentation, pressure from retailers, the impacts resulting from the access granted under international trade agreements, in addition to the constraints that will be imposed on us with respect to the export of dairy ingredients, make this program absolutely necessary. It is this type of program that will enhance investments and innovation in the dairy processing industry.

[Michael Barrett]

I couldn't add any more than to say that innovation and investment go hand in hand and that there is a requirement to have both. Recognizing that we have a small population—I heard this said in the last panel as well—the ability to innovate and to seek markets elsewhere is a critical component of growth, and that modernization fund is a critical part of doing so, as Mathieu has outlined.

[Lyne Bessette, Liberal, Brome—Missisquoi, QC]

Thank you very much.

How important is automation to innovation and growth in your sector?

[Michael Barrett]

I'll start and then I'll pass it to the Beef Farmers.

Certainly, automation is a critical component. Labour, as I heard in the last panel, becomes a significant hurdle to our being able to go forward. As mentioned, the food industry, although it has experienced some roller coaster hills and valleys through the pandemic, has been able to meet the requirements of the Canadian industry and Canadian consumers. However, automation is a critical component, because manpower, the ability to attract individuals, whether skilled or even general labour, becomes much more difficult. I would suggest that even during this pandemic, many food processors are looking for individuals and are having difficulty acquiring the help that's needed to continue to grow and support business.

[Richard Horne]

I would just add, from a beef perspective—the processors can tell you what they need—that we would underscore what Rob mentioned in his presentation. Make the funding programs targeted enough, with sufficient runway, to let the businesses decide how to best implement technology and automation advances in their plants that help spur innovation and growth. That would be our primary recommendation on that front.

[Lyne Bessette, Liberal, Brome—Missisquoi, QC]

Thank you.

My next question is also for the representatives of the Dairy Processors Association of Canada.

You spoke briefly about the fact that the food processing industry is experiencing recruitment and retention problems, especially in higher-skilled jobs.

Do you have any comments about this labour shortage? What solutions could the government offer to this problem?

[Michael Barrett]

I certainly would agree that specialized fields are critical. I think what we need in certain areas is the ability to be able to have programs that would support. For example, I'm not the largest dairy processor, but I could probably hire anywhere between 15 and 20 apprentice mechanics of all shapes and sorts, whether they be PLCs or electricians. We need a countrywide program that will allows us to be able to fund that.

It also goes beyond that. It goes to the element of those skill sets—cheese makers and things like that. There isn't necessarily the infrastructure to be able to support that type of skill development. We're having to import it.

In the other part of my life, I serve as a school board trustee. I'm always continuing to advocate the understanding that there are many, many different options in co-op programs and in support of those co-op programs. The belief that there is another alternative to having a degree—being able to also support the training of and the encouragement of youth in those programs—is essential for the dairy processors of Canada.

[Lyne Bessette, Liberal, Brome—Missisquoi, QC]

Thank you very much.

I have only 20 seconds left, so that's fine. Thank you.