Agriculture Committee on Feb. 18th, 2021

[The Chair, Liberal, Pat Finnigan]

I call this meeting to order. Welcome to meeting number 18 of the House of Commons Standing Committee on Agriculture and Agri-Food. Pursuant to Standing Order 108(2) and the motion adopted by the committee on October 24, 2020, the committee is resuming its study on processing capacity.

Today’s meeting is taking place in a hybrid format pursuant to the House order of January 25, 2021. Therefore, members are attending in person in the room and remotely using the Zoom application. The proceedings will be made available via the House of Commons website. So you are aware, the webcast will always show the person speaking, rather than the entirety of the committee.

I will take this opportunity to remind all participants of this meeting that screenshots or taking photos of your screen is not permitted.

To ensure that the meeting runs smoothly, I'd like to share certain rules with you.

Members and witnesses can speak in the official language of their choice. At the bottom of the screen, you can choose floor, English or French, without having to select the language channel. You can also use the “raise hand” function. If you want to speak or get the chair's attention and this option isn't working, you can always raise your hand. The clerk will prepare the list of members who want to speak.

Before taking the floor, wait until I recognize your name. Click on the microphone to turn off mute mode.

I want to remind you that all remarks from members and witnesses must be addressed to the chair.

When you aren't speaking, please mute your microphone.

As you may have noticed, today's meeting will consist of one panel of three witnesses, as we had a last-minute rescheduling of witnesses. The meeting will end at five o'clock, or might extend now that we've had a little problem.

I will start by welcoming our witnesses here.

I know Ron Lemaire, from the Canadian Produce Marketing Association, very well. He has been on our committee many times. Welcome, Mr. Lemaire.

We also have MNP LLP Kelleen Tait, partner; and Glenn Fraser, national leader, food and beverage processing practice. Welcome, Ms. Tait and Mr. Fraser.

I would assume that the third witness is not with us yet. When Derek Johnstone, special assistant to the national president of the United Food and Commercial Workers Union Canada, joins us, we'll make sure that he has his chance to make his opening statement.

Mr. Lemaire, do you want to start with your opening statement, for seven and a half minutes?

[Ron Lemaire, President, Canadian Produce Marketing Association]

Thank you, Mr. Chair.

On behalf of the Canadian Produce Marketing Association, representing over 800 companies growing, packing, shipping and selling fresh fruit and vegetables in Canada and supporting roughly 249,000 jobs across the country, I want to thank the chair and members of the committee for the opportunity to share our comments on increasing capacity for processing in Canada.

My comments today are reflective of a complex supply chain that works tirelessly to provide fresh fruit and vegetables across Canada, and to develop opportunities and solutions to increase processing capacity and competitiveness in Canada.

Our recommendations support the government's export objective of $75 billion by 2025, as referenced by the Barton report, and support the goal of increasing local capacity to protect food security and strengthen Canada's food sovereignty while providing safe food for all Canadians.

Canada's fresh fruit and vegetable industry contributes significant benefits to our economy, to our communities and to the government. In 2018 alone, the total value of the fresh fruit and vegetable sector was $17.7 billion. Development in the fruit and vegetable sector, including processing, directly leads to jobs for many Canadians and Canadian workers. At the same time, the government collects over $2.6 billion in revenues through taxes on production each year.

The fresh fruit and vegetable industry has significant potential to transition more products towards processing and value-added items such as frozen fruit and vegetables, baby food, juices, shredded lettuce, minimally processed salad kits, mini carrots, purées and others. In fact, in 2020, in a survey conducted by Caddle, 24% of Canadians indicated that they were planning to spend more on frozen produce in the next year, 2021.

Unfortunately, the current market conditions encourage more number 2 grade Canadian produce items to be sold in the open market in the United States for processing or for juicing than in Canada, as there are self-imposed barriers to domestic processing sectors. The pathway for fresh number 2 grade produce items to be processed needs to be modernized to encourage greater investment in the sector at the provincial level, specifically in Ontario. The regulated commodity model in Ontario is an example that has created a disincentive to drive innovation and investment.

Currently, we are not aware of new processors entering the Canadian markets, for reasons that include labour challenges, corporate tax structures and the regulated market conditions in our largest province. The regulated market conditions in Ontario restrict some movement of open-market fresh produce into processing channels. As an example, Ontario fresh producers are now shipping product to North Carolina for carrot purée and to New York, New Jersey and Pennsylvania for diced carrots for soups.

However, by selling into the U.S., a Canadian company receives only about 35% of the gross revenues back, due to the logistics and transportation costs. While these exports may seem on paper to look positive toward our Barton goal, they are not providing the best return for our growers.

To provide better support for increasing processing capacity here at home, there are three key areas of focus and review needed by the federal government: our domestic labour model in plants, the high cost of product and inputs, and competition from frozen products coming from overseas, which are significantly more cost-effective due to low input and labour costs.

This committee has heard previous testimony related to the gaps in labour; I will reiterate the estimated shortfall of 30,000 workers within the processing sector, with projections doubling by 2025. Without the necessary skilled workforce, the sector is already facing an uphill battle. CPMA supports a labour strategy that focuses on addressing the shortages in skilled trades, ensuring we have access to qualified foreign workers and supporting automation and innovation.

We all recognize that the produce sector functions in an extremely competitive market. As commodity prices and volumes drive the success or failure of our sector, the Government of Canada should examine short-term and direct supply chain opportunities to support and create market opportunities both domestically and internationally.

At the same time, federal and provincial regulatory models must also be reviewed to determine opportunities and gaps being created by the unintended consequences of regulated commodity models and production volumes. The COVID-19 pandemic has imposed significant new challenges for businesses throughout our supply chain, including the added costs of purchasing personal protective equipment and other health screening tools and equipment, the implementation of safety protocols to allow for social distancing and so on.

All of these impacts are difficult to pass on to Canadians without increasing the cost of fresh produce, thereby creating food security concerns.

While the government funding available through the agri-food workplace protection program and the emergency processing fund is welcome, these measures will not be able to address the full scope of the economic challenges facing our sector, especially as COVID protocols will be with us for the foreseeable future.

The Government of Canada should implement a series of tax-incentive programs that will encourage industry to invest in Canada. This can include PPE tax credits to support those companies protecting their workers on packing lines and processing lines or investment tax credits that can spur GDP growth.

As I noted at the outset of my comments, there is significant potential for the fresh fruit and vegetable industry in Canada to transition more products towards processing and value-added items. The Government of Canada can foster growth in our sector by working with industry to address the challenges I've described here today.

CPMA is greatly appreciative of the opportunity to share these comments, and I'm happy to answer any questions the committee members may have.

[The Chair, Liberal, Pat Finnigan]

Thank you, Mr. Lemaire.

Ms. Tait and Mr. Fraser, please go ahead.

[Glenn Fraser, National Leader, Food and Beverage Processing Practice, MNP LLP]

Thank you, Chair.

It is an honour to be invited today to discuss building back better with a more robust and competitive agri-food sector. Enhancing our domestic and global competitiveness with respect to food and beverage manufacturing capacity has never been more critical. A global race is on and Canada cannot afford to fall behind.

My name is Glenn Fraser and I'm the national leader of food and beverage processing at MNP. I am joined today by colleague, Kelleen Tait, national lead of livestock and poultry.

As a leading accounting, consulting and tax advisory firm headquartered in Canada, MNP is in the unique position to be the voice of over 20,000 agri-food clients, including 1,000 food and beverage manufacturing companies from coast to coast to coast. One thing is for sure, the post-COVID-19 business environment will look much different than it did pre-pandemic. More virtual activity is forecast as food and beverage manufacturers look to technological solutions to increase their efficiencies and effectiveness by adopting automation, mechanization, digitization, e-commerce and AI.

MNP believes Canadians will witness a significant increase in the applicability and investment in these areas within the industry supply chain. It's already happening as we speak. To enhance domestic and global competitiveness, we believe the federal government can help resolve ongoing issues and impediments to growth and profitability. We have three specific building back better recovery recommendations.

Our first recommendation is that the federal government take a leadership role in establishing new policies and programs to ensure the consistent availability of high-skilled labour. Labour supply is critical for an industry that is the backbone of Canada's food supply. In today's food and beverage manufacturing industry there is a labour shortage of 10%, which is expected to widen in the next five years. To address this the federal government needs to explore policy options that would invest in automation, training and career awareness.

Automation can bring in efficiencies and cost savings for businesses, and it also has the potential to help address labour shortages, which are particularly sensitive to disruption. Automation will equally create demand for skilled workers and draw more youth to well-paying jobs in their communities that they can be proud of.

To fully capitalize on this opportunity, the federal government will need to create programs and provide incentives geared toward training and skills development for the modern workforce. It is also critical to create specific policy geared toward developing awareness among youth of the variety of rewarding and skilled career and employment options within this industry.

Our second recommendation is for the government to foster innovation in the food and beverage manufacturing sector. The food and beverage manufacturing industry is currently experiencing decreased investment caused by declining margins, difficulties in accessing capital for investment, and ongoing barriers to accessing tax credits toward scientific research and experimental development.

Working in partnership with provincial governments and industry, the government should broaden existing funding programs while also developing industry-specific policy that can be used to promote innovation in food and beverage manufacturing. Innovation doesn't need to be leading edge or new technologies. Innovation can also be achieved by adopting proven strategies and technologies that may already exist inside or outside of Canada.

Programs such as Agriculture Canada's agri-innovate program and ISED's strategic innovation fund have the potential to be expanded to include incentives for food and beverage manufacturers to invest. We would like to emphasize the importance of innovation, automation, mechanization, digitization, e-commerce and AI in this sector. These funding programs need to be specifically tailored to the food and beverage manufacturing industry so there is a more streamlined and simplified method of accessing these funds.

Our third recommendation is for the FPT agriculture ministers to ensure there is a grocery code of conduct that establishes a fair, transparent and efficient relationship between grocery retailers and food and beverage manufacturers. In Canada, five major grocery retailers control 80% of the grocery market. This has caused an unbalanced relationship in the business landscape between retailers and the food and beverage manufacturers where arbitrary transaction costs, fees and penalties are levied, at times retroactively.

In addition, the COVID-19 pandemic has exposed additional challenges and costs at all levels of the supply chain.

Retailers have taken some of these financial costs associated with COVID-19 and passed them down to the manufacturers. This adds additional strain on already escalating costs for most if not all food and beverage manufacturers.

A grocery code of conduct would enable the food and beverage manufacturing industry and retailers to engage in a constructive and transparent manner that ultimately provides positive outcomes for all Canadians.

In conclusion, we want to thank this committee for its important work in building a more competitive food and beverage manufacturing industry. Automation, skilled labour, training and awareness, enhanced innovation programs and a grocery code of conduct would ensure this critical industry is equipped to grow and prosper at home, reach attainable export targets and compete abroad.

These recommendations are vital to our future food security and an affordable supply of quality food for all Canadians.

Thank you.

[The Chair, Liberal, Pat Finnigan]

Thank you, Mr. Fraser.

I believe we have Mr. Johnstone from United Food and Commercial Workers Union of Canada, special assistant to the national president.

Mr. Johnstone, you have seven and a half minutes.

[Derek Johnstone, Special Assistant to the National President, United Food and Commercial Workers Union Canada]

Thank you, Mr. Chair.

On behalf of the United Food and Commercial Workers, I would like to thank the standing committee for the opportunity to share our perspective today and also for the work of the committee on this important subject.

Before I put forward some of our thoughts, it might be good to say a few words about who we are.

The UFCW is the voice of Canada's food workers. We are one of the country's largest unions and are very proud and privileged to represent more than a quarter of a million hard-working people across Canada. About 80% of our membership work in food-related sectors. As we like to say, you can find UFCW members everywhere in the food chain, from field to fork.

Throughout the pandemic our members have played a central role in holding the front line and providing the food and other crucial products and services that Canadians need for their day-to-day lives.

I can tell you that the last 12 months have not been easy for food workers in Canada. For good reason, many of our members have been afraid to go to work. They are afraid to get sick; they are afraid to bring the virus home to their families. Thousands of our members have tested positive, a number have been hospitalized, and some have died.

As a food workers union, we've been calling for a number of measures and responses to the pandemic, many of which have been implemented in varying degrees by industry and by major employers in particular. However, consistency and enforcement remain a problem.

The CFIA, of course, watches over production, but they have made clear to us that their job is to ensure the safety of the food in the plant, not the people in the plant. That responsibility, as you know, falls to the provinces, with whom we have had, to say the least, mixed experiences throughout the pandemic.

The elephant in the room throughout the pandemic and long before COVID is line speed. The speed of the production line has made physical distancing practically impossible. For many years it has been the leading cause of repetitive strain injuries and mental health issues for many UFCW members.

The truth and the bottom line is that to protect Canada's food supply we must protect Canada's food workers. There remain some major structural issues that stand in the way of fully achieving that.

When we turn our focus to labour recruitment challenges, then, these are factors that must be considered as part of the problem.

That said, food processing is still a sector with a lot of potential. It's a sector that could and should be recruiting and creating more jobs for Canadians.

UFCW is very concerned about the exponential growth of the temporary foreign workers program in recent years. We strongly recommend a more varied approach to the situation facing our industry, one that prioritizes the expansion of federal and provincial nominee programs and one that makes sure that Canadians are fully aware of the opportunities and pathways that exist in the food-processing sector.

Government needs to ensure that investments are being made in developing domestic labour markets. We've seen data to suggest that there is an inverse relationship between TFW usage and public investments in active labour market policy initiatives, which quite frankly is no way to build the future.

Going forward, we urge the committee to recommend a stakeholder-based approach to developing recruitment, skills and strategies for the sector. UFCW, for instance, is very well positioned to help champion the food service and industrial trades. If employers were compelled to work with us on these issues, perhaps through the LMIA process, to identify domestic labour sources, that could result in better outcomes that benefit the sector as a whole.

In any event, the last thing we want as the food workers union is to see Canada's entire food system become reliant on a temporary, precarious and vulnerable workforce, such as we have now in primary agriculture. To do so would mean less stability, security and food sovereignty for one of Canada's most crucial sectors. With that said, thank you to the committee for the invitation and for shouldering this very important work. I look forward to answering any questions you might have.

In any event, the last thing we want as the food workers' union is to see Canada's entire food system become reliant on a temporary, precarious and vulnerable workforce, such as we have now in primary agriculture. To do so would mean less stability, security and food sovereignty for one of Canada's most crucial sectors.

With that said, thank you to the committee for the invitation and for shouldering this very important work.

I look forward to answering any questions you might have. Thank you.

[The Chair, Liberal, Pat Finnigan]

Thank you very much, Mr. Johnstone.

With that, we'll start our question round.

Ms. Rood, you have the floor for the first six minutes.

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

Thank you, Mr. Chair.

Thank you to the witnesses for appearing today. I've heard common themes today from all three of you, and one of the common themes is on labour shortages.

Mr. Johnstone, you mentioned that you would like to see more recruitment into the food-processing sector, I'm curious what your suggestion is to get that. Coming from a farming background myself, finding labour is the biggest challenge for any food producer, so I'm wondering if you could elaborate on how you think you can recruit people into this business. You say we don't need temporary foreign workers or seasonal agriculture workers, but without them, we have no food supply in this country, so I'd like to hear your thoughts on that.

[Derek Johnstone]

That, of course, is the question. I certainly think more can be done to leverage the networks that stakeholders have. We, as the food workers union, represent a quarter of a million members across Canada in over 600 communities, yet we have never really been engaged in trying to get the word out on the opportunities in the sector. We represent tens of thousands of folks in the meat sector in particular, and we know that there are very good jobs in that sector, still a lot of full-time jobs, these are jobs with pensions, they're union jobs.

I would suggest to you that a lot of Canadians, despite some efforts that have been taken by employers and some government work, are unaware of them. I know even with our own membership that that's the case. I think that the efforts to date probably haven't leveraged stakeholders as much as maybe they could have. One of the reasons we're keen to be here today is to really put on the record that we want to play a meaningful role in doing this.

As you may know, we used to have a forum in Canada through the sector council program that brought stakeholders together through a tripartite process to tackle challenges like this. That program, regrettably, was discontinued about a decade ago, and there is no forum that exists in Canada for us to do that, which I think is to the detriment of the sector.

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

Thank you very much.

Mr. Lemaire, I want to ask you a couple of questions. Being from a producer background myself, we've heard about the small profit margins that farmers have at the farm gate, especially in the fresh fruit and vegetable industry. I'm wondering if you could touch on a bit on the grocery code of conduct and why it's so important for processing in Canada. If we start losing our farmers, if we start losing our capacity here because of labour, because of bankruptcies that we could potentially be seeing because of COVID-19, why is it important that we have a code of conduct going forward and how is that helpful for producers to ensure that we continue to have food security?

[Ron Lemaire]

Certainly, I think one of my colleagues who testified, Mr. Fraser, did touch on the key points around the code of conduct and the competitiveness that is at the national level within retail. There are so few players that drive a price-driven market, which pushes down on the growers, who are price-takers. That is part of the challenge, especially when you look at it in the context of global and domestic, and it's the combination therein that creates the complexity of the question you ask. When you start looking at the cost of inputs, the cost of labour, even on entry now, if you want to be a farmer, the cost of land and/or transition of land from one generation to another, you begin looking at a very steep hill to climb as a producer. As you bring it all together, you start looking at what your market looks like, and a delivery of a product with a very small margin in a price-taking market can create a very strong hurdle for a Canadian producer.

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

Thank you very much.

You also touched on grade 2 and processing vegetables. I have a number of vegetable processors in my riding, we do a lot of field crops. I'm wondering if you could touch a bit more on that, because what I've heard from my processors is the biggest challenge is still labour; it's not actually getting the product, it's labour. With more farms potentially going out of business, they are going to have a hard time finding products, so I'm wondering if you could touch on that.

[Ron Lemaire]

I would love to, thank you.

This is coming directly from some of our fresh members who are not part of the Ontario Fruit and Vegetable Growers' Association. When you look at the annual negotiated price and volume model in place in Ontario for those items, out of the 350 processed veg growers in Ontario who are producing.... You're right, they are producing and to a volume that is required at the price they're being asked to sell. The labour is an issue for them, no doubt about it, but if I'm a fresh grower, I don't have access to that market. If I do have excess product, if I have a bumper year and I want to try to move my product into that market, I'm excluded. There are challenges for the fresh industry with that closed market concept. I don't want to put up a position for the processed veg group, but it does create an issue for expansion.

[The Chair, Liberal, Pat Finnigan]

Thanks, Ms. Rood and Mr. Lemaire.

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

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

Thank you, Mr. Chair.

I want to thank all the witnesses for being here today.

My questions are for Mr. Lemaire from the Canadian Produce Marketing Association.

Mr. Lemaire, you said that the profit margins for products exported to the United States for processing weren't as high as they could be.

Aside from implementing a code of conduct, what long-term measures can the federal government take to address this situation?

[Ron Lemaire]

Thank you for your question.

The key we're looking at here again comes back to a series of strategies that I noted. One is ensuring that we have access to the appropriate labour pool that we can effectively produce and process the products domestically. The challenge relative to selling into the U.S. comes into the added cost of logistics and transportation, and also looking at the market conditions for commodity pricing at the time the product is sold, which will fluctuate.

We've already heard some key pieces around Ontario and Canada. When we start looking at the other opportunities for growth in Ontario, when we start looking at key pieces around automation and innovation, it's perhaps the greatest opportunity we have, because if we can't find labour and we need to start moving down the path of increased automation and/or innovation around the production line, as we heard Mr. Johnstone talk about, it's the speed of the line and how it's operating and other tools that we can drive within that line. It is a labour gap of moving the product through, even at an increased speed with fewer workers, unfortunately, to try to meet the demand of the product in the market at a lower cost.

We are dealing with a competitive environment that requires our finding the most efficient model of producing, processing and shipping the product to its destination. Unfortunately on a global level other countries have implemented strategies including low-cost labour in some cases. In other cases it's incentives and support to their processing sector to enable them to be successful through their tax model, and through their corporate structure to enable them to structure their business to have an incentive to even be in existence within the country.

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

Thank you.

Last week, we heard from a representative of Olymel, a company that had to shut down one of its processing plants as a result of a COVID-19 outbreak. This situation reminds us how employees in the food industry, as essential workers, can be particularly vulnerable to the virus.

Can you elaborate on the measures that your members have implemented to protect their employees?

Have these measures led to any slowdowns in the supply chain?

[Ron Lemaire]

Most definitely. I can only talk to the fresh fruit and veg sectors and to the processing side on that end, and that can include the greenhouse industry, as well as looking at the minimally processed. When we start looking at the investments, you're looking at protective barriers between workers on the processing lines. You're looking at full personal protective equipment that they are wearing within those lines. You're looking at trying to create greater distance.

If you don't have the opportunity to create a barrier between workers, you are looking at shifts. You're managing your lines so your workforce is not coming in in one cohort, they're being broken down into various teams in the event of an unfortunate outbreak so you can manage that workforce and not see a reduction in support. A range of strategies have been extremely successful. We've continually looked at rapid testing and we have been asking about how we can access the tools so we can have that opportunity to do random testing, and/or an opportunity to test people as they potentially show symptoms to ensure the overall safety of the employee base. That unfortunately has not been successful to date.

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

Thank you.

You mentioned automation earlier.

In your opinion, what are the main barriers to innovation and the adoption of new technologies?

Also, to what extent can private investment help boost innovation?

[Ron Lemaire]

Private investment is a key function of driving innovation. It's also rethinking how we process, so some new, innovative tools that can change the actual production line, change the thinking around how we operate our line, again, from a fruit and vegetable perspective.

Also, it's looking at including the entire supply chain in the solution and not just looking at it within one segment of the market. Bringing in the growers, right through to the retail end, the buying end, and having that discussion as a group to find where those opportunities lay through the automation process is fundamental.

[The Chair, Liberal, Pat Finnigan]

Thank you, Ms. Bessette.

Thank you, Mr. Lemaire.

Now we go to Monsieur Perron.

Mr. Perron, you have the floor for six minutes.

[Yves Perron, Bloc, Berthier—Maskinongé, QC]

Good afternoon, everyone.

I want to thank the witnesses for joining us today.

I have several questions. I'll turn first to Mr. Lemaire.

Mr. Lemaire, most of the stakeholders who come here talk about labour issues.

In your sector, are there any bureaucracy issues when it comes to foreign workers?

[Ron Lemaire]

Thank you for your question.

It's a good question, and I apologize to the interpreters because I have it on the English channel.

I'll be very quick. I want to talk about the situation today, because we're dealing with a very unique environment where we have multiple layers of authority and multiple layers of responsibility to ensure the safety of the workers.

First it's getting them into the country, and the protocols we are working with to move them from their point of origin to the processing facility and/or area they're working within or the farm they're working on.

The fundamental challenge we're dealing with right now is the unknown. We all recognize the recent changes to the entry requirements into Canada and the challenges we're now dealing with, targeting a March 14 date, without a clear understanding relative to whether the temporary foreign workers are required to stay in a government-issued hotel and/or whether they will be exempt to enable them to transfer seamlessly to the farm for the quarantine period.

There is a range of challenges we're looking at that continually add more costs, so we look back at the issue of costs in the system.

The other piece around this is municipal and provincial.

On the issue of today, if we have a foreign worker coming into the country, they land in Toronto. If they have to hold in Toronto for three days because of the new measures and then they have to go to the Atlantic provinces, they have to hold for another 14 days in quarantine. Now we are up to 17 days out of the workforce, which is also a burden on the individual.

[Yves Perron, Bloc, Berthier—Maskinongé, QC]

Mr. Lemaire, I gather that you're telling me that you don't have any information and that you don't know whether you'll be required to quarantine workers.

The information that I have—I'm by no means saying that it's official—suggests that essential workers would be exempt and would go directly to the farms, as they did last year. No one has told you this. Is that right?

[Ron Lemaire]

The information that's been provided to date is that until the 14th they are exempt, and they are working through the details.

This is the bureaucracy. You have four departments that are working on moving temporary foreign workers to the farm and to the processing facilities, and within that system, you have the Public Health Agency, Health Canada, ESDC and then Agriculture Canada, all linking together. Then you have Global Affairs that is also working to ensure that the countries are functioning and able to move....

Within all of those jurisdictions and alignment, the information we're receiving is that they are exempt for now and they will be allowed into the country, but we do not know what will happen as of March 14.