Agriculture Committee on Feb. 18th, 2021

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

Okay. Thank you.

In your presentation, you spoke about foreign competition. You said that input costs were lower in other parts of the world and that perhaps labour costs were lower as well.

When you need to deal with foreign countries, such as when you export your products to the United States, you said that it was less cost-effective for you. I'd like you to elaborate on this.

What tool do you need to make your exports more secure?

[Ron Lemaire]

There's a range of pieces that come into play from the production level and from enabling more inputs, such as the registration of a greater volume and number of different crop production tools, that allow our producers to use and leverage a more cost-effective input in their production in a more cost-effective manner. That enables them to improve on their margin. New technologies also help them increase their yield. That's the first piece.

The next piece comes into ensuring they have a labour force. Then the other piece ensures that, as they move through the system and move it to the processing facility, the processing facility has those similar tools in place, so that they have the opportunity and the right corporate tax model to enable them to successfully drive and move the products through their processing system into a market that isn't dealing with extremely low wages, extremely low input costs and overall low cost of production, which is really the starting point for the entire system in fruit and veg.

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

Mr. Lemaire, for the processing industry to exist, you must first produce your products. Right now, I believe that your clients have major concerns about the economic situation.

Are you worried about bankruptcy announcements in the near future?

How can the government help you in this area?

[Ron Lemaire]

That's an extremely great point.

The government can do one key thing for the fruit and vegetable industry, which is not effectively protected in a bankruptcy scenario under the Bankruptcy and Insolvency Act. It can correct that by creating a deemed trust that would protect processors of fruit and vegetables and fresh fruit and vegetable sellers and growers in the event of a bankruptcy. The material and tools are there.

[The Chair, Liberal, Pat Finnigan]

I'm sorry Mr. Lemaire. Thank you. We're out of time on that one.

Now we have Mr. MacGregor for six minutes.

[Alistair MacGregor, NDP, Cowichan—Malahat—Langford, BC]

Thank you so much, Mr. Chair.

Thank you to all of our witnesses.

I'll start with Mr. Johnstone. I wanted to talk to you about the recent closure in Red Deer at the Olymel plant. We had a representative from Olymel appear before our committee to talk a little bit about that.

I wanted to get your perspective to start off with. How are the workers doing at that plant? How are they dealing with the new situation they find themselves in?

Also, could you maybe open the conversation up a bit more broadly from labour's point of view? We have found during the course of the study that meat-processing plants have become so concentrated that when they get shut down, it has such a huge cascading effect on the whole supply chain.

From your point of view, how are we to inoculate our processing plants and, of course, the workers who work in them from these future shocks to the system?

[Derek Johnstone]

Thank you, Alistair. That's a very good question.

I can tell you that the situation at Olymel is really the worst fears for these workers. When they get up every morning and go to bed every night, they think about when the next outbreak is going to occur. The most recent one has been at Olymel.

As I mentioned in my introductory remarks, our members are very frightened to go to work, and with very good reason. There have been some changes in the plant. I heard mention that some plexiglass shields have been introduced. It's certainly the case in most, if not all, of the larger processing facilities. They put some distancing in the lunch rooms and whatnot. Really, as long as the line keeps rolling at a top speed, you can't really do anything about the density on the floor. In terms of an outbreak, it's a bit of a ticking time bomb. We just saw that at the plant in Red Deer.

I can tell you that when that does happen, on top of the strains that folks have by going to work and the stresses associated with that, when they are forced out of a job, the onus is on them to adapt to that new reality for them. There have been some new programs set up throughout COVID, of course. There's the CRSB is the latest incarnation of that support. Again the onus is on the employee to file for that, unlike in some other jurisdictions.

We understand that in places like Denmark, which has pork processing as a huge part of its economy, that is not the case. In those scenarios, the administrative piece is handled directly between employers and governments. Not only are employees in that scenario getting their full pay, but it's a seamless approach for them. It's handled directly by the employer and the company.

It's something that I think would certainly go a ways to assisting our members who just want to go to work every day. They bear the brunt of these outbreaks when they happen in many ways. Certainly and most apparently it's their own personal health, but also in the more practical ways when it comes to trying to make ends meet. It's a difficult situation in a meat plant in multiple ways.

[Alistair MacGregor, NDP, Cowichan—Malahat—Langford, BC]

A common thread we've had through this study and others is the concentration in the marketplace, especially among meat processors. You have Cargill, JBS, Olymel. These are huge players, and they really control significant market share through just even one plant. I think Olymel said that Red Deer was...about 30% of pork processing in Canada, so that's massive.

You and I have talked before of the Ryding-Regency situation which I guess is...Tru Harvest Meats. Do you have any updates on that?

If we are looking to try to make sure that we have more processing capacity, we would be interested to know about ones that were shut down and what the odds were that they would be coming back to get that capacity back on line.

[Derek Johnstone]

I wish I did, and to your other point in terms of concentration of meat packing, for instance, that's an excellent, practical example. In Ontario there's really a crisis in terms of small to mid-sized packing facilities. Ryding-Regency was one of them. It's a facility that was shut down in September 2019, so this plant has essentially been dormant for a year and a half.

We have 200 members there. They are folks who haven't known what their future is at that plant for two Christmases. But on top of that, a big part of the committee's work over the last few meetings has been about the crisis with regard to skilled labour in food processing. We have 200 highly skilled industrial butchers who are in a position now—I don't know whether they go on to do something else, whether they leave the sector. It's not something that as an industry we can afford to have.

Despite numerous attempts with both the ministry and the CFIA, I could tell you that we have gotten hardly any information on what the status is at that facility. We understand that an application has been put forward, but that's been the case for going on a year. I have to say the communication has certainly been wanting on that piece for us, and certainly for our members.

[The Chair, Liberal, Pat Finnigan]

Thank you.

Now we'll go to the second round, and Mr. Steinley for five minutes.

[Warren Steinley, Conservative, Regina—Lewvan, SK]

Thank you very much.

Thank you to the witnesses for appearing before us today.

Throughout this process we've been hearing from witnesses saying that the margins are getting smaller, and the bottom line for the agricultural sector producers' manufactured processes are getting lower.

My question is for Myers Norris Penny, either Mr. Fraser or Ms. Tait. We haven't heard from her yet. Is MNP looking at undertaking an economic analysis of what the carbon tax has done to the agriculture sector? If they are, would they be willing to share that with the committee? If they have not, are they planning on doing so?

[Kelleen Tait, Partner, MNP LLP]

Thank you.

To date we have not completed an analysis on that, but we would be open to working with our client and with all those impacted on coming up with an analysis and providing some further information on it.

[Warren Steinley, Conservative, Regina—Lewvan, SK]

Mr. Fraser, do you have anything to add?

[Glenn Fraser]

No—exactly what Kelleen said.

[Warren Steinley, Conservative, Regina—Lewvan, SK]

Perfect.

I'm looking at tax changes that have been made from 2017, 2018, 2019, and to grow our processing capacity in Canada we're going to have to make some changes to our tax structure.

As tax specialists, are there any specific recommendations you could give to this committee that we could bring forward that would incentivize growing our processing and capacity sector in Canada?

[Kelleen Tait]

Absolutely. I think there are many opportunities to provide funding to some of these organizations so they can continue to access and innovate, as we've talked about. Some of those, like the scientific research and experimental development tax credit, can be overly complex, and at times our industry has noticed some poor success rates at obtaining funding through that program due to the complexity, so just understanding that maybe a more predictable system and one that is easily understood by the producers going into it....

[Warren Steinley, Conservative, Regina—Lewvan, SK]

I think that's a very valid point. When we did the BRM report, lots of producers and lots of agriculture witnesses talked about how complicated the tax process is.

Briefly, if you could, how could we simplify that process and the tax structure in the ag sector, especially when it comes to incentives, like you said, and tax credits for bringing more capacity to Canada?

[Kelleen Tait]

Absolutely. I think we also need to refocus on the definition of innovation and research and development. Oftentimes, our producers are taking new techniques, new to Canada or new to their industry, and they're perhaps not being given the credit for those under those programs.

As Glenn had alluded to, these don't need to be new, groundbreaking technologies. They need to be ones that help with the gross margin, the operational side, and can provide benefit to the producers.

[Warren Steinley, Conservative, Regina—Lewvan, SK]

I would be remiss if I didn't mention Protein Industries Canada, which is right in the heart of Regina, which is my riding.

You have a new partnership, or a recent partnership, with Bioenterprise Corporation. It expands on the role of business accelerators in the ag sector.

Will there be a role in that partnership with Bioenterprise Corporation to also help increase processing capacity? Could you expand on that a bit, please?

[Kelleen Tait]

Sure.

Obviously, in that scenario as well, we would be assisting with some of the people coming through that incubator. Some of the things we discussed earlier, those research and development credits, would play a huge role there.

Also, access to capital for some of those new businesses is going to be difficult, or established businesses, really. Therefore, if there was any availability of government funding that could be easily predictable and applied for, that would be truly of benefit.

[Warren Steinley, Conservative, Regina—Lewvan, SK]

Thank you very much.

Lastly, with the carbon tax increasing from $30 to $170 per tonne, do you think that might play a role in having limited capacity growth opportunities in Canada?

[Kelleen Tait]

It's always important for those producers to determine what their margins are going to look like, and that would certainly be a factor in profitability for many of them.

[The Chair, Liberal, Pat Finnigan]

Thank you, Ms. Tait and Mr. Steinley.

Mr. Drouin, you now have the floor for five minutes.

[Francis Drouin, Liberal, Glengarry—Prescott—Russell, ON]

Thank you, Mr. Chair

Thank you to all the witnesses.

Mr. Lemaire, it's great to see you. It's great to have you before our committee.

I'll go back to MNP afterwards, but I'm going to make a prediction here that at some point we're going to hear the Minister of Finance pleading for the private sector to make more investments as we heard the late Minister Flaherty, about 10 years ago, after the recession had passed, plead with the private sector to make more investments. I know in general the manufacturing sector had asked for the accelerated capital cost allowance, which was done in the fall economic statement in 2018.

Mr. Lemaire, in terms of those tax measures, are your members using that, or is it not working? Should we be doing other measures? I know you talked about more tax incentives. I would be curious to find out what those could be.

[Ron Lemaire]

We actually have a survey out asking some of those questions right now. I'm sorry, but I don't have the full details on the breadth of what the solutions are.