Agriculture Committee on Feb. 23rd, 2021

[The Chair, Liberal, Pat Finnigan]

Welcome, everyone.

I will call the meeting to order.

As you probably know, in this meeting, similar to the last one, we have only three panellists. We'll try to use the same general formula, and hopefully it will work. If we have extra time at the end, we'll divide it using the same formula as last time.

I welcome you to meeting number 19 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. Proceedings will be made available via the House of Commons website. The website will always show the person speaking rather than the entirety of the committee.

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

To ensure the smooth running of the meeting, I would like to share some rules with you.

Members of Parliament and witnesses may speak in the official language of their choice. Interpretation services are available for this meeting. At the bottom of your screen, you can choose between the floor, or English or French. With the latest version of Zoom, you can now speak the language of your choice without having to choose the corresponding language channel.

You'll also notice that the platform's “raise your hand” function is now more easily accessible on the main toolbar, if you wish to speak or alert the chair. If this option does not work, I suggest that members and witnesses who wish to speak turn on their cameras and physically raise their hands.

When you do not have the floor, please mute your microphone.

Before welcoming our witnesses, I want to remind the committee that recommendations for the processing capacity report are due Friday, February 26, at 5:00 p.m., and they must be sent to the clerk.

With that, I'd like to welcome our witnesses for this afternoon.

From the Canadian Cattlemen's Association, we have Mr. Bob Lowe, president. Welcome, Mr. Lowe. Also, we have Mr. Dennis Laycraft, executive vice-president. Welcome, Mr. Laycraft.

From Novalait, we welcome Ms. Élise Gosselin, chief executive officer.

Welcome, Ms. Gosselin.

From Maple Leaf Foods Inc., we have Nadia B. Theodore, senior vice-president of global government and industry relations. Welcome to our committee, Madame Theodore.

We will start with opening statements by the witnesses. I will proceed in the order that I have in front of me.

From the Canadian Cattlemen's Association, whoever wants to take a floor...or you can split your time. You have up to seven and a half minutes to make your statement.

You can start. Thank you.

[Bob Lowe, President, Canadian Cattlemen's Association]

Thank you, Mr. Chairman.

Good afternoon.

My name is Bob Lowe. I'm a rancher in Alberta and also the president of the Canadian Cattlemen's Association, the national voice of Canada's beef farmers and ranchers. With me is Dennis Laycraft, executive vice-president of the CCA.

Thank you for the opportunity to appear before the committee to discuss beef-processing capacity.

The beef industry is Canada’s largest agricultural sector, contributing $9 billion in farm cash receipts and $17 billion to the Canadian GDP, while generating over 225,000 jobs. It supports strong rural communities and is the largest Canadian conserver of the great northern plains. The sector’s contributions to Canada’s economy and environment would not be possible without the ability to process our product for national and international customers.

Today we will talk about what is needed to optimize beef-processing capacity. It is not a black and white issue of having too much or too little; rather, we need to attain the right mix of size and scale of processors within Canada. Large processors are efficient competitors nationally and internationally. They allow Canada to take advantage of trade agreements, while small to medium-sized packers allow for slaughter capacity for local food systems. Over the last number of years, the beef industry has been challenged with maintaining small to medium-sized packers and having sufficient processing capacity in eastern Canada.

During the pandemic, our sector demonstrated great resiliency, but vulnerabilities were identified. If we look at eastern Canada, which includes Ontario, Quebec and the Atlantic provinces, packing capacity was approaching full capacity prior to the pandemic, and the sector seasonally experienced long delivery times to get cattle to market. This resulted in longer feeding periods, increased costs and lower prices for producers.

We refer to a processing plant's capacity as its “utilization rate”. To meet demand surges in 2020, eastern packers pushed utilization rates in March through June to above 100% by using Saturday shifts. While we are lucky that these operations were able to push past 100%, this is not sustainable, as they require time for regular plant maintenance.

When the Cargill plant shut down in December, a backlog of 10,000 to 15,000 head of cattle was created. The set-aside program under AgriRecovery has helped bring stability to the market. However, the backlog of cattle remains, as it is difficult to increase capacity beyond 100%, further demonstrating the precariousness of 100% utilization rates.

Overall, limitations in packing capacity have had a significant financial impact on eastern Canada’s beef industry. It is estimated that the Ontario feeding sector has experienced cash losses of $238 per head in 2020.

Over the past five years, the majority of Canada’s total beef processing has taken place in western Canada. In the spring of 2020, temporary slowdowns effectively halted 70% of Canadian beef-processing capacity over a two-week period and resulted in a backlog of approximately 130,000 head of cattle in western Canada. The resulting feedlot losses were a total of $152 million between mid-March and mid-June.

Western processing plants have had an impressive recovery and have efficiently processed the backlog, which was possible due to available capacity. While cattle producers suffered significant profit losses from low market prices and high input costs associated with managing their cattle supply, the set-aside program helped stabilize the market and avoid even greater losses.

Now that I've provided some context, I'll turn it over to my colleague, Dennis Laycraft, to speak to our recommendations.

[Dennis Laycraft, Executive Vice-President, Canadian Cattlemen's Association]

Thanks, Bob, and thanks to the committee for the invitation to appear.

Back in 2018, we recommended the creation of a Canadian red meat industry export development fund, which looked at trying to increase capacity with a particular focus on eastern Canada, especially cooler capacity, some modifications on the processing line, and, as well, setting us up to be able to take advantage of a number of these trade agreements that require specialized processing to meet those specific requirements.

A second area we want to talk about is harmonizing our procedures in the U.S. and Canada with South Korea. Right now there is a specific clause in our agreement with Korea that would lead to the suspension of our shipments until an investigation is completed. Right now that's causing a number of plants in the U.S. not to process Canadian cattle—or, if they do, they're doing it only on a segregated basis. Access to the U.S. is really important for competitive pricing in our industry.

Bob mentioned the set-aside program, and we're asking that it be extended. We're not through the whole COVID situation yet, and we don't know what's going to happen for the rest of this year until we get up to where, hopefully, all Canadians, or most Canadians, are vaccinated. Having that tool in place worked very well last summer, and being able to work with it very quickly is really important.

Then I have a couple of comments about our regulatory system. Right now the procedures in Canada on our specified risk material related to BSE are different from those in the U.S., and this creates a competitive disadvantage. It actually led to the closure of a number of small and medium-sized plants that just weren't competitive with the different environments. We're looking at working with the agency to walk through a review of that, and hopefully we'll complete that as soon as possible.

Finally, I have to talk about labour. It's hard to talk about expansion when you're having trouble getting enough employees for your current size. The more individuals we're able to bring in who want to work in those plants.... These are all union jobs across Canada in our industry, and again, quite often depending on foreign workers to fill vacancies in that. Automation is something we're supporting, and it is part of the solution, but there is no replacement for a highly skilled meat professional when it comes to cutting all of these different specifications for market.

Finally, again, because of the risks, as you have seen, the packing industry in North America meat processing has spent $1.5 billion since last January to put in place protections for their employees. Certainly we feel that placing a vaccination priority on agri-food processing workers would be very important moving forward.

With that, I'll conclude our remarks.

[The Chair, Liberal, Pat Finnigan]

Thank you very much, Mr. Laycraft.

Ms. Gosselin, you now have the floor for seven and a half minutes.

[Élise Gosselin, Chief Executive Officer, Novalait]

First, I want to thank you for giving me the opportunity to provide some information to this committee.

I would like to approach processing capacity in the dairy industry from a slightly different angle, namely that of innovation and research, which support the capacity for innovation.

As you know, the majority of the industrial matrix, as far as dairy processing in Quebec in particular is concerned, is composed of small and medium-sized enterprises. However, to support research and innovation, these businesses can only rely on limited financial capacity and human resources.

This innovation is essential to processing capacity. To ensure the survival of companies, a constant effort is made to meet market demand, adapt to standards, and increase processes and competitiveness. Climate change and its environmental impacts also require companies to constantly adapt their processes.

In terms of societal concerns, the news this week showed just how important everything is in the dairy sector. This even includes animal feed. Consumer demand for more natural products and views on animal welfare mean that companies have to adapt to a constantly changing environment. They must adapt both their products and processes to be able to produce in this environment. Currently, it is industry suppliers, engineering companies, that support innovation in small and medium enterprises, particularly with equipment, but this does not necessarily meet all needs.

I would like to introduce you to our organization. Novalait is living proof that the Quebec dairy sector is particularly innovative. Twenty-five years ago, in 1995, dairy producers and processors decided to create a fund to invest in research. They not only created it, they created it together. In other sectors of the agri-food industry, particularly beef, which my colleagues are familiar with, samples taken from carcasses are used for research. This is also the case in the dairy sector, where producers and processors have come together to invest in research.

In the case of Novalait, all Quebec farms and all companies that process milk, from artisanal cheese dairies to multinationals, contribute to the research funding. Novalait solicits the expertise of researchers to develop knowledge and solutions to solve problems associated with the production and processing of milk. Since its creation, Novalait has invested $11 million in research, in more than 125 projects, for a total value of almost $55 million. This amount has been invested by producers and processors.

We often hear that in the agri-food sector, we are less innovative or we invest less in research than in other OECD countries, but it is important for you to know that this capacity for innovation is really present in the dairy sector in Quebec.

When Novalait was created in 1995, the dairy industry was facing two major challenges: diversification of dairy products and a significant decrease in fat consumption. Twenty-five years later, we can say that extraordinary progress has been made in the variety of dairy products offered. And just as people were afraid to consume milk fat 25 years ago, today's markets are hungry for milk fat in the form of cream or butter. This is a positive development for our sector.

On the other hand, we realize, not only in Quebec or Canada, but worldwide, that milk is made up of a certain percentage of proteins, fat and other solids. We try to match this composition as much as possible to market demand, but there is an imbalance. We meet 100% of Canada's butterfat requirements, but at the same time there are surpluses of protein and other solids, including sugars from fat. This means that every time we process milk, there is a coproduct, which is skim milk, made up of permeates from the concentration of milk. It is a coproduct that we must be able to add value to.

This problem exists in the United States and Europe, but Canada's situation is unique because of the free trade agreements and international agreements it has entered into. The ability of dairy processors to add value on world markets to their coproducts, i.e. skim milk powder or permeates, is limited. The Dairy Processors Association of Canada also mentioned this to you at a previous meeting.

At Novalait, we are looking for solutions to solve this problem. We are working on milk composition and trying to manage the cows' diet so that it can be aligned as much as possible with the needs of the industry, but this has its limits.

We also work with processors to better control processes to reduce the structural surplus imbalance of non-fat solids and find ways to add value to these products. We are currently looking for solutions.

What is important to understand here is that any increase in dairy processing capacity will result in an increase in coproducts, which we must be able to add value to. This is an issue that needs to be addressed in order to increase milk processing capacity in Canada. We have solutions to address this problem. We are concerned about the future. We want to emphasize here that research and innovation are among the priorities for the future.

Thank you.

[The Chair, Liberal, Pat Finnigan]

I remind everyone not to put the microphone directly in front of your mouth, because there's a popping noise that affects the quality of sound for the interpreters.

Thank you, Ms. Gosselin.

We'll go to our next presenter, Ms. Nadia B. Theodore from Maple Leaf Foods.

You have up to seven and a half minutes.

Go ahead, Madame Theodore.

[Nadia Theodore, Senior Vice-President, Global Government and Industry Relations, Maple Leaf Foods Inc.]

Thank you.

Good afternoon, everyone.

I am here representing Maple Leaf Foods, the largest food-processing company in Canada. We have operations across Manitoba, Alberta, Saskatchewan, Quebec, and Ontario and an exporting footprint that includes Asia, the United States and Europe.

We are truly, as a company, Canadian-born and globally grown. We are committed to and invested in the success and sustained growth of the Canadian agri-food sector and of the processing sector in particular, which we believe will be key to Canada's post-COVID-19 economic recovery. However, the question we're trying to grapple with today is how to make this happen. What will it take to make economic recovery happen?

I would like to highlight three areas that Maple Leaf Foods believes will be critical to success.

First is regulatory agility. We know that, if done correctly, regulation can have a positive impact on growth and foster a thriving competitive market that supports innovation and technological progress. However, if executed poorly, regulation stifles productivity, results in unnecessary costs for all businesses, particularly for small and medium-sized firms, and effectively reverses our competitiveness gains.

The good news is that Canada's regulatory system gives Canadians and our country's trading partners confidence that products made in Canada meet the highest health, safety, environmental and quality requirements. The bad news, however, is that our regulatory system is complex, with a multi-layered jurisdictional structure with no clear authority. Perhaps more troubling to us is that many regulations are either outdated or focused too heavily on prescribing a process than ensuring an outcome. This deters innovation and solutions that would improve health, safety, and environmental outcomes and stymies much-needed investment to our country. The ultimate results are additional cost, distrust between industry and regulators, and an overall less-than-efficient system that prevents us from living up to our true potential on both health and safety and global competitiveness.

Now, with the emergence of COVID-19, the Canadian government has shown that agility is possible in the regulatory process within the agri-food sector, and we sincerely hope the government continues to prioritize regulatory flexibility over the long term. In this regard, the recommendation out of the 2018 agri-food economic strategy table for an approach that is focused on predictability, efficiency, and effectiveness and that—equally important—considers the cumulative impact of regulation on competitiveness and net economic benefit to Canada should be further explored.

A second area that other colleagues have already mentioned today that I would like to also highlight is talent. Like any industry, ours requires an adequate workforce to keep operations going. This sector continues to identify chronic and critical labour shortages as one of the most pressing risks and a major constraint on both agricultural growth and global competitiveness. Right now, this sector is in need of 30,000 workers, 10% of our workforce. By 2025, we expect that number to more than double.

Now, this is not a new challenge. The industry has been sounding the alarm bells for several years, luckily coupled with concrete solutions that we are eager to work with all government partners on. Changes to the temporary foreign worker program and to immigration programming are needed to support immediate labour shortages. Even more immediate a need is to help address significant labour challenges that the sector is facing due to COVID-19. Even during a pandemic, Canadians need to eat.

It is because of our frontline workers that Canada's food plants continued to operate throughout the pandemic to provide us with food on our tables. Maple Leaf Foods alone has invested over $50 million to keep our workers safe to allow them to do so. It is critical that governments also reinforce that our frontline workers are critical, and the importance of their contributions to keeping our food supply safe.

We sincerely hope that the federal government will work with the provinces to ensure that food-processing plant workers are prioritized for COVID-19 vaccines immediately after critical health care workers, in all provinces and territories. This is in line with the direction provided by the national advisory committee on immunization and with what other countries around the globe, including our competitors, are doing.

As we have seen recently, there is also a serious animal care consideration to sustained labour shortages. In particular, the supply chain in the pork industry is very tightly calibrated. If there is a break in the hog supply chain, it certainly does not take long for things to get very serious on the farms. We have seen this just this week.

To solve longer-term labour problems, the recommendations of the agri-food economic strategy provide a good road map to assess future needs for all skill levels, to develop a sector-specific strategy for skills development that includes a focus on apprenticeship and skilled trades needs, and to promote the sector as a good career choice.

Before I close, I would like to touch on the topic of innovation. The global agri-food market in 2025 will be highly competitive and filled with new challenges—a growing population, climate change, and rapid advances in technology, just to name a few. Maple Leaf Foods strives for continuous evolution of our products and business strategies to meet these challenges head-on. In 2019, we became the first major food company in the world to be carbon-neutral and the only food company in Canada to set science-based emission reduction targets.

Existing federal innovation programs are not well suited to food manufacturing. Often they are premised on job creation or the development of disruptive technologies. In a small market like Canada, it is unrealistic to think that all or even most innovation will be disruptive.

Our industry will benefit from adopting technologies that already exist in other countries or industries and, in so doing, will introduce and customize innovation products and processes within our sector. Innovation will be critical to ensure the stability and growth of the sector, and more can be done to tailor the programs.

I'd like to thank you again for having me. I look forward to your questions.

Thank you very much.

[The Chair, Liberal, Pat Finnigan]

Thank you, Ms. Theodore. Thank you for keeping the time.

We'll now go to our question round. We'll start with a six-minute round.

Ms. Rood, you have the floor for six minutes. Go ahead.

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

Thank you, Mr. Chair.

Thank you to all the witnesses for appearing today. You have some great suggestions. There are a lot of issues, obviously, across industry with processing.

Mr. Lowe, I'm going to start with you.

You mentioned that you have a cow-calf and feedlot operation in Alberta. If I recall—or maybe I read it somewhere—you also have an operation in Manitoba. Am I correct in that?

[Bob Lowe]

Yes, you're correct in that.

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

I guess you can speak from personal experience about a couple of regions in Canada.

In more than one committee meeting, we've heard how the pandemic has affected processing capacity. You had mentioned this in your opening remarks and in your brief. I'm wondering if you could comment on how the federal government's pandemic funding—or other funding—has helped or not helped so far, specifically with beef?

[Bob Lowe]

I don't remember the exact numbers. Dennis might remember them better than me. Some money was put forward to help the packers with resiliency, with coming around after the Cargill thing in Alberta.

You heard Dennis say that the packers in North America spent $1.5 billion to keep their workers safe. That's a substantial amount of money that they paid by themselves to make sure the system kept going.

I mean, nobody has any money. The federal government put in.... I talk to Minister Bibeau a lot. I think they did as well as they could, given the circumstances. We kept rolling.

The set-aside program was really good. I'm not afraid to say that if it sat on the shelf so that it could be made available when needed.... The only problem with it was that it was 60 days too late. We had built up 130,000 head and that takes a long time to get through. At that point, when you have cattle, you don't just get to put them on the shelf. They keep getting bigger and they will eventually succumb to old age. It's not as bad as the pork industry, but you can't keep cattle alive forever.

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

Sure. Along those lines, your brief also mentioned concerns about pressures on smaller and medium-sized processors and the resulting reduced number of these.

Do you have any thoughts on how this could be rectified? As you just mentioned, the cattle kept getting bigger and bigger. Would a large number of smaller processors give some flexibility to producers on capacity when the big processors are shut down or have reduced capacity?

[Bob Lowe]

I think there are two points there. The smaller packers wouldn't have the financial ability to put that in place as fast as the big packers did. On the other hand, if we had more small and medium-sized federally inspected plants....

I think a major detriment to these small plants is the cost of being federally inspected, and the stuff you have to put in to qualify for a federally inspected plant makes it pretty tough for them to compete, and somehow.... A provincially inspected plant is good. They were full, and we were booking cattle in provincial plants six or eight months out.

We need more small federal plants. How that works, I have no idea, because if it were a long-term profitable statement, the bigger plants or somebody would have come up to the table and done it. As Dennis says, however, quite often we need surge capacity, which we lack for various reasons, whether it's regulations or.... What it is, I don't know.

The other thing is the chicken-and-eggs scenario. If the packers come, will the beef industry expand to do it? Lack of packing capacity is one of the reasons the beef industry has been stagnant for 15 years probably, so which comes first?

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

Right. Thank you.

Mr. Chair, I'm not sure how much time I have left. I know we're getting close.

[The Chair, Liberal, Pat Finnigan]

You have about a minute and 20 seconds.

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

Both Ms. Theodore and Mr. Lowe mentioned that there are some labour issues and shortages in trying to attract people and having to work with temporary foreign workers.

Do either of you want to comment on whether either of your industries is doing anything to recruit labour from the Canadian labour pool? Obviously, skilled labour is required for meat cutting. Is there recruitment going on to try to find or entice folks to get into the meat-cutting industry?

[Nadia Theodore]

I'm happy to jump in here.

To answer your question directly, yes, recruiting is ongoing. Of course, meat cutting is but one of the skilled labour requirements that we have at Maple Leaf Foods.

As I said in my interventions, this is definitely not a new issue for the industry. It's one that has been going on for several years now. Recruitment efforts absolutely are ongoing, but if I may, the issue is broader than an immediate recruitment effort to bring people in. It's really about a plan that needs to be put in place to understand what the immediate, medium-term and long-term gaps are in our skilled labour.

[The Chair, Liberal, Pat Finnigan]

Thank you, Ms. Rood.

Thank you, Ms. Theodore. I'm sorry. The time is up for this question, but you might have a chance to continue.

Our next question goes to Lyne Bessette, for six minutes.

Go ahead, Mrs. Bessette.

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

Thank you, Mr. Chair.

I wish to sincerely thank all the witnesses who are joining us today.

My questions will be addressed to Ms. Gosselin, from Novalait.

Ms. Gosselin, I found your opening statement and your explanation of the work done by Novalait very interesting.

Can you tell us about how your research is being put into practice by dairy processors? Can you give us some concrete examples?

[Élise Gosselin]

We want to make sure that our research is not only done for scientific publications, but that it really helps companies.

The first step is to work together to establish research priorities based on dairy processor leadership. They are the ones who inform us of the problems that need answers from science. If we ask the right questions at the outset, we are likely to get the right answers.

Then, we ensure that research projects are followed up by processor committees to guide companies along the way. As Novalait's funds belong to everyone, we try to do feasibility demonstrations or to do the groundwork to get the necessary information.

Afterwards, the companies themselves will ensure the development of their research projects up to the creation of products or processes. The fact that they have renewed their funding every year for the past 25 years is the best proof that this works. If they had concluded that our projects were irrelevant or useless, it wouldn't have worked.

I can also confirm that we have trained more than 400 people, including master's and doctoral academics, who are working in our plants and organizations. The people who work there are important.

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

Thank you.

You also spoke to us about the challenge of enhancing coproducts, such as skim milk powder. The committee heard about this a few weeks ago.

What are the solutions Novalait is looking at in order to solve this problem? Can the federal government play a role in this?

[Élise Gosselin]

We are looking at different ways to solve this problem and we are looking at it from two angles. We want to help individual companies with surplus nonfat solids to find solutions, and that is what makes us special. We look at what is being done around the world and what is applicable, and we try to avoid costly attempts by companies. We validate processes using university resources or centres, including finding solutions for innovative energy and packaging. We would like to have short cycles that allow us to make packaging with residues of milk coproducts, for example. These are elements that are currently being developed.

We try to equip each company to have a range of technologies to choose from, depending on its size and the type of products it makes. However, individual solutions do not solve a generalized problem. We find it interesting to look at the situation from another perspective to see if there are solutions that would allow us to handle larger volumes than a single company can handle on its own, such as bundling volumes. From there, we could turn to sources such as green energy or green chemistry. These options would be interesting, but they are beyond the scope of a single company.

Our strength lies in what we can do together.

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

Thank you.

You talked about the expectations of the consumer, who wants more and more organic dairy foods produced in a responsible way. Are dairy processors able to meet these expectations or are there still challenges?

[Élise Gosselin]

We are working on a project that tries to define these expectations. In particular, we are asking consumers what they mean by “natural products”.

The answer to this simple question is complex. This project, carried out in collaboration with several groups in the Quebec agri-food world, focuses on bread, meats and milk. Together, we are putting the question to consumers. Unravelling it all helps us to find leads.

Consumer perceptions are changing; however, when it comes to investing in processing capacity, the result must be long-term. We're working hard on having a clean label, removing all the chemicals used for preservation from the labels; we're trying to change the technology and processors are very active in this regard. We have concrete results and we are trying to find other processes to improve food preservation. We want the same quality, the same shelf life, but with more natural solutions.