Agriculture Committee on Feb. 25th, 2021

[The Chair, Liberal, Pat Finnigan]

I call the meeting to order.

Welcome to meeting number 20 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 is actually the last meeting with witnesses.

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 also remotely, by using the Zoom application.

The proceedings will be made available via the House of Commons website. So that you are aware, the webcast 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 neither taking screenshots nor taking photos of the screen is permitted.

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

Members and witnesses may speak in the official language of their choice. Interpretation services are available throughout the meeting. At the bottom of your screen, you can choose between the floor and English or French. The latest version of Zoom now allows you to speak in the language of your choice without having to select the appropriate language channel.

You'll also notice that the platform's “raise hand” feature 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 wishing to speak turn on their cameras and physically raise their hands. The clerk of the committee will keep a list of members who wish to speak. When you do not have the floor, please mute your microphone.

With that, I would like to welcome our witnesses today.

We have, from Fraser Valley Specialty Poultry, Mr. Ken Falk, president. Welcome, Mr. Falk.

Also, from Canards du Lac Brome ltée, we have Philip O'Shaughnessy. Welcome, Mr. O'Shaughnessy.

We'll start with opening statements. We'll start with Fraser Valley Specialty Poultry.

Mr. Falk, you have up to seven and a half minutes to give your opening statement. Thank you.

[Ken Falk, President, Fraser Valley Specialty Poultry]

Thank you very much, honourable chairperson and members of the committee. Thank you for the opportunity to speak today.

My name is Ken Falk. I'm a third-generation farmer in Canada. Two more generations are already active on our family farm. Fraser Valley Specialty Poultry produces ducks, geese and specialty chickens in Chilliwack, British Columbia. I'm the vice-president of the Canadian Commercial Waterfowl Producers Association.

We are encouraged that stability, renewal, capacity, competitiveness, and food security are important to government. The Barton report says that bold ideas will improve Canada's economic growth, and being a global food champion tomorrow cannot be held back by how we worked yesterday. Winning requires bolder ambitions, an urgent strategy and a new form of co-operation between the private and public sectors.

Meanwhile, other countries are increasing outputs, often supported by subsidies, with much lower standards, to the detriment of Canadian farmers struggling to compete against these imports or in export markets.

I want to highlight a couple of personal experiences that expose barriers to achieving our objectives.

Barrier number one is that the food sector faces over-regulation, with inconsistent, unreasonable, heavy and even sometimes underhanded enforcement tactics by the CFIA.

In our case, we were wrongfully charged for interprovincial movement of product. Details are in my brief, which I submitted earlier. Charges must be based on evidence, not on mere conjecture, speculation and mistakes. The harm, apparently, that could be done, they said, was monetary losses due to unfair competition. Facing $52,000 in fines, we spent over $214,000 in legal fees and five years to clear our name. This has seriously impacted our family, with many sleepless nights and incredible stress. It's been unfair, unethical, unprofessional and disrespectful. My character and integrity were called into question time and again.

They say that this is just a cost of doing business for us. Trust has been destroyed, and they say that now I just need to move forward with a positive attitude. I ask today that you restore our faith in government and make this right. I'm confident that none of you, as our elected parliamentarians, intended that we would be treated this way.

The administrative monetary penalties act and regulations must be changed. Eliminate the kangaroo court that the CFIA operates. Ensure that there is practical recourse. Key defences, such as due diligence, must be available. CFIA staff must be held to account when they get it wrong—not if, but when—or they will carelessly file wrongful charges again. Their cultural norm is to take punitive action instead of using a co-operative approach. We could have solved the situation in minutes. Instead, we spent years fighting. Civilian oversight would bring accountability. The ministers have refused to engage, and the complaints and appeals process is a sham.

We can learn a lot from the things we teach our children: to be fair, empathetic, helpful, trustworthy, respectful and kind. When we make mistakes, we acknowledge them quickly. We apologize and we make it right. Sadly, this has not been my experience with government. This punitive “gotcha” style of inspection must stop. This new co-operation between private and public sectors is possible, but it will require these bold ambitions, as the culture is so deeply entrenched today.

Now we get to barrier number two. Over the past five years, large quantities of very poor-quality ducks have been imported into Canada. The CFIA said they were produced in an equivalent system and weren't required to meet Canadian standards. We strongly disagree. Independent testing revealed how bad the product really was; not one sample tested met Canadian standards. The CFIA's first response was to try to discredit the report.

Labelling was also deficient. To instruct a consumer to warm raw poultry thoroughly before consumption could result in a serious food safety problem. The CFIA said that Canadians will know how to handle raw poultry, yet we know that if one of us had done that, the product would be recalled, and the producer would face huge fines.

Selling prices were well below the cost of production, likely due to subsidies in other countries but also due to lower standards of inspection, workers' rights, wages, animal welfare and the environment. A duck is a duck. They're sourced from similar genetic suppliers, are consuming similar feeds, and are raised much the same. There's no secret formula. The only difference is input costs.

We are held to high standards in Canada, and that's good. We only ask that they be reasonable, that they provide a level playing field and we be treated fairly, and this has not happened. We don't understand why government would knowingly want to run us out of business.

After recent meetings with the CFIA, we are hopeful that this is being resolved, but serious harm has already been done. The waterfowl sector in Canada is struggling, and we fear these inequities will happen again and again.

Here's the irony. We've suffered monetary losses due to unfair competition, but CFIA says they don't consider that. However, that's exactly why they wrongfully charged me in the first place.

If you want stability, renewal, capacity and competitiveness, stop the unfair treatment. Be fair. Support Canada's producers.

A third barrier is access to capital. As a niche market in the poultry sector, we're often overlooked. I'm also a supply-managed producer, so I work with my friends in supply management, only to find that those sectors will be eligible but we're not. We don't have the lobby power, so effectively we're forgotten. We've struggled with lenders, particularly in recent years, with unfair competition and with the treatment by CFIA, all of which have driven margins down to the point that we are barely able to survive. Banks don't lend to struggling companies in the real world.

The impacts of COVID-19 have been devastating for our sector. Duck is primarily a food service product, and as you know, that sector has been decimated. We didn't enter COVID with the cash to survive lengthy shutdowns, so we've all had to cut production and lay off staff. Now we fear that cheap foreign duck will flood into Canada again. Please don't let that happen.

We can supply Canadians with duck while producing a world-class product for export. The same standards and laws that we uphold in Canada must be enforced on all who want to import to Canada, and there must be substantial changes if we are to compete well in export markets.

We need to be supported in our efforts by government in order to be profitable. If you want stability, renewal, capacity and competitiveness, and you want to protect food security, I say rebuild trust. If we can trust one another, the unfairness would not happen, the adversarial “gotcha” style of inspection would finally come to an end and the punitive enforcement would be replaced with co-operation. I ask you to take the lead. It's going to take that urgent strategy, but it will be worth it.

Again, I thank you for allowing me the opportunity to speak today.

[The Chair, Liberal, Pat Finnigan]

Thank you, Mr. Falk.

Now we have, from Canards du Lac Brome ltée, Monsieur Philip O'Shaughnessy, for up to seven and a half minutes.

Go ahead.

[Philip O'Shaughnessy, General Manager, Canards du Lac Brome ltée]

Good afternoon.

Thank you, Mr. Chair and members of the committee.

My name is Philip O'Shaughnessy and I am the general manager of Canards du Lac Brome ltée. Our company began operations almost 110 years ago. We have several farms and two processing plants. Our main site is located in Val-des-Sources, in the Eastern Townships.

I'd like to take the time today to share with you the two biggest challenges facing the company: labour shortages and high production costs.

Currently, the bottleneck for our company is the lack of unskilled labour in our processing plants, mainly at the Val-des-Sources slaughter site. We currently operate our processing centres with a number of employees below the minimum required threshold, which has a direct impact on our production volume. Another effect of this lack of manpower is that many by-products cannot be recovered for sale and are therefore wasted, representing a loss of several hundred thousand dollars annually.

This problem seems to be widespread in slaughter sites. We believe it is much more serious for companies located in the regions, like ours. Indeed, they do not have access to the labour pool of nearby large cities.

We believe that the Canadian government can easily solve this problem by allowing more temporary foreign workers into our food processing facilities. Indeed, with more of these workers, we could quickly increase our processing volumes. This approach, which seems to us to be by far the best solution, has proven its worth in our business to date, both in agriculture and in processing. These workers are recognized as being of high quality and reliability. In addition, they occupy unskilled labour positions that too few Canadians want to work in.

The current limit of 10% is clearly insufficient to meet the needs. With respect to our specific situation, a limit of 30% on temporary foreign workers would be necessary to meet our unskilled labour needs.

The second challenge that we would like to bring to your attention is high processing costs, which are constantly increasing and are undeniably a barrier to increasing our processing capacity. This is primarily related to environmental management costs and animal health and welfare requirements imposed by the Canadian Food Inspection Agency. We are also talking about wage increases as well as the general increase in all other production costs. In our industry, these cost increases are very rarely offset by price increases. In the duck industry, profit margins are constantly decreasing. This situation is a barrier to the development of new markets.

Moreover, in our specific case, we are in a niche market. Canards du Lac Brome must therefore make additional and essential efforts to make its products known and create new consumption habits. This is what has been done successfully by Canards du Lac Brome since the early 2000s, mainly in the retail market in Quebec. In fact, we must face the fact that the North American population consumes few ducks, unlike European or Asian populations. We made significant investments in the past, but the return on investments had been very conclusive.

However, to continue this approach outside of Quebec, we would have to invest far too much money in consumer education through tastings and advertising campaigns. This is now too risky financially, because the return on investment will not be there in this case. For example, products imported at a discount from certain European countries have benefited greatly from our advertising offensives, without having to invest any money in market development. We recommend that the government offer support in target markets and financial assistance for the development of new markets. Promotion of the multiple benefits of duck consumption could be of great benefit to our industry.

In the same vein, we are seeing more and more buyers turning to imported products at lower prices and with lower quality standards than Canadian standards. The agency's Canadian standards are still recognized by the industry as the highest in the world. However, European and U.S. standards are officially considered equivalent to Canadian standards. The high costs associated with the agency's standards, compared to those of the European Union, contribute considerably to the fact that our production costs are sometimes higher than the selling prices in some of these countries. As a result, since the free trade agreements, some Canadian products are at a distinct disadvantage compared to foreign products. Many customers are not prepared to pay the costs related to our standards. These standards are no longer necessarily to our advantage. The fact that we have stopped selling in Japan in favour of other markets is a perfect example of that.

The role of the federal government is crucial in this matter. By reviewing equivalency standards, it will allow Canadian products to be competitive with imported products in our own market.

In conclusion, we recommend the implementation of the following three actions:

First of all, the unskilled labour shortage must be addressed, through the use of temporary foreign workers in particular. Second, we are asking for financial support to enable the development of new markets. Finally, we must ensure that products imported into Canada meet the same standards as those required for Canadian products.

I would like to thank the members of the committee for giving me the opportunity to share with them the challenges our company faces in increasing our processing capacity and competitiveness.

[The Chair, Liberal, Pat Finnigan]

Thank you, Mr. O'Shaughnessy.

We will now move on to the question period.

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

[Richard Lehoux, Conservative, Beauce, QC]

Thank you, Mr. Chair.

I thank both witnesses for being with us this afternoon.

We can see that the issues raised by the two witnesses are similar. The issue of labour is also important. Much has been said about the regulations put in place by the Canadian Food Inspection Agency.

Mr. Falk, you tell us that this is abusive regulation. I understand that you have experienced particular problems with the agency.

Other than that, I'd like to talk about the labelling of imported products, which is the same as talking about reciprocity of standards at the entry of products, in my opinion.

Mr. Falk, do you think we should place more emphasis on the reciprocity of these standards?

Mr. O'Shaughnessy, you can also answer.

[Ken Falk]

I can start with that.

Yes, clearly there needs to be reciprocity, both in terms of standards of processing and also in terms of labelling. We saw a number of deficiencies in the labelling coming into the country. In fact, we saw a lot of product that was labelled for institutional or food service use, but it was being sold into retail, so it was not labelled appropriately for the retail market. There really was no recourse for us, because once the product is on the retail shelf, it would require a recall, and the CFIA was not prepared to do that.

Philip, do you have something to add?

[Philip O'Shaughnessy]

I agree with Mr. Falk on this.

Once again, it is often a matter of enforcing regulations and applying the same standards to our products as to imported products.

[Richard Lehoux, Conservative, Beauce, QC]

With respect to reciprocity, you said that the standards that currently apply to products from the U.S. and Europe are considered equivalent to those in Canada, but that, in practice, you are not sure that we have the same standards.

[Philip O'Shaughnessy]

That's right. We do our own studies and we have also commissioned independent third parties to do them, and we have indeed found that some products on the market could never have left our plant.

[Richard Lehoux, Conservative, Beauce, QC]

With respect to labour, you say that the 10% limit on temporary foreign workers is far from adequate. This is not the first time we've heard that. You're asking that it be raised to 30%.

Has this need become more pressing in recent years, or have you been caught in this situation for quite some time already?

[Philip O'Shaughnessy]

I know that the industry strongly advocates a 20% limit. It seems to be a widespread demand, because it is a rule that applies to a large majority of companies. For our part, the fact that we are in the regions exacerbates our problem. I've discussed this with people in the industry, and those who are lucky enough to be closer to Montreal have workers who commute morning and night. In our area, we are much too far away for our workers to be able to do that.

It's not a new fact that a 30% limit would solve our problem. It's been around for several years.

[Richard Lehoux, Conservative, Beauce, QC]

So the issue dates back several years, and that would solve part of the problem.

Does it affect processing plants or production more, or are both affected by significant labour shortages?

[Philip O'Shaughnessy]

Our problems are mostly related to processing plants. When you talk about production, I imagine you're talking about animal production, right?

[Richard Lehoux, Conservative, Beauce, QC]

Yes.

[Philip O'Shaughnessy]

This problem was solved several years ago. As you may know, there is no mandatory limit on the amount of farm labour. This problem has been solved once and for all. We have a lot of foreign workers, but it's not the same program as the one for industrial workers.

[Richard Lehoux, Conservative, Beauce, QC]

In the end, this led to the situation you are experiencing. The problems are mostly related to processing.

Earlier you talked about processing costs. I'd like you to go a little deeper into this subject.

[Philip O'Shaughnessy]

Processing costs have increased everywhere.

Earlier, I made a lot of reference to environmental and animal welfare requirements, which have become very important, especially in the last two years. This requires additional monitoring and facilities from the farm to the processing plants. Environmental requirements are much more stringent. From year to year, we receive requests to improve many things.

Of course, there are all the other costs, especially labour costs, which have increased a lot.

However, in the duck industry, prices have not increased.

[Richard Lehoux, Conservative, Beauce, QC]

You were talking about the issue of animal welfare.

On the topic of reciprocity, do we have similar working methods to the United States or Europe?

[Philip O'Shaughnessy]

Many of our people have seen several plants around the world. We can confirm with certainty that practices elsewhere are certainly not acceptable in Canada.

[Richard Lehoux, Conservative, Beauce, QC]

At the end of the day, this certainly increases production costs.

[Philip O'Shaughnessy]

It increases [Inaudible].

[The Chair, Liberal, Pat Finnigan]

Thank you, Mr. Lehoux.

[Richard Lehoux, Conservative, Beauce, QC]

Thank you, Mr. Chair.

[The Chair, Liberal, Pat Finnigan]

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