Evidence of meeting #119 for Agriculture and Agri-Food in the 44th Parliament, 1st Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was fertilizer.
A recording is available from Parliament.
Director, Governmental and institutional affairs, Sollio Cooperative Group
One thing is certain: As Mr. Kaastra mentioned earlier, the real uncertainty for us lies on the supply side. It's the certainty of being able to access the market.
You may recall that, in its report on food safety, a study in which Mr. Kaastra testified, the committee recommended keeping open the possibility of reviewing decisions.
Bloc
The Vice-Chair Bloc Yves Perron
Thank you, Mr. Poisson.
Apologies. I had promised my colleagues that I would not go over time but I went over slightly.
Don't worry, Mr. Poisson. We'll come back to this question later.
Mr. Cannings, you have the floor for six minutes.
Richard Cannings NDP South Okanagan—West Kootenay, BC
Thank you.
Thank you for being here today.
I want to clarify a few things.
These are not sanctions. These are the removals of best or most favoured nation treatment. The tariffs go up 35%, so there's a 35% added cost to you and your customers. Is that correct? When you were importing from Russia...?
Chief Executive Officer, Sollio Cooperative Group
That's correct. There were sanctions on specific vessel owners and things like that, which limited our flexibility for bringing product in, but it's also true, technically, that we could import fertilizer today with a 35% tariff added.
NDP
Richard Cannings NDP South Okanagan—West Kootenay, BC
You operate primarily or solely in eastern Canada.
Chief Executive Officer, Sollio Cooperative Group
No, actually, if I can respond. We also operate in western Canada. We have a series of distribution and supply chains in that region as well.
NDP
Richard Cannings NDP South Okanagan—West Kootenay, BC
From the national side of things, on Canadian imports, are there any better opportunities for western Canada's operators? I'm from British Columbia. Are there Asian options that are available there?
I'm just trying to paint a broader picture here.
Chief Executive Officer, Sollio Cooperative Group
It's a very fair question.
In particular, China is significant. I believe it's the biggest user of fertilizer products globally. It's also one of the biggest producers as well, but what we have seen, particularly in the period following the pandemic, is a significant number of export restrictions being put in place, primarily for phosphate and nitrogen products. That limited their ability to supply the regions of the world, but certainly it is an option from time to time to bring product from the Asian market into the western regions of the U.S. and Canada. That's correct.
NDP
Richard Cannings NDP South Okanagan—West Kootenay, BC
As you said, North America itself, I think, especially for phosphorus, is not a....
Chief Executive Officer, Sollio Cooperative Group
There is no domestic production in Canada of phosphorus. Historically, there has been production at times, both in western Canada and in northern Ontario. There do remain phosphate reserves, but they're undeveloped at this point in time. For all farming production and farming activity across Canada, whether west or east, we depend 100% on imports of phosphate.
We are a significant nitrogen producer; however, we are a net importer in total. We don't have enough domestic production of nitrogen for all the farming needs across Canada.
NDP
Richard Cannings NDP South Okanagan—West Kootenay, BC
There is a big fertilizer plant in my riding. As I understand it, the Teck smelter in Trail does produce nitrogen fertilizers or ammonia-based products. What you're saying is that operations like that within Canada and the United States are not enough.
Chief Executive Officer, Sollio Cooperative Group
They're certainly not enough.
I believe the specific production you're referencing would be an ammonium sulfate product. It's a nuance of a nitrogen product. It is nitrogen production, but it certainly would not be enough to supply all requirements.
NDP
Richard Cannings NDP South Okanagan—West Kootenay, BC
I think I read that Russia traditionally has supplied 40% of our fertilizer.
Chief Executive Officer, Sollio Cooperative Group
Into eastern Canada, that is correct, yes.
NDP
Richard Cannings NDP South Okanagan—West Kootenay, BC
Okay.
You've mentioned that prices have obviously gone up. Have they gone up to match that 35%? Is that how prices have reacted? How much have prices gone up because of the increased demand elsewhere?
Chief Executive Officer, Sollio Cooperative Group
The impact on prices fluctuates, as it would in any commodity market, due to a large number of different reasons. At that time, there was a reaction to the replacement cost on fertilizer having gone up quite significantly, even surpassing the 35% that was imposed, but that would have been for a short period of time. It's not specifically reflective of the 35% tariff into eastern Canada any longer.
It really is that we can't depend on supply from Russia, which traditionally has been a lower-cost source. We now have to source from other higher-cost regions, and then there's higher cost of transportation to bring it into our markets.
NDP
Richard Cannings NDP South Okanagan—West Kootenay, BC
It's not like those other suppliers are charging more; it's just that it always has cost more for the product, plus the transportation.
Chief Executive Officer, Sollio Cooperative Group
Yes. Our least-cost option is no longer available, and now we have to go to the next higher-cost options afterwards. That's correct.
NDP
Richard Cannings NDP South Okanagan—West Kootenay, BC
I have a note written down here on the low energy cost. You're saying that's where.... Is that the driving issue in fertilizer production? Is it that energy cost, that electricity cost, for production?
Chief Executive Officer, Sollio Cooperative Group
Yes. I could go into detail on that, but I won't.
In any case, yes, typically, there is an energy requirement to convert nitrogen from the atmosphere to a usable form that plants can take up. Lower costs—gas costs or energy costs—are what influence the construction of fertilizer production around the world.
NDP
Richard Cannings NDP South Okanagan—West Kootenay, BC
Okay.
Just as an aside, that's why the Teck smelter is in Trail. It's because of—
NDP