Agriculture Committee on March 31st, 2022

[Karen Proud]

I'm sorry, but I'm not sure I got the whole question.

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

My question was for Mr. Pharand, but I see that he's not online. I will ask him my question later.

Mrs. Proud, you say you haven't yet recommended any solutions to the government. What could we do to help the industry in a meaningful way right now?

Mr. Drouin said that the problems began before the conflict in Ukraine. So this is a difficult year for you and we need to help you.

Would temporary financial support help?

[Karen Proud]

I think it's a very complex question in terms of how to address the issues. Again, I think I'll ask my colleague, who has been having conversations with the government on options we may want to consider. I don't think we've gotten to a stage where we're really recommending, but I know there have been a number of options that have been discussed. Maybe I can pass it to Clyde to talk about the conversations we've been having.

[Clyde Graham]

Sure.

First of all, I think the difficulty for our members really relates to February 24 and then the sanctions, particularly the 35% sanction that came in March 3. Before that, the market was operating and we were not facing difficulties, but when the war started and the sanctions emerged, the companies that are importers from Russia were all in various stages and had different positions in the market. It is more complex than one-size-fits-all, and I think the government officials we talked to understand that. One of the key principles that would be important is that any compensation would fully flow to any farmers who had been impacted by the sanctions and the costs, but at the same time, some of our agribusinesses, our fertilizer importers, have taken some very significant losses in trying to comply and support the government sanctions and position on Russia.

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

Thank you, Mr. Graham.

Mr. Pharand, they tell me you are with us.

Do you have any comments about this?

[Benoit Pharand, Chief Executive Officer, Réseau Végétal Québec]

I'm sorry I didn't answer the question I was asked earlier. I didn't understand the question and didn't know I could speak.

I represent the fertilizer, crop protection and seed industry. When I spoke with members of our network, I found two things that were a little more problematic. The first is the difficulty in getting supplies early in the season and the second is pricing.

I think a clarification must be made about pricing, primarily for Eastern Canada. The majority of products, if not all products, had been ordered prior to March 3. These products were not in transit, but they had been ordered.

Unfortunately, Canadian producers or producers in one part of Canada will be penalized by pricing. Producers primarily receive nitrogen products by ship. On the one hand, we don't know if we will get the product in time for the start of the season, and on the other, there is the price and when the order was placed.

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

If I understand what you're saying, the government could help you by providing compensation for what was ordered before the sanctions took effect.

Is that correct?

[Benoit Pharand]

Compensation would be helpful, but perhaps an exception could also be made to allow these products to be sent so we could stock up. Secondly, an exception could be considered for products that had been ordered but were not yet in transit. That might be an avenue to consider. I also believe there would be an opportunity for compensation.

Before the war in Ukraine, prices had already risen significantly. The war is causing prices to go up, and the 35% tariff is really huge.

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

If you could make one more recommendation to the committee, what would it be?

[Benoit Pharand]

I keep coming back to the same two things. First, we need to make sure we get the product in time for the start of the season. Second, we need to work with the government to find a way to get rid of these tariffs that are driving up production costs.

I have a two-pronged recommendation. The most important thing for everyone, especially for producers in Eastern Canada, is receiving the product. Secondly, the pricing issue is going to be very important this year.

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

Thank you very much.

[The Chair, Liberal, Kody Blois]

Thank you, Mr. Pharand and Mr. Perron.

Mr. MacGregor, you now have the floor for six minutes.

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

Thank you very much, Mr. Chair.

Mr. Graham, I want to pick up on the exchange that you had with Mr. Drouin, because he was asking about the increase in fertilizer prices that happened prior to the invasion, and you said that that was due to reduced production, which sent a signal to primary producers that they needed to plant more, and of course, they're going to have to use more fertilizer to do so. Not only has the war in Ukraine led to an interruption in fertilizer, notably Russian fertilizer, but of course, Russia and Ukraine together are 30% of the world's wheat supply.

There was a story in The Globe and Mail today that said this year's crop in Canada could be the most important one planted since the Second World War. Aside from what's going on with the price of Russian fertilizer, there's the fact that there is going to be demand for a massive increase in production, especially in Canada, to pick up that slack. Can you provide the committee with some information on what that's going to do to fertilizer prices?

[Clyde Graham]

Every year, planting around the world is a very important thing, and I think we're starting to realize that. It's not just one year that it's critically important, it's every year. But I understand what you're saying about the current situation.

I'll make just one clarification. What I was saying was that the signal that went to growers around the world came from the fact that global stocks of grains and oilseeds were low, and that meant high prices. They're using fertilizer to meet that demand for crops, from rice to corn to wheat and barley. Obviously, if you were going to be losing significant exports from Russia and from Ukraine into the world marketplace, that would tend to put price pressure on those grains and oilseeds. Again, farmers would be trying to take advantage of those high prices and the need for those crops by maximizing their production.

In Canada a lot of decisions about this year's planting have already been taken. Farmers have their seed. Most of them, thankfully, have their fertilizer, particularly in the west, but there's not too much that could be done by farmers to increase production this year in Canada or in many other parts of the world.

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

Ms. Proud, we have information from the federal government showing that of our total imports of fertilizer, Russia made up 16%. When you look at the other two major sources, the United States and the Netherlands.... I understand that our own domestic production is not going to be able to ramp up immediately, but in anticipation of trying to get more Canadian supply, employ more people and really give our economy locally here a shot in the arm, how do our production costs in Canada compare with those of the United States and the Netherlands?

[Karen Proud]

That's a very good question, to which I don't have a particularly informed answer.

I don't know, Clyde, if you're aware of the comparison of our production costs with the U.S. and certainly the Netherlands.

[Clyde Graham]

I'm not so sure about the Netherlands being a major exporter of fertilizer. We would probably get more from places like Morocco, the Middle East and places like that.

I think we could try to get you some cost comparisons. I think one thing that has been a damper on investment, particularly in nitrogen fertilizer in Canada, has been the cost of carbon, the carbon pricing and its outlook, because when you're planning investments, you're talking decades of life of a nitrogen fertilizer plant. That perhaps has been one of the reasons we haven't had new plants built in Canada for many decades.

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

I'm sorry to interrupt. I want to get one more question in.

Russia annexed Crimea back in 2014. There has been a low-level war going on in the Donbass region of the Ukraine for several years. Of course, there were rumblings leading up to the current conflict for many months. Did any of your members anticipate that this was going to happen? I think the tea leaves were showing that a conflict was about to erupt.

Further to a previous question, how do we develop a long-term strategy knowing that conflict in this region and that sanctions on Russia will probably remain in place for quite some time?

[Karen Proud]

I think we absolutely need to be a reliable source of fertilizer in Canada. I would say our members—frankly, most folks around the world—didn't anticipate the sort of war that we've now seen with Russia invading Ukraine the way they did. The contracts they would have entered into with the Russian suppliers were many months before this conflict even happened. They weren't able to really anticipate at the time, and when the time happened, there wasn't sufficient time to make alternate plans or change course.

I think the big thing that our members and countries around the world and others are looking for is this: Where is the supply going to come from? Who can be that reliable supply? I would argue that Canada can be that reliable supply. We just need investment here.

[The Chair, Liberal, Kody Blois]

Thank you, Ms. Proud.

Thank you, Mr. MacGregor.

We're going to go to our second round now, with Mr. Barlow for five minutes.

[John Barlow, Conservative, Foothills, AB]

Thank you, Mr. Chair.

There are a lot of questions arising out of the situation in Ukraine and Russia. I'd like to try to get a bit more clarification on where we stand on that.

Ms. Proud, have you received any more clarity from the government on the application of the tariffs and, specifically, the fertilizer that was prepaid and en route before March 2?

[Karen Proud]

We are still seeking some clarification from the government. We understand that there is a process that our members can go through in order to potentially get Russian shipments of product into the country. Those sanctions are on ships docking in the country. We don't have complete clarity as to what that process is and how one goes to apply for it. We understand that there are some guidance materials being produced, and we're still waiting to see them.

While the government has been helpful in part, there is still a lot of detail we're looking for, specifically if we have longer-term needs. It's not one ship here or one ship there. We are waiting for that information.

[John Barlow, Conservative, Foothills, AB]

In that same vein, will fertilizer that is in transit from Russia and Belarus be allowed to be off-loaded in Canada, or is it going to have to be moved to a ship of a different flag? Do you know?

[Karen Proud]

Some of that fertilizer arrived in Canada and was off-loaded. That was that period of what was in transit versus what—

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

Mr. Chair, we have a problem.