Agriculture Committee on June 6th, 2022

[Dave Epp, Conservative, Chatham-Kent—Leamington, ON]

Thank you very much.

I have a question for Mr. Cullen, please.

We've talked about and we've heard much testimony around the impact in Ukraine on its citizens and its effect on other countries through its exports. Russia is the aggressor here. Russia is also a big agricultural powerhouse.

What third party countries are potentially also affected by Russia's involvement in this war either through curtailed investments...or aren't there any?

[Dr. Maximo Torero Cullen]

As I mentioned in my presentation, all the countries that are food import dependent on both the Russian Federation and Ukraine are affected. The ones most affected were the ones that were more than 50% import dependent on these two countries, especially North Africa, South Asia and other countries in Africa.

The problem is not only the import dependency. Part of it has been covered by other countries that have increased their supply and their exports. The problem is also the access to fertilizers. Given the importance of fertilizers, the access to fertilizers could be substantially affecting many countries that cannot produce what they were producing before. That's the bigger challenge that we're facing right now.

[Dave Epp, Conservative, Chatham-Kent—Leamington, ON]

Thank you.

I'd like to follow up with the question that much of the world is focused on, which is about biosolutions to some of the energy concerns that we have.

Given the crisis we have, can the world both address environmental concerns through continued growth in biofuels and continue to feed the world? Is our productive capability there?

[Dr. Maximo Torero Cullen]

You always have trade-offs in the decisions you make.

Biofertilizers still have a long way to go, so I don't think that will be the immediate solution. It's something that will progress over time.

Right now, if fertilizers cannot move faster.... There is a possibility that they can move because they are not part of the sanctions. In the case of Ethiopia, one of the main successes is the use of soil maps, which have helped to increase efficiency in the use of fertilizers. We believe that's something that can be used very fast in many countries to reduce the waste in terms of fertilizers.

The blending of NPK has to match what you really need, which is the problem we face today.

[The Chair, Liberal, Kody Blois]

Thank you, Mr. Torero Cullen.

Thank you, Mr. Epp, for your line of questioning.

Now we have Mr. Drouin for six minutes.

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

Thank you, Chair.

I want to thank the witnesses who took the time to come before our committee today.

My first question is for Mr. Torero Cullen.

You've mentioned that countries are trying to find new suppliers. We've heard from previous testimonies that, while we may be able to find new suppliers, they could be expensive because of transportation. Are you seeing this happening right now in the marketplace?

[Dr. Maximo Torero Cullen]

Yes, sir.

There's a significant problem in what we call the food import bill, which is the cost of what you imported before the problem—before the war—and what you import today. There are several dimensions that have substantially increased the food import bill of all these vulnerable countries. One is, of course, the prices, which have increased substantially. The second is the evaluation of the exchange rate, which also increases the cost of the import bill.

We are proposing to the IMF to develop what we call the food import financing facility. Essentially, we calculate the gap in the food import bill, we rank the countries by vulnerabilities and we identify the countries that are a priority because we want to minimize the potential risk of social unrest. For example, for Africa we are talking about $9 billion, which will be the total coverage of 100% of the gap in terms of the food import bill. If you cover 10%, it will be $0.9 billion. If this is a loan, the cost is minimal and basically can be covered with SDRs within the mechanisms that IMF has.

Yes, the food import bill has increased substantially. Just to give you an idea, in the case of Lebanon, the prices have multiplied substantially. The amount of food they import is around 40% less than what they used to import. That shows clearly how something that was supposed to be inelastic became elastic because of the crisis we are facing.

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

Obviously, we're starting to see reports of countries limiting exports or having export quotas.

What message would your organization deliver to those countries?

[Dr. Maximo Torero Cullen]

We have compared the level of export restrictions in the COVID-19 period, which were minimal, with 2007-08, which was around 70% of the traded calories. Today we are a little bit higher, at around 70.5% of traded calories.

Our position, together with the Agricultural Market Information System's position, is that we should avoid any export restrictions at this point. One clear example of doing that is what just happened in the food price index of FAO. The reason the food price index of FAO declined a little in the month of May was that Indonesia removed their export restriction on palm oil. The value of oilseeds is the one that decreased substantially.

It's essential to keep trade open and it's essential to avoid export restrictions.

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

Great. Thank you.

My next question is for Mr. Hagerman.

I want to thank your organization. I've known the work that you've been doing for a while. I've actually met my other colleague on the other side through the Canadian Foodgrains Bank.

Are you doing an analysis on the ground with your partners to see what can be done further? One recommendation you've made is to increase Canada's contribution to the Food Assistance Convention. Other than that, do you have any short-term solutions where your organizations can play a bigger role?

[Paul Hagerman]

Thank you.

In terms of short-term solutions, we're kind of struggling because we have committed program funds to help people in particular countries for food assistance, but we're finding that the dollars just don't go as far as they used to. We had x number of dollars to feed 3,000 families and now, because of the rising price of food, that money will only feed 2,000 families. We don't have another source of funds.

We're in the process of working with other civil society organizations or other humanitarian organizations in Canada to appeal to the Canadian public for funding. We expect an appeal to go out within the next few weeks looking for money from the public. We expect the Canadian public will be very generous, but it would be wonderful if we could match that with funding from government because we're kind of struggling to deal with the rise in prices and how we manage that.

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

Great. Thank you.

Finally, Ms. Labat, you've talked about a few things that the European Union was doing with the resolution passed on March 23. I want to touch base on point number two. You didn't have a chance to explain what they have done to help farmers, but you've said there was some help there.

Can you elaborate on that in about a minute? If you don't have time, I would ask you politely to submit it in writing to this committee.

[Maud Labat]

Absolutely, and I can certainly follow up in writing.

There have been a number of actions that have been proposed in this communication. I am assuming your question relates to the help that we're giving to farmers in the EU. That is a support package of $500 million euros, so roughly $750 million Canadian, and it makes use of our crisis reserve.

The idea is to support the European producers who have been most affected by the serious consequences of the war in Ukraine. It allows member states to provide additional financial support to farmers and to address market disturbances that come from both the increase in the input costs and due to the trade restrictions.

We have also accepted more advances of direct payments and triggered an exceptional and temporary derogation to allow the production of crops on fallow lands. Then we have called on member states also to take some measures such as reducing VAT—the equivalent of our HST—on prices of food so that food is, of course, less costly, but that's more for European consumers.

I'll be happy to follow up in writing, of course.

[The Chair, Liberal, Kody Blois]

Thank you, Mr. Drouin.

Thank you, Ms. Labat.

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

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

Thank you, Mr. Chair.

First of all, I would like to thank the witnesses for being here today. We appreciate it.

Ms. Labat, I'll continue with you.

The previous panel urged us to make Ukrainian grain exports possible as a matter of urgency. How do you see that happening? How can Canada work with you to help in this regard?

[Maud Labat]

Thank you for the question.

The European Union has done several things, including establishing contacts with Canada.

Currently, the most important thing for us is to facilitate transit and trade. In other words, we simply have to manage these logistical problems and to get the production out of the country. In fact, I think the witnesses in the previous panel have already discussed this.

Also, the European Commission announced in May the establishment of solidarity corridors to help Ukrainian exports. As you heard earlier, one of the things is to get more freight and terminals, and more storage capacity, which would allow goods to be taken out of Ukraine. I could very well pass on this announcement to you.

We also have a section looking at how to improve connectivity between the European Union and Ukraine, because the connections and infrastructure are not equivalent, as was mentioned earlier. This is one of the first things we are doing in the short term.

The international institutions have adopted a very strong policy of denouncing the export restriction measures that have been taken. Other witnesses have also spoken about this. I think we're working very closely with Canada on this and on avoiding further restrictions, obviously. We're working a lot with the G7, with the Food and Agriculture Organization of the United Nations, or FAO, and with the World Trade Organization.

I'll stop there, but if you have any follow-up questions, don't hesitate to ask me.

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

Thank you very much, Ms. Labat. Your comments are very interesting.

Furthermore, you seem to offer a lot of assistance to your producers, even those who are out of area. Did I understand correctly?

[Maud Labat]

Could you clarify what you mean by "out of area"?

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

During your discussion with Mr. Drouin, I understood that you had provided significant assistance to your agricultural sector to increase its production in order to compensate for the loss of Ukrainian goods on the market.

Did I understand correctly?

[Maud Labat]

Yes, we expect European producers to be able to increase their production. In the last five years, we have exported about 27 million tonnes of wheat per year. However, for the year 2022-2023, we expect to export up to 40 million tonnes, if the weather conditions are favourable, of course, which would be an important contribution to the world market.

Of course, as I just said, all this depends on the weather conditions, but also on the inputs, especially fertilizers. As other witnesses have said before me, the price of fertilizers has exploded in the European Union. I think it is currently over 280% of the normal price. So we'll have to see whether or not this possibility will materialize.

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

Thank you very much.

Dr. Torero Cullen, in your introductory statement, you mentioned that we need to react quickly. You also talked about increasing productivity, but you seemed to have run out of time at the end of your five minutes. Do you want to add to your idea on this?

[Dr. Maximo Torero Cullen]

No, what I was referring to was that in the current situation, for this year, we have a problem with food access because of increasing prices, but our major concern is what will happen in 2023. That has to be resolved very quickly because of the crop calendar and because of the importance of fertilization right now. Fertilizer needs to be delivered. Despite the fact that we have truly increased efficiencies in the use of fertilizers, as I referred to, there is an urgency for countries that have a gap in the fertilizers they need to be able to resolve that as soon as possible.

As you are aware, the U.S. has clearly stated that they don't include fertilizers and food in sanctions, and they also have proposed the issue of letters to try to accelerate that process so that you derisk the problem of moving the fertilizer out of the Russian Federation.

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

That's fine, thank you.

What could Canada do in this regard? What would your recommendation be?

[The Chair, Liberal, Kody Blois]

Please answer in 15 seconds.

[Dr. Maximo Torero Cullen]

Canada can always help. It's an exporter of fertilizers too, so Canada can help in that sense. Also, it's very important to find mechanisms in which fertilizers can be moved out and distributed to the countries in need. The main concern we have right now is with rice, because it's the time they need to fertilize before harvest, and that's what could create the problem with rice, which is the only commodity that is doing okay right now.