Agriculture Committee on Nov. 2nd, 2022

[Kathleen Sullivan, Chief Executive Officer, Food and Beverage Canada]

Thank you very much, Mr. Chair, and good afternoon.

I am Kathleen Sullivan, CEO of Food and Beverage Canada. We are a national trade association that represents Canadian food and beverage manufacturers. Across Canada there are almost 8,000 food and beverage manufacturing establishments. The vast majority, as I'm sure you well know, are small and mid-sized businesses. These companies play a critical role in transforming Canada's agricultural products into food for Canadians and for our trading partners.

A strong and vibrant food-processing sector is critical to support primary agriculture, to ensure local food security and to ensure Canada's food sovereignty. The past few years have been unprecedented in this sector. Critical labour shortages, disruptions in global and domestic supply chains, historic price inflation, climate emergencies, natural disasters, transportation infrastructure disruptions and many other events have placed inordinate and, most importantly, destabilizing pressure on Canada's food system.

While food manufacturers should be looking towards recovery and growth, they are instead contemplating consolidation and contraction. Critical to the future of Canada's food system is ensuring that we strengthen the foundational elements that are required to support and stabilize this sector. Without a strong foundation, economic growth and expansion will not be possible.

Today I will very briefly focus on three critical foundational issues: labour, supply chains and infrastructure.

The first is labour. Labour remains the most serious issue facing Canada's food and beverage manufacturers. I think over the past year we've had a chance to talk to almost all of you about this. Today we estimate that the sector is still short about 20% of its workforce, a situation that of course was exacerbated during the pandemic. It has worsened, and we expect it will worsen over time.

Manufacturers are struggling to attract workers from a limited and shrinking labour pool. Chronic labour shortages and serious skill gaps undermine our ability to maintain current levels of food production, threatening local food security and weakening our future economic development and trade growth.

With funding from the future skills centre, my organization, along with the Canadian Agricultural Human Resource Council and the Canadian Federation of Agriculture, is now leading the development of a workforce strategic plan for agriculture and food and beverage manufacturing. This is an industry-led initiative, with participation from over 100 stakeholders. It is identifying the root causes of our labour shortages and our skills gaps, identifying concrete actions to address these shortfalls and setting meaningful goals and timelines to measure progress and resolve the issues. We strongly encourage the federal government to continue supporting this work.

We also encourage the federal government to continue making improvements to Canada's temporary foreign worker and immigration systems. Foreign workers will be critical to addressing labour issues in the short and medium term. In April, the federal government announced very welcome changes to the TFW program to provide short-term relief for labour force challenges. We encourage the government to continue improving access to foreign workers by simplifying the TFW program, by introducing a trusted employer model, as announced in budget 2022, and by establishing programs to secure workers for permanent and year-round jobs.

I will just take a moment to comment on yesterday's announcement about the immigration targets for the next three years. These are very welcome, but unfortunately even with greater numbers of people coming into the country, the current immigration streams do not always support the workers we would be looking to have enter our industry, so we will have to work on that as well.

Finally, I want to talk jointly about supply chains and infrastructure. The federal government has designated food and beverage manufacturing, along with the entire food supply chain, as critical infrastructure. Despite this, in truth, few measures are in place to insulate Canada's food system from external pressures. The challenge of maintaining Canada's food infrastructure and supply chains falls largely to industry itself, a challenge that is complicated by the size and scope of industry, by the lack of policy coordination across different government jurisdictions, by the global nature of supply chains themselves and by the fact that virtually all of the enterprises that exist along the food supply chain are private enterprises, many of which are publicly traded and each of which has its own independent objectives and governance structure.

We very much welcome the report of the national supply chain task force released in October and encourage the federal government to implement those recommendations.

We also recommend the federal government adopt measures to ensure a consistent and coordinated approach to support supply chain resilience for Canada's food system. This could include, for example, investing in ongoing monitoring and intelligence gathering related to global and Canadian supply chains that is shared with industry, and investing in measures to buffer the food system from external shocks and to support food supply chain resilience, starting with a critical assessment of key risk factors and vulnerabilities along the food supply chain.

[The Chair, Liberal, Kody Blois]

Ms. Sullivan, I've given you a little bit of extra time. Could you just wrap up, please?

[Kathleen Sullivan]

On infrastructure, I would just like to add—and the national supply chain task force report comments on this—that we also encourage the government to recognize that a lot of the infrastructure needed to get people to work is actually local infrastructure—whether there's affordable housing, public transportation or day care for workers—so it is imperative that the governments at the federal, provincial and municipal levels continue to work on that.

I'm more than happy to elaborate on any of these during the question and answer period.

Thank you.

[The Chair, Liberal, Kody Blois]

I'm sure our colleagues will call upon you.

Mr. Paul, you have up to five minutes, please.

[Stephen Paul, Vice-President, Supply Chain Logistics, Ray-Mont Logistics]

I want to thank the committee for giving Ray-Mont Logistics the opportunity to speak in respect to the Canadian food supply chain.

To give you a bit of background about Ray-Mont Logistics, we're a 30-year-old company based in Montreal with a focus in the movement of containerized goods. We have three terminals strategically located in Canada—in Montreal, Vancouver and Prince Rupert—with an operating capacity of over 125,000 TEUs annually. We're an export-oriented company, having moved over one million TEUs over the last decade. We're vertically integrated, which allows us to collaborate with railroads, ocean carriers, transportation companies, port operators and customers simultaneously, and this gives us a unique perspective.

Our primary commodities are agricultural, plastic, resin and pulp, but agriculture has been at the root of our company's existence for the last 30 years. Pre-COVID, we moved approximately 2.5 million tonnes of agricultural products in containers for export.

The supply chain challenges to move agricultural products in containers have been tremendous over the last few years, and it must be noted that the early warning signs actually date back pre-COVID to the spring of 2019, with the emergence of blank sailings as a mechanism to control supply chain economics. However, the emergence of COVID in the spring of 2020, and the resulting supply chain events that followed, has created new challenges at every turn. It has led not only to disruptions of containerized agricultural exports, but to the supply chain having to readjust and reinvent itself at times.

Over the last few years, key areas of concern have been the aforementioned blank sailings; access to empty containers by select carriers; removal of historical vessel services or vessel allocation, which has resulted in seismic shifts of volume from west coast ports to east coast ports for agriculture; growing labour issues in every sector of the supply chain; and, most importantly, the fluctuating shifts on import movement, resulting in a perpetual pendulum effect on the supply chain readjustments. Examples of this are port and rail congestion, which happened after the first wave of COVID as imports surged seemingly without notice, and then changes to supply chain strategies on large import companies from just-in-time to just-in-case, which has subsequently placed additional pressures on warehousing and container storage capacity.

While we do see signs of improvement in the supply chain, there are many challenges that persist today and numerous areas for improvement to move agricultural products more effectively and efficiently.

Here are a few of the recommendations we have as an organization.

The first is to take an understanding that the shift in supply chain patterns could be long-lasting. We can't merely expect the supply chain to normalize fully and that the previous way of moving things will be sufficient. We have to come to a realization that this might be the new normal. We have to understand that element, and that what drove container growth in ocean containers over the last several decades, namely market share, has subsequently been replaced with a focus on financial stability and margins for most private businesses.

The second recommendation is that there must be a quick development of new and existing infrastructure to create surge capacity at multiple levels of the supply chain. These levels include port infrastructure and rail infrastructure, as well as transloading and logistics parks. To achieve this initiative, programs such as the NTCF will be required to encourage private firms to expand their supply chain capacities. The process must be streamlined to react quickly, as the emerging issues in the global supply chain are growing and developing more rapidly than Canada is keeping up with them.

The third element is that all levels of government must encourage and support supply chain development projects for the overall improvement of the Canadian supply chain and the economy as a whole. To give a personal example of this, Ray-Mont has been attempting for six years to expand the logistics footprints of our operations in Montreal, which would increase capacity here by 400%, only to be met with challenges from multiple levels of government. Had the project been developed from the outset, many of the challenges that currently plague agricultural exports through this corridor, as well as the supply chain as a whole, would have been absorbed by that expansion. Ultimately, supply chain inefficiencies lead to increased costs and inflation.

The fourth element is that we must engage with supply chain stakeholders at the highest level, and in particular with the shipping industry, to work with them on solutions and ask the critical questions. In saying this, I will stress that it's imperative to work with them and not against them, as ocean carriers are private companies making a choice to call Canadian ports. One illustration of this is the port of Montreal, for example, which has additional berthing capacity, but steamship lines are choosing not to call these ports.

As I referenced previously, we've seen the removal of historical services from the west coast in the past couple of years. Again, this is a choice. We must ask them why they are choosing to do this and why the capacity is being pulled from Canada. More importantly—

[The Chair, Liberal, Kody Blois]

Mr. Paul, I apologize. We're out of time.

I want to get to questions, so I'm going to go to Mr. Beusekom for up to five minutes, and you'll have time to be able to finish your remarks. Thank you.

[Jim Beusekom, President, Market Place Commodities Ltd.]

Good afternoon.

My name is Jim Beusekom. I'm the president of Market Place Commodities. We're located in Lethbridge, Alberta. I'll give you a brief background of what we do. We trade grains, pulses and oilseed commodities produced by farmers in western Canada. Our market is threefold. We sell into the domestic feed market, which goes mostly to cattle and livestock production. We export to the United States, and we export by container to the Asian market, with the bulk of that container volume shipping to southeast Asia.

We source our commodities from farmers in western Canada in what we would typically refer to as supply surplus areas. The municipal districts, counties or rural municipalities across Alberta and Saskatchewan generally produce many more commodities than what they consume, meaning there's more available than we need for our domestic market. We ship this into export and international markets. We move these commodities from sellers to buyers, and we use third party logistics, such as truck, railroad and shipping container.

Most of our domestic trade is moving by truck logistics across Alberta, Saskatchewan and Manitoba, with some help from rail when needed. When we export to the United States, we tend to ship, again, by truck or by a combination of trucking and rail. Typically, we truck it into the United States. From there, we access U.S. rail, such as BNSF, and it goes to destination markets in the United States that way. For overseas exports, we use all modes of transportation: truck to rail, rail to port, and then containers to the overseas markets.

It's much about logistics. To elaborate on these logistics, there are some areas that continually need to be reviewed and improved on. In trucking logistics, there are two areas of concern. One is a shortage of drivers. It's very difficult for trucking companies to expand and meet the need for customers today. We would like to suggest that we need to review and simplify the process to obtain a driver's licence in Canada. For example, it's more difficult and more expensive today to get a driver's licence to become a class 1 trucker than it is to obtain a small plane pilot's licence. You can actually do it more quickly and cheaply, I believe. The other thing is to potentially review insurance companies' requirements and guidelines for trucking companies.

The other problem we've had with trucking is past and current mandates required to cross the border to the United States. That's hugely impacted the number of truckers who are able to move product for us across the border. We're located roughly 100 kilometres from the United States, so going back and forth across the U.S. border is very normal.

With regard to rail logistics, we want to give credit where credit is due, and our experience with CP Rail.... Again, we're in the Lethbridge area, so we tend to use mainly CP Rail, and our working relationship with them has been good. They've made significant improvements in available equipment. In our case, it is moving intermodals by rail from Calgary to Vancouver. Shipment times are decent from the origin to the destination.

Areas of concern with rail are, of course, when there are derailments and natural disasters, as there were a year ago in interior B.C. These things all significantly impact shipping capacity. When those types of events happen, there are not a lot of options today for the rail lines to reroute around the problem areas. As a result, we are unable to get our product to the port.

The third is container and port logistics. This was discussed already, but our ability to get product to port is only as good as our ability to get it through port and onto vessels. Port congestion, lack of shipping lines coming into port, blank sailings, shortage of containers, and containers returning to Asia empty are all major issues and just a few things that we want to mention.

That, really, is a summary of my statement. Again, I'd like to thank you for the opportunity to act as a witness at this committee.

Thank you.

[The Chair, Liberal, Kody Blois]

Thank you very much, Mr. Beusekom.

Lethbridge is home of the Lethbridge Hurricanes, a good junior hockey program. Go, Hurricanes, go.

Colleagues, unfortunately we're a little tight for time. I want to tell you that we're just going to do one round of six-minute questions. I believe we're going to start with Mr. Lehoux.

If the Liberals and the Conservatives want to split their time, please go ahead accordingly.

Mr. Lehoux, go ahead.

[Richard Lehoux, Conservative, Beauce, QC]

Thank you, Mr. Chair.

I'm going to share my speaking time with my colleague, Ms. Rood.

I'd like to thank the witnesses for coming.

My question is for you, Ms. Sullivan. You said that the workforce was the most serious problem being experienced by the industry. You mentioned that a workforce plan had been prepared with help from some 100 stakeholders.

In this plan, are there two or three priority measures that could be implemented as quickly as possible?

Could you give us some details on this?

[Kathleen Sullivan]

On the plan that we're looking at, labour is a complex, multi-faceted problem, and any solution is going to have to be multi-faceted as well.

Some of the things we're looking at that I would suggest are priorities are, first of all, really simplifying, as much as we can, the temporary foreign worker and immigration systems and, obviously, as a baseline, protecting and looking after worker rights. We can't magically create more Canadians. With what our demographics are doing, we're really going to have to look at foreign workers, both temporary and permanent, to bolster the workforce in the short term—not just in our industry, but also in others.

[Richard Lehoux, Conservative, Beauce, QC]

Is it important right now to extend labour contracts to a period of two, three or four years, instead of keeping them very short term?

Would this be a positive measure?

[Kathleen Sullivan]

Yes, that would have a very positive impact. It would certainly reduce the cost and administration that companies are going through to, in effect, bring back the same workers year after year. I think that would go a very long way toward allowing companies to focus on what they should be doing, which is making food, instead of focusing on paperwork and administration.

[Richard Lehoux, Conservative, Beauce, QC]

Thank you.

On a related matter, you spoke about the lack of coordination in the supply chain.

What concrete role could the federal government play in the short term?

[Kathleen Sullivan]

The supply chain task force recommended the establishment of a supply chain office, and I think we have to look at something analogous to that for the food system. You literally have hundreds of thousands of farms, tens of thousands of retail outlets and food processors. The system does a very good job coordinating on a day-to-day basis, but then you start to throw in these unexpected events and it becomes quite challenging.

I do think that having coordinated oversight—a whole-of-government approach, as discussed at the previous panel—is one of the concrete measures that governments can take to play the role they can play. Moreover, they can take some real steps to make sure that there is concrete coordination between different levels of government, even down to the larger municipalities.

They can also look at things like how we digitize information across the system so that non-competitive information might be available for making quick and easy decisions, and finally, undertake an exercise to really understand what the critical points and risk points along the supply chain are and how we can bring stakeholders together in an appropriate manner when there are problems, so that they can work together to solve them.

These are some of the concrete measures that governments can take to play the role they can play. They can't fix all of the problems, but I think there is a very important role for governments here.

[Richard Lehoux, Conservative, Beauce, QC]

Ms. Sullivan, with respect to infrastructure, a subject you talked about earlier, do you have something to say to us about the federal government's role?

[Kathleen Sullivan]

There are two main things I would point to. One is labour. Our infrastructure and transportation systems are facing the same labour problems we are, particularly on the trucking side. Another is capacity. We don't have the excess capacity we need to be able to deal with surge periods of time, or to deal with situations like we saw in B.C. with the floods, where the port of Vancouver was essentially closed for a period of time and then backed up for months after that.

[Richard Lehoux, Conservative, Beauce, QC]

Thank you.

Ms. Rood has the floor now.

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

Thank you very much, and thank you to the witnesses for appearing today.

Ms. Sullivan, I want to ask you one question. A couple of years ago, I started talking about a grocery code of conduct. You didn't mention this in your remarks today, but having a grocery code of conduct in place would be a huge benefit if we're talking about food security and making sure that we protect our producers and farmers.

I'm wondering what your thoughts are, very quickly, here. Would a grocery code of conduct help to resolve some of the problems that we are seeing today?

[Kathleen Sullivan]

I think, if it's properly constructed and mandatory, a code of conduct could help.

The challenge we have is a grocery retail market in which five banners control over 80% of the sales, and 8,000 Canadian companies are trying to sell into it. There's clearly an imbalance of power here. The call for a code of conduct was rooted in the series of unilateral fee increases we saw—as you pointed out—in some of these larger grocery stores a couple of years ago. The market isn't able to work the way we would like it to. You have that level of concentration in one segment of it.

I think that, if we had a code of conduct that set some very clear rules on what is and isn't permissible, if participation was mandatory, and if there was a very strong compliance mechanism that ensured small enterprises could access dispute resolution if they needed it, it could definitely help.

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

Thank you very much.

I only have about 20 seconds left, so I wonder if there's anything you missed adding under infrastructure when you were giving your opening statement.

[Kathleen Sullivan]

We see so many reports written, and nothing happens with them. We have this gem of a supply chain task force report. In large measure, it repeats recommendations made by the agri-food economic strategy table back in 2018. Let's get moving on it. This only works if we all work together. I think we have a real opportunity.

I will say that three things we have become very good at, in the pandemic, are troubleshooting, working together and being creative. I think we have to draw on those skills we've developed throughout the pandemic, not let them die, and start to think bigger and better about how to improve our supply chains.

[The Chair, Liberal, Kody Blois]

Thank you, Ms. Sullivan.

Thank you, Ms. Rood.

Go ahead, Mr. Drouin.

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

Thank you, Mr. Chair. I will be splitting my time with Mr. Louis, the excellent member from Kitchener—Conestoga.

I want to thank all the witnesses for being here.

One question I have is for Mr. Paul.

You raised the importance of the national trade corridors fund. I've heard plenty about issues with certain barriers, whether at the port or with the rail lines. Obviously, there are always scarce resources. We can't invest everywhere at the same time, and labour is an issue.

From your perspective, where do you see the biggest bang for our buck in unplugging that supply chain clog, wherever it's happening?

[Stephen Paul]

I think the development of large-scale logistics parks or supply chain infrastructure projects is where you can get the most benefit.

To give you an example, we're trying to move from a 12-acre site—where we are currently, in Montreal—to a 60-acre site, adjacent to the port of Montreal. This would not only benefit ourselves, but give more fluidity.

I think the focus should be on growth products that can be achieved quickly and have a number of key elements already in place, because I find that a lot of submissions in different projects can be “pipeline ideas”. They may come into development in two, three or four years, but the projects that are fairly close to turnkey are the ones that, I think, should have the required focus. That can then start engagement.

As I mentioned before, the speed with which other projects across the globe are developing is so much faster than what we're seeing in Canada. By the time we catch up to those initiatives, we're already behind the new initiatives happening elsewhere.

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

Thank you so much for providing that feedback.

To Ms. Sullivan, thanks for being here.

Obviously, labour continues to be part of the conversation. In your sector, it will always be part of the conversation. It's like the skilled trades. It's been a conversation for as long as I've been alive. Obviously, automation is a key issue. I'm wondering whether you have stats from your members on how much investment they've made in trying to automate parts of those systems. Where there's a lack of labour, are they replacing that with new technologies?