Agriculture Committee on Dec. 5th, 2022

[Dr. Rebecca Lee]

I would love to know the number, just to know what's happening in detail. I do know of farms that have already decided not to continue. Again going back to the next generation, they don't have a next-gen person to take over. They're not interested under these circumstances. It's just one thing after another that's being burdened on the farmers.

What they could also be doing is switching to products that are not fruit and vegetable that are less labour-intensive and less input-intensive. We would end up probably importing a lot more of our fruit and vegetables as a result.

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

Do you think the increase in the carbon tax will also hasten this demise for farmers?

[Dr. Rebecca Lee]

It could very well do, but I would have to get back to you on that.

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

We have about 30 seconds left.

Are there any actions from the supply chain task force that need to be taken?

[Dr. Rebecca Lee]

Yes. I've mentioned addressing the labour shortage issues and employee retention. Establishing a federal supply chain office to reunify relevant federal government activities would be another as would protecting corridors, border crossings and gateways from disruption.

We want to make sure that we have a free flow of goods, so one action would be developing a national transportation supply chain strategy and engaging the United States, the provinces and territories to achieve mutual recognition of regulation policies and processes.

[The Chair, Liberal, Kody Blois]

We'll leave it at that. Thank you both.

We have Mr. Drouin for six minutes.

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

Thank you, Mr. Chair.

I also want to thank all the witnesses who are here today.

My first question will be for Mr. St‑Laurent from Sobeys.

Mr. St‑Laurent, I'd like to know what your company generally does when there are forces in operation that cause price increases, when those forces are not necessarily attributable to Sobeys.

The most recent example I could give is California lettuce. In the summer, we can grow our own supply of fruit and vegetables, but in winter we ordinarily have a little more difficulty doing that.

What are you doing to ensure that Canadians do not suffer these repercussions, or suffer them to the least extent possible?

[Pierre St-Laurent]

Thank you for asking that question.

A lot of initiatives are underway, and some had already started before. I am going to give you an example.

A few years ago, when Toundra Greenhouses in Saint-Félicien started producing cucumbers year-round in a greenhouse, Sobeys committed to buying the entire production.

That is a great help to people to start out in business and get financing, and to strengthen the resilience of the supply chain.

At present, we have a partnership with the company called Winter Farm, for example, for winter strawberries. We provide do a lot to encourage controlled environment vertical farming, to reduce our dependence on California and Mexico, in particular. We have a long way to go, but we are giving it a lot of support.

During the pandemic, we had serious concerns about the border, and that must not happen again. We are therefore accelerating our investments and our partnerships with various businesses in order to develop vertical or controlled environment agriculture.

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

We see that there are starting to be a few more of our companies in the Canadian market.

We were used to seeing them, but it was on a smaller scale. Now we are seeing companies like TruLeaf undergoing major expansion. I don't think they want to replace Canadian producers, but they are probably trying to replace imports from California, which are not sustainable, as we can see.

[Pierre St-Laurent]

The best way for us to support them is to buy the product, to guarantee that we will buy the quantities produced.

That is what we get a lot of requests for. When the companies are starting up, or investing, or looking for investments from various parties, you can't imagine how much it speeds things up when we guarantee that we will buy their entire production.

That is kind of the role we are playing at present in the start‑up of a number of start‑up companies.

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

Right.

Ms. Lee, I've been talking about sort of vertical agriculture, and I'm wondering whether your members are getting involved in that and how they're looking at it. Are they seeing it as a potential threat?

It's mostly for wintertime, obviously. I know many of your members do 12 months, but not every member is. Is that something that they're looking for? What would spur that investment for them to get into that so that we're self-sustainable 12 months a year?

[Dr. Rebecca Lee]

It's a completely different business. I don't know personally of any farmer who is in the field right now who is thinking of going into vertical farming because, as I understand it, it's completely different.

I can see greenhouse businesses making sure that they can perhaps go year-round. There are usually a couple of months in there when providing lighting and electricity doesn't necessarily make sense from a price point of view. That might be an easier way for my growers to explore.

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

Is that something that they're worried about, though, knowing that lettuce leaves are making their way into vertical agriculture?

I know through research that they are working on fruits and veggies. Is that something that your membership's worried about?

[Dr. Rebecca Lee]

I don't know. It hasn't been a concern.

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

So far.

I want to come back to Mr. Graydon, who spoke generally about the proposals from association members.

I don't want to question the companies specifically, but obviously there is a trust problem between consumers and companies, be they supermarkets or other companies.

What can be done to restore consumers' trust and guarantee that there is no "greedflation" going on, knowing full well that all consumers have read the news about bread price fixing?

[Michael Graydon]

Yes. I think trust is a very important component. As an industry, this isn't something that is fixed by the manufacturers or the retailers exclusively; this is an opportunity for us to collectively put some energy behind it.

Again, the grocery code of conduct is a big step forward. It shows the unification of the industry with regard to fair practice, transparency and fair dealing. I think it starts to signal to the consumers that the industry is intent on working to try to drive forward very succinctly a change in perception.

We are challenged a bit as we speak, with systemic global and geopolitical issues putting a lot of pressure on our business. I believe these too shall pass. I think as we continue to work as an industry to find solutions, versus pointing fingers at each other, we will start to see an element of trust start to reintegrate back into our industry.

[The Chair, Liberal, Kody Blois]

We'll leave it at that.

Thank you, Mr. Drouin. Thank you, Mr. Graydon.

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

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

Thank you, Mr. Chair.

Thanks to the witnesses for being with us. We appreciate your collaboration. Obviously, we are looking for information more than anything else.

My first question is for Mr. St‑Laurent.

Mr. St‑Laurent, thank you for your clear presentation and your clear figures.

I would like to be sure I understood you correctly. When you talk about a 2.5 to 2.6% margin, you are talking about the grocery sector only. Is that correct?

[Pierre St-Laurent]

Yes, that's right. In fact, at Empire, over 90% of our business is in the food sector.

That corresponds to our net profit margin.

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

Right.

So you are able to give us your figures for that sector directly...

[Pierre St-Laurent]

Yes. Those are the figures that are already published in our quarterly report.

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

Right.

A few minutes ago, we heard Ms. Lee talk about the fact that producers are finding they are getting lower sale prices. How do you explain that?

The margins are decreasing enormously and some even say they are selling at a loss, while you are managing to maintain your margins.

Can you explain why the vegetable producers are in that kind of situation? I would just like to be able to understand.

[Pierre St-Laurent]

I can tell you that local products have a place on our shelves.

Our business model is the same for all our franchisees from one end of the country to the other. They are people who are involved in their communities. They give space to those products because consumers want them. There is no objective other than that: consumers demand local products.

I don't have information to show that it is not profitable for vegetable producers. We negotiate with them and we offer them space on our shelves.

Our merchants do the same thing directly with them, without involving our company in most cases. Obviously, the big producers that go through our warehouses go through us, because of the costs associated with the logistics. It is all done contractually, by mutual agreement.

We never have enough local products. Even though we prefer to have products from Canada, it is unfortunately the case, even in season, that we have to get our supply from other countries. That is not what we prefer. Consumers prefer fresh local products.

To my knowledge, these are agreements negotiated contractually. We don't force anyone to sell to us at a loss. That is not at all a part of our culture.

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

I would like to talk about the costs imposed on suppliers by retailers. I raised the question earlier with Mr. Hussain, but I didn't really get an answer. You may be able to give me some ideas.

The committee has heard the representatives of the Dairy Processors Association of Canada. Mr. Frigon told us that marketing costs represented 18% of the costs of fresh product suppliers in the United States as compared to 28% in Canada, in the retail business.

What explanation is there for that kind of difference?

[Pierre St-Laurent]

It's hard for me to comment on the figures from the United States, since I am not familiar with them.

However, I do know that for all dairy products in Canada, the Canadian Dairy Commission seems to have been exposed to all the arguments necessary for a price increase. Three consecutive increases have been allowed for reasons I consider to be justified. Milk is obviously a component of cheese, yogurt and a lot of products in stores.

I can talk to you about the situation in Canada, but it is difficult for me to compare it with the situation in the United States, unfortunately.