Thank you, Mr. Chair.
I am Martin Caron and I am the General President of the Union des producteurs agricoles. I also have a field crop and dairy farm in Louiseville, in the region of Mauricie.
According to many economists, the inflationary period that we are going through right now is unique, due to the fact that the price increase of many products has been caused by supply issues, and not by increased demand. We must remember that the pandemic wreaked havoc in a number of supply chains, both locally and globally, including the food supply chain.
That's when Canadians realized how important it is to have local food production and processing capacity to ensure food security. Inflation created upheaval within our local or domestic food supply chain. During the pandemic, many processing plants had to reduce or halt their production because of COVID‑19 outbreaks. More recently, shortages and increased costs for labour have had an impact on businesses' profit margins within the farming sector. Businesses are having a hard time being competitive, because some of their rivals often have an almost unlimited access to very cheap labour.
The agricultural production sector is no different. The farm businesses that we represent in Quebec have had to deal with a sharp increase in the price of their inputs. In Canada, the price of inputs rose by nearly 30% between the first quarter of 2020 and the third quarter of 2022, according to Statistics Canada's farm price input index. Three of the main production inputs, which are animal feed, fertilizer and fuel, have seen price increases of 56%, 84%, and 82% respectively, which is much higher than the consumer price index. For horticultural producers, the price of flats has also skyrocketed during the same period.
On top of having to deal with rising input costs, farmers are now facing sharp increases in loan payments. We must remember that farmers have invested massively in their businesses over the past few years in order to meet environmental and animal welfare standards. The Canadian agriculture sector's debt has risen more than 30% over the past five years and was sitting at $129 billion in 2021. Over time, we believe that higher rates will generate $5.5 billion in interest payable.
When we know that net farm income is, on average, $6 billion, it is obvious that the increase in lending costs will greatly affect the profitability of many businesses over the next few months. Because of their high debt load, next-generation and new businesses will be particularly hard hit by increased interest rates.
Despite this difficult situation, we believe that the agri‑food sector hasn't done too badly, particularly for consumers. Even though the price increase of food is slightly higher to that of the consumer price index, i.e., 15.9% compared to 11.9% since the beginning of the pandemic, this increase is still much lower than the increase in farm input prices during the same period, which was 30%.
That said, we are not out of the woods yet. According to economic forecasts, interest rates will remain high over the next 24 months, which will maintain pressure on farm businesses' margins. What's more, labour issues, both in terms of supply and cost, will continue to dent the competitiveness of the farming and food processing sector.
To try and alleviate the situation, the government should provide the sector with the support it needs, such as temporary ad hoc assistance, as the United States has done. It has to keep the interest‑free advance at $250,000 for the advanced payments program. It should also reimburse producers who have had to pay the 35% surtax on Russian fertilizer. Moreover, the government should put measures in place that will allow farm businesses and food processors to enjoy competitive labour costs. Finally, the government should extend access to the Canada emergency business account for Canadian businesses, which will come to an end in 2023.
Finally, the government must support a code of best practices for distributors in order to ensure the fair distribution of revenue between the various stakeholders of the agri‑food sector. This will ensure that the consumer pays a fair price for his or her food. Ad hoc assistance and the measures we are requesting will help with the financial impact that is hitting farm businesses, which are having to deal with historic increases while ensuring a supply of food for our population.
Thank you.