Agriculture Committee on Feb. 13th, 2023

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

I'm going to say something totally non-partisan: I want to thank my colleague from the Bloc Québécois for introducing Bill C‑282. Actually, the minister, the entire cabinet, the vast majority of my party members and I supported it.

As we know, the dairy sector is often criticized for being under supply management. However, as we've seen inflation shoot up, the price of milk has remained fairly stable, at least on the farm. I can't speak to the cost of processing or the retail price, but at the farm level, the price has remained quite stable.

Do you have any comments about this?

[Martin Caron]

First, I have to say that we're pleased to see support for Bill C‑282, which deals with supply management.

This is certainly something that lets us adjust prices very quickly. What we're saying today is we want a fair price. That allows for predictability, research and innovation, while also meeting Canadians' expectations. People talked about animal welfare and the environment, among other things. Farming operations need predictability. As we know, when we invest in agriculture, it's for the long term, and the supply management system makes that possible. The producers benefit, but so do all Canadians. Whether we're talking about processors or suppliers, the whole chain benefits.

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

Thank you for your comments, Mr. Caron.

[The Chair, Liberal, Kody Blois]

Thanks to you both.

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

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

Thank you very much, Mr. Chair.

I'd like to thank the witnesses for being with us this evening.

If I'm smiling, it's probably because I find that Mr. Drouin is a great inspiration. Because of him, I won't need to use my six minutes of speaking time and I can talk about something else.

We understand how important supply management is for the industry. We will include that in our recommendations to guard against inflation.

Mr. Caron, you talked about specific proposals in your speech. Among other things, you mentioned deploying ad hoc support, one-time emergency assistance to help businesses cope with inflation, as the United States has done.

Could you expand a bit on that proposal?

[Martin Caron]

The United States did it in late August or early September, rapidly injecting $1 billion through the Inflation Reduction Act of 2022. They quickly realized that businesses needed cash. The message we got from our businesses after the holidays was that they needed cash too.

The government created the Canada emergency business account, but the repayment window has been extended to the end of 2023. We'd like to see the program continue to provide access to cash.

You heard what was said earlier about interest rates going up over 4%. The farming sector is $129 billion in debt. If 100% of the payments on that debt resume, that amounts to $5.5 billion, while the net income in the sector is $6 billion. Surely you can understand that our flexibility is being taken away immediately before we've been able to accomplish anything.

Also, it's projected that it may be as high as 50%, in terms of repayment or renewal of loans. In any event, it's going to have a huge impact over the next two years. That's why cash needs to be available.

We're also meeting environmental expectations. As members of the Standing Committee on Agriculture and Agri‑Food, you often hear about climate change, greenhouse gases and various indicators and targets. It takes cash to be able to support the farming sector, knowing just how much the sector has invested or borrowed in the past few years.

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

Thank you very much, Mr. Caron. You've made clear recommendations.

You also stated that the amount available through the advance payments program should be maintained at $250,000. Can you explain exactly what you're requesting in that respect?

[David Tougas]

The interest-free limit for advances was raised from $100,000 to $250,000 for two years, 2022 and 2023. We're asking that the $250,000 limit be maintained for a longer period, at least for the next few years, so that we can get through the crisis. If not, the limit could simply be set at $250,000 from now on, given that our businesses are growing and because that amount should have been updated in the past few years anyway.

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

Thank you very much.

You talked about competitive labour costs. I imagine you'd also like to see more flexibility in the temporary foreign worker program. Can you expand on that for us?

[Martin Caron]

I know the government has made an effort, but I feel that everyone on the Standing Committee on Agriculture and Agri‑Food has seen that it needs to go a bit further. You have to realize that in Canada, even in Quebec, a third of our agricultural workforce comes from abroad. So it's important that we have flexible and predictable programs.

As producers, we're asked to be productive and efficient, and we demand the same of our tools and systems, be it the government or its departments. We're asking for more efficient tools and systems, not a heavier administrative burden.

We need to continue moving in this direction to increase program flexibility, while also respecting workers. We feel it's very important that all these workers be part of our business expansion. They have been involved for years. They're great and wonderful people, and we need to properly welcome them and set up transition committees with them. We need to get everything done by the book, but faster.

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

With respect to the 35% surcharge on Russian fertilizer, we've had some discussions here amongst ourselves. How would you like to see those tariffs reimbursed?

[Martin Caron]

We agree that reimbursement is in order. In Eastern Canada, this has had an impact. We're talking about significant amounts of money. It's cost us a few million dollars, and they are telling us to remain competitive. The money is there, and we're asking to be reimbursed for those costs. There may be different ways to do that, and we're open to it, but we do need to be reimbursed. It will help producers mitigate the impact of inflation and remain competitive. Without that money, businesses can't invest in research and innovation or environmental protection.

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

Thank you.

Produce growers spoke to us about reciprocity of standards last week. In 20 seconds, can you tell us about that?

[Martin Caron]

We've been asking for it for years. We need to have the same tools. When we say we want to remain competitive, we're saying we want the same tools. When we talk about reciprocity of standards, there's a reason we're also asking for a code of good practice: It's another tool we'd like to promote.

[The Chair, Liberal, Kody Blois]

Thank you very much, Mr. Caron and Mr. Perron.

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

Thank you, Mr. Chair.

Thank you to our witnesses for helping guide our committee through this study.

Dr. Stanford, I'd like to start with you. You probably are aware, of course, that we have had representatives from some of the grocery companies before our committee. Unfortunately, they thought it best to send their vice-presidents and not their CEOs or presidents. I found them to be quite defensive. The narrative they presented to our committee certainly was in that light.

I'm really glad to have you as a witness. I appreciate the submission you've given us. I think you've provided a very important counter-narrative, which is backed up with the facts you've gleaned from readily available statistics, that food retail margins have soared since 2019 and profits have doubled, which of course is happening at the same time that sales volumes are going down for each of the companies.

I'll quote you from the back part, where you stated the following:

The evidence is clear: food retailers have taken advantage of the pandemic and its aftereffects to extract more surplus from their workers and consumers....Their profits have clearly contributed to inflation, and should be challenged: with excess profit taxes, stronger competition rules, and better labour standards.

However, I also want to go to another sector. You have this great table on page 5 of the submission you gave to the committee where you look at the top 15 sectors in terms of the increase in profits they've seen. Fossil fuels, of course, are incredibly important in the agricultural sector. Primary agricultural producers do get a break from the fuels they use on the farm. That's provided for in the Greenhouse Gas Pollution Pricing Act. But fuels are incredibly important for delivering not only the inputs to the farm but also the food they produce to the supermarkets.

When I look at your chart, I can see the change in net income for oil and gas. Since 2019 it has increased by 1,011%. You list $38 billion. Now, we hear a lot of sound and fury in Parliament about carbon pricing, but this is the elephant in the room. I think we ignore it at our peril.

I'm wondering if you could put that into context. What does that kind of profit margin increase do to the affordability challenges that Canadian families are facing these days?

[Dr. Jim Stanford]

Thank you, sir.

I produced that table because I do hope the debate over prices and profits in food retail—it is very important, and I thank the committee for undertaking it—can be the start of a larger conversation. I've described the factors in food retailing where companies are taking advantage of the supply chains, the uncertainty, the preserved spending power of Canadians—I don't say overheated demand, but their spending power was preserved thanks to the emergency supports during COVID, which have now all been phased out—and their market power to increase profits to the highest share ever of Canadian GDP. That similar mechanism is visible in other “strategic” sectors, as I call them, which have a place in the overall supply chain that allows them to charge what the market will bear even in a moment of social and environmental and economic crisis.

At the top of the list, there's no doubt about it, is the oil and gas sector. The excess profits earned there since the pandemic account for about one-quarter of the total mass of profits across the 15 sectors I identified in that work. The increased prices that embody those huge profit margins then trickle through the rest of the supply chain. Food processors have to pay that, so they have higher costs, nominally, but then they add their own higher profit margin on top of that. The same goes for the food retail sector. By the time the consumer gets it, there's been excess profits added at several steps of the whole supply chain. That magnifies the final impact on consumer price inflation.

I'm grateful to the committee for undertaking this look at food inflation, but when the supermarket vice-presidents come to you and tell you that their margins aren't up that much and their costs were increased, I would point out, first of all, that their margins are up and their profits are up despite the higher costs. Then I would point out that their own higher costs are a reflection of similar excess profit-taking at other stages along the supply chain. No greater example of that exists than the increase in profits and prices in oil and gas products.

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

When it's laid out on a table like that, it's just simply an insane figure. You would agree with me, I'm gleaning from your comments, that this kind of profit margin is doing much more harm to Canadian families than a price on carbon could ever hope to do.

Finally, I want to get an answer from you on this question as well. You have those recommendations of excess profit taxes, stronger competition rules and better labour standards. Is there anything else you would like to see in this committee's final report in terms of recommendations? Is there anything you want to put further emphasis on?

Thank you.

[Dr. Jim Stanford]

Thank you.

First of all, regarding the reference to the price on carbon, particularly when the revenues from the price on carbon are refunded to Canadians, it's hard to see what net impact that has on the real purchasing power of Canadians. I suspect it's negligible.

Certainly the run-up in energy prices that we have seen in this period has everything to do with global futures market speculation. The world supply of oil was not actually affected by the war in Ukraine. World oil supply, including supply from Russia, has increased, not decreased. Yet the way futures markets work, and the way our energy policy in Canada works, the resulting spike in prices was translated into Canadian consumers very quickly. That was all profit because the actual price of producing that energy in Canada, refining it, and distributing it to consumers did not change much at all.

In terms of recommendations—

[The Chair, Liberal, Kody Blois]

Mr. Stanford, unfortunately we're going to have leave it there.

Thank you, Mr. MacGregor.

Colleagues, we're getting a little bit tight here for time so I'm going to ask for three or four minutes; you're not going to get the whole five—

I'm sorry, Mr. Lehoux. I'm going to say four minutes, and at four minutes I'm going to stop it. I'm tough.

We're down to four minutes and we'll try to shave a little for the Bloc and NDP.

[Richard Lehoux, Conservative, Beauce, QC]

Thank you, Mr. Chair.

I'd like to thank the witnesses for being with us this evening.

Mr. Caron, I'm going to go back to the labour issue once again. We did some studies a few months ago, perhaps over a year ago, on the issue of reducing the use of forms and paperwork. You had even made some proposals, which we included in our report submitted to the minister.

Did those recommendations from the committee yield any results?

[Martin Caron]

Thank you for the question.

Some follow-up was done. One thing we know is that the government plans to implement a “trusted employer” model that's more flexible and greatly reduces the administrative burden.

We also talked about asking to do labour market impact assessments every three years, or even every five years, within an established framework. I believe more needs to be done on that.

Then we have the whole housing component and all the changes that need to be made. We're still waiting on that and to hear how we can achieve greater flexibility.

[Richard Lehoux, Conservative, Beauce, QC]

So I understand that you're still waiting on those things.

[Martin Caron]

Yes, we're waiting on a few things.

[Richard Lehoux, Conservative, Beauce, QC]

Once again on the labour issue, several farmers in my area have complained in recent weeks and months that temporary foreign workers were no longer available because they had been hired by companies not necessarily in the farming sector. This stems from flexibility introduced due to the pandemic.

I imagine farmers must be talking to you about this very important issue. Do you have any news on that?