Agriculture Committee on March 20th, 2023

[Richard Lehoux, Conservative, Beauce, QC]

Thank you.

Mr. Boxall, you mentioned a lack of transparency several times. We've just heard that the code of conduct will help correct that. Do you have any other suggestions for the committee to improve transparency about price increases?

[Ian Boxall]

I think there needs to be some transparency around the meat sector. When a farmer produces a cow, it goes to a slaughter plant and it shows up on the grocery store shelf and in the prices we're paying there. That's an easy one to look at. With that one I think there are lots of links in the supply chain that could be researched.

Then, when it comes to the farm gate, what is the price of fertilizer? What base is the price of fertilizer, when most of it's made here in western Canada and the prices we are seeing are record highs?

I think there are other avenues you could look into.

[The Chair, Liberal, Kody Blois]

Thank you very much, Mr. Boxall and Mr. Lehoux.

Welcome to the committee, Mr. Longfield. The riding you represent, Guelph, is recognized for its many farming operations.

You have the floor for three and a half minutes.

[Lloyd Longfield, Liberal, Guelph, ON]

Thank you, Mr. Chair, and thank you to the witnesses.

I want to focus on what I think is a connection between what Mr. Boxall was saying and what Mr. Lee was saying in terms of looking at the supply chain. I'll start with Mr. Boxall and then go over to Mr. Lee, with the time I have left, on vertical integration of some of the systems we're talking about.

Mr. Boxall, I love the idea of the grocery code of conduct, but it is part of the overall supply of food. You're at the very starting point of it, and the price of seeds has also gone up, as has everything else, for your inputs. Then we have the transportation sector and then the wholesalers and distributors.

You mentioned some of the policies around.... I talked to some of the farmers around my area, who have said that some of the large chains will hold back payments, pay on 120 days, pay lower margins and really squeeze the people who are supplying them.

Could you maybe comment on what we could do to address the food pricing system as an overall system?

[Ian Boxall]

It starts right from the inputs we buy at the farm. Let's get some transparency around that and look at every link in the supply chain. We don't have a huge greenhouse sector here in Saskatchewan for me to speak exactly to the grocery store code of conduct, but I do understand that transparency around the behaviour of big corporations dictating how they are going to treat suppliers is an issue.

Yes, maybe there are thousands of grocers in this country, but they are not treated the same and they do not treat their suppliers the same. I think having some transparency around how that works would be great, but I also think we can start right at the farm gate. Let's get some transparency in the whole supply chain, which would have a—

[Lloyd Longfield, Liberal, Guelph, ON]

I'm very limited on time. We just don't have time. I'm sorry.

Also, on the credits coming back with the carbon pricing system we have in place, the additional credits going to rural communities or people in rural areas, I think there's also an opportunity for carbon accounting on the soil, and if you're sequestering carbon you should be getting credit for it. There's a delta there. You're paying a tax. You're getting a credit. We don't talk about the credit so much.

Could you maybe comment very quickly on that? We don't have many seconds left.

[Ian Boxall]

I don't think we are there yet, where we are being recognized for the credit side of it. I would like to see money going into research to ensure and figure out where the carbon is being sequestered. Let's take research money and put it into figuring carbon sequestration and not a tax.

[Lloyd Longfield, Liberal, Guelph, ON]

The University of Guelph would love to hear that, and so would the University of Saskatchewan, because they can do these things.

[Ian Boxall]

Absolutely.

[Lloyd Longfield, Liberal, Guelph, ON]

Professor Lee, regarding the vertical integration, we have systems now in which we have suppliers throughout the chain owned by the same types of corporations and sometimes the same corporations. Could you talk about what vertical integration has done to the price of food?

[Dr. Ian Lee]

I haven't studied vertical integration and its consequences in the food industry, but I've certainly studied it. In fact, I teach it. I just did my class on this.

With vertical integration in major economies—mostly in the States—the trend is towards de-integration because of market forces, and I don't have time to go into all the reasons. The reason we have so much vertical integration in agri-food in Canada, I think, is the lack of competition. It has sheltered companies and allowed them to vertically integrate, and I think it's fair to say that the research shows that companies that are vertically integrated are able to impose more market discipline and control over prices and to make more money.

Ideally, I think we want to encourage de-integration, whereby a firm will sell off its subsidiaries that are upstream more than the downstream ones.

[Lloyd Longfield, Liberal, Guelph, ON]

I agree 100%. Thank you, sir.

[The Chair, Liberal, Kody Blois]

Thank you very much, Mr. Lee and Mr. Longfield.

Mr. Perron, you have the floor for 90 seconds.

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

Thank you, Mr. Chair.

Mr. Boxall, I really enjoyed your opening remarks. You talked about making food security a priority. I have two quick questions for you, and I'd like your responses to be brief.

You talked about recognizing innovation. Should countries recognize and financially support environmental innovation in farming operations on a permanent basis?

You also spoke of price fixing mechanisms. Other witnesses have told us that it was urgent that the Competition Bureau conduct an investigation into that. What are your thoughts on that?

[Ian Boxall]

We need research into carbon. Farmers care. We care about the environment. I had a little trouble with the interpretation on the question—I don't remember mentioning price-fixing in my introduction—but I do believe we care about the environment. We have for generations.

In saying that, at no time should a policy affect production. At the end of the day, when Canada's products are needed and wanted in the world, we need to ensure that food production is top of mind, and then possibly environment is second.

[The Chair, Liberal, Kody Blois]

Thank you very much for keeping your questions and answers brief, Mr. Perron and Mr. Boxall.

Mr. MacGregor, you have the floor for 90 seconds.

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

Thank you, Chair.

Mr. Boxall, I'll turn to you for my last question. It's also dealing with the Competition Bureau. We had them before our committee as witnesses. They were explaining that on the allegations of bread price-fixing, they're still investigating that matter. The allegations came forward and they started in 2017. It's 2023. They're still under investigation.

Do you have any thoughts on whether Canada needs a strengthened Competition Bureau, with more resources and a better mandate, to just make sure that in heavily concentrated marketplaces there's a bit more refereeing going on? Maybe that works in tandem with a grocery code of conduct, but with a bit more refereeing going on.

Do you have any thoughts on that?

[Ian Boxall]

Absolutely. I think that would work right in tandem. I think the Competition Bureau needs more resources, and also probably needs more teeth. I see it at the CTA as well. If you want to talk about transportation issues in our country, I think the CTA needs more resources and more teeth too, which could help with some supply chain issues.

Those are two areas that I think could help for sure.

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

Thank you.

I'll leave it there, Chair.

[The Chair, Liberal, Kody Blois]

Thank you very much, Mr. MacGregor.

I'm just going to ask Professor Lee one very quick question.

Thank you for preparing this document that was made available to the committee members. You referenced Loblaws' margins being about 3.7% and Empire's 2.7%. I think you introduced important testimony about food price inflation elsewhere in the world, right? This is a very nuanced conversation even within our own country, but then you lather on other jurisdictions to help give some comparative examples. That doesn't make the issue go away here, but it does give context.

Do you have any sense of what retail margins would be for large supermarkets similar to Loblaws or Empire in other jurisdictions? Have you done any research in that domain?

[Dr. Ian Lee]

I've only looked at the U.S., but I've certainly looked a lot at the U.S. I'm talking grocery retailing. It's a very popular industry to study in strategy classes with students—that and airlines.

In terms of profit margins, I'm talking percentages. We're not talking dollars, because of course the U.S. is 10 times bigger. When you look at the margin, the ratios and the percentages, they're astonishingly similar at the grocery retailing level in the States versus Canada. It's a remarkable similarity.

[The Chair, Liberal, Kody Blois]

Thank you very much.

Thank you, colleagues.

On behalf of all of you, let me thank Professor Lee, Mr. Boxall and Mr. Terrazzano. Thank you for your testimony today and for driving into our study.

Just before you go, colleagues, on Wednesday we will be in camera, studying global food insecurity. That's the second round of that report. Please come prepared to discuss that.

Next Monday, our intention will be to continue with this study. I believe, Madam Clerk, we have confirmed that the CEO from Walmart will be joining us for the first hour. For the second hour, we will go in camera to continue the third round of the global food insecurity report, and we'll give some reflections to our analysts to get them started on this report, so at least we can get them moving in that direction.

Finally, with your indulgence, given the fact that the budget is coming on Tuesday, there is lots for us to pore over, as members of Parliament. I would propose that we break on that particular day and then come back at it in earnest in April, unless there are some strong objections to that. We can discuss it before heading into next week, if you'd like.

I don't see any strong objections. That will be the pathway we take. We'll see everyone on Wednesday.

Thank you to our witnesses.

The meeting is adjourned.