Agriculture Committee on March 20th, 2023

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

Thank you, Mr. Chair.

Chief Louis, please tell us more about access to traditional food resources. How is that coming along? What solutions are you looking at?

I'd also like you to tell us about access to clean drinking water. We're talking about food, but as we know, many communities also have a problem with access to water. Can you speak to that, please?

[Chief Byron Louis]

When we're talking about food insecurities, I think one of the things that must be understood is that there's a fundamental difference in nutrition among first nations people or indigenous people. Western society is basically a protein-driven diet that's based upon flour and the Middle East fertile crescent.... For first nations, we're protein. Everything that we have comes from protein. You take away the ability to access that, and it directly affects us.

In our community, we're 2,200 people, yet we have 600 people who are suffering from diabetes of one form or another. What's that driven by? It's carbohydrates.

When we're talking about food security, there must be recognition that.... Somebody—I forget who it was—mentioned earlier a recognized right to food. Well, we have that. It's constitutional; it's section 35. That is a right, but it's not being recognized or implemented by any level of government. It doesn't matter if it's provincial or federal. That needs to be changed, because we need to turn this around if we're going to turn around food insecurity. We need access to our traditional foods.

[The Chair, Liberal, Kody Blois]

Please be brief, Mr. Perron.

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

Mr. Louis, can you tell us about drinking water supply issues? How do you feel about that? What do you think should be done about it?

[Chief Byron Louis]

For us, it's litigation. It's the only way we are actually able to get any results. Taking the federal government to court over safe drinking water and making it a human right is the only ability we have, and it's the only thing that actually created any type of level of change.

[The Chair, Liberal, Kody Blois]

Thank you very much, Chief Louis and Mr. Perron.

Mr. MacGregor, you have the floor for 90 seconds to two minutes.

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

Thank you.

Chief Louis, I'd like to continue with you.

I was on the public safety committee a couple of weeks ago, and we heard from a witness representing the Nunavut Association of Municipalities. He was also talking about how hunting was used to really shield a lot of families from the high prices of food, and about that connection to the land. They were talking about the danger that certain elements of Bill C-21 posed to their hunting rifles, which they depend on.

I'm proud to represent a riding out here on Vancouver Island that sits on the traditional territories of many Coast Salish first nations, part of the Nuu-chah-nulth first nation, and the Pacheedaht and Ditidaht first nations.

I guess my final question to you in the time I have left is this. You know, we have a diet here that is very much based on what the ocean provides. If you could just talk about the access to processing capacity.... What can the federal government do more to ensure that first nations have access to those traditional foods, to help them process them and to maybe tackle the problem that many communities are experiencing with these high food prices?

[Chief Byron Louis]

The problem doesn't exist with the processing. It exists with a lack of resources, our natural resources that are out there. One of the things we need is for government to start recognizing what's called “natural capital”, and I'll quickly go through this.

If we look at the Sto:lo, let's say a really rough estimate is that they consume about 1,000 pounds of aquatics per year traditionally. It doesn't sound like much until you multiply it by 10,000 Sto:lo. Suddenly, you're talking about 10 million pounds of fish. Now times that by retail value—because if you can't get it in the river, you have to go to Costco or other stores—and that's $12.50 a pound. Suddenly, you're talking about the value of 10 million pounds of fish being close to $120 million. Now times that by all the first nations going up the Fraser. Suddenly, you have about a billion dollars' worth of resources. It's not being measured. It's not being looked at as that value, and this is natural capital.

All these proteins that are in there, that we can't buy with our fixed incomes but could get naturally.... That is natural capital. That needs to be recognized.

[The Chair, Liberal, Kody Blois]

Thank you very much, Mr. MacGregor and Chief Louis.

Colleagues, that unfortunately brings us to the end of the first panel. It was a great discussion to get us started.

On behalf of all of you, I'd like to thank, from the Okanagan Indian Band, Chief Byron Louis; from the Daily Bread Food Bank, Mr. Neil Hetherington; and from Second Harvest, Ms. Lori Nikkel. Thank you so much for taking the time to be with us to help inform our study.

Colleagues, please don't go far. We're going to adjourn for just two minutes to get us transitioned over, but we'll see you shortly.

[The Chair, Liberal, Kody Blois]

We're going to get started with our second panel.

Thank you for your patience in letting us get transitioned and make sure our technical team is all set for our translators.

We have three individuals appearing today on the second panel.

By video screen we have Ian Lee, who is associate professor at the Sprott School of Business at Carleton University.

Welcome, Mr. Lee.

From the Agricultural Producers Association of Saskatchewan, we have the president, Ian Boxall.

It's great to see you, Mr. Boxall. We had the chance to interact with you just a week or two ago with the CFA meetings. It's great to have you before our committee.

From the Canadian Taxpayers Federation, we have Franco Terrazzano, who is the federal director. He is appearing here in person.

I'm going to move forward with five-minute opening remarks. I'm going to start with Mr. Lee for up to five minutes.

Sir, the time and floor are yours.

[Dr. Ian Lee, Associate Professor, Sprott School of Business, Carleton University, As an Individual]

Thank you, Chair and committee members, for inviting me to discuss this important subject.

First are my disclosures: I do not consult to any person, firm or association in the agri-food value chain system in Canada; I do not have any investments in any firms anywhere in any industry; and I do not belong or donate any money to any political party anywhere.

My fourth disclosure is somewhat different. Before returning to graduate school for my Ph.D., I was a commercial lender and banker for nine years—

[The Chair, Liberal, Kody Blois]

I'm going to have to stop you, Mr. Lee; I have a member here flagging something.

Mr. Perron, I understand that we're having interpretation issues.

Madam Clerk, can you find a solution?

Mr. Lee, keep your phone handy. The interpreters are having a bit of a challenge with your headset. I know we've tried to get this through, but if you could just go on mute and keep your phone handy, our technical team is going to try to reach out, and we'll try to get you sorted.

Mr. Boxall, we'll try you. We're going over to you for up to five minutes.

[Ian Boxall, President, Agricultural Producers Association of Saskatchewan]

Good evening.

Thank you, Mr. Chair and committee members, for this invitation today to discuss the views of farmers on food inflation.

As you mentioned, my name is Ian Boxall. I'm the president of the Agricultural Producers Association of Saskatchewan, which represents around 15,000 farm and ranch families. I'm also a farmer from the community of Tisdale, in northeast Saskatchewan.

I want to focus my comments today, first, on inflationary factors affecting our industry, and second, on the importance of a grocery store code of conduct to promote certainty and transparency throughout the food supply chain.

As committee members know, Saskatchewan farmers do not set the price of our products, or the price for the inputs we buy to grow them. We are impacted by inflation on both ends, when we purchase our farm inputs, and when we purchase food, yet the causes of inflation are many: geopolitical issues, weather-related events, the pandemic and inefficiencies in our system.

On food price inflation, farmers are very sensitive to the current environment affecting consumers. We are at the forefront of food production, and it is often easy to point to the price of the commodities we produce as the cause of what is happening at the grocery store.

This is why APAS is undertaking work to highlight a farmer's share of the food dollar. We want to help educate the public and build a better understanding of the impacts farmers have on the price consumers see today. I anticipate this to be negligible, given the rapid rise in food prices. We plan to have this work completed in April.

We also support the importance of a Canadian grocery code of conduct to improve efficiencies, collaboration and transparency throughout the supply chain. The code will help ensure that processors, wholesalers and large and small retailers play by the same rules, adhere to standards and ensure fair transactions throughout the value chain.

In 2021 Saskatchewan farmers experienced their most expensive crop ever for livestock and grain production, spending $11.5 billion on farm expenses. That's 11% higher than 2020. The year 2022 wasn't any better. Saskatchewan farmers are concerned about the lack of price transparency and supply, and about certainty for critical farm inputs, such as fertilizer, fuel, seed and chemicals.

The cost of production inflation creates added risks for producers. In 2021, Saskatchewan farmers spent $2.67 billion on fertilizer purchases alone, which made up 24% of cash operating expenses, exceeding the previous year's fertilizer purchases by 30%. Since 2019, glyphosate has increased 62%, fuel is up 52%, the price for urea has increased 112% since May 2019, and anhydrous ammonia is up 113%.

These inputs are critical for food production and security at a time when the world needs Canadian agricultural products. We know that inflation and the cost of living are a major concern right now for everyone. At the same time, costs are especially volatile for essential farm inputs, which make up a huge portion of farm costs. A lack of transparency on what's causing price spikes is very concerning and requires further investigation.

I'd like to close out my remarks by making these observations for your consideration.

First, food production and security should always be of the utmost importance in policy development. No policy should limit, restrict or reduce food production, or decrease food security.

Second, it is important to support and recognize innovation. Farmers have adopted or produced some of the most innovative technologies, which have positively contributed to food production while increasing the biodiversity of the land and reducing our carbon footprint. We will continue to do so.

Third, efficiency, accountability and transparency of transportation systems, to help limit supply chain restrictions so that agriculture products reach their destinations, are critical to reducing inflationary costs.

Fourth, a grocery store code of conduct can be a useful policy instrument to achieve better collaboration and efficiencies to help address food costs.

We feel these measures will help reduce supply chain friction and improve dynamics.

Finally, Saskatchewan farmers are encouraged by the progress of Bill C-234 to exempt natural gas and propane for on-farm use. This bill will help reduce costs that farmers should not have to bear and cannot pass along.

With that, I will stop there.

Thank you, Mr. Chair, for this opportunity. I look forward to the discussion.

[The Chair, Liberal, Kody Blois]

Thank you very much, Mr. Boxall.

We are going to turn to Mr. Terrazzano, who's in the room.

Mr. Lee, I was just notified by the clerk that our technicians are trying to get hold of you at the number we have on file. They're having some difficulty. Check your phone, and we'll work on your technical side.

Hopefully, in five minutes we'll have you ready to go right after Mr. Terrazzano, who now has the floor, for up to five minutes.

[Franco Terrazzano, Federal Director, Canadian Taxpayers Federation]

When you increase costs for farmers, Canadians pay more for groceries. When you increase costs for truckers, Canadians pay more for groceries.

I'm Franco Terrazzano. I'm with the Canadian Taxpayers Federation. I'm here on behalf of 235,000 Canadian taxpayers who want you to stop hiking the taxes that make it more expensive for farmers to make our food, for truckers to deliver our food and for families to buy that food.

There's an easy and quick way for the government to make food more affordable—stop hiking taxes—but in less than two weeks the government will raise the carbon tax for the fourth time since the beginning of the pandemic.

The carbon tax will increase the price of gas by 14 cents per litre and the price of diesel by 17 cents per litre.

Everything that gets delivered by truck will become more expensive, including your favourite kale salad.

After the tax hike, federal carbon, fuel and sales taxes will cost about 29 cents per litre of diesel. That means the big rig truck driver who delivers food to the store will pay about $260 in federal taxes every fuel up.

Farmers say that the carbon tax cost them about $14,000 on average in 2019, according to the CFIB. A higher carbon tax means it's more expensive for farmers to dry grain, and it means higher prices at the store.

The carbon tax on propane and natural gas will cost farmers $1 billion through 2030. That is according to the Parliamentary Budget Officer.

I will now read you a quote from Jeff Barlow, an Ontario corn, wheat and soybean farmer: “My competitors to the south of me in the United States do not pay that [carbon] tax, so now my cost goes up and I have no alternative. By penalizing me, there's nothing else that I can do but just be penalized.”

Less than a quarter of countries have a national carbon tax. That's according to the World Bank. Ottawa hiked taxes while many of our peers and competitors cut taxes during the pandemic. There are 51 other national governments that cut taxes. That includes more than half of the G7 and G20 countries, and it includes two-thirds of OECD countries.

Australia, New Zealand, the Netherlands, Germany, South Korea, the United Kingdom, Italy, Israel, India and Portugal are among those countries that cut fuel taxes. Ottawa is getting ready to impose a second carbon tax through fuel regulations this summer.

British Columbia currently has a second carbon tax. It costs about 16 cents per litre of gas and 19 cents per litre of diesel. There are no rebates with the second carbon tax.

The more you tax, the less money Canadians have to afford higher-cost groceries. If you think you can raise taxes, skim some off the top and still make people better off with rebates, then I have some ocean-view property in Regina to sell you.

The carbon tax will cost the average family between $402 and $847 this year, even after the rebates. That's according to the PBO. That could be a couple weeks of groceries for a family of four, but it's being taxed away.

Lower and middle-income Canadians and households currently experiencing energy poverty, such as single mothers and seniors living on fixed income, will feel the most pain from the second carbon tax. That's according to the government's own analysis.

The higher carbon taxes are layered on top of higher payroll and higher alcohol taxes. According to a recent Leger poll, 74% of Canadians say families pay too much tax.

Fortunately, you can provide relief for your constituents. You can help make life and groceries more affordable. At the very least, you must stop hiking taxes.

Thank you.

[The Chair, Liberal, Kody Blois]

Thank you very much, Mr. Terrazzano.

I understand that Mr. Lee is still on the phone, technically. In the interests of time, colleagues.... I apologize that Mr. Lee is not available. If we get him back, we'll let him provide his remarks and engage.

I don't want to preclude us from moving to questions, so I'm going to start with Mr. Barlow, for up to six minutes.

[John Barlow, Conservative, Foothills, AB]

Thanks, Mr. Chair.

I'm hoping that at the end if there are a couple of minutes to spare, we can ask some other questions to Mr. Lee, if possible.

Thanks to our witnesses. I appreciate Mr. Terrazzano's bringing up The Last Saskatchewan Pirate, because there probably is a “Jolly Roger on Regina's mighty shores”.

I'm going to start with Mr. Boxall.

You mentioned that Saskatchewan had its most expensive harvest in history, at $11.5 billion, which was 11% higher than previous years.

Mr. Terrazzano mentioned this, and we have it in some information from Mr. Lee, that diesel fuel is up 76.5%, and input costs for farmers are up 65.1%. This is all from Stats Canada. The carbon tax is going up again on April 1.

What kind of impact is the carbon tax having on Canadian farmers and your ability to remain financially sustainable?

[Ian Boxall]

It's had a huge impact. It's a cost that comes right off our bottom line. We've seen it go up every April 1 for the last number of years, and we have no control over passing that cost along or anything. Yes, we can track it. The numbers show that we're somewhere between $14,000 and $25,000 in carbon tax for an average farm in Saskatchewan. That's only on the stuff that we can track. We know for a fact that anything that's brought in by rail or by truck has a carbon tax. All the manufacturing of the equipment and all of that stuff has a carbon tax that is just built into the price.

Yes, it is a huge expense. Can we track it exactly to what we are paying? No, but even what we can track has been a huge expense, a huge hit to our bottom line, and it's affected our production for sure, and the livelihood of the farmers.

[The Chair, Liberal, Kody Blois]

Mr. Barlow, I'm going to just stop you, and I'm stopping the clock. We have Mr. Lee back.

Mr. Lee, I'm going to ask you if you could try to put your microphone between your nose and your mouth. We are going to give you another shot.

Mr. Barlow, I'm going to try to give him his five minutes. That way I'm not precluding you from getting questions to him.

Mr. Lee, fingers crossed, I'll turn it over to you, if you'd like to try again.

[Dr. Ian Lee]

Thank you very much. I hope you can hear me now. Is that acceptable?

[The Chair, Liberal, Kody Blois]

You're coming in. We'll go by my view of the translators. Fingers crossed, and over to you.

[Dr. Ian Lee]

Thank you.

I already provided my disclosures about not consulting, not being partisan and not belonging to any political party. I'll cut right to the chase.

I've taught the strategy course for the past 35 years at Carleton, where we analyze individual companies using the audited financial statements, looking at things like gross profit margin, net profit margin, ROIC, inventory turnover and so forth. In that time, teaching it five times a year over 35 years, I've estimated that my students and I have looked at 3,000 to 4,000 corporations, or 10 to 15 per course.

Why I'm telling you about this is that we look at trend data. We've also looked at Loblaws, Metro and Sobeys. Moreover, inter-industry comparisons have been published from time to time in Canada and the U.S. that repeatedly demonstrate that grocery retailing is a notoriously low profit margin industry compared to most other industries.

However, before turning to the issue at hand, I want to address this overarching narrative that has emerged in recent times concerning corporate profitability, because some parliamentarians have criticized the profitability of certain select corporations. I would suggest, in my judgment, that this is a mistake on two levels.

First, Canada and other OECD countries do not regulate wages or prices, and Parliament does not regulate profit margins. There's no act of Parliament that does that. That's the job of competition.

Secondly, the late Harvard economist, Joseph Schumpeter, and Harvard strategy professor Michael Porter have taught us that firms exist to create something of value. This can occur only if firms generate sufficient resources to cover their costs. They have to be profitable.

Indeed, I saw that as a former banker. From time to time I had to put businesses into bankruptcy because they didn't make a profit. They couldn't cover their costs. All the employees were laid off. That's not a good thing.

Where I'm going with this is.... I understand your concern about profitability. Some argue that it's the rate or the degree of profitability. To address this claim, we have to examine the actual evidence-based, audited financial statements of companies that have been so accused.

For the fiscal year ending 2021, the net profit margin for Loblaws was 3.7%. For Empire-Sobeys it was 2.7%, and for Metro it was 4.5%. These net profit margins may seem very high to people who are unfamiliar with evidence-based analysis. In fact, retail grocery store net profit margins are unbelievably low—absolutely and relatively—compared to the double-digit profit margins in pharma, banking, beverages, automotive manufacturing, chemicals, computers, construction, electronics, entertainment and health care products. I haven't touched all of them.

Why the confusion? The critics are looking only at the end of the food chain and seeing the retail prices of the grocery retailers increasing, and then leaping to the conclusion that the retailers caused the price increases. They didn't, but how do we know?

We turn to StatsCan's empirical evidence. I provided to you an infographic from StatsCan, which was published only in December. It's for wheat-based products only, but most of those inputs identified by StatsCan in fact are used throughout the food chain. Diesel, pesticides and trucking costs each show stunning increases. It's a 34% increase for pesticides, 28% for energy and 20% for trucking.

I'll be wrapping up now.

There's another way to test the allegation of what's being called “greedflation” by those who don't accept the StatsCan data. We can examine food inflation rates only—not general inflation, only food—in other OECD countries. If the grocery retailers in Canada were raising their prices beyond the price increases in their input costs from farmers or wholesalers, it would show up in higher food inflation rates in Canada relative to other OECD countries.

Fortunately, the OECD has just released very fresh comparative food inflation data from only two weeks ago. It shows that food inflation in Canada is not above but below the OECD average. It's below France's, below Germany's and below the U.K.'s.

In conclusion, the evidence-based research from the audited financial statements of Canadian grocery retailers, the statistical data from Statistics Canada and the statistical OECD food price inflation data conclusively demonstrate that the claim of “greedflation” or excessive price increases by the grocery retailers is factually without any foundation at all.

Thank you.

[The Chair, Liberal, Kody Blois]

Thank you, Mr. Lee. You're right on time.

Let me take one moment to recognize Mr. Epp, who is substituting in today. We have Mr. Longfield and Mr. Naqvi online. Welcome to this committee.

Mr. Barlow, I know we cut into your time. You have four minutes and 15 seconds remaining. The floor is yours.

[John Barlow, Conservative, Foothills, AB]

Thank you, Mr. Chair.

I will carry on with my questions.

Mr. Boxall, the Canada food price index report came out at Christmas, and it said as the carbon tax continues to go up and is tripled, an average Canadian farm of 5,000 acres will pay about $150,000 in carbon tax alone.

What kind of impact will that have on the sustainability of Canadian agriculture?

[Ian Boxall]

It will have a huge impact—$150,000 on a 5,000-acre farm. It's unfathomable that we will get there on a carbon tax alone. It makes my skin crawl to think that's where we'll be, and then to be turned around and not recognized for the work that is done, ensuring that we have proper grasslands and that we have proper management of our farm soil. Farmers are the biggest stewards of the land in this country, and we care more about the environment than we ever get credit for. It really is going to be detrimental to Saskatchewan farmers.