Agriculture Committee on April 19th, 2023

[The Chair, Liberal, Kody Blois]

I call the meeting to order.

Welcome to meeting number 57 of the Standing Committee on Agriculture and Agri-Food.

A few reminders to start. Today's meeting is taking place in a hybrid format. The proceedings will be made available via the House of Commons website.

Colleagues, I'm going to ask the room to quiet down a little bit, as we've started. For the benefit of the translators and for the benefit of your dear chair, quiet down a little bit, would you?

Just so you are aware, the webcast will always show the person speaking, rather than the entirety of the committee.

Colleagues, we are continuing, pursuant to Standing Order 108(2) and the motion adopted on October 5, 2022, our study on food price inflation.

I want to thank all of you for coming a little early. We are expecting bells and votes tonight. I have talked to everyone, and when the bells start at 5:30, just to make sure the second panel can get done, we're going to extend, by no more than 15 minutes, with your consent, which I'm told is forthcoming, so thank you. We'll make sure that we get the second panel in, to the extent we can. We will go off to vote, and we will not be coming back to this room. Once the vote is done, we will be done.

With us today, from the Association québécoise de défense des droits des personnes retraitées et préretraitées, is Pierre Lynch, president.

Welcome, Mr. Lynch.

From Consumers Council of Canada, we have Ken Whitehurst, who is the executive director.

From the Global Institute for Food Security, we have Alanna Koch, chair of the board of directors. My understanding is that we're still having a bit of an issue with Ms. Koch, but hopefully she can join us.

From Food Producers of Canada, we have Denise Allen, president and chief executive officer.

We're going to dive right into this. I'm going to start with Mr. Lynch.

You have up to five minutes. I will be very strict on the time, unfortunately, because of our constraints today, but you will have five minutes, and I'm going to turn the floor over to you, my friend.

[Pierre Lynch, President, Association québécoise de défense des droits des personnes retraitées et préretraitées]

Thank you.

Good afternoon, Mr. Chair, deputy chairs and members of the committee.

I want to thank you for the opportunity to speak to you today about inflation, and food price inflation, specifically. Before I get to the heart of the matter, I'd like to tell you a bit about the Association québécoise de défense des droits des personnes retraitées et préretraitées, or AQDR.

The AQDR has 30,000 members across 37 local branches throughout Quebec. We work to advocate for seniors, but above all, to shine a spotlight on the living conditions of the most vulnerable seniors.

We can't talk about food inflation and the exceptional circumstances we are facing without talking about those whose monthly budgets are severely depleted by food price increases. The purpose of my remarks today is to give a voice to the most vulnerable seniors.

In Canada, two main benefits are available to seniors: old age security, OAS, which is universal, and the guaranteed income supplement, or GIS, which is tied to income. That means seniors who receive the GIS are among the poorest in the country. The low-income cut-offs in Canada are based on the market basket measure, commonly known as the MBM.

The government uses the MBM to set OAS and GIS levels, and low-income cut-offs. The problem with the MBM thresholds is that they are too low to allow for a dignified existence. Seniors have to make agonizing choices given the housing crisis, higher medication costs and evermore expensive food costs. Another thing to keep in mind is the fact that the typical grocery basket of a financially vulnerable senior doesn't look like your average grocery basket. In February, for example, the consumer price index, or CPI, was 5.2%, which isn't enough to offset the 10.6% increase in food prices—double the CPI. For seniors in vulnerable financial situations, that's a huge chunk of their grocery bill. What's more, the indexing of their benefits isn't immediate. It's done quarterly, so in the meantime, seniors are sinking further into poverty. That's the reality.

We want to raise awareness among the public and Canada's big grocery store chains. On one hand, imposing unreasonable price increases that generate excessive profits is equivalent to taking money away from the most vulnerable seniors and putting it in the hands of some of Canada's wealthiest people. On the other hand, I urge the committee members, as part of their study, to consider the disproportionate impacts of inflation on food and other basic commodities, and by the same token, challenge the measures used to define low-income cut-offs. Neither the CPI nor the MBM allow for acceptable poverty thresholds. If the goal is to lift seniors out of poverty, the federal government has to establish a livable income measure and change how it defines poverty, so that everyone receiving old age benefits is able to live a dignified existence.

In conclusion, the problems stemming from food price inflation are the product of the very complicated relationships between farmers, processors and grocers. It is essential to examine supply chain issues to fully understand the problem, but it's also important to examine the unequal repercussions on the other end. The government needs to find ways to better support vulnerable seniors.

In the meantime, let's hope the wealthy contributing to food price increases realize just how much their fellow citizens are struggling. Let's hope a renewed sense of responsibility and civic-mindedness wins out.

Thank you.

[The Chair, Liberal, Kody Blois]

Thank you very much, Mr. Lynch.

We will now hear from Mr. Whitehurst.

[Ken Whitehurst, Executive Director, Consumers Council of Canada]

Good afternoon. I'm Ken Whitehurst, executive director of Consumers Council of Canada. The council is a not-for-profit working towards an improved marketplace for consumers in Canada.

Thank you for your invitation.

Canada's consumers face difficulties. They are worried about prices and the supply of goods and services, and they feel manipulated by business and unprotected by governments. They worry about those less fortunate than themselves and the hidden costs of deprivation.

The council's focus will vary from what you've heard so far. Our submission does not seek to pinpoint the causes of food inflation. Let's explore how governments and food retailers can soften the negative impacts of temporary food inflation using regulatory and other tools, and how to prepare for the future.

Canadians are now much more aware of global, national and local food supply risks. Improve the safety, security, diversification and productive capacity of domestic food sources.

Consumers feel gamed every way they shop. Raising food prices by offering less product for a similar price—shrinkflation—is common. Unfortunately, consumers are four times more likely to notice a price increase than a package size decrease. This practice erodes confidence in retailers, producers and government.

Make it easier for Canadians to shop. Mandate unit pricing like other major countries. Quebec is the one province that regulates unit pricing. Start by adopting its rules nationally, and improve and enforce them. Consider our report, “Unit Pricing: Time for a National Approach”.

The council has noticed eroded consumer protection enforcement. Health Canada's and CFIA's comprehensive inspections to detect misrepresentation and substitution are all but gone. Current risk-based enforcement methods are inadequate. Consumers cannot themselves identify food adulteration, short weight, substitution, uninspected foodstuffs, misrepresented origin, non-approved irradiated food, misrepresented retail meat cuts or repackaged food with fudged “packed on” dates. Please protect consumers when they cannot protect themselves, especially with prices rising sharply.

Because every cent counts, ensure price accuracy at checkout. Over 20 years ago, the Competition Bureau worked with retailers to introduce a scanner price accuracy code. Consumers are supposed to be compensated for inaccuracies, but this program relies on consumer vigilance and most don't know it exists. The code is based on a fantasy that expects a consumer accompanied by small children with a cart full of groceries to examine each item scanned and remember the shelf price. If a difference is noticed, they must inform and educate the clerk and sometimes debate with a store manager. The Retail Council of Canada arbitrates disputes. Finally, this does not guarantee the problem will be fixed. Include the code in government surveillance.

Require regulators to be alert to incidents of non-functional slack fill. Section 9 of the Consumer Packaging and Labelling Act prohibits deceiving consumers about the quantity and quality of what's inside a package. Health Canada and the Competition Bureau could jointly administer section 9.

The council told Measurement Canada's consultation on trade measurement that consumers need action to get what they pay for. It recommended consolidating federal responsibility for the accuracy of net quantity declarations on packaged consumer food and general merchandise. Canadian Food Inspection Agency is supposed to ensure net quantity for food products, and the Competition Bureau for general merchandise. Neither agency makes accurate weights and measures an enforcement priority. The bureau has not carried out net quantity inspections for two decades. Measurement Canada inspectors visit retailers to verify scale accuracy. They could also verify net quantity and unit price declarations and price accuracy.

Food insecurity raises the question of who within the federal government represents consumers at the policy table when issues like food inflation and security, or consumer protection and safety arise. The council felt encouraged when, in 2019 and 2020, the Prime Minister mandated three federal agencies to create a Canadian consumer advocate to oversee complaints in the federally regulated telecommunications, transportation and banking sectors. The council supported this and recommended that the advocate promote consumer interest in all sectors. Recent letters don't mention this mandate, but the council learned, through access to information, that Innovation, Science and Economic Development Canada proposed expanding it. Two House of Commons petitions, with signatures from every province and territory, support this. Petitioners await the government's response.

A consumer advocate would provide a centre of expertise for House of Commons committees seeking expert witnesses. The council supports the establishment of an independent federal advocate with the sole function to argue for consumers, support their voices through civil society and stress the relationship of consumers' needs to the decision-making processes within agencies of government.

You've been told that your search for the sources of food price inflation is complex, but these are straightforward measures to show Canadians that Parliament has their backs when they go shopping.

[The Chair, Liberal, Kody Blois]

Thank you, Mr. Whitehurst.

We'll now turn to Ms. Allen for up to five minutes, please.

[Denise Allen, President and Chief Executive Officer, Food Producers of Canada]

Thank you, Chairman.

Good afternoon, Chairman and distinguished members of the committee. Thank you for your invitation to appear on behalf of the Food Producers of Canada to discuss the important issue of food price inflation and its effects in Canada.

I am Denise Allen, president and CEO of FPC. We are a national industry association representing small and medium-sized enterprises whose primary business is the manufacturing of value-added food and beverages. I am also a member of the industry steering committee whose directive is to design a proposed retail code of conduct, which is a first for Canada.

FPC has a proud 30-year history and a strict mandate of advocating on behalf of Canadian owners, investors and leaders of food-based businesses. Despite the operational challenges and economic headwinds we face as an industry, we remain firm in our belief that we will work collaboratively to protect Canada's domestic food supply and that we will continue to build capacity and attract investment.

As Canada's agribusiness industry, we represent more than 8,000 manufacturing facilities, many of which are the single largest employers in rural communities. Our industry employs more than 300,000 people across Canada, making it the largest manufacturing employer and an essential part of Canada's economy. As a key link in our national food value chain, food processors are the largest purchasers of farm gate output, to which we add value and which we sell both domestically and abroad.

Food processors represent Canada's internationally recognized and respected brand of safety and quality on a global stage. As the world continues to struggle with climate change and post-COVID recovery against a backdrop of armed conflict, shifts in social demographics, insufficient international development aid, a return to isolationist politics and nationalistic policies, and a global economy facing rampant inflation, supply chain disruptions and resulting increases in food costs, reliable estimations are that one in every four humans is now faced with food insecurity.

Food security has become one of the principal issues of our time, and it is even more pronounced in our northern and remote communities. Many of these factors exist globally and are exacerbated by the war in Ukraine. Subsequent pressure on energy and fertilizer prices, resulting from geopolitical conflict and the prolonged occurrence of these factors, has contributed to an environment of broad-based price increases at all points of our food value chain.

In addition to sharp increases in manufacturing inputs, FPC members are reporting an additional financial burden in the form of interest rate increases and debt servicing. For many of our smaller players, increases have forced the deferral of planned investments in innovation and automation, further reducing their ability to effectively compete.

Further, our competitive environment has been greatly restricted by over-consolidation in many sectors. I want to note that the food industry is not alone in this regard. Consumers are living with those unintended outcomes specifically in grocery, telecoms and banks. With five major retailers now controlling more than 80% of the Canadian grocery market share, suppliers currently have little to no recourse when faced with escalating fees and fines. Working relationships in the culture of our industry have been strained, as fair and transparent business relations are difficult to achieve without the principles outlined in the proposed code.

Our industry is working diligently and collaboratively with all stakeholders to launch the proposed code, which we believe will add greater contractual certainty and improve supply chain efficiency by setting forth trade rules and a mechanism for dispute resolution. It is critical that the code be implemented and adopted by all industry stakeholders.

With respect to the Competition Bureau and the Competition Act, I would like to note that FPC applauds Minister Champagne for his call to action for Canada's Competition Bureau to look deeper into the issue of food inflation and its root cause.

We would like to encourage the modernization of Canada's Competition Act and challenge the outdated belief that bigger is better, which was reflective of the business philosophy in the 1980s, when the act was made into law. An overhaul of competition law is taking place in other jurisdictions, notably in the U.S., where President Biden recently stated that “competition has weakened in too many markets”.

We would like to highlight that, in addition to the review and modernization of the Competition Act, other, longer-term policy changes hold opportunity to leverage Canada's abundance of national resources. While other countries are faced with resource scarcity, in part due to climate change, Canada represents an opportunity to feed the world in the coming 50 years. We have water, land, fertilizer, feed, energy and people. Our policies must now align with good economics, which will ensure that we are competitive, make it easier to invest and further develop export volume in commodities like chicken. Consumers pay much higher prices in Canada than in the rest of the world for chicken and other commodities, like eggs and turkey.

In summary, there have been significant efforts made to outline what our government can do to improve the business conditions necessary to protect domestic food supply. Many of my colleagues have appeared and added their voices of support for the code and the need to enhance our competitive ability.

Thank you, Mr. Chairman. I look forward to our discussion.

[The Chair, Liberal, Kody Blois]

Thank you, Ms. Allen.

First of all, there are a couple of housekeeping notes.

Welcome to Mr. Davies and Mr. Savard-Tremblay, replacing Mr. MacGregor and Mr. Parent.

The bells, as I understand it, are going to start at about 5:40. If I do my math, that will be about 15 minutes per session, which leaves about 30 minutes for questions. My goal, as your chair, is to have five minutes for each party. We'll then go to five minutes with the Conservatives and the Liberals, and that will be about 30 minutes. That's how we're going to approach this.

I'll start with the Conservatives.

Mr. Barlow, it's over to you.

[John Barlow, Conservative, Foothills, AB]

Thank you very much, Mr. Chair.

Thank you to our witnesses for their insights into this study.

Ms. Allen, thanks for being here. You were talking about the impact that interest rates are having on your members. A lot of the study and the conversation has been about the excess profits of grocery CEOs and that type of thing. I think it is a little short-sighted to see this as the sole reason for food inflation and the impact it is having on Canadians.

For your members, what impact do higher interest rates, higher input costs, higher fuel costs and higher transportation costs have on consumers? What impact are those issues having on your members and thus on the prices on the grocery store shelves?

[Denise Allen]

FPC members are reporting a multitude of impacts that are directly related to interest rate rises and interest rates in debt servicing. Access to capital has been restricted. It's very difficult when business owners are looking to invest in plant equipment, innovation or measures that enhance food safety and they have a trade-off between those investments and having to pay more for virtually every expense line in their business.

In relation to being able to absorb those costs and pass them on to the consumer, it's not always possible. Many of my members are bound by trade agreements that don't allow immediate effect of price changes. Also, we're bound to a cycle of retail at operational times of the year as well. It's normal for a blackout period to exist around Christmastime that prohibits any price changes.

We are bound by those trade agreements. We are bound by all of the cost increases, inputs and trade-offs within the business, and all of those are pressuring producers' margins and our ability to reinvest in our business. It's difficult to draw a straight line, as the environment is very complex. In effect, it is prohibiting investment, and it's making us less competitive every day.

In closing, to answer your question, to put it in real terms, almost every week I hear from a member who is looking at creating a plant and investment. They look at Canada versus other jurisdictions in the world. Due to our regulatory environment, all of the issues that you named, overlapping regulations and a non-competitive market, most of the time I hear that the decision is now to invest elsewhere, other than in Canada. That's probably the most disturbing thing with respect to our domestic food supply.

[John Barlow, Conservative, Foothills, AB]

Thank you for that.

I guess that competitiveness comes with the regulatory and tax regime, as we've seen the carbon tax increase again. This would seem to be the most inopportune time to be increasing costs on your members. For example, and that would be in the regulatory regime as well, you're going to have to start dealing with front-of-pack labelling, which we've been told will be about $2-billion cost to your members.

Is that accurate? What kind of impact will that have at a time when things are precarious? I don't think you need to be facing additional costs and regulations. Can you give some insight on what impact that will have at this time?

[Denise Allen]

Certainly. The estimation of $2 billion overall as an impact to the industry for front-of-pack labelling alone is accurate.

In the current competitive environment, we are looking at every possible input to our businesses rising dramatically. From front-of-pack labelling, whose timing is very difficult, especially after COVID, the supply chain disruption, climate events, labour.... We're in a very serious labour shortage in our industry. Each day, we are approximately 30,000 people short as an industry, and that number is expected to double by 2025 to 65,000. We need immediate relief with respect to labour.

To get back to your question on whether or not our industry is being affected by other factors in the regulatory environment, I can say yes, absolutely. Taxes are crippling for small business owners, and now we're looking at increased costs through transportation, through carbon taxing and through other environmental measures that are making investment in Canada incredibly difficult to defend. Inevitably, the owners, investors and leaders who are making those decisions are looking to other jurisdictions in the world, and that is a direct threat to our domestic food supply and consumers.

[The Chair, Liberal, Kody Blois]

Thank you, Ms. Allen.

Thank you, Mr. Barlow.

We'll now turn to Mr. Drouin, please, for up to five minutes.

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

Thank you, Mr. Chair.

I want to thank the witnesses for being here with us.

Ms. Allen, you've just touched on a few points. We have debated this issue of how investors look at Canada, and we had a good conversation, a good exchange, between my colleague Mr. Steinley and Michael McCain in front of committee. There were discussions about the carbon tax and whether that was the sole purpose of the decision-making process of whether or not a company will decide to invest. Mr. McCain bluntly rejected that statement, saying there are multiple factors. Taxes are just a small portion of it. While important, they're a small portion of it, with proximity to primary goods and proximity to access to labour being important, and obviously trained labour being important.

From your members' perspective, would you say that taxes are the most important perspective for investment? I'm looking at McCain, who's made a $680-million investment. There are a bunch of other companies out west that are making major investments. I'm just trying to get a good picture from your members' perspective of whether or not they're not making these particular investments because of that.

[Denise Allen]

Thank you for that question. It's a very good question.

I would refer to economies of scale. The majority of my members are small and medium-sized enterprises and they struggle with the time and investment it takes to apply for the government funding that is involved in a lot of these large plants and large-scale investments in Canada today. We're talking about mom-and-pop shops, multi-generational businesses and family businesses that aren't on the same scale. When they go to work in the morning, they are looking at taxes and rising prices in every manufacturing input they have into their organization: increased cost for labour, if they can access it, increased cost of transportation, overlapping regulation. It's an incredibly difficult competitive environment, and then layer on that the relationship they have with retailers and hospitality sectors, which are two major selling channels, the retail and food service sectors, all of which are under the same strain. This is not unique to suppliers, and we're empathetic with the various value chain members who are dealing with the same issues as us.

Your question was around investment. The members that belong to FPC are generally small and medium-sized enterprises, family-owned, privately owned businesses that struggle every day to stay alive, to access labour. Those economies of scale that apply to Mr. McCain often don't apply to my members. It's a very difficult environment. While I appreciate those comments, and they are relevant to his scale of business, again, the government funding that's easily accessed by virtue of a company being able to have the time and expertise to invest in the application process is very difficult for the mom-and-pop shops, which have their hands on their operations each and every day.

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

You talked about the blackout period before that. Obviously, there's no price increase during.... We've certainly learned during our committee appearance that it's normal for prices at retail not to go up during the Christmas period.

I've heard you say you're supportive of the code of conduct, so I'm assuming the majority of your members would be supportive of the code of conduct.

[Denise Allen]

Thank you for that question.

My members are very supportive of the code of conduct. I think your question was around the blackout period, if I understood correctly. That is a normal part of the retail cycle during the holiday season. No prices are increased.

It's very difficult for small and medium-sized enterprises to navigate that landscape if they need to raise their prices. They're not in control of what the consumer sees at retail and they're bound by trade agreements, if they have them. A lot of small and medium-sized enterprises are experts in the production of their brand and their products, but they're not always experts in complicated and very detailed supply or contractual agreements. Many of them don't have trade agreements.

One area we hope to address by implementing a code of conduct is to ensure that those trade agreements set forth the trade rules that outline when and how price increases can be achieved.

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

As a second follow-up to that, you've spoken about the Competition Act and the need to modernize that act.

Do you have any specific recommendations that would be favourable to your membership?

[The Chair, Liberal, Kody Blois]

You have about 30 seconds, unfortunately, Ms. Allen.

[Denise Allen]

Certainly.

That's a very complex question.

The ability to come back to that in a more meaningful and detailed way would be welcomed.

We feel that the over-consolidation that's taken place in a number of sectors in the Canadian economy could be better managed by providing the Competition Bureau with more ability to investigate and have more transparency into the business dealings and consolidation that's taking place in the grocery sector specifically because we are here to talk about food inflation.

That would require an overhaul and a modernization of its ability to investigate and demand certain information from parties looking to consolidate. We can look to other jurisdictions to look at ways by which we can prevent some organizations controlling more than a certain amount of the market share available in any particular area.

[The Chair, Liberal, Kody Blois]

We're going to have to leave it there, Ms. Allen.

Thank you, Mr. Drouin.

[Denise Allen]

Thank you.

[The Chair, Liberal, Kody Blois]

Welcome to the committee, Mr. Savard‑Tremblay.

You have five minutes.

[Simon-Pierre Savard-Tremblay, Bloc, Saint-Hyacinthe—Bagot, QC]

Thank you for having me.

Good afternoon to my fellow members.

Mr. Lynch, I'm going to start with you.

You described the situation retirees and early retirees face. It's very tough for them to go to the grocery store today and buy what they usually would.

Do you think enhancing the OAS for people 65 and older is an option worth considering?

[Pierre Lynch]

It's something that could help.

Keep in mind that other things could help as well. Making some non-refundable tax credits refundable is another option. One thing is for sure: the government has to start addressing the problem. It's anticipated that 25% of the population will be older than 65 by 2030. That is a huge challenge we are going to have to deal with. If we don't do something immediately to start plugging this hole, we are going to see poverty levels skyrocket.

[Simon-Pierre Savard-Tremblay, Bloc, Saint-Hyacinthe—Bagot, QC]

Thanks for clarifying that and for saying you think the measure could help.

My next question is for Ms. Allen, from the Food Producers of Canada.

You represent food processors. What do you hear from your members the most when it comes to the rising costs in the supply chain? Where do the companies you represent stand?