Agriculture Committee on June 12th, 2023

[Dr. Rebecca Lee, Executive Director, Fruit and Vegetable Growers of Canada]

Thank you very much, Mr. Chair and members of the committee, for the invitation to appear before you today.

Quinton and I appreciate this opportunity to address you on behalf of the Fruit and Vegetable Growers of Canada. I am Rebecca Lee, executive director of FVGC. We represent growers across the country involved in the production of over 120 different types of fruit and vegetable commodities over 14,000 farms.

We are here today to express our strong support for Bill C-280, the financial protection for fresh fruit and vegetable farmers act. As you all know, the produce sector has been pushing for this for many years. We greatly appreciate the support we've received from the committee members, from all parties, on this initiative. Speaking on behalf of Canadian growers, we strongly urge all parties to see to it that this bill passes swiftly so that it can provide the necessary safeguards to our growers in what is surely a volatile and uncertain time for our industry.

Our sector is quite unique and differs from other commodities in that our products are highly perishable and our window for sales very narrow. This is why the existing protections for agriculture products in the Bankruptcy and Insolvency Act are not adequate. In the event of a purchaser's insolvency or bankruptcy, our growers are left with limited recourse and significant losses.

A key aspect of this legislation is that, once the proceeds from the sale of fresh produce are deemed to be held in trust for the supplier, they are not included in the company's property. This is significant, because it means these assets would be protected, and it does not take away from other creditors' ability to access their claims in the event of a restructuring or insolvency.

This not only provides growers with an additional layer of protection. It is also an instrumental tool in ensuring fairness and equitability in these often complex dealings. Additionally, the definitions included in the legislation consider the realities of our industry. Acknowledging that the fruits and vegetables might be repackaged or transformed, and yet remain the beneficial property of the supplier, is an important detail.

I will now let Quinton Woods, FVGC's trade and marketing working group chair, explain further.

[Quinton Woods, Chair, Trade and Marketing Working Group, Fruit and Vegetable Growers of Canada]

Good evening.

As Rebecca said, my name is Quinton Woods. I am Fruit and Vegetable Growers of Canada's trade and marketing working group chair, and the sales manager of a root vegetable operation at Gwillimdale Farms. Gwillimdale is a premier grower, packer and shipper of root vegetables, located on the northern tip of the Holland Marsh.

Bill C-280 is a topic about which I am highly passionate. I want to point out that this proposed legislation could pave the way for reinstating the Perishable Agricultural Commodities Act protection for Canadian growers by the United States. PACA had been a crucial protection for Canadian growers, ensuring prompt payment and offering a dispute resolution mechanism. The loss of this privilege in 2014, because of the lack of reciprocity in Canada, dealt a significant blow to our industry, exposing our growers to increased financial risk.

Gwillimdale’s operation was directly affected in 2014. Coming out of the recession of 2009, a U.S. customer, with whom we had done business with for many years, stopped paying us. We were left with no choice but to launch a formal complaint against this company through the PACA in the United States. Unfortunately, the day on which we filed the formal complaint, the United States pulled reciprocity for Canadian sellers. That meant we were required to post a bond for twice the value of our claim. At that time, our claim was worth $100,000 U.S, and we were required to post a bond for $200,000 U.S. We were not in a position to post the bond at that time and were forced to walk away from our claim. If Canada had implemented a system prior to revocation of reciprocity, we would have been able to continue our formal complaint without posting a bond.

The proposed legislation would be of no cost to the government, as it would not be required to carry financial liability or backstop any losses. However, it will provide significant benefits to growers, and one could argue, it is a form of business risk management, but one that requires no government funding. This legislation offers a framework that bolsters the stability of our industry and promotes fairness in business practices, ensuring the viability and growth of our sector for years to come.

FVGC sees this bill as a game-changer, providing our members with much-needed protections and possibly leading to greater market opportunities. We urge you to consider these benefits as you deliberate on this legislation. Our members depend on it, and the bill will bolster the strength and sustainability of the Canadian produce sector at a time when it is sorely needed.

We cannot forget that the benefits are not restricted to our growers. A more robust and secure Canadian produce industry, backed by these protective measures, would help to address the growing concerns of Canadian food security and food sovereignty.

Thank you for your your time and consideration.

[The Chair, Liberal, Kody Blois]

Thank you very much. You were right on time.

We are now giving the floor to the representatives of the Quebec Produce Growers Association.

Ms. Lefebvre or Mr. Bourgoin, please go ahead.

[Catherine Lefebvre, President, Quebec Produce Growers Association]

Good evening to the members and the chair.

Thank you for having invited us to take part in this meeting.

The Quebec produce sector covers approximately 36,5000 hectares of cultivated land that generated over $500 million in revenue in 2020. The mandate of the Quebec Produce Growers Association includes providing market access to growers and creating conditions conducive to economic success. We now conduct much of our work at Place des producteurs, in Montreal, one of the largest fresh fruit and vegetable distribution infrastructures in the country.

The growing, harvesting, packaging and marketing of fruit and vegetables generate substantial production costs and require huge capital investments. Not only that, but producers and sellers of fruit and vegetables for consumption by our neighbours to the south face an additional financial risk because of the lack of financial protection if American clients go bankrupt. Approximately half of Quebec's vegetables are exported to the United States. Fresh fruit and vegetables are not like other food products, such as preserves. They are very perishable, meaning that it's impossible to take back the vegetables in the event of non-payment. That's the nub of the problem. The federal government's current rules seriously limit the capacity of growers and sellers to obtain compensation if the buyer declares bankruptcy. Practically speaking, sellers have no protection.

In the United States, if a produce buyer goes bankrupt, the growers and sellers can avail themselves of trustee provisions under the U.S. Perishable Agricultural Commodities Act, the PACA, to obtain payment. Our growers and sellers do not have protection for payment in the event of bankruptcy, which can mean disproportionate financial risks for them. The perishability of fresh produce makes growers vulnerable, particularly in Quebec, where 70% of farms have fewer than five hectares of land. When product buyers become insolvent, vegetables that have not been paid for no longer have any value.

In short, the absence of financial protection puts horticultural growers in Canada in a highly vulnerable financial position for three main reasons. The first is the risk of not being paid for the products they grew, at a time when major production cost increases have been significantly cutting into the profit margins. The second is the imbalance in terms of trade risk management with the United States. The third is the lack of access to reciprocal preferential protection for exports to the United States.

[Patrice Léger Bourgoin, General Manager, Quebec Produce Growers Association]

The bill's implementation would provide priority access to an insolvent client's cash, inventories and accounts to help offset the losses associated with a product that was delivered but not yet paid for. As my colleague Mr. Woods said just now, the introduction of a mechanism that would give Canada some financial protection would open the door to restoring preferential treatment under the U.S. Perishable Agricultural Commodities Act, the PACA, for Canadian companies that sell products to the United States. This preferential treatment was in place prior to 2014, when it was revoked by the United States because there was no reciprocity.

It's essential to protect the supply chain. If one of the links has not received payment, it affects the entire system, right down to the family farm. In such a context, even if the seller is an intermediary, there has to be protection, and growers who sell through a third party depend on a domino arrangement to receive payment.

It's worth mentioning that once the act is enacted, the government would no longer have a direct role to play in the insolvency process and would have no financial responsibility once there is royal assent. So the act wouldn't require the government, and hence taxpayers, to compensate or cover losses incurred by a farmer if a buyer was unable to meet its obligations. Basically, the proposed model in Bill C‑280 reflects the parameters of a tried and true model used in the United States. It's a financially achievable solution that would not place any additional burden on the government.

The adoption of Bill C‑280 would promote a predictable and more stable market for companies through the safety net that would be established.

To conclude, I would like to underscore the fact that the Quebec Produce Growers Association firmly supports Bill C‑280.

Thank you.

[The Chair, Liberal, Kody Blois]

Thank you very much.

Ms. Rood, you have the floor for six minutes.

[Lianne Rood, Conservative, Lambton—Kent—Middlesex, ON]

Thank you, Chair.

Thank you to our witnesses for being here today.

Coming from a produce background myself, I know people in the industry. I've worked with them for years, and they're some of the most resilient people I've met. They're also some of the biggest risk-takers you will ever meet in this country. If we think about it, every person on this planet consumes fruit and vegetables. That's the reality. That's how important this industry is to the people of Canada, to the people of the world whom we feed, and that's why it's so important we make sure our farmers can stay in business. This is another tool they can have in their tool box.

We've heard examples and I've seen examples in industry, and we've heard tonight that not every farmer will claim bankruptcy. They may just walk away, and that also impacts other farmers, because growers tend to work together with other growers, with wholesalers. We sell to folks who resell.

Dr. Lee, I wonder if you could let us know what you've been hearing from the growers out there. Is this bill needed? We've heard a little bit. How will this legislation promote certainty for our farmers in the fruit and vegetable sector here in Canada?

[Dr. Rebecca Lee]

Thank you very much for your question.

I've been hearing right across the country that it's extremely important to have this support for our growers. We did a campaign. Some of you may have received letters from constituents in your ridings. Over 320 have come in. Considering that what farmers do is farm, the number of letters that have come in is quite substantial. That is evidence of the support for it.

It's been mentioned before that the supply chain here supports roughly 250,000 jobs. Having this bill will allow the food system to be much more resilient, and it will provide the financial certainty for, as you mention, an essential sector, essential not only for the economy but also for our health—fruit and vegetables. It's going to enhance the affordability and accessibility of fruit and vegetables to Canadians across the country and, as has been mentioned, it will not cost the government anything.

As we've heard also, it will help reinstate the PACA in the United States so that growers who want to expand or who are doing business in the United States and who depend on that market can also be sure that they will be paid down there as well.

[Lianne Rood, Conservative, Lambton—Kent—Middlesex, ON]

Thank you.

I'm going to turn my attention to PACA.

Mr. Woods, you mentioned that when growers are selling into the United States, currently our produce growers have no mechanism for dispute resolution in the U.S. That does affect whether growers may choose to sell to the U.S. They're taking a bigger gamble if they sell a bunch of a high-cost commodity to the U.S. You mentioned $100,000 on your farm, but that was years ago. Now with price inflation and food inflation and costs, it goes up higher.

Can you elaborate a little bit more on how this will help protect Canadian growers who export to the U.S., since a lot of our produce is exported to the U.S.?

[Quinton Woods]

Thank you.

One thing we have to realize in today's marketplace is that we continue to consolidate our marketplace. Our receivables and our sales to specific customers get larger and larger.

When I talk about $100,000, that was in 2014. That claim in today's environment would be well over a million dollars.

Through the U.S. right now, we do have some sort of protection, but we have to post a bond for double the value of our claim. Unfortunately, for most people, when they haven't been paid, cash flow is very tight. A lot of the time, that bond is extremely difficult to post. It could lead to dire situations like ours, where it potentially could have been a lot more harmful than what it was.

A lot of the time, you're doing business of upwards of 10%, 20% or 30% of your total sales to a single customer. If that customer doesn't pay you, it can be very harmful.

[Lianne Rood, Conservative, Lambton—Kent—Middlesex, ON]

How many farmers that export to the U.S. would you suggest this would affect?

Do we have a statistic or a number of produce farmers who may export?

[Quinton Woods]

I'm not sure we have that specific number here today. We can get it for this committee.

Just from looking around in our industry, I would say that most of the packers, marketers and grower-packers would export some sort of volume to the United States.

[Lianne Rood, Conservative, Lambton—Kent—Middlesex, ON]

Thank you very much for those answers.

How has the lack of protection impacted sales to the U.S.? Do we have an idea?

Have there been reservations from wholesalers in the United States about doing business with Canadian farmers?

[Quinton Woods]

I think we have to flip the coin here, and we have to look at the United States.

Fortunately, there's still some access, whether we call that access or not, to the United States PACA system, but we have to look at whether we are actually looked at as a potential market for U.S. shippers. Currently, there is no protection here for U.S. shippers.

We have to look to see if we're a market that attracts interest from shippers in the United States. As Mr. Davidson alluded to earlier, three-quarters of our lettuce comes from outside this country. We have to make sure that we continue to have access to those vegetables from the United States.

[The Chair, Liberal, Kody Blois]

Thank you very much, Ms. Rood and Mr. Woods.

Mr. Turnbull, you have six minutes.

[Ryan Turnbull, Liberal, Whitby, ON]

Thanks to all the witnesses for being here today. This is an important conversation.

Mr. Webber, maybe I'll start with you.

Based on your experience in dispute resolution, how do you anticipate this bill will impact disputes between suppliers and retailers?

[Fred Webber]

Do you mean suppliers and retailers in the U.S.?

[Ryan Turnbull, Liberal, Whitby, ON]

No, I mean in Canada.

[Fred Webber]

It's a very difficult question.

The DRC has been set up and operating for a long time. Before I retired, most of the problems that would come up regarding dispute resolution or payment issues between farmers and large retailers were really resolved though informal mediation. It operates much the same way as PACA in the United States does.

These are business people; they'll listen to reason. You have a neutral party in the middle that knows how the game is supposed to be played. If they are confused about what their deal was, well, there are default rules. The DRC has default rules. The PACA has default rules.

I don't think this particular legislation will have an impact on dispute resolution per se. As I mentioned in my opening comments, where the change is going to come is when somebody won't pay and they are just adamant they won't pay, the DRC can take away their membership, which means they can't buy and sell produce anymore. However, they can't enforce any payment.

I hope that answers your question.

[Ryan Turnbull, Liberal, Whitby, ON]

Thank you. Yes, it does.

How will this bill affect the operations of the Fruit and Vegetable Dispute Resolution Corporation, in your view?

[Fred Webber]

The DRC and PACA have had a long history of working together. In fact, the PACA actually handles a few of the disputes for the DRC. Then we talk back and forth regularly because the systems are so common.

As this reciprocity returns, there will become more U.S. members. There will be more applications to DRC to resolve disputes. That's all good stuff because as Quinton was mentioning, this is not a one-way street. The relationship between the U.S. and Canadian growers is very important. Canadian produce flows south when there's an abundance of Canadian produce. We make up for the shortages during that long, cold Canadian winter with product from the United States.

Overall, it's going to make everything better.

[Ryan Turnbull, Liberal, Whitby, ON]

Thank you for that.

Mr. Currie, if I have any time left, I'll ask you a quick question.

From the CFA's perspective, how will this bill potentially impact the agricultural sector?

[Keith Currie]

The thing that we need to realize—and it's been spoken about tonight already—is that this is about risk management. That's really what it's about. Growers across the country.... Regardless of whether you're growing livestock or produce crops, from the time you put the seed in the ground, propagate plants in a greenhouse or breed cattle or livestock until that product has matured, there is risk involved, but there's manageable risk. There are tools available to help you minimize that risk.

When it comes to the horticultural sector, once that product leaves the farm, then you are the only risk tool that's available. You have to self-insure the risk. There's a lot at stake for our producers. As I said, I've been involved in this farm advocacy game for almost 40 years now, and I've spent a lot of time in the province of Ontario through the organizations there. It's been something that's been desperately needed for nearly a decade now, so it's very important to our farmers.

[Ryan Turnbull, Liberal, Whitby, ON]

Thank you.

Do you foresee any challenges in terms of the implementation of this bill, Mr. Currie? We're having an open conversation, so if you do, it's okay. We can work though it. I think there's a lot of support for this bill.

[Keith Currie]

Yes. I think it's inherent on this committee to work with both the industry and Mr. Davidson, the proponent, to make sure that the i's are dotted and the t's are crossed to ensure that the bill is as good as it can be. There are always unintended consequences. However, get it as right as you can, and more importantly, let's get it in place now. We can always fix it afterwards if there are problems that we see going forward with language and whatever, but yes, let's get it done.