Thank you very much.
EarthFresh Farms Inc. is a Canadian produce company based in Burlington, Ontario, that specializes in growing, packing and distributing potatoes, especially organic potatoes and exclusive premium varieties, to retailers and food service companies in Canada and the U.S.
With over 15,000 acres of its own varieties of potatoes, the company produces the largest stock of exclusive potatoes in North America. Overall, we ship 450 million pounds of potatoes to Canadians from coast to coast. As well, we have four packing facilities. We have one in P.E.I., which is the largest fresh packing facility for potatoes. We have our head office in Burlington, Ontario. In Millgrove, Ontario, we have a growing, packing and storage facility. We have a new Atlanta, Georgia, operation, where we're also a member of PACA.
I'd like to thank AAFC for the ongoing support, the National Research Council and IRAP for helping us drive growth, innovation and the significant benefits of Canada's support for all the projects that they have funded. We'd like to thank Innovation Canada for the accelerated growth service program that we're very proud to be part of.
Thank you for allowing me to be a witness with respect to Bill C-280. It is exciting how close we are, but there's still further work to be done. I'm here to represent the Canadian processor and highlight the financial challenges the bill will have throughout the entire value chain. The value chain is the producer, the processor, wholesaler, retailer, food service and then eventually the product gets to the end consumer. The end result will be an increase in prices for the end consumer due to the increased cost of borrowing for working capital requirements at each stage of the value chain.
The key summary points are as follows.
Ensuring Canadian producers are protected under the bill in its current state will cause processors like EarthFresh to have priority payables with the producers. Priority payables, like payroll, taxes and pension costs, are deducted under all operating, banking and borrowing base calculations. This will cause processors not to have the ability to utilize any portion of their operating facilities with lenders.
Companies throughout the value chain will be forced to invest significant reserves in the business or find alternative sources of high interest financing because nothing will be secured against those facilities. This will create significant challenges for businesses throughout the value chain to grow and have innovation.
Potentially, prices for the end consumer could increase by a minimum of 5% in order to find alternative financing solutions, such as the factoring of AR or AR insurance.
As members of the CPMA, which we're very proud of and involved with, we have discussed the challenges from the processor perspective. Unfortunately, the current Bill C-280 does not have the correct solution. In addition, further investigation has to be done to understand the material financial challenges it will cause throughout the value chain.
The overview of key concerns has been discussed, but right now there's still insufficient analysis of the financial effect throughout the entire value chain. We need to take our time. We need to work with the lending industry, the banks, to see how they will interpret Bill C-280 right now. We cannot do it after the fact because it will have a significant financial burden on the entire value chain if it moves forward in this state.
Now we have the chance to get it right before we move forward. I have looked at the analysis that we currently have. Right now, it dates back to 2015, so there's further work to be done.
As well, current U.S. banks deduct the priority payables from the borrowing base. This is confirmed by my own direct financing experience with U.S. national and regional banking institutions.
To summarize, I look forward to further discussions of the issues and solutions. As well, I have the following suggestions.
Quantify the impact to processors and other agri-food businesses. This can be done by engaging in direct conversation—this is, for me, the most important—with Canadian banking institutions, with Farm Credit Canada and EDC, noting that the majority of FCC businesses are with term loans that only have collateral on assets outside of working capital; with more businesses in the value chain; and finally, with corporate lawyers who have a key understanding of Canadian and U.S. financing.
Thank you.