Agriculture Committee on Feb. 28th, 2022

[Dave Carey]

I'll start on that, and, again, pass it to my colleague Chris.

In Canada we're lucky; we control 60% of the world's trade of canola. Australia is our biggest competitor, but there are other oilseeds that are happy to step in and fill that, like soybeans from Brazil and the United States. Canola is a Canadian invention and one we want to see abroad more. There are definitely times when—just like we see in our grocery stores in Canada, with the just-in-time delivery system—customers need that grain at the right time and the right place.

I'll ask Chris to weigh in.

[Chris Davison]

I have a couple of builds there.

Part of what we rely on with Canadian canola is our differentiated value. We have a unique value proposition of canola products that's well recognized in terms of providing high-quality and useful functionalities, but we can't take that for granted. We certainly continue to work in established markets that already recognize the superior properties, but we also continue to build a deeper appreciation for what canola and canola-based products have to have in developing markets, where we see opportunity going down the road.

As Dave alluded to, particularly coming out of a year like we had in 2021, there are some challenges to that. One I alluded to briefly in terms of—

[The Chair, Liberal, Kody Blois]

Mr. Davison, I apologize. I was hoping you were going to be able finish that statement, but we want to stay on time.

I'm going to go to Mr. Turnbull for six minutes now.

[Ryan Turnbull, Liberal, Whitby, ON]

Thanks, Mr. Chair.

I appreciate all of the panellists' being here today. Thank you for your testimony and for the incredible work that you and your organizations do every day to maintain a robust food system in Canada.

Perhaps my questions will focus, at first, on Mr. Thériault. I hope I said it right. My French isn't so great these days. I'm working on it.

I have two lines of questioning for you, Mr. Thériault. One is related to efficiency versus resilience. The other line of questioning is related more to corporate consolidation within agriculture and new farm entrants. There's a line of questioning on each of those.

Mr. Thériault, I understand that in the past, you've said that Canada's food system is highly efficient and mature. What we've seen over the course of the pandemic and multiple natural disasters over the last couple of years is that efficiency—often achieved by increasing scale, consolidating operations and reducing costs, such as wages—can come at a great price when there are interruptions or moments of crisis. For example, in 2020, we saw COVID outbreaks in two multinational meat processing facilities in Alberta, which resulted in a backlog of roughly 100,000 cattle, costing hundreds of millions of dollars in extra feed and lost revenues.

We all understand that efficiency is really important in our food system. In your opinion, has our focus on efficiency had a detrimental effect in terms of increasing our vulnerability in times of disruption? Could you comment on that, Mr. Thériault?

[Pascal Thériault]

I think we had to get the plant size we got to because of the efficiency. We compete on the world market; therefore, we must sell at the world price. Especially in meat processing, if we expect to be competitive, we have to be amongst the ones that can produce at the lowest cost. That did involve some high concentration for slaughtering in beef, poultry, and in the hog sector also. Indeed, once one of those plants was hit, of course the effect was much larger than if one out of 10 little plants had been hit to produce the same exact volume.

[Ryan Turnbull, Liberal, Whitby, ON]

If we had much more processing capacity and shorter supply chains, do you think that would increase our ability to manage those types of disruptions in times of crisis?

[Pascal Thériault]

One of the bigger costs that we have when we look at slaughtering is all the fixed costs that come with technology, that come with maintaining those capital assets. That is why, over time, we moved toward a larger, more efficient way of doing it, although it does have its weaknesses.

[Ryan Turnbull, Liberal, Whitby, ON]

Can you diagnose any of the weaknesses you think we could work on that from your perspective would be targets for the federal government to implement some changes?

[Pascal Thériault]

One way to go is definitely to go toward automation of the slaughtering process. Corporations, processors, have a hard time recruiting employees. That's not particular to the ag sector, but the difference with the ag sector is that we are dealing with biological goods and there's a perishability that exists. Therefore, going toward automation is probably the best way we have to alleviate that labour shortage, but it comes at a cost. If you're going to start talking about, I don't know, $100,000 to $300,000 per position you would replace, the processors need access to those funds to allow that processing or that transformation toward automation to happen.

[Ryan Turnbull, Liberal, Whitby, ON]

Automation would decrease the cost of labour, but obviously there would be a large capital outlay at the beginning for companies to replace the labour costs, given automation is pretty expensive.

[Pascal Thériault]

It is always a trade-off when you use fixed capital assets to replace labour, and therefore there's an upfront cost and then a maintenance cost that would probably be effectively cheaper than hiring labour. In the short run, though, processors need to have access to those funds.

[Ryan Turnbull, Liberal, Whitby, ON]

Is the upfront cost something the federal government could help to finance, do you think?

[Pascal Thériault]

I think the federal government could play a major role in financing or helping those processors to face the costs of keeping our sector competitive.

[Ryan Turnbull, Liberal, Whitby, ON]

Thank you. I want to move to my second line of questioning now, which is about corporate consolidation.

The ownership and control of Canada's food-producing land is becoming more concentrated. This has been a trend that's been growing over many years. According to a new report from the Canadian Centre for Policy Alternatives, in Saskatchewan, 8% of farms operate and control 38% of the farmland. In Alberta, 6% of farms operate 40% of the farmland. In Manitoba, 4% of farms operate and control 24% of the farmland.

You mentioned family farms in your opening remarks, and the push for more profitability and how we have some of the lowest prices in the world.

I'm wondering whether this consolidation is also creating problems when we see that there's also a decline of about 70% in terms of young and new farmers entering agriculture. There are some statistics on this that I've read recently.

I would like to hear whether you think—

[The Chair, Liberal, Kody Blois]

Mr. Turnbull, I apologize. I tried to give you a few extra seconds as one of my colleagues, as I would anyone, but unfortunately we're over time.

Mr. Perron, you have the floor for six minutes.

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

Thank you very much, Mr. Chair.

I thank the witnesses for being with us today.

Mr. Thériault, I'd like to continue to talk about the phenomenon of concentrating slaughter. In your statement, you mentioned the difficulty of reducing production costs to be competitive and the need for automation. I understand that government support in the form of an investment policy in agri-food processing plants would be more than welcome.

Could you tell me about this quickly?

[Pascal Thériault]

Yes, that is exactly the case.

To achieve a final world price, the processor is going to have to either lower his own production costs on the processing side, or pay less for the animals he's going to slaughter, which brings us back to a problem of slaughter concentration on the producer side. That's not necessarily what we're looking for either.

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

That's just the topic I wanted to address, so I'm glad you brought it up.

In the pork sector, but also in several other animal productions in Quebec, there are problems related to the concentration of slaughter and the greater power that this gives to these owners compared to independent operators.

Of course, the government could help automate the large centres, but don't you also think that a smaller regional processing network could be set up that would be complementary and secure the supply chain in case of a problem, whether it's a COVID‑19 outbreak, a strike or something else?

I'd like to know what you think.

[Pascal Thériault]

Indeed, this parallel network can exist and there is certainly room for short circuit commercialization in the field of meat processing. This would help secure our markets and slaughter capacity to some extent.

As for our slaughter capacity, it's a bit like the chicken or the egg—please excuse this agricultural expression. Farmers need to get the best possible price to be able to continue producing, and processors need to pay the lowest possible price to be able to continue processing. Even with small, local abattoirs, this problem will remain.

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

So, in addition to supporting the automation of the larger centres, there could be more permanent government support given to these smaller facilities, precisely to promote the sustainability of these infrastructures.

[Pascal Thériault]

Currently, there are large meat processors because, in the past, the government, for rationalization purposes, had asked these larger players to become more financially involved to buy out several small slaughterhouses. These were subsequently closed down for efficiency purposes, and so that there would be a more globally competitive hog industry.

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

The COVID‑19 crisis has highlighted the weak links in our food chain. We may have made a mistake in the past and we should go back to more regional processing by financially supporting this sector. This would allow more regional processing and reduce transport distances.

What do you think?

[Pascal Thériault]

I missed what you said because there was no sound.

There is room for short circuits. In terms of regional marketing, you have to know that there are not many players in food distribution. The less these big buyers have to deal with a large number of suppliers, the easier it is for them too. We always strive to keep prices as low as possible for consumers.

As for whether there is room for more local products that stand out, my answer is yes, absolutely. That said, Monday through Friday, as I like to say, people try to eat at the lowest possible cost.

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

This further demonstrates the importance of state support.

I'd like to take you in another direction. You talked about valuing the food sector and its workers, but also about taking into account the needs of consumers. Do you have any concrete recommendations for doing this?

[Pascal Thériault]

I have been training young farmers for 15 years now. As soon as you come out of the typical farming environment, you have a very poor understanding of what the agri-food sector involves and the technological level of agri-food production. Guidance counsellors, for example, are not inclined to guide young people into this sector.

Why train a biologist rather than an agronomist? We need both, just as we need technologists and vocational graduates, who can do agricultural mechanics instead of mechanics as such. The agri-food sector has long been taken for granted. We need to succeed in promoting agri-food specificity in the training programs.

There are also consumer expectations. Some consumers sometimes have extremely unrealistic expectations. You can add quality controls, and producers are certainly willing to do that, but it comes at a price. The more demands there are, the higher the price. The consumer needs to understand that all these requirements will have a cost at the end of the day and they need to be prepared to pay for it.