Agriculture Committee on March 3rd, 2022

[The Chair, Liberal, Kody Blois]

I call this meeting to order.

Welcome to meeting number eight of the House of Commons Standing Committee on Agriculture and Agri-Food.

I'm going to start with a few reminders.

The meeting is taking place in a hybrid fashion, but it is lovely to see many committee members back in the room. It's a sign of the times.

The proceedings will be made available via the House of Commons website. As you are aware, the webcast will always show the person speaking rather than the entirety of the committee. Screenshots are not permitted.

Colleagues, I have a couple of business announcements before we get to our witnesses.

One, we've reached out to the minister on supplementary estimates (C). She is available on March 21, 2022. Assuming there is no issue with this committee, we would like to extend the invitation for her to come.

I'm seeing agreement in the room, so we will do that.

The second piece is around the supply chain study. We will be getting to our sixth and final meeting on Thursday, March 24, 2022. I'd like to set aside about 15 minutes to work with the analyst to provide some drafting instructions. I'm assuming that is not an issue for folks in the room. Is that correct? Good.

Finally, and this is important, colleagues—

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

Sorry, was that March 21?

[The Chair, Liberal, Kody Blois]

March 24 will be our sixth and final meeting on that study. On that particular day, I'll seek to have about 15 minutes for committee members to give some feedback to our analysts.

Also, given that we will be transitioning into a new study that we've talked about, the environmental study, the clerk is asking that by Friday, March 18, we have a list in so that she can begin the work of preparing for the next group.

Keep those calendar dates.

Finally, in relation to Mr. MacGregor's motion vis-à-vis the trip to Scotland for the soils conference, we do have a budget. It has been sent to me. We can disseminate that to the group, but it's important, when it goes to the liaison committee, for each of the respective parties on the committee to engage with their House leadership team, their whip leadership team, to make sure we're not going to have any issues. I'll rely on Mr. Barlow, Mr. Perron, Mr. MacGregor, and Mr. Turnbull to have those conversations accordingly.

[John Barlow, Conservative, Foothills, AB]

Will the minister be here on the 21st for two hours, or one hour?

[The Chair, Liberal, Kody Blois]

We can have a conversation. I think the convention is, generally, to have an hour for the minister. The second hour is for the officials.

[John Barlow, Conservative, Foothills, AB]

Is it for the supplementary estimates (C) and the main estimates?

[The Chair, Liberal, Kody Blois]

It will be for the supplementary estimates (C). The mains will come after.

Seeing nothing else, I'm going to move on.

Pursuant to Standing Order 108(2) and the motion adopted by the committee on Monday, January 31, the committee is resuming its study of the agriculture and agri-food supply chain.

Of course we have our witnesses on the screen.

From Food, Health & Consumer Products of Canada, we have Carla Ventin, who is the senior vice-president of government relations. From Soy Canada, we have Brian Innes, who is the executive director. From Top Shelf Feeds Inc., we have Dennis Comeau, who is the general manager.

You'll each have five minutes to present opening remarks.

Let me also take just a quick moment to recognize Mr. Falk. He will now be sitting on this committee. Welcome, Mr. Falk.

We're going to move over to Ms. Ventin for five minutes, please.

[Carla Ventin, Senior Vice-President, Government Relations, Food, Health & Consumer Products of Canada]

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

I'm Carla Ventin, senior vice-president, government relations, at Food, Health & Consumer Products of Canada.

For over 60 years, FHCP has been the largest national industry association, representing companies that manufacture and distribute the vast majority of the everyday essential products found in every refrigerator, pantry, cupboard, and medicine cabinet in Canada.

Our sector employs more than 350,000 people in nearly 10,000 facilities in urban and rural communities across Canada.

Food manufacturers are the top employers in rural Canada, and purchase 40% of the food that farmers grow. Our members transform Canada's agricultural riches into value-added finished goods that feed families here and abroad. Consumers have trusted our members' brands for over 100 years.

For our industry, business is not back to normal. From the cross-border blockades to the B.C. floods, the impact of omicron, and chronic labour shortages, our members have faced unprecedented challenges to ensure that Canadians have access to essential everyday products.

With Canada's inflation rate now at a 30-year high, it is not surprising that cost pressures are a huge challenge, and we anticipate further cost pressures from the invasion of Ukraine. We are concerned about the risk that this poses to food security, both in Canada and abroad.

Overall costs for our industry have increased by 17%. The cost of commonly used ingredients for food companies has increased up to 80% in the past year. The cost of paper pulp, a key ingredient in cardboard packaging and boxes, has increased 15%-50%, while the cost of key plastic packaging components has increased by 43%. Labour costs for food manufacturing alone have increased by 16%, so not surprisingly, over 60% of our member companies are operating with a 25% reduction in production.

With growing supply chain disruptions, labour gaps, and rising costs, manufacturers face mounting challenges in meeting consumer demand.

Addressing worker shortages would add a great deal of domestic certainty during this crucial time in our economic recovery. From our member surveys, over 75% reported labour capacity shortages, while over 50% are experiencing an average of 20% absenteeism. While we believe the federal government is moving in the right direction to address our labour crisis, this needs to be expedited. We welcome the commitment to a sector-specific agricultural labour strategy to address chronic labour shortages in the agri-food sector and promote skilled trades.

Our members prefer to source their labour domestically. From a business perspective, it's just a lot easier and more cost-effective. Despite investments in training and recruitment efforts, however, available jobs remain unfilled. It is therefore crucial to look abroad to fill this gap. We are encouraged by the government's commitments to bring in a trusted employer stream for the temporary foreign worker program, expand pathways to permanent residence, and increase economic immigration. More resources should be dedicated to accelerate progress in all of these areas.

Amid rising inflation and supply chain disruptions, grocery chains are making things worse by continuing to introduce new fines and penalties on suppliers. This is just not a problem for food manufacturers; it's a problem for many farm groups as well. Our survey revealed that members experienced a 25% increase in supply chain fines. These escalating fines contribute to consumer inflation and food insecurity.

This underscores why Canada needs a mandatory and enforceable grocery code to restore balance and fairness in the retailer-supplier relationship. We must ensure the industry process currently under way continues at an expedited pace. Implementing a grocery code would also add a great deal of domestic certainty.

Finally, we applaud the government's commitment to reduce and prevent supply chain bottlenecks in Canada's transportation networks through the national trade corridors fund.

While investments in transportation are essential, we must also invest in the human capital needed to keep our critical infrastructure running. We can have the most efficient and modern transportation infrastructure in the world, but it can easily come to a halt, as we have seen in recent weeks. Governments need to take the necessary steps to secure and protect our critical infrastructure to prevent this from happening again and, more importantly, to help rebuild Canada's international reputation as a reliable trading partner and an attractive place to invest.

I thank the committee for this opportunity and I welcome your questions.

[The Chair, Liberal, Kody Blois]

Thank you very much.

We're now going to move to Mr. Innes for five minutes.

[Brian Innes, Executive Director, Soy Canada]

Thank you, Mr. Chair.

Thank you very much for the invitation to be with you here today. My name is Brian Innes. I am the executive director at Soy Canada.

Effective transportation corridors are the lifeblood of our industry. We're really pleased that the committee is studying the role of government in enabling our products to get to market. Right now, your study is very important for our sector, because we have very poor container service, which is preventing us from being competitive in global markets.

I'm here today representing the soybean value chain. Soy Canada includes members from all segments of the value chain, from seed companies to producers to processors and exporters. We have a diverse industry, and we grow soybeans from the Atlantic Ocean all the way to the Rocky Mountains.

Soybeans are the third most valuable crop in Canada. They're the most valuable crop in Ontario and the most valuable source of revenue for farmers from crops in Quebec. We produce world-leading, food-grade soybeans to produce things like miso, tofu, natto and soy milk. We also produce commodity beans that are crushed to make meal for livestock, as well as oil for humans and for biofuel.

With more than 70% of our production exported, we are very focused on export markets and doing what's required to be competitive. Unfortunately, container service is our weak link right now. Container service is essential for our sector, because all of our food-grade production is shipped in containers. Approximately 40,000 containers of our food-grade soybeans are shipped from farmers' fields and processing plants in Quebec, Ontario and Manitoba to Asia, the Middle East and Europe. Unfortunately, because of the poor container service, we're losing value in market share to competitors in the U.S. who are getting better service.

I think the best way to illustrate this for you is to describe what our exporters are facing. Our exporters tell us that they are facing price discrimination. Prices for containers in Canada have soared relative to the U.S. While U.S. prices have increased by 30% to 40%, in Canada these prices have soared by 100% or 150%.

Our exporters tell us that they don't have sufficient access to empty containers to ship our products. Access to empty containers is being restricted by shipping lines as they focus on profits over service. This means that they're denying service to Canadian shippers like the soybean industry while they make record profits. As this committee has heard, and as has been widely reported, the container shipping lines are making record profits. In 2021 alone, they made five times more than the previous decade combined. These profits have been extracted from us and have put Canada at a competitive disadvantage.

What our exporters also tell us is that we're facing poor service, with little recourse due to the market power exerted by these container shipping lines. There is little competition, as there are only three shipping alliances that dominate global trade. For Canada, it's even worse. In Montreal, one line controls 70% of all the container movement from the port. When there's little competition, we're subject to the whims of whatever price, whatever level of service and whatever empty containers we are offered by the one shipping line.

Members will be aware that global shipping lines and supply chains are complex. Unfortunately, that is not a reason to exempt shipping lines from the normal limits imposed on businesses by the Competition Bureau.

As members of the container crunch coalition, we at Soy Canada have been consistent in asking for the federal government to show leadership and help our country have access to competitive container service. We ask that the government immediately open an investigation, under section 49 of the Canada Transportation Act, to investigate what is contributing to the current container disruptions and to better inform the legislative and regulatory changes required to address these competitive failures.

Second, we ask that the government name a supply chain commissioner to lead the recently announced industry-government task force, to bring together stakeholders and identify immediate solutions to address the supply chain disruptions we're seeing, especially in the containerized shipping supply chain.

These two actions are critical next steps for us to identify solutions to the poor services we're facing. They will help us move past the current situation, where we can't meet our commitments to customers, where we're rendered less competitive by discriminatory rates, towards a situation where all operators in the supply chain can improve performance—

[The Chair, Liberal, Kody Blois]

Mr. Innes, I apologize. We're at five minutes, and I know our colleagues will want to engage with you.

We're going to move along to Mr. Comeau for five minutes, and then we'll get to questions.

[Dennis Comeau, General Manager, Top Shelf Feeds Inc.]

Thank you, Mr. Chair and committee, for giving us the opportunity to speak today.

My name is Dennis Comeau. I am the general manager of Top Shelf Feeds. We are the last agricultural feed manufacturer on Vancouver Island.

For a basic understanding of who we are and how we play a role in the agricultural community, we service approximately 135 commercial farms from Victoria to Port Alberni, along with the surrounding Gulf Islands. We also supply four of our retail stores, from Langford to Powell River. We have managed to get through many challenges since the start of the company in 1973. Our locally owned business has been through rail strikes, avian influenza, ferry strikes, rail blockades, and a shrinking market due to a lack of processing plants here on Vancouver Island.

Our challenge for the last seven years has been the cancellation of rail service direct to our facility. Top Shelf Feeds and our customers have been patiently waiting for decisions to be made on bringing back rail freight service to Vancouver Island.

We currently bring approximately 2,000 tonnes of raw grain per month to Top Shelf into a Nanaimo yard that is 45 minutes away from the mill. We transload that grain onto one of our trucks, and we bring it back to the mill in Duncan for processing. What used to be eight railcars in a five-day period at Top Shelf Feeds direct to Duncan is now limited to four or five railcars per week in the Nanaimo yard.

To put it in perspective, we manufacture about 140 tonnes of finished seeds per day. We only unload one railcar per day, and that takes up to nine hours. Railcars only hold between 80 and 90 tonnes, so we are short approximately 50 tonnes per day of raw grain. For this, we rely on trucks from the Lower Mainland, Alberta and Saskatchewan. Rising fuel costs and truck availability are driving the freight rates up significantly.

As far as commodity prices go, prices for commodities are at an all-time high and continue to challenge producers in the quota system. Chicken growers have a severe impact as feed prices tend to fluctuate monthly, and the payout price to the grower has adjusted annually. The dairy industry has the same challenges, compared to the input costs fluctuating monthly. Some farms, farm stands and local markets have also been directly impacted and are questioning whether to keep the farm operational.

On the pandemic, we did see an increase in sales in our retail sector at the start of the pandemic, and some of this had to do with idle farms starting up again to ensure food stability for the local market. We also saw some panic buys that caused lulls in sales for months to follow. Labour shortages have their typical turnover in level-entry positions, but senior staff took all precautions and followed government mandates to keep healthy in a safe workplace. Only two COVID cases were reported among our 50 full-time employees.

In terms of the flood, our hearts go out to all the farms, families and businesses that were affected by the flood in 2021. Top Shelf Feeds took part in daily alignment meetings with feed mills, transportation experts and governing bodies to ensure that all of our island farms were able to stay in production through this very devastating time. On behalf of all of our farm families, we thank everyone involved in keeping the grain moving, which allowed our mill to remain at full production.

To end, Top Shelf Feeds is grateful to the Vancouver Island growers and producers for their ongoing support. We ask government to continue to recognize the importance of our agriculture community here on Vancouver Island. We have many years left in the industry to service the growing population in our area.

Thank you very much.

[The Chair, Liberal, Kody Blois]

Thank you, Mr. Comeau.

Mr. Barlow now has the floor for six minutes.

[John Barlow, Conservative, Foothills, AB]

Thank you very much, Mr. Chair.

Thanks to our witnesses for their testimony and being with us here today.

Mr. Innes, I would like to start my questions with you, as you've outlined a pretty stark contrast between how Canada has dealt with the shipping container crisis and the supply chain issues compared to the United States.

Just to outline, the United States administration has put some pretty stiff pressure on shippers. Initially, they named a shipping czar and imposed some pretty strict fines on empty shipping containers. They're building a new container loading facility at the port of Oakland, and now there's new legislation called the Ocean Shipping Reform Act. Also, during the State of the Union address, the President talked about jacking up shipping rates during the pandemic and how they're going to crack down on that.

By comparison, we've done very little here in Canada. You mentioned—and I know we've supported this—investigation under section 49 of the Canada Transportation Act and naming a supply chain commissioner of some sort, but none of those things have happened.

Have you had any discussions with the government on why those steps haven't been taken? Where does that put us in terms of our competitiveness with our competition south of the border?

[Brian Innes]

Thanks very much for the question.

As you alluded to, I think we can be competitive around the world as long as we have a level playing field, but unfortunately we're not seeing that at the moment. We have raised these concerns both with government officials and with ministers themselves.

To your direct question around the response we're getting, the response out of the transportation summit was to commit to a task force. We would very much like to see that task force happen, with the inclusion of a focus on container shipping lines, given the significant action you mentioned south of the border.

Without that public attention and without that focus here in Canada, we're just not seeing the shipping lines paying attention. That is showing in prices, showing in service and putting us at a competitive disadvantage.

[John Barlow, Conservative, Foothills, AB]

You mentioned the supply chain summit. I know that Soy Canada, with the rest of the container crunch coalition, put out a press release asking for a fast-paced analysis and assessment of the supply chain and outlining key areas on which to focus.

I have two questions, I guess. First, has that assessment been done or initiated? Second, has the government given you any reason or any timeline on why a supply chain commissioner has not been appointed , why an investigation under the Transportation Act has not been initiated, and why the assessment hasn't been completed or even started?

[Brian Innes]

We don't have information as to why that investigation has not been started or a commissioner or a task force has not been initiated yet. We're very interested in understanding that. It is a complex problem, but we are seeing clearly that co-operation with international allies when it comes to competition measures that shipping lines must follow is quite critical.

We have seen here in Canada some ambiguity about whether these shipping conferences or the alliances we have now are subject to the Competition Bureau, so unfortunately we have not seen that clarity come from our government yet.

[John Barlow, Conservative, Foothills, AB]

Ms. Ventin, your organization and others signed a joint statement asking the government not to proceed with the trucking mandate, but they did proceed with that.

Now we're hearing word of a potential interprovincial trucking mandate, when most provinces and other countries around the world are now removing restrictions and mandates. This seems to go contrary to what the movement is in other districts. What implications has the trucking mandate had for your industry, and what implications would an interprovincial trucking mandate have for your stakeholders?

[Carla Ventin]

Thank you for the question.

First of all, I just want to say, along with Mr. Innes and Mr. Comeau, that we all need to get our ingredients, our raw materials and our products moving into, outside of and across the country. Rail and the containers and truckers are all so important in this integrated supply chain network.

Yes, we were very much concerned about the trucking mandate. There is already a huge shortage of truckers in Canada, and that speaks to the human infrastructure side of our critical infrastructure.

I would just say that the trucking mandate has caused additional hiccups for the cross-border delivery of food. Most of our products are delivered by truck, as well as containers and rail, so what we saw was a bigger problem with shortages and more hesitation. This had to do with, I think, individual hesitation among truck drivers who didn't feel comfortable getting the vaccine, but it also speaks to the blockades in Canada. What we're hearing is that they were just hesitant to cross the border because they didn't want to get stopped, and they didn't trust Canada's trade infrastructure—

[John Barlow, Conservative, Foothills, AB]

I'm sorry, Ms. Ventin. I only have time for one really quick question.

The emergency foreign worker program was put forward by several manufacturing and stakeholder groups, but your group did not sign on to that. Is there a reason why?

[Carla Ventin]

Not at all. Labour issues are a very big concern for us. We absolutely support the increase in the cap, as well as other initiatives to bring in more labour.

Thank you.

[John Barlow, Conservative, Foothills, AB]

Thank you.

[The Chair, Liberal, Kody Blois]

Thank you, Ms. Ventin and Mr. Barlow.

Ms. Taylor Roy has the floor now for six minutes.

[Leah Taylor Roy, Liberal, Aurora—Oak Ridges—Richmond Hill, ON]

Thank you very much, Mr. Chair.

Thank you to our witnesses for being here today. This is obviously a very important issue for all of us.

Ms. Ventin, as the voice of Canada's leading food, beverage and consumer products organization since 1959, you've played an important role. I believe your organization appeared before us back in 2012, and now you are here again today. I'm wondering how the supply chain changed from 2012 until now, and how many of the current problems we're seeing today are situational.

You mentioned at the beginning COVID, omicron, the floods, the illegal blockades at the border and different things. How much of it do you think is situational and how much do you think is structural?

[Carla Ventin]

If anything, I think the supply chain has become more integrated. There are a lot of structural challenges. We do need to modernize the infrastructure. We need to invest not only in physical infrastructure but in that human infrastructure that is the people, including the truckers who help to move the product across the country.

We cannot underestimate the severity of the situational issues—including COVID, omicron, the floods and the blockades—on the ability of our member companies to produce, and the damage that's done across the country, including to our international reputation, which I think has caused further disruptions to the supply chain currently in Canada.