Agriculture Committee on Dec. 11th, 2023

[Patrice Léger Bourgoin]

We've made a choice, particularly in Quebec, to practise human-scale farming, diversified farming by fruit and vegetable producers who essentially belong to family businesses. Until now, the risk has been entirely acceptable. However, in the context of climate change, it's less and less realistic, for the economic survival of those businesses, to require producers to bear virtually all of that risk.

I'm going to let my colleague Ms. Lessard discuss the various changes we would like to see put in place.

[Catherine Lessard, Deputy Director General, Association des producteurs maraîchers du Québec]

Can you hear me clearly? There was an issue with the microphone earlier.

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

You can answer and we'll see if there's still a problem.

[Catherine Lessard]

All right.

Yes, we'd like certain adjustments to be made to the risk management programs to afford businesses a vision of the future. They must be able to cope with climate change and the price swings that may occur in the next few years.

There's the AgriStability program at the federal level. Without going into the technical details, I'll just say that this program is based on margin variations over a five-year period. Of course, climate change will cause more variations and, as a result, more than one in five years will be bad. Consequently, we think a major change has to be made to the AgriStability program to take climate change into account.

The same is true of all the harvest insurance programs administered by the provinces. Producers would also have to take out extended coverage, to deal with climate change, and possibly disaster insurance coverage for extreme cases.

The purpose of these recommendations by the Association des producteurs maraîchers du Québec is to maintain future fruit and vegetable activity. Stable fruit and vegetable operations necessarily mean stable prices.

[The Chair, Liberal, Kody Blois]

Thank you very much.

Unfortunately, the sound quality is too bad for the interpreters. I'm sorry, Ms. Lessard.

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

May I continue with Mr. Léger Bourgoin in that case?

[The Chair, Liberal, Kody Blois]

Yes.

I've stopped the time. I let her finish because I wanted to make sure you had the answer, and some of our francophone colleagues, but for our English colleagues, there was no translation. I let that happen, and I used my discretion.

You have three and a half minutes left.

Unfortunately, you won't be able to speak, Ms. Lessard, because of the sound problem.

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

I'll continue with you, Mr. Léger Bourgoin.

You're asking us to review the risk management programs. My Liberal colleagues will tell you they've just been renewed until 2028. What's your answer to them?

[Patrice Léger Bourgoin]

We can say that, despite the fact those programs have been renewed until 2028, climate change is at our door and we have to be able to adapt in accordance with its magnitude. Quebec suffered dramatic consequences this past summer, when we had record precipitation and a frost in June. Who could have anticipated a frost in June barely a few years ago? While southern Quebec was flooded, Abitibi, in the north, experienced an unprecedented dry period.

Risk management programs have to be constantly reviewed to deal with climate change, which not only affects both Quebec and Canada, but the entire planet as well.

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

You also talked about creating an environment conducive to investments to improve risk resilience and innovation. Would you please expand on that idea?

[Patrice Léger Bourgoin]

Climate change will obviously bring on new farming practices. We have to work with the various stakeholders, such as the scientists and the businesses that sell inputs, to adapt our farming practices to climate change.

This need to adapt practices, whether in irrigation or drainage, for example, will encourage us to reconsider practices we've engaged in for decades. We need to be financially capable of meeting these challenges through innovation, but no SME can face those challenges alone.

It's helpful to remind you, sir, that the average farm in Quebec has to invest $500,000 at the start of the season before it can make even a single dollar in revenue. And I mean revenue, not profit. It's harder and harder for agricultural SMEs to meet that enormous challenge.

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

Mr. Léger Bourgoin, what will happen in the next few years if we don't follow your recommendations, if we don't revamp the risk management programs, if we don't facilitate investment, if we don't take care of you and if we let you manage the risks on your own?

[The Chair, Liberal, Kody Blois]

You have 30 seconds in which to answer.

[Patrice Léger Bourgoin]

Then Mr. La Flèche will have to work very hard to source fresh fruit and vegetables from around the world because we won't be able to produce them in Canada.

That situation has already occurred in Ireland, Mr. Perron. Last summer, the Irish ran out of fresh fruit and vegetables. Grocery store shelves were empty.

We have to prevent that kind of situation from occurring in Quebec and Canada.

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

Thank you.

[The Chair, Liberal, Kody Blois]

Thank you very much, Mr. Léger Bourgoin and Mr. Perron.

Go ahead, Mr. MacGregor.

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

Thank you very much, Mr. Chair.

Thank you to all the witnesses who are helping to guide our committee through this study.

Mr. Stanford, I'd like to start with you. We've now had four of the CEOs reappear before our committee. What struck me when Mr. Weston was here—and indeed with all of them—was the reason so many people across Canada have such a lack of trust in the grocery retail sector. It is that families from coast to coast to coast are struggling, yet we see this corporate sector still doing quite well.

The reason it's such an emotional issue is that they are selling not just any product; they are selling the necessities of life. I mean, that's the thing where we're all equal. We all need to eat to survive. Even when it comes to medications, that's still a reality. I know Mr. Weston's salary is about 431 times that of the average employee. None of the CEOs were able to tell this committee how many of their employees are using a food bank just to get by, even though they may be working full time.

I really appreciate how, in your handout to the committee, over pages 2 and 3, you really illustrated the point that despite claims this is a low-margin industry—and I think it's a misnomer—it doesn't necessarily reflect the fact that it's not a profitable business. To simply explain it, you can have relatively the same margin over a number of years, so that may look low or static, but in grocery retail, it's doubled. You've shown that. Even so, if their gross revenues are going up, that margin is still going to translate into a fairly substantial profit. We've seen that when you compared quarters year over year. Is there anything you wanted to add to that point from your opening remarks?

[Dr. Jim Stanford]

Thank you, Mr. MacGregor.

I think the issue of the profit margin has been misunderstood and perhaps deliberately misportrayed as a sign the industry is not profiting from food inflation. We've heard the claim that, if you buy $100 worth of groceries, only $3 to $4 of that actually goes to the profits of the supermarket. We have to adjust that analogy today, because a cart of groceries costs $200 now, not $100. Therefore, only $6 to $8 of it goes to the profits of the supermarket. Still, that makes it seem inconsequential, and it's not.

First of all, as I noted, food retail is not a capital-intensive industry, so the amount of invested capital in that sector is not high. It's barriers to new entrants, including the market power of the companies that are already there and have consolidated their power through all the mergers and acquisitions that have occurred over the last generation, which were detailed in that Competition Bureau report, and very helpfully. That's what keeps it so cozy as an oligopoly, and it has allowed them to take advantage of the uncertainty and disruption associated with the pandemic, and increase their margins.

First of all, it's false that the margins didn't increase. Secondly, even if they seem small, it's a large amount of profit relative to the capital that's invested.

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

Thank you, Mr. Stanford.

I'm going to load up two questions here, just in the interest of time.

You stated in your handout and your opening remarks that the carbon tax absolutely pales in comparison with the profits in the oil and gas sector as a driver of inflation. In previous handouts, you've shown that oil and gas, over the last three years, has seen net profits increase by over 1,000%.

Can you extrapolate, from those massive profits in oil and gas, how that's affected food prices? I think we need to look a little upstream.

Also, I noticed you wrote a bit in your handout about how even executives in the grocery retail sector are doing stock buybacks and dividend payouts. I have a friend back in my riding of Cowichan-Malahat-Langford who's looked at the financials of oil and gas. He noted the oil and gas sector has shifted to a capital-discipline, flat-growth and high-shareholder-return strategy. They too are using their massive profits not to reinvest in industry or pay the Canadian people but to send to shareholders. Those are the primary beneficiaries.

Do you see correlations in the grocery retail sector?

[Dr. Jim Stanford]

You're quite right, sir.

In fact, your initial question talked about the necessities of life and this being one reason why Canadians are so upset about food prices. However, there are other necessities of life, including housing, energy and other things we must buy. In many cases, companies were able to take advantage of the disruptions of the pandemic to increase their own profits. You could say this is just how the market works. Suppliers will charge what the market will bear. In my own view, I think there are both ethical and economic reasons to challenge the ability of companies with that market power to increase prices in a moment of economic and social disruption.

Energy prices, initially, in the period up until mid-2022, were the leading cause of inflation in Canada. The profits captured by those companies made the supermarket profits look like spare change, really. They were enormous. Now energy profits have come back down, in part because of the normalization of supply relationships. Food retail profits have stayed quite high.

However, in both cases, they earned huge amounts of profit and contributed significantly to Canadian inflation and the macroeconomic after-effects of inflation, including the high interest rates we're experiencing now. They have so much money that they literally don't know what to do with it. That's why, in the energy sector, the food retail sector and some other sectors, you've seen a surge in share buybacks by companies that are saying they're going to find a way to pay this back to investors.

The federal government, of course, has a new modest tax on share buybacks. I think that's a good idea, and I think it should be expanded. Other measures should be taken to capture some of the froth that is represented in those record profits in food retail, energy and other sectors.

[The Chair, Liberal, Kody Blois]

Thank you very much, Mr. Stanford.

[Dr. Jim Stanford]

Thank you.

[The Chair, Liberal, Kody Blois]

Thank you, Mr. MacGregor.

You mentioned the word “froth”, Mr. Stanford. I'm going to be want a beer after this committee.

Anyway, speaking of committee, we only have a few minutes left, colleagues, so I'm going to try to keep it tight. I'm going to ask for four minutes from the Liberals and Conservatives, and we'll do two and a half each for the Bloc and NDP.

It's over to you, Mr. Steinley.

[Warren Steinley, Conservative, Regina—Lewvan, SK]

Thank you, Mr. Chair.

I'll pass it over to my colleague Mr. Lehoux right after this.

I'd like to put the following motion on notice:

Given Canada’s Territories have disproportionately higher food prices due to transportation costs and that the Carbon Tax makes everything more expensive and that the Premier of the Northwest Territories has requested a complete exemption from the Carbon Tax for his jurisdiction; the committee call on the government to immediately carve out the Northwest Territories from the Carbon Tax to bring home lower food prices.

It's over to Mr. Lehoux.

[Richard Lehoux, Conservative, Beauce, QC]

Thank you.

Thanks to the witnesses for being with us this afternoon.

Mr. Léger Bourgoin, you mentioned a lot of things at the outset.

For example, you touched on equitable relations between the parties, retailers and producers; in short, among all the intermediaries.

You also discussed the importance of reciprocity of standards in importing products in a context where fruit and vegetable businesses in Quebec are mainly family businesses.

Do you think we're doing a good job on the reciprocity of standards for importing certain products into Canada? Various products could be imported in much larger volumes in future. What impact you think that will have on the reciprocity of standards? Are we doing the work correctly?