Maybe I'll have to.
Evidence of meeting #89 for Agriculture and Agri-Food in the 44th Parliament, 1st Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was prices.
A recording is available from Parliament.
Evidence of meeting #89 for Agriculture and Agri-Food in the 44th Parliament, 1st Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was prices.
A recording is available from Parliament.
President and Chief Executive Officer, Retail Council of Canada
It's an interesting concept. There's absolutely no question that the large corporations can negotiate. The issue is very much to protect the entire supply chain. I think my colleague here talked about small farmers, small processors, wholesalers and small retailers. They are extremely important to the health of the code.
We're not at a stage though, Mr. Chairman, where we would exclude anybody, but that may be a discussion we should consider.
Liberal
The Chair Liberal Kody Blois
I think this committee, as Mr. Charlebois said...and it's not a partisan element. I think that all parties are starting to get to the point where, if we can't find that pathway, there will be increasing pressure from the opposition and indeed from the backbenchers of our Liberal caucus to say, “Let's get on with it then.”
I know it's complicated in terms of how it will play out across the provinces, but that is the sentiment I see around this committee and indeed around Parliament Hill.
Just very quickly to you, Mr. Charlebois, you mentioned Europe. You mentioned the regulatory burden and some of the challenges and how farmers are protesting. I thought Mr. MacDonald had an interesting line of questioning, in that we're starting to see this idea of a carbon border adjustment mechanism. I'm one of the folks who would suggest that, if we don't start accounting for that, there's only so much that we can ask our own domestic industry to bear in terms of pricing before we do become uncompetitive—to the point that you were making.
What's your sense of what's happening in Europe and some of what the Biden administration is seeing? Do we think there will be a point in the future when that will start to become part of the trading mechanism for how we move agricultural products around the world? Where would Canada benefit in that? Our industry is quite sustainable. I see a world in which, if that were taken into account, we could actually be on a strong footing.
Senior Director, Agri-Food Analytics Lab and Professor, Dalhousie University, Agri-Food Analytics Lab
Yes, I would say that decarbonizing our agri-food economy could become a competitive advantage over time.
How we do that is obviously up for debate. I'm more of a carrot believer than a stick believer, to be honest. I think we need a mixture of both. Right now all we see and, I would say, probably all the industry is seeing is a stick. I think we need both.
Liberal
The Chair Liberal Kody Blois
Just quickly on that, this will be the last thing I ask. I don't want to test my colleagues too much.
How important is it that something like ECCC can move on offset protocols whereby farmers can actually see some revenue coming in for their sustainable practices—a carrot-versus-stick element? What would your recommendation be to the government to move more on that protocol so that farmers could see both sides of this ledger as opposed to seeing it as just a potential threat?
Senior Director, Agri-Food Analytics Lab and Professor, Dalhousie University, Agri-Food Analytics Lab
Yes, absolutely. My colleague Stacey Taylor mentioned earlier the importance of collecting data and good data. This is something we're missing in Canada. To create a dialogue to get everyone on board about an issue as important as the environment, you need data. Right now, there's little of it. There's a huge data deficit in Canada in terms of understanding carbon emissions, who's doing what and what the implications are over time. There's a lot of misinformation out there, and that needs to stop.
Liberal
The Chair Liberal Kody Blois
Thank you so much.
Thank you for the quick indulgence, colleagues.
That brings us to the end of our first panel. Thank you very much to Dr. Charlebois, Ms. Taylor, Mr. Currie, Mr. Ross, Ms. Brisebois and Mr. Littler.
We're going to pause for just a few minutes, and we'll bring in our second panel.
Liberal
The Chair Liberal Kody Blois
Colleagues, I know everyone is still getting shifted around from the last panel, but welcome back. We have to keep moving.
We have our second panel up, and we have three more great witnesses. From Carleton University's Sprott school of business, we have Dr. Ian Lee. From the Canadian Agri-Food Policy Institute, we have Tyler McCann, and from the Fruit and Vegetable Growers of Canada, we have Mr. Marcus Janzen.
Mr. Lee, you are online. I'm going to give you up to five minutes to start. We're going to get right at it.
It's over to you.
Dr. Ian Lee Associate Professor, Sprott School of Business, Carleton University, As an Individual
Thank you, Chair.
The first of my disclosures is that I don't belong to or donate money to any political party. Second, I'm a tenured prof, paid by Carleton for 37 years, teaching the strategy capstone course that evaluates competitiveness and value creation of industries and firms. I do not consult anybody anywhere. Third, immediately after the collapse of the Berlin Wall in 1989 I taught, from March 1991 until 2020—over 100 times on the ground, not by Zoom—in former centrally planned economies, including Russia, Poland, Ukraine, Romania and, later, Cuba, Iran and China, where food prices were completely or mostly fixed by the state. One more disclosure that the translators don't have—I should have put this in—is that I grew up on a farm, a real farm, in Beckwith Township, Lanark County, eastern Ontario, in the 1960s, so I am very familiar with what life is like on a real farm, not a hobby farm.
During the last 18 months an urban legend has emerged amongst some in the Ottawa political process that grocery retailers are engaged in predatory pricing, profiteering and creating “greedflation”. I testified twice before the finance committee of the House in the last six months. I provided the actual empirical statistical StatsCan data and audited financial statements of Loblaw, Sobeys and Metro—with which I have no relationship other than I buy groceries there—showing that grocery retailing in Canada and the U.S. has been a notoriously low net-profit-margin industry for three quarters of a century, averaging 3.2% to 3.5%.
Members of Parliament, it's time to go back to school. Two hundred and fifty years of economic theory and practice and over 50 Nobel prizes in economics have taught us that a decentralized economy of private decision-makers making private, not political, decisions over the value chain of any company—capital investment, R and D, production, pricing—produces the incredible standard of living of the high-income countries. This is documented by the World Bank.
Joseph Schumpeter taught us the why and how: Competition causes firms to endlessly innovate in order to differentiate to try to achieve a sustainable competitive advantage, the holy grail of any private firm, and this creates gales of creative destruction.
At the centre of this edifice called the market economy or capitalism is price discovery. This is why price control of any kind on any product or any service anywhere is deadly and destructive. It kills price discovery and thus efficient pricing decisions by impersonal private market forces, which are replaced by the very worst kind of policy decision-making: political and bureaucratic decision-making grounded in the false belief of non-market people—including professors like me—in their superior knowledge concerning the marginal prices of millions of products and services sold every minute in the market.
This explains why Nobel laureate Friedman was correct in noting that no low-income or middle-income country has ever, in human history, become a high-income country unless they transformed to decentralized economic decision-making. Indeed, none of the 37 OECD high-income countries have adopted food price controls as a long-term policy. By contrast, price controls, especially food prices, are regulated, fixed and controlled in many poor countries.
The poster child for price-fixing of food is Venezuela's Maduro, where inflation is now at 283%, but don't forget Argentina, from Peron through to the Kirchners, with inflation running now at 211%, or Turkey's Erdogan, with inflation at 65%. Each of them is doing food price control.
Let's quickly turn to the largest and most successful economy in the world since the 1880s. Of course, I'm talking about the United States. Is the Congress or the liberal Biden administration discussing formal food price regulations or disguised food price-fixing by ordering grocery CEOs to lower prices? The answer is a loud, crashing, “No.” Why, then, are some MPs and government trying to adopt de facto food price controls similar to Venezuela, Argentina, Turkey and other poor developing countries with disastrous economic records that produce poverty, instead of emulating the U.S. economic policy of “government, hands off” concerning price discovery?
I will now close on a very personal note. It's likely some MPs listening will think, “There's another ivory tower academic quoting all the books who doesn't know about the real world,” so I want to talk about the real world.
I lived in Warsaw four to five times a year, in a private apartment, from March 1991 throughout the 1990s. Poland regulated food prices until 1995. I tried to buy food in the local grocery stores quite a few times, but the lines were very long. The shelves were often empty—
Liberal
The Chair Liberal Kody Blois
Mr. Lee, we're unfortunately out of time. I'm going to let you finish your thought about the idea of not regulating food prices, but quickly, because we're at time.
February 6th, 2024 / 12:10 p.m.
Associate Professor, Sprott School of Business, Carleton University, As an Individual
I have just two sentences left.
The lines were very long and the food was disgusting. Why? Prices were set by the state with no understanding of marginal costs because of the conceit—that's Nobel laureate von Hayek's word—of politicians and bureaucrats who thought they knew more about the optimal prices of the millions of food items than the decentralized market of price discovery.
No, we in the public sector do not.
My final comment is that no brain in the world, not even those of President Xi and his millions of minions, can process the trillions of bits of information daily in an economy concerning prices and scarcity at the margin.
Members of Parliament, Pogo warned us, “We have met the enemy and he is us”, not the grocery retailers.
Thank you.
Liberal
The Chair Liberal Kody Blois
Thank you, Mr. Lee.
We'll now turn to Mr. McCann for up to five minutes.
Tyler McCann Managing Director, Canadian Agri-Food Policy Institute
Mr. Chair, members of the Committee, good morning. Thank you for inviting me to testify today.
The work done by the Committee on issues related to food price inflation is essential to deepen our knowledge and to propose solutions.
About one year ago, I appeared before the committee and recommended that the government do more to release data and analysis to improve our understanding of the drivers of food price inflation. I appreciate that the committee made that recommendation in its report and that the government acted on it last fall. StatsCan's food price data hub and increased focus on the issue inside Agriculture and Agri-Food Canada is a step in the right direction, but much more can be done to provide public data and analysis to inform the policy debate.
Today I want to offer several observations and make another recommendation.
First, policy-makers are not usually lucky enough to get such consistent evidence as we see around food price inflation. The Bank of Canada, academics, researchers and public institutions in the U.S. and the EU all point to food inflation being driven higher by a long list of causes. Most conclude that inflation will slow when those causes, from Russia's war to higher interest rates, resolve themselves. The consistent evidence underscores that increasing food prices is not the fault of a single actor and stabilizing them will require multiple different actions.
Second, the grocery retail landscape in Canada is more competitive than we often give it credit for. Even last year's Competition Bureau report, which concluded that grocery margins have increased by a modest yet meaningful amount, highlighted that the grocery sector is a low-margin competitive business. The bureau cites foreign retailers who admit that it could be difficult to compete on cost in Canada.
Third, food price inflation is a value chain challenge that requires value chain solutions. This is underscored when a retailer freezes its prices and then passes that freeze on to its suppliers. Tension between suppliers and retailers can be a healthy force to keep food price inflation in check when the appropriate checks and balances are in place. An effective and meaningful code of conduct can be one of those checks and balances.
Fourth, grocery stores are big, complex spaces, and the food in a shopping cart behaves in different ways. Much attention is paid to the top-line food inflation number, but when you dig deeper, you see that in December you could get fish, some vegetables and bananas for less than you could a year ago. While no one expects deflation in the overall food price index, the variability in the food basket speaks to the different drivers of inflation and the need for different solutions to stabilize them.
A final observation is that it is challenging when we try to pass judgment on data alone. If you told people that retailers' net cash income in 2022 was 31% higher than in the five-year average before, some might claim profiteering. If you saw a net-worth increase by double digits between 2019 and 2021, in the midst of the pandemic, some people would worry about the impact that has on food prices, but those numbers don't come from the retail sector in Canada. They come from Canadian farms. No one should claim that farms' incomes are rising too fast, but it shows how it can be inappropriate to draw conclusions on the drivers of food inflation without a much deeper understanding of the broader context along the supply chain.
We've seen government take a more thoughtful approach to issues like this. In the midst of the global supply chain disruptions, the government launched a national supply chain task force with the objective of making independent recommendations regarding short- and long-term actions to alleviate supply chain congestion.
I recommend that the government launch a food value chain task force. The task force should have three priority mandates. First, it should build on StatsCan's data hub by producing detailed analysis on food inflation drivers along the value chain. Second, it should make concrete recommendations for the public and private sector with a focus on where Canadians can act. This should include retail, but it must also include an examination of systemic issues—including supply chain fluidity, regulatory burden, taxes, underinvestment in R and D and declines in productivity growth—and make recommendations that can drive those costs down.
Finally, it should look at where the government can act to support those Canadians who are hardest hit by higher food prices. Food Banks Canada gave Canada a D+ in its inaugural poverty report card, highlighting that the impact of food price inflation is a broader poverty challenge that must involve solutions beyond the food system's scope.
Unfortunately, the supply chain task force has shown that writing the action plan can be the easy part. Acting on it is much harder. Complex issues do not always lend themselves to the silver bullets that governments seem to prefer. While it is easy to say that all options are on the table to stabilize prices, there seems to be a focus on the retail sector, with other more sensitive but potentially more impactful policy changes actually off the table.
As food inflation shows, many of these systemic issues and pressures will remain. Even if the political pressure falls as food inflation falls too, the opportunity will still exist to do something substantive. It may not be easy, but it will be worthwhile.
Liberal
The Chair Liberal Kody Blois
That was almost perfect—four minutes and 59 seconds. Well done, Mr. McCann. You're no stranger to this committee, so—
Liberal
The Chair Liberal Kody Blois
Yes, we could learn some lessons, says our colleague here.
Mr. Janzen, you have up to five minutes.
Marcus Janzen Vice-President, Fruit and Vegetable Growers of Canada
Thank you, Mr. Chair.
My name is Marcus Janzen and I have the privilege of serving as the vice-president of the Fruit and Vegetable Growers of Canada. I also, during the day, have a pepper greenhouse just outside of Vancouver, British Columbia, in Abbotsford.
I'm here before you to discuss the pressing issue of stabilizing food prices in Canada, a concern that deeply affects Canadian fruit and vegetable growers, as well as all Canadian citizens. FVGC represents approximately 14,000 farms, producing 120 types of crops, and we contribute about $6.8 billion to the Canadian economy.
A 2022 survey conducted by our organization revealed that close to 44% of our growers are operating at a loss presently, and three-quarters have difficulty offsetting production cost increases that would include the carbon tax, the P2 plastics program, tariffs on fertilizer and aggressive targets for reducing fertilizer emissions. Those challenges, including Bill C-234, risk the sector's affordability and sustainability going forward.
Bill C-234 is at a critical place. By eliminating heating and cooling exemptions to greenhouses and barns, this jeopardizes our competitiveness, as we heard from the previous witnesses, particularly relative to the U.S.
We propose a series of actions that would include the following: reject the proposed amendments to Bill C-234; remove the P2 plastics program in order to further evaluate, particularly when it comes to PLUs, the unintended impacts on costs and therefore food prices; and eliminate the fertilizer tariffs in order to not disproportionately negatively effect domestic producers. We need, again, the idea of having a more cohesive regulatory conversation with government before policies are in place. We would look for the quick passage of Bill C-280, which is essentially the PACA-like trust to be reinstated.
Lastly, we would support an increased resolve to bring the grocery code of conduct into reality.
That concludes my remarks.
Liberal
The Chair Liberal Kody Blois
Thank you, Mr. Janzen.
I will now turn to questions, colleagues. The way we're going to do this is that we'll do our first six-minute panel, and then I'm going to go four minutes for the Conservatives and Liberals, and two minutes on that side. That's the only way we can be on time.
I believe I'm over to the Tories and Mr. Steinley.
Conservative
Warren Steinley Conservative Regina—Lewvan, SK
Thank you very much, Mr. Chair.
Thank you to our witnesses.
I'm having trouble rounding this all out because we're talking about food increases across Canada in grocery stores, but the policies Mr. Janzen just mentioned—P2 plastics, fertilizer reduction, carbon tax—are all policies that the Liberal government has brought in.
I've never heard a government argue so much about the policies that they brought in when they were actually successful. The desired result of a carbon tax is to increase prices on people so they change their behaviour. Every Liberal has stood in the House of Commons and said that, so the carbon tax is working when it comes to food prices. They've increased the food price and changed people's behaviour across our country, because they can't afford to eat as much as they did before the carbon tax came into place.
I'd ask Mr. McCann, is that not the point of a carbon tax brought in by this Liberal government—to increase prices and change consumer behaviour?
Managing Director, Canadian Agri-Food Policy Institute
That is certainly the principle behind the carbon tax, that you're going to add the cost related to the emissions of a product. That is the intent. I think if you go onto the government's website, that's very similar language to what they use.
We have this reality where the food system is a source of emissions, producing food in Canada and around the world represents about 10% of global emissions. There are opportunities to reduce those emissions. Where you get into a discussion on what's the most effective approach to reducing emissions on farms, we see different approaches in Canada and around the world. I think there are other opportunities that someone spoke to earlier as to how you could drive that decarbonization of the food system.
Conservative
Warren Steinley Conservative Regina—Lewvan, SK
The Global Institute for Food Security out of Saskatchewan has just come forward with a study in partnership with the University of British Columbia. It shows Canadians' total agricultural emissions. Of total emissions in Canada, agriculture makes up 8%. For all other jurisdictions, agriculture-related emissions represent around 25% or more of total emissions.
Would it not be better for us to take our sustainability across the world and help people to lower their emissions than to continue to punish the people who create food in our country? As I said, it's very weird for a government to be so upset that the policy they implemented is actually working and that food prices are higher because of their policies.
Managing Director, Canadian Agri-Food Policy Institute
I think a couple of things can be true at the same time. We can have one of the lowest emission food-producing systems in the world, and there could still be an opportunity to reduce our emissions further. Often the big winner from reducing emissions are Canadian farmers themselves. Fertilizer emissions represent fertilizer that farmers have paid for that's not doing the job it was intended to do.
I think the question gets to be what the right approach is to build on that competitive advantage. How do you take the low-emissions agriculture that we have, turn it into a competitive advantage and turn it into a tool for good? I think there are a lot of opportunities to take different approaches that could help farmers out and help grow the Canadian advantage we have.
Conservative
Warren Steinley Conservative Regina—Lewvan, SK
As you're a farmer, I just want to say thank you for the job you do. I appreciate your answers to my questions.
Conservative
Lianne Rood Conservative Lambton—Kent—Middlesex, ON
Thank you.
We know that front-of-pack labelling is going to cost $8 billion. We heard you say earlier that the new P2 plastics ban is also going to add costs to farmers.
I'm wondering, Mr. Janzen, if you can speak to that. We've heard that the new P2 plastics ban is going to cost upwards of $6 billion. You mentioned the PLU stickers. What will this do to food costs, availability and waste?
Vice-President, Fruit and Vegetable Growers of Canada
I think the industry is very willing to look at science-based opportunities to reduce plastics. I think we've seen that already in the last 10 years—for example, with lower-profile clamshell containers that use less plastic.
I think the industry's perspective would be that we need a better system, not only to reduce plastic use but also to reuse it. That's as opposed to eliminating plastics from the system. The reality is that there really are no alternatives to move especially perishable products in an effective way over the kinds of distances we face in Canada without using plastics in some form.