Finance Committee on April 17th, 2020

[The Chair, Liberal, Wayne Easter]

Sorry, I didn't have my mute off.

While we're on that same line of thought, I will turn to Mary.

Mary, you mentioned the emergency program that you were proposing, an emergency fund. Do you want to expand on that and on what it would mean? Perhaps it's equally important that not many people understand the whole food security issue for the country. This isn't just about farmers earning a livelihood and an income; the very essence and bottom line of this is food security for Canada. Perhaps you could expand on that.

[Mary Robinson]

Thank you, Wayne.

I'd like to build on what Martin has shared with us. The AgriInvest stimulus we've asked for would be 5%, based on allowable net sales from 2018. The reason for our suggestion is that it's a very simple mechanism that would give a quick injection of cash to producers straight across all commodities in the country. We thought that would be the cleanest way to get a stimulus to farmers to help them address some of these extraordinary costs.

The second part of our ask was that we would increase AgriStability coverage, and that would mean returning the coverage rate to 85% and removing the reference margin limit. Now, AgriStability is typically used to address large declines in margins. What we've seen is subscription to this program drop off because it's become very ineffective. I believe it was the Conservative government that cut it back 15%, so now if you're going to trigger an AgriStability payment, you're in very rough shape financially. It comes much later, 16 months after the fact, and it's really not that effective as a safety net program. That's why we've asked for AgriInvest to be reinstated to what it was before.

We've also asked for improved access to capital. We know all of these offers to Farm Credit Canada have been made. They represent only about 30% of the lending within our sector, so we'd like to see CALA expanded to other lending agencies in Canada.

The emergency fund that we mentioned is really a statement of confidence by government to Canadian producers. We've heard from other presenters that we're competing against American producers who definitely know they have the confidence of their president. They've seen over $30 billion given to them. What we need is for our government to step up, much as they have with health, and say that we need to ensure that our domestic food supply is secure this year. We need to make sure that the producers who are investing hundreds of million of dollars right now have the confidence to do that. If we don't have that kind of financial backstop from the federal government, we are going to see a reduction in the amount of food planted and the number of animals raised this year. We will see it hit all of us, and it will definitely result in food shortages, a decrease in the variety of food and an increase in the cost of food.

We've been careful to not raise panic and alarm about this in the press, but I can tell you that in Prince Edward Island and straight across the country, I'm hearing about upwards of a 25% reduction in potato planting. I'm understanding that in the Holland Marsh and that entire area, which is really the vegetable basket of Toronto where 90% of the produce comes from in the middle of summer, they're looking at a 10% to 40% reduction in their planting.

This is going to have a direct impact, because producers right now do not feel that the government has put anything meaningful in place that they can take to the bank so that if something happens on their farm due to COVID-19 and they're unable to harvest, they're going to be covered. It makes more sense for them not to make the investment.

[The Chair, Liberal, Wayne Easter]

We'll have to end it there.

We turn now to Mr. Julian and then to Mr. Lloyd and then Ms. Koutrakis.

Go ahead, Peter.

[Peter Julian, NDP, New Westminster—Burnaby, BC]

Thanks very much, Mr. Chair, and thanks to our witnesses for being here. You represent very important sectors, and we certainly appreciate your time today and hope that your families are safe and healthy.

I'd like to start with Mr. Nighbor. The Forest Products Association of Canada represents a very important industry. You've written the government, I understand, about the mill-by-mill approach in terms of the wage subsidy, which should be easy to fit within the regulatory framework, and also about the sliding-scale approach as well. I'd like you to tell us what response you've received on that, because these are two very thoughtful approaches that can make a difference for mills across the country.

Second, perhaps you can go into the discussions you've had with unionized workers around USW and Unifor and what suggestions those discussions have led to in terms of how we can help provide support during this crisis.

[Derek Nighbor]

Thanks for the opportunity.

The wage subsidy piece has been top of the list with Unifor and USW in our conversations, just in terms of getting more of our companies in. As to the reasons that we're not fitting, there are a couple of things. The March 2019 comparison was when we were at our low point in lumber commodity markets. We came off a real high in 2017, got hit with softwood lumber, and things started to slide late in 2018. That was not a great benchmark for us. The January-February 2020 adjustment as an average didn't work either, because we were still not quite out of that point yet. Our margins are very thin and we're also selling in U.S. dollars. Our revenues get a bit of an artificial bump with the U.S. dollar, with the Canadian dollar going down, so we just couldn't fit into this model.

To be fair to the finance minister, we've shared these new approaches just in the last couple of days. We were looking forward to last Saturday's legislation and we took a few days to try to find our way. We do think there's an opportunity in the regulatory framework, so we'll do our best to push there. It's only been a couple of days, to be fair to Minister Morneau and his team.

As I said, that's not a magic bullet. We have massive cash flow issues that we have to deal with. Really, the wage subsidy will help us get a number of mills up and running, get some more people working and get that chip flow going to the pulp mills. We have three pulp mills that are either.... One is down and two are going down, but their order sheets are pretty full, so there's a demand for their products and we'd like to keep those pulp mills moving.

On the worker side, I learned two things in this process. The first is around what's called a SUB, or a supplementary unemployment benefit. Because we're a commodity sector, prior to March 15 a lot of companies in our sector that were in temporary shutdowns would try to keep a lot of our employees whole. They might go on EI, and then we'd top them up with SUB. It could be $200 to $300 a week on top of the $573 under EI.

On March 15, we kicked into the CERB, and I think I get why this happened: It was the ease of getting this thing up and running and cash out the door. Then the maximum benefit moved from $573 to $500. As well, our ability to do that $200 to $300 top-up was taken away from us. Right now it's still not fixed. It's been in Minister Qualtrough's office for about a week. We've had a couple of tries. I know they're busy, but we still haven't had word back.

That measure to top up and help our workers during this transition is on industry's dime, and we'd like the flexibility to use it again.

[Peter Julian, NDP, New Westminster—Burnaby, BC]

Thank you very much.

I've spoken to the minister. The minister has the powers and has said that she will put them into place as part of our parliamentary agreement last Saturday. The SUB is not a barrier. It's just a question of the government having the will to keep their commitment. The commitment they made to us is that the SUB will be reactivated.

My next questions are for Mr. Caron and Ms. Robinson. I'd like to discuss the business risk management programs and Farm Credit Canada.

Our agriculture critic, Alistair MacGregor, has already called for a comprehensive review of the business risk management programs and the effectiveness of Farm Credit Canada.

Do you think a review is imperative, just like the emergency fund? Both of you mentioned the importance of taking immediate action.

[The Chair, Liberal, Wayne Easter]

Who wants to go first?

We will go to Mr. Caron and then Ms. Robinson.

[Martin Caron]

That's a very good question.

It is urgent to make adjustments when it comes to AgriStability. Ms. Robinson mentioned that producers use that program and that things must be taken a bit further. Regarding the agri-invest program, that is a key element that helps quickly provide operating funds for businesses, so that they can, among other things, deal with the conditions we are experiencing. If that program was enhanced by 5%, it would be important not to require the normally required contribution from producers to have access to the money. Those are elements to consider.

I will let Ms. Robinson answer the emergency funding question.

[Mary Robinson]

I apologize. I couldn't hear the question because I had the interpreter, as well as Mr. Julian, speaking at the same volume.

Is there any way I could have the interpreter repeat the question for me?

[The Chair, Liberal, Wayne Easter]

It's related to AgriStability, AgriInvest and business risk management.

[Peter Julian, NDP, New Westminster—Burnaby, BC]

Yes, and the importance of moving very quickly on that. Alistair MacGregor has called for a very quick and important improvement to those programs.

[Mary Robinson]

Because of our seasons, the urgency is dire. The AgriInvest tool is an easy way to quickly get money out there, and then to have an announcement that AgriStability has been brought up to meet our requests would give producers the confidence that AgriStability will be there for them further down the road if they run into trouble.

The emergency fund goes beyond that. It's specifically about the impacts on a farm. We're seeing right now that our beef farmers are unable to send their animals to slaughter because of all these impacts of COVID, and we understand that a union is pushing to shut down the plant. They're having to hold on to animals longer, so the Canadian Cattlemen's Association has put in a request for a set-aside program that would be the same as for BSE.

There are many specific examples within this. AgriRecovery, we understand, is going to be modified so that we can access it for COVID-related losses, but the emergency fund is kind of an umbrella fund beyond that. I know the clerk got a copy of our plan, and she will be sharing it with all of you if she hasn't already. If you have any questions, please be sure to reach out to us after the fact.

[The Chair, Liberal, Wayne Easter]

Scott, do you have anything you want to add?

[Scott Ross, Assistant Executive Director, Canadian Federation of Agriculture]

Yes, sir. I think Mary covered it very well.

I think the urgency of the BRM program enhancement speaks directly to the fact that farmers are making plans and decisions right as we speak. Those tools are needed to provide them with confidence so that we don't see those shortages and price increases that she referenced in her earlier response.

[The Chair, Liberal, Wayne Easter]

Thank you.

We're out time, Peter.

To Mr. Nighbor at the Forest Products Association, if you could send us a copy of that note that you sent to Minister Qualtrough, it would be helpful.

Turning now to five-minute rounds, we will start with Mr. Dane Lloyd and then move on to Ms. Koutrakis.

[Dane Lloyd, Conservative, Sturgeon River—Parkland, AB]

Thank you, Mr. Chair.

My first question is for Mr. Nighbor. We were talking about rural and remote communities and we know sawmills are predominantly located in rural communities. My concern is this: You've noted the pulp sector has [Technical difficulty—Editor], and I think we can guess why. Toilet paper consumption has gone up dramatically, but the use of toilet paper has probably not gone up dramatically. We're seeing huge stockpiles in people's houses.

Do you believe that in the near future there's going to be a serious drop in demand for pulp products when people don't need to go to the store to buy toilet paper anymore because they have so much?

[Derek Nighbor]

That's a good question. Yes, there was a surge in toilet paper, but in tissue markets there were paper towels, sanitary wipes.... I think there was maybe more of a surge on the wipes. Toilet paper is a bit of an anomaly. That was a 241% shift. I think if you talk to the toilet paper manufacturers, they'll say they expect to see a significant dip in the weeks and months ahead.

As for the other product areas, not at all. If you think about sanitary wipes and paper towels, you'll see the demand is going to be pretty strong for those, so the prospects for our pulp mills are pretty good. Our biggest issue is that they need that consistent flow of chips to operate, especially in B.C. I mentioned almost 40 mills were down. Twenty-four of those mills are in British Columbia, so the impact in western Canada has been more significant at this time, but if this drags on, I'll be increasingly concerned about capacity issues in the east as well.

[Dane Lloyd, Conservative, Sturgeon River—Parkland, AB]

Absolutely. One of those mills is in my riding, as you know. About 60 people were laid off. Can you describe to us in more detail why the current lack of a segmented approach...?

We know a lot of these industries are integrated—pulp mills, lumber mills—so they can't demonstrate a 30% loss in revenue. Can you explain that further, and why it's important for the government to adopt a segmented approach so that we can get people back to work in our rural communities and our mills?

[Derek Nighbor]

Yes, and if we went down 30% even in the heyday, we'd be in big trouble, just based on our margins, so that number is not part of our vocabulary.

Your community is an interesting one. The mill in your community was acquired by a slightly larger company some time ago. They then fold that mill into the larger company's revenue picture.

For that mill in your community, for Spruceland, if we can look at that mill's financial picture and make it fit outside the parent company, it would create an opportunity. If we can't do that, given the unique.... Forestry is not alone in this challenge in fitting to this 15% or 30% threshold. Maybe if you get 10%, the subsidy is a bit less. Those are a couple of fixes.

I'm encouraged to hear—and this confirms what we were starting to hear in the last day or so—that there could be an opportunity to implement this fix within the existing regulatory framework. We'll be doing that follow-up with the minister's office on Monday.

[Dane Lloyd, Conservative, Sturgeon River—Parkland, AB]

That's positive to hear. Thank you.

To Cleanfarms, for many of us I think this pandemic has reiterated or reinforced the importance of plastics for medical devices such as N95 masks and endotracheal tubes. In your work with agriculture, could you enlighten us about the consequences to our food sector in light of COVID-19 if we had no plastics right now for your particular industry?

[Barry Friesen]

If plastics were to disappear, it would be tremendously detrimental to the food sector.

We commend the fact that people are interested in getting plastic out of the waste stream, the lakes, the rivers, the streams and the oceans, but the way to do this, we think, is through programs like ours. It's by putting extended responsibility on industry to be in charge of plastics management, as opposed to putting blanket bans on materials. As you said, if plastics were no longer available, there would be a tremendous impact.

I go back to my first job. There were four of us. We baled 11,000 bales of hay in P.E.I. in a six-week period. With the use of plastics, that can be done now by one person in a matter of days. It's tremendous how much plastics technology has improved agriculture today.

[Dane Lloyd, Conservative, Sturgeon River—Parkland, AB]

Mr. Friesen, could you outline what these consequences would be? I think everyone wants to know. Can you give us some real-life examples?

[Barry Friesen]

The real-life examples would be that in some cases the price of food would go way up if we were to lose the ability to use plastics in agriculture, from store to material to production to hay bale wrap. All hay used in the dairy industry is now wrapped in plastic.

[Dane Lloyd, Conservative, Sturgeon River—Parkland, AB]

No, I mean in your industry. What role is plastic playing in protecting the food supply in Canada during COVID?

[Barry Friesen]

It's tremendous. The same practices as before COVID are being used today. We have these materials here to use, but the challenge we're facing right now is that recycling plants are being shut down and we're not going to be able to collect a lot of these materials, so it's very difficult.

COVID isn't having a direct impact on agriculture yet in the use of plastics. Those technologies are still available. The problem is going to be if we can't collect it, if we can't manage it. We're going to have to burn or bury this material. That's probably going to be the biggest impact as well.