Thank you, Mr. Chair and honourable members of the committee.
On behalf of the Canadian fresh fruit and vegetable supply chain, I welcome the opportunity to share our recommendations for budget 2020-21.
Since the start of the pandemic, the fresh fruit and vegetable supply chain has seen massive shifts in our markets, changing retail sales patterns, the rise of e-commerce and major disturbances in food service. We recognize there will be winners and losers as we emerge from 2020.
Today my comments will focus on the need for a financial protection mechanism for produce sellers in Canada, which is a tool that has long been a priority for our sector and has only been intensified by the COVID-19 environment. Other programs and tools that also require consideration include the swift deployment of the universal broadband fund and other critical infrastructure; targeted tax credits for essential services to support required changes in COVID business practices, including the purchase of new equipment and PPE; and more effective programs to support our domestic food supply as an essential sector and to bolster food security in Canada.
Our recommendations can be found in our submitted brief. More information is in our comprehensive report, which outlines 24 recommendations for government action to support our sector in COVID recovery.
We have an immediate need for a Canadian limited statutory deemed trust to effectively protect produce sellers during buyer bankruptcy in Canada. This is at no cost to the government and would provide an avenue to reinstatement of protection in the U.S. for our exporters.
Growing, harvesting, packing and selling fruit and vegetables comes with a number of risks. COVID has only created greater challenges, as overhead and capital costs continue to rise, while returns are delayed until the product is sold and payment is collected down the supply chain, usually long after the farmer or produce seller has shipped their product.
We know bankruptcies are coming. Federal support, loans and credit have created a false sense of security. Economists have already coined the term "zombie companies". These companies are leveraging federal programs or tapping banks for more credit. Over the next two years, the pandemic will drive Canadian produce companies into bankruptcy. We anticipate company failures, especially among hard-hit food service businesses. These closures will be felt by urban Canadians, who will miss their favourite restaurant, but they will be felt the hardest in rural Canada, where farmers will be forced off the family farm.
In the case of an insolvent buyer, the current super-priority provision for farmers fails to effectively protect our sector, as the terms of payment for fresh produce sales regularly extend beyond the 15 days between delivery and buyer bankruptcy as prescribed in the act. Sellers of fresh produce are rarely able to recover their product, as other commodities are most often able to do under the BIA.
Canadian fruit and vegetable farmers have already begun to identify a growing concern related to their accounts receivable and delays in payment due to COVID. Compared to the same period in 2019, the industry is seeing 25% or more of their accounts overdue. For some, this equals over half of their estimated annual income. These delays put an increased burden and strain on the sector and are clear indicators of financial turbulence and potential bankruptcies down the line. Our lack of financial protection for produce sellers also means we can no longer access protection tools in the U.S. without incurring significant cost. For Canadians to file complaints in the U.S., we now must post a bond twice the value of the claim.
The effects of the COVID-19 pandemic are already being felt south of the border. Over the first three quarters of this year, the value of complaints filed under the U.S. Perishable Agricultural Commodities Act for non-payment has risen by 52% in 2020 compared to 2019, and this is expected to rise even further in Q4.
We urge the government to implement a Canadian limited statutory deemed trust to effectively protect produce sellers during bankruptcy in Canada. It would be fitting for a financial protection mechanism to be included in the budget implementation act, as it would support one of our critical sectors and strengthen our own food sovereignty and security. This no-cost tool has been supported by this committee and the AGRI committee twice, most recently in recommendation 15 from its report of November 2020 on enhancing business risk management. More importantly, the tool would protect sellers domestically, remove complications in cross-border trade in the U.S. and reduce potential costs imposed on Canadian consumers.
In closing, thank you to the members for the opportunity to share our comments today. I will be happy to answer questions.