Thank you, Mr. Chair.
I am Martin Caron, general president of the Union des producteurs agricoles. I am also a dairy producer and a field crop producer in Louiseville.
As you know, we are living in a historic inflationary period caused by a multitude of events and circumstances. These elements combined have created a crisis situation that is promoting a sharp rise in product prices. You have to go back to 1991 to find a higher annual growth rate in the consumer price index, or CPI, than in 2021.
When it comes to price changes, of all the products in the CPI, food has surely received the most attention. Yet food prices have changed in a very similar way to the overall CPI since the start of the pandemic. Indeed, food prices in Canada have increased by 13% since January 2020, while the total CPI has increased by 11.5%. Some items in the overall CPI have seen their prices rise faster than others, such as gasoline, whose price has increased by 48%.
For the agricultural sector, input prices rose 20% between the first quarter of 2020 and the first quarter of 2022, according to Statistics Canada's farm input price index.
Three of the major production inputs—feed, fertilizer and fuel—experienced price increases of 100%, 60% and 50%, respectively, which is much higher than the CPI. Let's also not forget that, for eastern Canada, which is more dependent on imported fertilizers, the 35% tariff on Russian fertilizers has not only increased the cost of fertilizers, but also made their availability more fragile. For horticultural products, the price of containers has also increased significantly.
For the Canadian agricultural sector, these increases represent $10 billion in additional expenses. The majority of these increases have occurred in recent years. This is unprecedented.
It is important to remember that the price of agricultural products is only a fraction of the price of food we find on grocery store shelves. For example, for every $1 spent in Quebec on beef, less than $0.38 goes back to the producer. For yogurt, only $0.13 of every dollar consumers spend goes back to dairy farmers.
Historically high input prices mean an unprecedented strain on farm cash flow, even for productions that operate in a more favourable market context.
Established farm businesses are not the only ones affected. Owing in part to their higher debt load, next-generation and start-up businesses are being hit hard by rising production costs.
The Bank of Canada's desire to curb inflation through interest rate increases is laudable, but for us, this policy will have the effect of replacing one problem with another.
Farm businesses have had to invest heavily in recent years to, among other things, comply with societal expectations regarding the environment and animal welfare. In addition, the value of farmland has more than tripled over the past 10 years. This has resulted in a doubling of the agricultural sector's debt load over the past few decades. Every one percentage point increase in interest rates ultimately generates approximately $1.2 billion in additional interest expenses for Canadian farm businesses, representing approximately 25% of the sector's total net income in 2021.
In this context, and given the critical nature of agriculture for food security, the government must act quickly to support our sector. Special assistance is needed to avoid a financial catastrophe among thousands of farm businesses. We stress the need to act quickly. Assistance could be modelled on the Canada emergency business account, which would make it possible to combine liquidity support with business profitability assistance. The government must also optimize the tools and programs already in place that adequately respond to the current context. For supply-managed productions, price adjustment mechanisms must be reviewed to ensure greater flexibility.
Inflation will have a negative effect on businesses' productivity and profitability. It will also affect their ability to invest in automation, robotization and new technologies. These solutions to labour shortages and climate change require very large investments, which inflation strongly discourages.
The one-time assistance and requested measures will help mitigate the financial impact on agricultural businesses, which must both deal with historic increases and secure the food supply of our population.
Thank you.