Finance Committee on Sept. 28th, 2022

[Philip Lawrence, Conservative, Northumberland—Peterborough South, ON]

I think that's an excellent suggestion, Mr. Littler.

Mr. Caron, if your members were unable to access the amount of fertilizer they would need for their crops, would that hurt their yield, and would that in turn increase the cost of groceries for Canadian consumers?

[Martin Caron]

May I comment, Mr. Chair?

[The Chair, Liberal, Peter Fonseca]

Please.

[Martin Caron]

First of all, there is an important link between fertilizers and the yield of our productions. That's one of the reasons we use fertilizers, whether synthetic fertilizers or natural ones. I am thinking of the manure we use, for instance. Our organic production is also growing well here in Canada. It is growing more and more.

However, when we talk about reducing fertilizer use, we have to be careful about what that means in terms of greenhouse gases. The goal of net-zero emissions makes us more efficient and productive in our crops, and fertilizers help us achieve that productivity.

The other thing to watch out for is that, every time agriculture or agri-food is taxed, the pantry of Canadians is being taxed. It directly increases the price of groceries. I don't think that's a good way to go. When agriculture and agri-food are supported, access to healthy food at an affordable price is also supported. We need to keep doing that.

I also agree wholeheartedly with what has been pointed out about grains. They are a staple food.

[The Chair, Liberal, Peter Fonseca]

Thank you.

That's the time, MP Lawrence. Thank you.

Now we are moving to the Liberals. I have MP Chatel for six minutes, please.

[Sophie Chatel, Liberal, Pontiac, QC]

Thank you very much, Mr. Chair.

There is no doubt that we are facing a climate crisis, which is bringing on a global food crisis. We are on the cusp of this crisis, and agriculture has never been more important. We need to take both action on climate change and action to prevent it and support our farmers. Those two things go together—one does not go without the other—and that is something our farmers and agricultural producers understand very well.

I know we have talked about this before, Mr. Caron, but the OECD report that talks about reforming agricultural policies to mitigate climate change proposes, among other things, increasing direct payments to farmers who provide ecological goods and services, such as ecosystem services or carbon sequestration in agricultural soils.

Do you think that is a good recommendation?

[Martin Caron]

Thank you for the question.

The answer is yes. Canadian producers and farmers are mobilized to make these efforts. Innovation and research enable us to have healthy soils and to contribute to the reduction in greenhouse gases. Doing that, as I mentioned earlier, does require a lot of investment.

In my opinion, making direct payments to farmers who provide ecological goods and services, as is done in Europe and the United States, is a step in the right direction. It also removes some of the pressure they are experiencing because of inflation. Our farm businesses have already started to make investments, and you will understand that, when we make investments, we also go into debt. That is why it's important for us to have a program in place to help us with that. We need an emergency account for Canadian farmers because our businesses will be weakened by rising interest rates, and there is a risk that people will be discouraged from continuing to take concrete action if they don't have the cash flow.

Before we move to green agriculture, we need to make sure our businesses are not in the red.

[Sophie Chatel, Liberal, Pontiac, QC]

Thank you, Mr. Caron.

I want to come back to innovation. I recently rode on a farmer's tractor using a new bioactive technology that replaces chemical fertilizers with organic products. Farmers who have tried it this year have had much better crops. So we need to invest quickly in the technologies you were talking about earlier.

I also have a question for Mr. Littler.

I read a pretty alarming report about climate change, particularly about droughts in the southwestern United States, which is a food pantry for Canadians. We import a lot of food from that region. The water deficit, which we are seeing even at home, is catastrophic.

What will be its impact on the food crisis?

[Karl Littler]

Well, I mean, it's already being felt. California is obviously a massive source of fruits and vegetables, particularly as the seasons roll, but there have been droughts in western Canada as well and, of course, weather events of all kinds in British Columbia. It's not just the fruit and vegetable side. I mean, it affected egg producers in B.C., as a case in point, so there's no question that the climatic events are having a significant impact on this. Somebody described California's experience as a heat dome and the worst weather in history, so it is a severe risk.

[Sophie Chatel, Liberal, Pontiac, QC]

Thank you, Mr. Littler.

In conclusion, I would say that on‑farm climate action is essential. Carbon pricing is just one tool we have, but we need to use all the required tools, including investments. To do otherwise would simply be irresponsible.

[The Chair, Liberal, Peter Fonseca]

MP Chatel, you still have a minute and a half.

[Sophie Chatel, Liberal, Pontiac, QC]

This is the first time it's happened to me.

Mr. Caron, you talked about the labour shortage in the agricultural sector. What are your thoughts on the trusted employer program?

[Martin Caron]

Thank you for the question.

That program is a development that we had asked for.

You also need to ensure that you reduce the administrative burden so that we can access foreign workers. I remind the committee that temporary foreign workers in Canada make up one-third on the agricultural workforce. Of course, we want to have programs and LMIAs—labour market impact studies—that are valid for three to five years. That would be a big step forward. We need to continue in this direction to establish some administrative flexibility because we really need the workers.

[Sophie Chatel, Liberal, Pontiac, QC]

Automation will not replace all workers. That is my understanding of recent studies.

[Martin Caron]

That's right. Not all producers can afford to make investments in automation, and they rely on labour.

I want to emphasize that the priority for Canadian producers is to support local employment in our regions. However, the reality is that one-third of our employees are temporary foreign workers.

[Sophie Chatel, Liberal, Pontiac, QC]

That's a lot.

Thank you, Mr. Caron.

[The Chair, Liberal, Peter Fonseca]

Thank you, Mrs. Chatel.

Now we'll have questions from the Bloc.

MP Ste-Marie, you have six minutes, please.

[Gabriel Ste-Marie, Bloc, Joliette, QC]

Thank you, Mr. Chair.

Mr. Caron, Mr. Tougas and Mr. Littler, thank you for joining us.

My questions are for Mr. Caron, but if Mr. Tougas wants to supplement his answers, please feel free to do so.

Mr. Caron, thank you for your very content-rich opening statement. You have submitted a lot of information. Please feel free to return to some of the points for further discussion as you see fit.

I want to come back to the topic of inflation. People are seeing food prices go up at the grocery store. Mr. Caron, your presentation was pretty clear: your input prices have gone up again. Necessarily, this is reflected in the price of groceries.

I was struck by a few statistics, especially the ones about input prices going up and the price of farmland, which has tripled in the last 10 years. It makes no sense.

You said there has been a lot of investment in the last few years to automate and to comply with animal welfare rules, as well as with new environmental standards. To calm inflation in general, the Bank of Canada's monetary policy is to increase interest rates. Farmers will be the first to be affected by this policy, as they are part of an industry where there is a lot of capital invested for every dollar of profit.

We know that our farmers work very hard. They don't often have it easy and they are often isolated. Many personal difficulties can arise from all of that.

In the current context, how is the morale of the troops, of your members, in the face of this inflationary crisis?

[Martin Caron]

Thank you. I will start answering your question and will then let Mr. Tougas complete my answer.

As far as morale goes, the situation is worrisome. It is a real concern for our businesses that are in the succession or start‑up stage. Interest rates are rising at almost 3% right now. As I mentioned earlier, a 1% increase represents an increase of $1.2 billion Canadian. So there is a significant impact. I feel that we need to move quickly with a program. Producers are being asked to be competitive and productive. Our American neighbours were quick to provide $1 billion in direct payments. They provided those funds because they know that agriculture is the foundation of a nation.

I will turn the floor over to Mr. Tougas, who will be able to address the economic issues related to land, among other things.

[David Tougas, Coordinator, Business Economics, Union des producteurs agricoles]

I will add a few things.

In his presentation, Mr. Caron talked about debt and the value of farmland, which has tripled. There is a connection between the two, as you may expect. Farmland is 80% of the assets of farm businesses. It is a critical asset for agricultural production. When the value of this asset triples, debt quickly follows. In addition to the investments related to societal expectations, which we have discussed, land values contribute to debt.

[Gabriel Ste-Marie, Bloc, Joliette, QC]

Thank you.

Agriculture is the foundation of a nation. Feeding people is the most important activity. We must continue to properly recognize this economic activity and adequately support our farmers.

With rising interest rates, costs and concerns, is there a way to restore profitability margins? Are the profits still there?

I am especially interested in the next generation of farmers. Mr. Caron, you mentioned a few times the youth in agriculture. In 2021, before the last election, we had finally passed a bill to facilitate the sale of businesses, including farm businesses within the family. The government would not move forward. The committee revived the issue over the summer. The government finally went ahead, but said it would eventually come back to clarify the terms and conditions. Since then, accountants have been saying that they can't do these transactions because they don't have direction from the government.

With the new legislation, is the sale of a farm business to a family member done correctly or is it still problematic?

[Martin Caron]

Thank you for the question. I will answer it and then let Mr. Tougas complete my answer.

One of the things that we were asking for was that incentives be put in place. In that regard, I want to remind people that the average age of farmers in Canada is about 56. That means that farm transfers will take place. We need to plan for that quickly. Nonetheless, there are new farm businesses. Knowing that assets have increased in value, we need to find a way to provide incentives. A lot of gifts are made to children by parents, but also by some who don't like to see perfect strangers becoming owners of farm businesses.

Perhaps Mr. Tougas would like to speak to other issues.

[David Tougas]

Regarding the rise in interest rates, Mr. Caron mentioned in his opening statement that every 1% increase translates into a 20% to 25% impact on net farm income for the entire sector. Obviously, it depends on the term the farmer has chosen. An impact like that isn't felt at the time the hike is announced.

For our farmers, it's akin to the sword of Damocles hanging over their heads. When it comes time to renew their loans, the rates will be higher, and that's when the liquidity and profitability of our farms in Canada will be hit.

[Gabriel Ste-Marie, Bloc, Joliette, QC]

Thank you very much.

[The Chair, Liberal, Peter Fonseca]

Thank you, Mr. Ste‑Marie.

Now we will have questions from the NDP.

We have MP Blaikie for six-plus minutes.