Fisheries Committee on March 30th, 2009

[Léonard Poirier]

I am not an expert on buyback and rationalization programs. We have always been in favour of keeping our boats. In a way, we have already carried out some rationalization, but not through these programs. We did not receive funding that way. In any case, there were failures. A number of programs were delivered. The last one seemed to please some people, but was not as effective as expected. They thought it would be possible to remove more boats. I should point out, however, that the program was not aimed specifically at the lobster fishery. The objective was primarily to buy back licences for groundfish, at least in Quebec. The effects were not as positive as was hoped, but some boats were removed. The fact is there were complications. There was a licence buyback program for groundfish and a temporary allocations program for snow crab. Initially, the latter program was introduced with a view to establishing a stabilization fund. We were among the first to develop such a project.

The infamous allocation program for crab was diverted over time, supposedly to help groundfish fishing fleets that were in difficulty in Quebec. When the time came to introduce the licence buyback program, given that ongoing allocations had been promised for the crab fishery, fishers did not want to withdraw for only a few thousand dollars, even if it was from the federal government. It is the chicken-and-egg problem. For the most part, people preferred to remain in the system and receive snow crab allocations which were originally to be used for stabilization. But the idea was not to stabilize people whose economic activity simply could not continue. Indeed, as Mr. Déraspe pointed out, a financial assistance program should allow people going through difficult times to get back on their feet and keep going. We are not talking about assistance for life; it isn't forever. When prices drop and these enterprises receive assistance to help them come through the crisis, that is understandable, but again, the resource has to be there when the markets and the enterprises start up again. In the opposite case, if there is a resource problem, I can understand the need to withdraw… That is why things have become complicated. We have to ensure that these problems do not recur. If there are to be buyback programs, they must be effective, so that people will really be interested in responding to the offers.

[The Chair, Conservative, Rodney Weston]

Thank you very much.

That concludes our time.

I'd like at this time to thank you very much, on behalf of the committee, for coming this morning and providing us with the advice you've brought forward.

Once again, thank you. Merci.

We will take a couple of minutes for a health break for the committee members while we change over to our next witnesses.

[The Chair, Conservative, Rodney Weston]

We'll begin.

One point I wanted to make before, and I apologize for not making this point to the previous group--Mr. Blais, maybe you could pass it along to them--is that the proceedings today are recorded. If you would like to receive a transcript of today's hearings in the future, you can receive it by contacting the clerk. It's just for future reference.

We have with us today representatives from Madelimer.

Mr. Chevarie, I will let you open. If you want to introduce your colleague, the floor is yours.

[Jacques Chevarie, Director General, Cap sur Mer]

Good morning everyone. My name is Jacques Chevarie and I am the President of Cap sur Mer. There have been changes recently. The company has three processing plants, in Grande-Entrée, Havre-aux-Maisons and Gros Cap. Sitting next to me is Marc Gallant.

[Marc Gallant, Chief Financial Officer, Cap sur Mer]

Good morning everyone. My name is Marc Gallant and I am the Chief Financial Officer for Cap sur Mer.

[Jacques Chevarie]

We are somewhat ill-prepared because we were only advised last week that we would be appearing. We have plenty of expertise with respect to processing, purchasing and selling lobster, but we have not prepared anything. The group that came before us said pretty well everything that had to be said about conservation. It is a very good example of what is being done. Indeed, it is one of the only species I know of to have been managed by fishers and scientists working together, and Fisheries and Oceans has been a close collaborator; that is very much to its credit. It is pretty much the only species left around the Magdalen Islands, because the others have pretty much disappeared: groundfish, pelagic fish, etc. And fishers did not have much to say about that, it should be noted. They have made a great effort and that is very much to their credit.

In terms of the lobster fishery in the Magdalen Islands, year after year, we work with approximately 5 million pounds. That has been quite steady for many years. Of course, the fishing season is not very long. Unlike in the other provinces, we do not have much crab either. Approximately 1 million or 1.3 million pounds of crab belong to the Magdalen Islands. That would be with the allocations; it is not only a permanent quota. And, in terms of the resource itself, there is a constant decline.

What we would like to do is look at the expenses we incur in the Magdalen Islands, compared to the other provinces. Even though we are in the midst of a crisis which is worsening, we are islanders, meaning that we have two islands to cross if we want to get out: the Magdalen Islands and Prince Edward Island. People on PEI find this to be an expense, but we are even further away. So, that is the issue I would like to look at more closely with you. I am available to take your questions.

However, I am going to ask Marc if he wants to add something.

[Marc Gallant]

I would just like to give you a quick overview of our enterprise. We process several species, especially lobster, and particularly lobster from the Magdalen Islands. We are currently merging two enterprises in the Magdalen Islands, Les Pêcheries Gros Cap and Madelimer. As Mr. Chevarie was saying earlier, our new company name will be Cap sur Mer. The main reason we are merging is to lower our costs and increase the volumes we can process in our plants. The problem we face is the same one many people are faced with—increased expenses and, for several years now, the disappearance of fairly good processing volumes we used to be able to access, such as pelagic fish. In the past few years, pelagic fish have completely disappeared from the Magdalen Islands. As a result, we have had to reorganize our businesses and focus on the species that are most significant here in the Magdalen Islands, including lobster. In 2008, we agreed that it was a good opportunity to go ahead and merge the two companies, so as to be stronger together and try to go further in developing the species that we process.

[Jacques Chevarie]

If you want to buy lobster from Cap sur Mer but are having trouble finding the name, you can locate us under the name Cape by the Sea. It's the same thing.

[Voices]

Ha, ha!

[The Chair, Conservative, Rodney Weston]

Thank you very much, Mr. Chevarie.

In the interest of time, would it be acceptable to the committee if we went with a shorter round of questioning?

[Lawrence MacAulay, Liberal, Cardigan, PE]

We can if we have to.

[The Chair, Conservative, Rodney Weston]

We'll go with a five-minute round, if that's okay.

We're going to begin with Mr. MacAulay.

[Lawrence MacAulay, Liberal, Cardigan, PE]

And be strict on the time.

[The Chair, Conservative, Rodney Weston]

I'm going to be very strict on the time this time.

[Lawrence MacAulay, Liberal, Cardigan, PE]

Thank you very much, and good morning. I'm pleased to be here.

First of all, you run a processing plant. What is your inventory? Do you have a lot of lobster left? Do you have a lot of lobster in inventory?

[Jacques Chevarie]

No, I would say that in terms of the lobster inventory, we do not currently have any, even though we are processors.

[Lawrence MacAulay, Liberal, Cardigan, PE]

If you were to be asked if the inventory would affect the price that you're going to pay at the wharf, you would say the inventory would have no effect on what you're going to pay at the wharf.

[Jacques Chevarie]

We are not in that situation, but there are lobster inventories on Prince Edward Island and Boston markets, for example. It would seem that the current inventory is not the same as ours. However, that does have an effect on our orders. It can affect prices. When there are inventories, prices are always lower.

[Lawrence MacAulay, Liberal, Cardigan, PE]

I understand for sure, and I understand it could be. We are going to Prince Edward Island, and I will be asking that very same question to people who are in the processing industry. You mentioned expenditures here as compared to other zones, I take it. I'd like you to expand on that and on what you want compared and on where you're going with that statement.

[Jacques Chevarie]

In terms of transportation, there has been a lot of discussion about the cost of fuel. If you compare the cost of fuel in the Magdalen Islands to the cost in Prince Edward Island and New Brunswick, you will see that costs are higher here. If you ride around, you can check the prices at the pump. Fuel costs between 10¢ and 12¢ a litre, and even more, which makes for a considerable difference. For us, the cost of transportation between the Magdalen Islands and Souris has major consequences. The cost of delivering lobster to Boston from the Magdalen Islands is $4,750. Between PEI and Boston, it costs $1,500 less. My figures may not be perfectly accurate, but they are very close to reality. From New Brunswick, it is even cheaper. So, we are competing with the other provinces, and that has a major impact on our prices. We process the resource, which means that we have to import CO2. When we bring in CO2 from the other provinces, we have to pay for return transportation. If we go to Prince Edward Island, for example, one tank can certainly represent an additional $1,500 to $2,000.

On Prince Edward Island, there is a bridge to cross. We have to cross the same bridge and absorb the cost of crossing it. For every pound of lobster or fish, we estimate that our transportation costs are 15¢ or 20¢ higher than those in the other provinces. We also import product. If it is coming from Boston, we pay the cost of three trips for a single trip with processed products—in other words, two trips to bring it in and one trip going out. We buy live lobster from the Eastern United States, as do New Brunswick and Prince Edward Island, but it costs us $4,750. We can about 50 per cent of the lobster. Our costs are extremely high.

[Lawrence MacAulay, Liberal, Cardigan, PE]

I appreciate that, and I truly understand what you're saying. I might add that for Prince Edward Island to have an advantage on anything.... You would have had that cost 10 years ago too. Our biggest concern is...and of course, it is a concern, and if it's something you think we could suggest to address this for the Magdelan Islands, that's what we're here for. If you think there's a way something can be done in order to make the costs more fair, then I'd like to hear it.

Thank you.

[Marc Gallant]

What we would like—and we are discussing this at the provincial level—is not to have an advantage over others, but at the very least be able to do business at the same level as the others. What we are asking is that there be some determination as to ways of working.

Let's take the example of transportation costs. It is quite true that these same costs existed 10 years ago, except that everything went up after what happened with the price of oil. Transportation costs rose much more than some other costs.

It's really a question of determining how we could work things so that we would receive a treatment comparable to those of the other businesses—for example, other processors in New Brunswick, Prince Edward Island or Nova Scotia. We don't want to have an advantage over them, but we would like to be on an equal footing with them.

[The Chair, Conservative, Rodney Weston]

Thank you.

Mr. Blais.

[Raynald Blais, Bloc, Gaspésie—Îles-de-la-Madeleine, QC]

Thank you, Mr. Chairman.

Good morning everyone.

For the information of committee members, I would just like to say that the current study will ultimately lead to recommendations that will be presented in the House of Commons, to the government, and then to the Department of Fisheries and Oceans. We are aiming for rapid intervention. We are almost at the beginning of April, and the season will begin in early May. However, there are already a lot of things being done.

I simply want to point out that the fishers' level of organization is such that they are able to come through the kind of events we have seen recently, and which may well occur again. In light of what you just said, your reorganization allowed you to be better equipped than if you had been working in different silos, with a lot of different enterprises. By consolidating, you gain strength.

I would like to hear your views on future constraints. If we have a clear understanding of the constraints and challenges that are on the horizon, we will have a better understanding of the kind of solutions that are needed. You frequently referred to transportation. That is one potential solution.

The recession in the United States will affect the market and the price of lobster. Even though lobster from here is not exported to the United States, there is a danger that the Quebec market, which is our main market, would be inundated. That would result in competition that could destabilize prices. So, I would be interested in hearing your comments on the constraints facing processors such as yourselves. It is important for us to know about them and have a good understanding of what they represent.

[Jacques Chevarie]

You are right: the crisis is hitting the United States hard, but it will also hit Quebec, Canada and everywhere else. That is why we have been talking about transportation and our advantage in that respect. As Marc was saying, we have a fuel surcharge. The crisis in the U.S. is affecting the Magdalen Islands and everyone else. If we have higher expenses, it affects us more. The market is going to be inundated. Will the United States buy our lobster? We do not know. We are in the same boat as everyone else; we are no different.

If they do not buy lobster from the Magdalen Islands, they won't buy it from Nova Scotia, Newfoundland or anywhere else either. It's the consumers that don't want lobster. Over the last three or four years, we have seen the Quebec market overrun with lobster that does not necessarily come from Canada.

In the other provinces, lobster is smaller and costs less. The fisher receives less, and the consumer pays less. The size of our lobster is comparable to lobster in Nova Scotia and Newfoundland. Large lobster is a more difficult market. As a result, lobster from the Magdalen Islands or the Gaspe will not have the same attraction, particularly in the midst of an economic crisis. Also, the other provinces are closer than we are. Quebec City or Montreal are closer to Nova Scotia than the Islands. The same applies to New Brunswick and Prince Edward Island.

Marc, do you have anything to add?