Fisheries Committee on March 31st, 2009

[The Chair, Conservative, Rodney Weston]

Good morning, everyone. We're about ready to begin this morning.

I'm going to briefly turn the floor over to Mr. MacAulay to say a few words.

[Lawrence MacAulay, Liberal, Cardigan, PE]

Thank you very much.

First of all, I want to welcome you to Prince Edward Island.

You've had a good taste of what it's like around here. It could be a lot worse. Kenny could hardly get out of his driveway, but he did finally get here.

I want to welcome you here. It's so important that we hear from the grassroots. We certainly did yesterday, and we will again today. For our guests, we have the governing party, the Liberal Party, the Bloc Québécois, and the NDP represented here, and it's a great chance to voice your concerns.

I suppose if you wish to praise us for anything we've done, we'll be accepting that too, but we're probably not expecting it.

Again, welcome.

Go ahead, Mr. Chairman.

[The Chair, Conservative, Rodney Weston]

Thank you, Mr. MacAulay.

Before we begin this morning, I would like to point out a couple of things. First of all, thank you very much for coming to meet with us this morning.

The second thing is that because of the number of people we have today, we have to meet certain time constraints. When you're speaking or responding to questions, if you hear a beep, beep up here, don't be alarmed; it's the timer we have.

We'll give you 10 minutes, if you want, to make a presentation to the committee, and then each party has a certain allotment of time to ask questions and for your responses as well. You'll hear this beep, beep throughout the proceedings this morning. If I could ask you to adhere to that timeframe, I certainly would appreciate it. Again, it's in the interests of trying to hear everyone's concerns here today.

To begin with, I'll turn it over to you, Mr. Frenette, I believe you're going to make some opening comments to the committee. The floor is yours.

Thank you.

[Ed Frenette, Executive Director, Prince Edward Island Fisherman's Association]

Thank you, Mr. Chairman. I'd like to introduce Mr. Ken Drake, who is the president of the P.E.I. Fisherman's Association.

I'll begin by saying welcome to the members of the standing committee and the ladies and gentlemen. First let me welcome you to Prince Edward Island. It's not often that a Commons committee of this stature makes the opportunity to visit our Island province. On behalf of the P.E.I. Fisherman's Association, please accept our sincere thanks for the invitation to appear here today. It's not often we have the opportunity to do so.

The topic of today's hearings is the growing concern over the 2009 lobster fishing season in Atlantic Canada. As the representative organization of 1,300 core licence holders in Prince Edward Island, for whom the lobster fishery is the primary income source, we are especially concerned about the coming season.

The global economic and financial crisis we face, the softening of some traditional markets, the growing pressures on harvesters by the processing sector, the ever-increasing costs of primary production, and many other issues are cause for worry to our members.

Perhaps some background is in order. Inshore fishing is not a particularly lucrative mode of employment. Statistics published in 2006 by the Fisheries and Oceans policy and economics branch show that fishermen in the three lobster fishing areas surrounding Prince Edward Island earned the following before-tax incomes from all fishing sources: LFA 25, $7,082; LFA 26A, $11,010; and LFA 24, $63,423.

In 2008 fishermen endured a 25% decrease in the shore price of lobster, with the price for canners as low as $4 and markets at $5, down from $5 and $6 the year previous. At the same time, cost of production for bait, fuel, gear, etc., increased by some 37% over the previous five-year average. With such an obvious cost-price squeeze, it is clear that any decline in the shore price paid to fishermen will inevitably result in the bankruptcy or elimination of a solid number of P.E.I.'s inshore fishing enterprises.

The industry around the world has heard the lament from P.E.I. processors of an exorbitant inventory on hand this winter, mostly in the form of so-called “popsicle packs” and whole cooked. Some estimates were as high as $25 million worth of inventory. The results, of course, were to be expected. Wholesalers and brokers simply stopped buying, awaiting fire-sale prices.

While the PEIFA does not have access to processors' figures, we do have solid industry intelligence that tells us that inventory on hand is much less than the $25 million mentioned in the media and is gradually being moved. Nonetheless, this winter's situation raises a number of serious questions for us with regard to the processing industry. For example, what is the standard amount of inventory on hand during the winter months in most years? Does government or an independent third party have access to regular reports on the amounts of inventory held by processors? What is the formula for valuing inventory? What is the marketing and sales strategy employed by the processing sector? What efforts are being undertaken in terms of new product development? What is the business model used by individual processors? Most importantly, why has there been a consolidation of processing facilities in both Prince Edward Island and New Brunswick?

We ask these questions because things are being asked of us. We are being asked, when we do not know what the processing sector is doing for itself. We have been asked, for example, to consider a reduction in fishing days early in the season. We have been asked to consider rotating buying days at wharves. We have been asked to limit landings in the event of a harvesting glut. We have been asked to support processors' requests for government credit guarantees. These things and more have been asked without mention of security or guarantees for harvesters themselves.

Fishing is an industry of tradition. Lobster fishing is a competitive fishery. Harvesters fish the same area year after year. Most use techniques they have developed over the course of their years on the water. Most continue to sell to a buyer with whom they have had a long-lasting relationship, a buyer who provides bait and supplies and who purchases lobster. In the past two years, these traditions have been challenged. Processing plants have been closed. Commissioned buyers are being eliminated. DFO has recommended resource management proposals that have caused concern and confusion amongst fishermen--of course, all within the continuing litany of concern over the economic and financial situation we face.

Fish harvesters are economically dependent upon the processing sector. There is no regulatory regime that establishes the price to be paid to fishermen for their catch. Traditionally, the harvesting sector relied upon the inherent competition between buyers wanting to purchase lobster. Now that competition is being eliminated with the aid of government decision-making, and fishermen are feeling the brunt as shore prices fall and input costs rise.

Lobster harvesters recognize that change in their industry may be inevitable, but to adjust to that change willingly, fishermen demand a certain level of participation and protection. For example, Island lobster harvesters have long called for a licence rationalization program that would see the permanent retirement of licences from the fishery. For two brief years in 2004 and 2005, LFA 25, using funds from the sale of a snow crab quota, was able to permanently retire nine lobster licences and shelve a number of others for one year at a time.

Unfortunately, court rulings prevented any further action along this front. Since then, Island fishers have been requesting government support and most recently have entered into discussions with federal and provincial authorities to develop a rationalization process, with contributions from the two levels of government and the industry.

If agreement is reached, we hope to see a process whereby primarily older fishermen will be able to exit the industry with dignity, those who remain will see improved access to a stable resource, and there will be specific assistance to younger entrants seeking to enter the fishery. We are also examining broader issues of eco-labelling, having gone through a Marine Stewardship Council pre-assessment, and the ocean-to-plate concept of harvesting for the market. These are long-term considerations that require time and discussion to determine.

Short-term concerns, though, face us immediately. The harvesting sector is receiving mixed messages from the processing sector. Some processors say the situation is enormously difficult, while others state that the 2009 season will be similar to previous years. Confusion and fear are rampant.

If we are to assume that shore prices will be lower this year, what will be the effects?

First, since most harvesters hire two helpers, one of them will not be hired. What does that person do to survive?

Second, given the competitive nature of the lobster fishery, harvesters will necessarily increase fishing pressure on the stock in order to earn as much as possible in the short two-month season. This could have devastating effects on future lobster stocks in the region.

Third, as the incomes referred to previously become even lower, many fishermen will be forced into bankruptcy, forfeiting not only their fishing enterprise, but also homes, property, and investments they have already borrowed against simply to make ends meet.

The only protection against possible economic disaster in the lobster fishery this year is government intervention. PEIFA submitted recommendations for inclusion in the recent federal budget, including: establishment of a stabilization fund for harvesters; financial support for rationalization; policy initiatives to ease access to credit for fish harvesters; funding support to a national agency to promote seafood marketing, eco-labelling, and ocean-to-plate initiatives; reduction in certain fees such as those for licences and observers; tax reductions for the application of green technologies to fishing enterprises; improved science, research, and enforcement of small craft harbour programs by DFO; improved training assistance for fish harvesters; and encouragement to the provinces to initiate or improve Fisheries Loan Board agencies and programs.

In all of this we have seen a short-term marketing effort introduced, funding to small craft harbours, and hopefully, easing of credit restrictions by private lenders. However, there was nothing included in the budget that would ease the effects of a serious decline in the 2009 season.

An immediate problem to be faced by captains and crews in the event of low prices will be eligibility for unemployment insurance.

An immediate problem to be faced by captains and crews in the event of low prices will be eligibility for unemployment insurance. The system, where implemented, whereby a captain could qualify for EI based upon 2008 landings, could be eased. First, with the certainty of EI the captain would not place additional pressure on the stock, thereby contributing to conservation, and helpers would be able to fish the full season being paid from landings and therefore qualify for their own EI support.

Fuel is a major input cost. In 2008 we saw the cost of fuel reach staggering prices, and there is nothing in place to prevent a recurrence. Canada's primary industries must have a mechanism in place to protect primary producers from sudden and enormous increases in fuel costs.

Another major concern is the cost of bait, primarily herring for the lobster fishery. The spring herring fishery is on the verge of being closed by DFO, this while adjustments were being made to the harvesting plans of the large purse seine fleet in the Gulf of St. Lawrence, allowing them to land smaller fish, with changes to the small fish protocol that see this fleet landing ever larger percentages of spring component in the fall purse seine fishery. Without a spring herring fishery, frozen bait must be purchased from off-Island corporations at exorbitant prices, adding to the cost of operation. Immediate steps must be taken to limit the destruction of the purse seine fleet on herring stocks in the southern gulf.

We have seen and heard much of the stimulus approach taken by governments around the world to fight the present recession. Incentives should be in place to encourage fish harvesters to purchase needed equipment from local suppliers. If fishermen stop purchasing needed equipment, not only do local economies suffer, but it also leads to a growing threat to safety at sea for vessels and fishermen alike.

The Province of Nova Scotia has recently enhanced its fishermen's loan board service to assist new entrants in the fishery. The development of a regional fisheries loan agency, supported by both provincial and federal governments, dealing only with the fishing industry, could easily be designed to ease the restrictions imposed by private lenders and to adjust to changes in the industry on a year-by-year basis.

Specific to Prince Edward Island, the harvesting community is united in its position that the so-called Ocean Choice agreement be annulled. While this is purely a provincial matter, the agreement limits competition and reduces processing capacity, with the consequent effects on the harvesting community. The moral pressure that can be applied by this committee to the province can only assist in seeing this agreement revoked.

In closing, we thank you, Mr. Chairman and members of the standing committee, for the opportunity to address you. We look forward to taking any questions you might have.

[The Chair, Conservative, Rodney Weston]

Thank you very much, Mr. Frenette.

Mr. MacAulay.

[Lawrence MacAulay, Liberal, Cardigan, PE]

Thank you very much, and thank you for your presentation.

The people here wouldn't be aware of the consolidation of the fish processing, so I'd like you to elaborate a bit on what effect it has had in bringing new processors in and this type of thing, just so they're aware. I think in any business you need competition in order to make sure you get a better price on that line.

[Ken Drake, President, Prince Edward Island Fisherman's Association]

The most recent thing we saw just lately was the announcement of the closing of the plant in the Beach Point area.

In case anybody here doesn't realize, if I wanted to start a small processing line in my building at the shore on Prince Edward Island, and I got the building all ready for health purposes so that it qualified and everything was ready to go, I couldn't process. I couldn't even bring in my wife and her daughter to process lobsters on Prince Edward Island now because there is a regulation that disallows any new processors on Prince Edward Island. What's happening here is we're having buyers telling us that they have glut parts of the season where they can't handle all of the lobsters we catch due to their facilities being unable to handle them. This is what they are blaming for the high inventory of popsicle packs. In order to handle the lobsters, they had to shift to popsicle packs because it's quicker; hence they ended up with too much of that packed.

In my opinion, due to the situation where one company has been given the opportunity to say there will be no more fish plants on Prince Edward Island--and that is the company that is reducing the number of plants on Prince Edward Island--and we're hearing people say there is not enough capacity right now, we're in quite a situation.

The other thing we don't have on Prince Island that they have in some other areas is a good storage facility so that we can hold lobsters over. We don't have that in Prince Edward Island. Possibly that may be a way around this glut in the future--the construction of something on a large scale to handle this oversupply in a certain part of May that they're talking about. The short-term and easiest way around it would be to allow people to come in here and buy lobsters, to do lobsters as they want to, and allow competition.

In some wharves right now, in the past year or so, there were probably four buyers on the wharf and three of them were taking the lobsters to the same place. That's not competition. Competition is where it has to be to create prices.

[Lawrence MacAulay, Liberal, Cardigan, PE]

I'd just like you to elaborate a bit on the storage facility. A number of fishermen have mentioned to me that the statement that prices are always going to be lower.... I've been around for a while, and I think every year at this time we hear the prices are going to be lower. That is just always the way it is.

You can have inventories now. We were in the Îles-de-la-Madeleine yesterday. I asked the processors about inventory. They didn't have a lobster left in their inventory.

This is why this committee is travelling, to find out on the ground what exactly is going on.

So on the storage, could you explain how valuable this would be to the dollar the fishermen would receive?

[Ken Drake]

Basically it would be a live holding facility, and what would happen is--

[Lawrence MacAulay, Liberal, Cardigan, PE]

Who would own it, Kenny?

[Ken Drake]

It would have to be independently owned.

[Lawrence MacAulay, Liberal, Cardigan, PE]

You wouldn't want a certain company to own this. It would be independent.

[Ken Drake]

No. The charge for using it would be just based on the cost for running it, I would think. You wouldn't want somebody making an extra profit over and above what the cost of running it was.

Basically, in Nova Scotia right now the fishermen themselves have storage facilities to keep lobsters alive through low times. Then when prices increase a little bit they move their lobster at that time. It would solve the glut situation they're talking about in Prince Edward Island right now. Lobsters in the glut times could be held over, and they wouldn't necessarily have to be held over for a long period of time, but only through that time period that they're saying they can't handle the lobsters.

This would take care of helping to increase more fish plants, and you would also be able to search farther and wider on where you sold the lobster.

[Lawrence MacAulay, Liberal, Cardigan, PE]

I will also be presenting a motion. You can present a bill or a motion, but whatever you present in the House of Commons, it is up to the government of the day, whoever it might be.... You can have success with all governments and trouble with all governments. I have had experience both ways.

The motion I will be putting before the House next month will be to put a retirement package in place so that fishermen can leave the industry, and with that, the licence would be retired, never to be issued again, that type of thing. It's not something where you can go back to a politician and get the licence.

I'd just like you to elaborate a bit on how important that would be to the fishing industry in certain areas here--in certain areas, and I'm well aware of them myself, but just to get it on the record. This is so much needed. Do we want to let them just keep fishing until they either go broke or deplete the stocks--one or the other?

[Ken Drake]

In most cases when you have licences changing hands, they'll move to an area where the fishery is more lucrative. Certain areas become more concentrated over a period of time, and the chance of the stocks rebounding in those areas becomes reduced.

We have an aging population of fishermen. It would be a natural cull, if you want to use the word, of fishermen right now. If you have people who want to get out of the fishery, the best time to do it is when the oldest people want to get out.

For example, if you took one fisherman out of a certain area, that's 300 traps removed from the water right there. Over a period of time, if those 300 traps caught, say, 10,000 pounds, then compound that over, not just the year they're taken out of the water, but all the years in the future. That 10,000 pounds is left in the water to multiply. You get a real spin-off effect.

If you do other anecdotal things, they don't seem to work.

[Lawrence MacAulay, Liberal, Cardigan, PE]

I'd like you to comment a bit on Nova Scotia. As we're all aware, there was a great difficulty on the price. All of a sudden they started selling lobster out of the back of trucks. I'd like you to give the committee a bit of insight into what happened during the season.

Did the season close, or was it over? It caused the price to change. Right after, the price went up. I think the committee needs to hear that.

[Ken Drake]

Their fishery is in the fall, and they fish until the weather starts to get bad. But fishermen started pulling their traps out of the water earlier than they normally would due to the fact that there was a tragedy...[Technical difficulty--Editor]

[The Chair, Conservative, Rodney Weston]

Sorry, Mr. Drake. Please continue.

[Ken Drake]

The situation was that the price was declining. The season was drawing close to its normal end, but the fishermen ended it even sooner due to the fact that the price was in a serious low state.

Fishermen normally get a large demand in Europe and other places for lobster because of the Christmas season. Buyers told the fishermen that it didn't look like that would happen. The demand was there, but the price structure wasn't going to be able to handle a large price. I talked to fishermen from Southwest Nova after that and they felt the buyers had duped them a little, because after they cleaned out their pounds the price did go up.

The reason it went up was that there was a certain amount of steady supply. The whole world will take a certain amount on a steady basis, but when there's a glut situation, or if people are holding a lot of fish and they move that fish quickly, it is inclined to drop the price. When they moved all their fish, the price was low. Then all of a sudden there was no inventory, as nobody was fishing because winter was coming, and the price went up. The fishermen only got three and a quarter a pound, by the way, and that was for market lobsters.

[Lawrence MacAulay, Liberal, Cardigan, PE]

When the price went up, did the buyers receive that dollar?

[Ken Drake]

Actually, most of that inventory, I understand, was gone. The buyers moved it at that price. What happens is that it's all supply and demand.

Just a week ago, the people who were holding some lobster in pounds.... Some fishermen still fish through the winter. It's just a gradual supply, not a heavy supply. Demand was high in Boston and those places.

At any rate, just last week, the people who were holding lobsters in the pounds decided that they'd better move those lobsters, because the fishermen in Southwest Nova started putting their traps in the water last week. That's how the marketplace reacts. The price dropped $1.50 a pound last week because fishermen started to put their traps in the water and the people who had pounds moved their lobster quickly. Just a little surge like that could create this all of a sudden.

From what I understand, the people who buy lobster buy very carefully and very slowly at a high price. They're scared they'll get caught. For instance, a pound in the United States lost $150,000 last week because the price dropped. That's how volatile it is.

[The Chair, Conservative, Rodney Weston]

Thank you, Mr. Drake.

Monsieur Blais.

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

Good morning, Gentlemen.

I am well aware that my colleague, Lawrence, has a very good grasp of your situation. I, for my part, require additional explanations. We will proceed step by step.

First of all, in Prince Edward Island, is the resource considered to be abundant and stable? Are there geographical problems in certain areas? How does it work?

[Ed Frenette]

Sir, in P.E.I., for the most part, I think, the resource is abundantly stable. The province has its own lobster biologist working strictly with the P.E.I. lobster stocks. His research has been going on now for close to a dozen years.

Last year, in 2008, the landings in LFA 24, which is our north shore, were 65% above the 40-year average.

In the eastern part of the Northumberland Strait, in area 26A, they were up some 15% over the 40-year average.

In the western part of the Northumberland Strait, in LFA 25, they were up 8% over the 40-year average.

The one area where we do have serious trouble is in the central part of the Northumberland Strait, basically running from an area from Point Prim down to Summerside. Most fishermen believe that's affected by the construction of the Confederation Bridge; siltation occurred as a result of it. That area is down 40% from the 40-year average. There are very few fishermen left in that area.

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

Fine. That takes care of the resource as such.

I will now talk about the fishers. What I heard earlier made me think of what the people in the Gaspé region are going through, especially in certain fisheries where income levels are far from sufficient. This forces fishers to go after other species, namely offshore species. In other words, they do what they have to to earn a relatively decent income because what they get from the lobster fishery is far from sufficient.

To what extent is that the case here? Are there a lot of fishers who do not earn enough income? And in such cases, how do they manage?