Fisheries Committee on April 1st, 2009

[Colin MacDonald]

I certainly have made my views known to the province and provincial fisheries ministers from before Jim Barkhouse's days as provincial fisheries minister. Their attitude is to accommodate the fishermen, and the fishermen feel that it's in their interest to have the maximum number of buyers available to create price pressure. They like to sell. As a quick example, if you and I went to the shore tomorrow, with no relationship to anybody, simply as two individuals with a rented truck, they would sell us lobsters for the same price or for 25¢ a pound more, or even a little less because we're paying cash, and cash is nice because it's not traceable, and they would give us the crates they have from whoever their regular dealer is. We'd throw them on our truck and leave. We wouldn't need any infrastructure at all. What that does is create pressure on the existing dealers in the community. They're afraid of losing the lobster product because they've already committed overhead. They've already hired people, they have bait, they have gear, they have advances out to the fishermen, and if they don't get the lobster, they can't offset those.

The province is very sensitive to what the fishermen want as opposed to what's good for the industry.

[The Chair, Conservative, Rodney Weston]

Thank you.

Mr. Allen.

[Mike Allen, Conservative, Tobique—Mactaquac, NB]

Thank you, Mr. Chair, and thank you, Mr. MacDonald, for being here today. It's day three of our excursion. I also want to thank Greg for his fine hospitality here in his riding. I appreciate it very much.

Mr. MacDonald, I will just pose a couple of questions, and then I think Mr. Kerr would like to ask one and maybe I'll take it back after that.

Yesterday on the Island we heard some comments with respect to processing capacity. There was one comment that they were short on capacity, but then in some side conversations others would say that it's not so much a function of processing capacity as much as it is the ability to store and be able to smooth out the processing capacity.

Do you have any thoughts on that?

Second, with respect to sustainable practices and your comments on that, do you believe that certification is one method that's going to force the industry into better practices at the dock and all though the value chain for the products?

[Colin MacDonald]

Those are two good questions.

I thank you all for allowing me to be here today. I am enjoying the questions, because I think they're very germane to the problems in the industry.

With respect to processing capacity, the issue isn't with the processing capacity, because when the capacity was larger, no one was making money. That's why Polar Seafoods collapsed and ultimately became OCI. The individual parties couldn't make money. When they consolidated and had all those factories in place, they couldn't make money. So when they collapse it down to a single factory, and it can't make money, there has to be some thought there.

The issue is not shortage of capacity; it's a shortage of imagination in the products that are produced. Our high-pressured lobster meat product is a revelation to the industry. It produces a processed product that eats as well as live lobster. If I served the two of them to you out of the shell, you wouldn't be able to tell the difference. In 80% of the cases, the people we've served it to have preferred the high-pressured product to the live product.

The industry lacks the imagination or the ability to invest in new products. Your issue with the processing industry is that popsicle packs don't sell. They don't sell because they're garbage. I don't know if you've ever had the pleasure of eating one, but go and buy one, thaw it out, reconstitute it in the form you want to eat it, and taste it. Or, take a can of lobster meat and thaw it out, then buy a live lobster and cook it, and compare the taste and texture of the two. It doesn't deliver on the promise to the customer. The customer is looking for a wow experience, a truly exceptional eating experience. It's marketing 101.

The ability to store the product is not going to solve their problems. If you store the product, it costs money. You need electricity and you need labour. You're going to have some mortality in the process, unless you get very sophisticated, like we do. Our mortality is less than 1%; it's 0.62% this year, relative to an industry that is throwing away 10% to 15%. Storing is only going to exacerbate their costing problem with the product.

They have to tie the catch to their processing, and they have to upgrade the products they're delivering to the market. The market is saying it doesn't want to buy that; it's not good enough any more. It's the same problem that GM and Chrysler are having. “We don't want to buy that. There are better products around to spend money on.”

As the market gets tighter and the economy tightens up, the restaurateurs and retailers are saying, “We have to make damn sure that every one of our customers is happy with the experience. We can no longer fritter away customers with second-grade products.”

In these environments, we become more preferred by our higher-end customer base because they want delivery of a consistently great experience for their customers, every time. Once you disappoint a customer, you lose that customer.

Sustainability will help change some of the practices in the industry. Sustainability will maybe get the government to focus on the fact that we're killing the resource. We're killing the goose that's laying the golden egg, because of political expediency, because of the need to get re-elected in this four-year timeframe, as opposed to doing what's good for the resource over the long term.

It takes a lobster at least nine years to grow to the point of reproductive capacity. If we keep banging away at it, at some point, nine years in the future, we're going to find we don't have an underlying base of animals reproducing out there.

[The Chair, Conservative, Rodney Weston]

Mr. Kerr.

[Greg Kerr, Conservative, West Nova, NS]

I'd like to welcome Mr. MacDonald.

We won't talk about being elected. We won't compare charms, and how one gets elected and so on. I will say that my colleague from Alberta shudders at the thought that we're going to start buying lobster at Wal-Mart. I think probably there are some difficulties in where the whole industry is heading on that part.

I do want to ask a question. There was great interest yesterday in talking about pounds and storage. If the chair gets consensus, we're actually going to visit a local pound, because a lot of the members have not actually seen one. But I gather from your description that they can expect to be disappointed, because you're the only one who has lobster pounds of the quality that should be out there.

[Colin MacDonald]

There are imitations of what we do. We have full-time biologists at all of our operations. We have biologists who go to the shore and inspect the product. And we monitor the product. So the level of sophistication won't be there, no.

There are storage facilities around that do a good job, but they don't have the same level of sophistication, and they won't produce the same quality and product at the end of the day.

[Greg Kerr, Conservative, West Nova, NS]

I have a quick part B on that, and I don't mean this facetiously at all because I think you've explained a lot of things in great detail: is there anybody else in the industry who you feel deserves to stay in the industry and who is doing stuff similar to what you're going?

You're talking about the industry having to respond. You feel you're doing it correctly. Is there anybody else out there who is doing a good job?

[Colin MacDonald]

I think everyone deserves the right to stay in the industry. At the end of the day, the one determinant of staying in the industry is going to be profitability. I don't pretend to have all the answers. I tried to say that at the beginning. I may have glossed over it, but I don't pretend to have all the answers to the problems in the industry.

I'm obviously not aware of what everyone else in the industry is doing. I know what we're doing, why we're doing it, and what difference it makes to our business, to the profitability of our business at the end of the day, and to our ability to have survived as a company for the past 32 years. I can speak specifically to that. I can't speak to what other people are doing other than in a general sense.

[Greg Kerr, Conservative, West Nova, NS]

Thank you.

[The Chair, Conservative, Rodney Weston]

Mr. Calkins.

[Blaine Calkins, Conservative, Wetaskiwin, AB]

I have two quick questions.

I see a lot of similarities between farming and the fishing industry. A farmer goes out, raises his crop, and takes it to the terminal to sell it, where it gets graded based on the quality. You get paid a premium based on that quality. That farmer can also take the risk of doing a contract with a grain-buying agent or whatever the case might be, based on what that farmer thinks he can produce.

So my question to you, sir, is this. Does your company grade these lobsters in any way? Also, do you contract with fishermen and pay a premium for better quality on the dock?

[Colin MacDonald]

The structure of the buying side of the industry, Mr. Calkins, is such that whatever I pay, the rest of the industry pays.

We introduced banding back in the late 1970s and early 1980s. Prior to that, lobsters were pegged or cut on the claws to immobilize them. We started shipping lobsters to Europe, and in Switzerland, the Swiss actually have a law against mutilation of animals, so they burnt the first shipment of lobsters we sent over because it had pegs in it and they perceived that as mutilation.

We went to the industry in southwest Nova Scotia, as a matter of fact, and tried to encourage the banding of claws. We actually turned our band supply over to a local plug producer, d'Eon, and went to our fishermen and said that we'd pay them 25¢ extra, which at that time was a substantial amount of money, if they'd band both claws of the lobster and that we'd give them the bands free.

The industry used to charge for pegs. The industry's response, to a man, was, “We'll give you the pegs free and we'll pay you 25¢ not to band them.” That has been the history of the industry. That has been the response of the industry to anyone who tries to make a change in the industry to the benefit of the underlying animal.

I try to grade or pay a higher price at the shore. If I pay 25¢ more, everyone else pays 25¢ more, because it's a very pride-driven industry. As a matter of fact, if I pay 25¢ more to have quality selected out, then it's likely that somebody else will pay 50¢ more. They'll pay the money until they don't make any money. They don't care, or they have historically not cared. I know it doesn't make any sense, but let me tell you, come down and participate in this fishery for a while. It's crazy.

We used to pay the fishermen extra. We used to pay two prices. We'd pay them, say, $5 for two-claws and $3 for one-claws. They had a blended price and they didn't want to land the one-claws. We dramatically drove down the supply of the one-claws that were being landed to us. The rest of the industry decided they'd pay $5.50 for one to stop us from doing that--no logic.

[The Chair, Conservative, Rodney Weston]

Thank you very much, Mr. MacDonald.

On behalf of the committee, I'd like to take this opportunity to thank you for coming here this morning and providing us with some very useful information and advice. Once again, thank you for taking the time out of your busy schedule.

We will take a short break as we change witnesses.

[The Vice-Chair, Liberal, Lawrence MacAulay]

We call the meeting to order.

We will welcome two fishermen, I understand--

[Greg Kerr, Conservative, West Nova, NS]

Excuse me, Mr. Vice-Chair.

The chair was going to ask a question between rounds. My apologies, guys, but this seems interesting, after the first presentation.

There was quite a strong interest yesterday in visiting a local pound. The mayor said that if we gave him a call.... It's Newell's, downtown. It's close. That's the reason it was selected. It may be a bit of an imitation, according to what we hear, but it's a pretty decent operation. If the committee would like to go, the bus is available.

Julia, I guess it could only happen at the noon hour, because there's not enough time at the end of the meeting. It would be very brief.

[The Clerk of the Committee, Ms. Julia Lockhart]

How about if I get back to you?

[Greg Kerr, Conservative, West Nova, NS]

You get back to me on that.

First, is it the will of the committee to visit the pound?

[Some hon. members]

Yes.

[Greg Kerr, Conservative, West Nova, NS]

Thank you.

That takes care of that one then, Julia.

Sorry, guys.

[The Vice-Chair, Liberal, Lawrence MacAulay]

Excuse me, gentlemen, for that rude interruption.

No, Mr. Kerr has been a great host indeed. It's a pleasure to be here and a pleasure to have two fishermen before the committee.

Mr. Spinney, are you going to start?

[Ashton Spinney, As an Individual]

I'm going to start.

[The Vice-Chair, Liberal, Lawrence MacAulay]

Thank you very much. Please proceed.

[Ashton Spinney]

Thank you for this opportunity to act as a witness on behalf of LFA 34 lobster industry licence holders in these proceedings of the parliamentary Standing Committee on Fisheries and Oceans.

I'm Ashton Spinney. I am the chairperson of LFA 34 management board. I have fished in LFA 34 for over 50 years. Our organization was established as the district 34 lobster committee in 1998, with a name change in 2005 to LFA 34 management board.

I will interject here that I am also now, and have been for a number of years, the industry co-chair on DFO's advisory committee, and I have the wonderful privilege of sitting with the director. I can't recall his title, but he's sitting here today.

There are numerous challenges facing our lobster industry. Today, I will briefly identify some of these challenges and suggest appropriate steps to bring about solutions. Please note that these challenges are not listed in order of priority.

Challenge number one is the high financial cost to attain and maintain MSC certification. Our concern is the ongoing high financial burden placed on the industry once the industry completes the pre-assessment and the final certification of the MSC.

Recommendation: that the parliamentary committee review the rationale for the MSC requirements to conduct yearly audits and the stipulated need for a reassessment every five years. Industry will work with government bodies to find other less costly mechanisms that can and should be put in place to ensure that MSC requirement standards are annually met by industry, with a required MSC reassessment in 10 years.

Challenge number two is to ensure that lobster licence holders receive a fair market price for their lobsters.

Recommendation: that the parliamentary committee initiate a review to look into the fall 2008 pricing of lobster in the maritime region, with a view to recommending government support and fair trade options.

Challenge number three is to have Fisheries and Oceans Canada, from the maritime region's headquarters in Dartmouth to the national headquarters in Ottawa, recognize, acknowledge, and support the efforts and the success of the maritime region inshore lobster industry's management system, which uses input controls.

Recommendation: that the parliamentary committee be aware of the underlying forces aimed at concentrating the lobster industry in the hands of a few. These forces exist outside and within government. The main tools that enable the concentration of the Canadian inshore fisheries in the hands of a few are, one, transferable quota; two, control and agreements; and three, DFO management support for the concentration of licences.

Recommendation: that the parliamentary committee report to Parliament and to the Honourable Gail Shea, Minister of Fisheries and Oceans Canada, that the inshore lobster industry in southwest Nova Scotia under the current input control management system is sustainable, stable, and viable.

Outcomes. The acknowledgement of and support for the successful efforts to manage a sustainable inshore lobster fishery by our minister and by our Parliament would encourage and assist a process of building a working relationship based on trust between industry and DFO management. The acknowledgement and support of the inshore lobster fishery management system by the minister and at the level of Parliament would reduce the political power of those few who strive to concentrate lobster licences and to create a vertically integrated inshore lobster industry.

We will provide this committee with more details and data to support our claim of a sustainable and viable inshore lobster fishery. We in LFA 34 have a sustainable viable fishery that supports southwest Nova Scotia through the 987 licences that enable economic prosperity for the region, for our communities, the licence holders, their crews, and families--

[The Vice-Chair, Liberal, Lawrence MacAulay]

Mr. Spinney, there's about 10 minutes allotted for presentations.