Fisheries Committee on May 26th, 2010

[Lyndon Small]

Mr. Kamp, as a representative for the over-40-foot fleet, I'll say the buddy-up policy is a very important policy. It has to stay in place for the long-term future success of enterprises in the over-40-foot fleet. The buddy-up policy is a form of consolidation and a form of rationalization. It is a form of efficiency and good business sense. We'd like to see the two policies—buddy-up and combining—run parallel and in conjunction with each other with as much flexibility as possible for the licence-holders in this industry to make their operations the most efficient and viable.

I'd also like to mention for the over-40-foot fleet that a lot of those enterprises are family-run businesses, and if two members of the family combine, one of the licence-holders has to lose his or her identity. They've probably gone out and purchased an enterprise for $1 million. Then they lose their vessel registration, their groundfish licence, and their pelagics, the capelin and mackerel. A significant amount of value is lost in that acquired enterprise, so our association is in the process of putting a proposal forward this fall, in the off-season, whereby the buddy-up policy will stay in place. We may have to give it a different title, because it's a form of partnership. Whether it's a family partnership or a non-family partnership, it's a partnership that is beneficial to both parties involved.

In terms of combining, another issue that a lot of our members have brought forward to our executive is the amount of quota you can combine. Presently, restrictions in the criteria for combining mean you can only combine two quotas. That is crab, shrimp, or cod. However, our members feel that the second quota of crab or shrimp should be increased to three or four quotas to make that enterprise even more efficient and successful and to provide good incomes for everybody from crew members right up to vessel owners. That is a major concern we have.

In our division 3K, there are different fleet sectors. There's a full-time fleet sector and there's a supplementary fleet sector. In the supplementary, you can only combine double what your quota is. For example, if 100,000 pounds is the maximum individual quota in the 3K supplementary fleet--it's twice whatever the quota level is in your fleet, so you are capped at 100,000 plus 100,000--your quota is 200,000 pounds. But if you are a full-time licence-holder and you have 220,000 pounds, you can increase your combined quota to 440,000 pounds.

We'd just like to see the ability to increase your quota level straight across the board.

[The Chair, Conservative, Rodney Weston]

Thank you.

Go ahead, Mr. Andrews.

[Scott Andrews, Liberal, Avalon, NL]

Thank you, Mr. Chair.

We're going to be sharing our time. I'll try to keep my questions short, and if we can keep our answers short, we'll get a few more in.

Clarence, I have two questions. Could you clarify for committee members the difference between RSW and regular-icing crab? I don't think all members of the committee would understand the difference, but it leads into quality, and the most important part of what we're hearing today has to do with the quality of the product that we land and the quality of the product that goes out the door of the plant.

The second thing is on DFO regulations. Do you believe this industry is over-regulated, and should we review all DFO regulations at the same time?

If anyone else wants to comment on that, please do.

[Clarence Andrews]

The RSW vessel, refrigerated sea water, it's 10 years ago I built this one. Probably in fairness I was the second one to build a RSW boat in Newfoundland. In relation to the crab fishery, personally it's the only way to fish crab. It's a live product. They go down in two- to three-degree water, the same as the water they came out of. The advantage with a RSW vessel, besides the good quality, is the duration you can stay at sea. A regular boat may be three days fishing, using ice; you get back to the plant and get your stock processed. An RSW boat gives you the advantage of going out fishing four, five, or six days until your tanks are filled. That's why I built the RSW. Instead of making 20 trips per season to bring my IQs in, I can make 10 trips, cutting economics, cutting fuel, saving on time. So it's a big advantage.

DFO regulations, in my view.... I've been at this now almost 40 years. They tell you when to go fishing and how much to bring in. April you've got a trip limit, May you've got a different trip limit, and from the first of June and onwards you've got another different trip limit. One of our IQs is 25,000 per trip to 50,000 per week. Why not go out and bring in 50,000 in an RSW boat? Instead of making two trips, you'll make one trip. It's this kind of stuff.

DFO charges IQ fees. A few years ago we got $2.50 a pound for crab, and DFO charged x number of dollars. This year we're getting $1.35 per crab, but we're paying the same IQ fee that we paid when we got $2.50 for our crab. IQ fees should be based on the value of the product. Tomorrow we might be getting 50¢ for crab, but you're still paying the same IQ fee that you paid when you got $2.50 for your crab. With observers' fees it's the same thing; they don't fluctuate up and down with the value of your product.

All of these regulations are crippling us.

[Scott Andrews, Liberal, Avalon, NL]

Thanks, Clarence.

I'm going to pass it to Gerry now.

[Gerry Byrne, Liberal, Humber—St. Barbe—Baie Verte, NL]

We've had a lot of interesting discussion about the price differential, the market differential between the Newfoundland region and the gulf. It was noted that there are morphological and quality differences between certain regions of Newfoundland and the gulf, in particular 3L with size.

I just want to target something. I understood that 3K actually had produced some of the highest-quality, highest-yield crab product in eastern Canada. We've heard testimony that says you can negotiate higher prices for Newfoundland crab in the Maritimes.

Lyndon, can you verify for the committee your understanding of the quality of 3K crab compared with the Maritimes?

To Mr. Sackton, what is the price driver in the Maritimes? What's happening there versus what's happening in Newfoundland?

[Lyndon Small]

Mr. Byrne, in terms of the quality of 3K crab, it's been known for a long period of time now. The Newfoundland and Labrador provincial government and a delegation went to Japan back in 1993, and it's been documented that there's a lot higher yield for the 3K crab product. The size is quite comparable to other areas of the southern gulf. We've had discussions with deputy minister Alastair O'Reilly who worked in a processing plant way back in the nineties, and he said the yield was significantly higher, in the range of anywhere from 5% to 7% higher.

I'll just sum it up there. Our association lobbied ASP this past winter, off season, and we said, look, we see a direct gain, a direct higher return for higher-sized crab. The way the price structure is here in Newfoundland, it's basically a “TAL qual” average price for all crab in all areas, and not all crab are equal. Not to take away from any other areas, but let's put an incentive program in place whereby another size, say a 4¼- or a 4½-sized carapace, which will yield probably an eight to ten or 12 ounce-plus section, will give a higher return to the producer and to the harvester.

In terms of the product out of 3K, it's well documented that it's of much higher value.

[The Chair, Conservative, Rodney Weston]

Mr. Sackton, can you comment briefly on the prices?

[John Sackton]

Yes. The gulf crab and the Newfoundland crab actually go to different markets. In the gulf region, they're still producing gas-frozen crab. That goes to very high-end Japanese companies. They're producing an in-shell product that goes to Japan in the shell. If you look at the export figures from New Brunswick and Newfoundland, for example, almost 100% of the Newfoundland crab that's bought by the Japanese goes to China for reprocessing. Almost 100% of New Brunswick or gulf crab that's bought by the Japanese goes directly to Japan for a shell-on fancy crab pack. There are very different prices for those two products.

[Gerry Byrne, Liberal, Humber—St. Barbe—Baie Verte, NL]

Are those Japanese buyers driving the market a little bit?

[John Sackton]

Well, yes, because the highest-value product is the gas-frozen fancy-pack crab. When you hear of $100 or 100,000 yen or whatever snow crab in Japan, that is a gas-frozen whole crab. It's a gas-frozen section that's packed in a very fancy pack. That's the highest value. There are some Japanese-owned companies that are vertically integrated in the gulf that bid up and set the price. Then the other people have to compete with them. There are two markets.

[The Chair, Conservative, Rodney Weston]

Yesterday we saw a plant in the Gaspé region, and they defined the difference between the two products and the two processes that are demanded by the market.

Sorry, we have to move on to Mr. Blais at this point in time.

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

Thank you, Mr. Chair.

I would like to make a comment about what Mr. Seymour said earlier, and others, I think.

I completely understand the pleas you are making, or the alarm bells you are sounding, and I feel that we share them. With regard to seals, the loups-marins, as we call them in the Magdalen Islands, the way things are going, we are wondering whether we care more about the seals than we do about the fishermen. That is exactly what it looks like at the moment. With every passing day, seals of all kinds, but especially the grey seal, which is a voracious eater, keep eating any cod that are left as well as other species, such as lobster. I am not sure what happens with crab.

I would like us to talk about labour now. I think you brought it up earlier, Mr. McCurdy. I think the fisherman mentioned it. Age is creeping up on us and we are wondering where the next generation of workers in the plants and the fishing communities is. Some are interested in continuing, but others are pretty discouraged by the situation. Nothing suggests a bright future, which normally would get everyone into their boats. At the moment, you might say the opposite is happening.

I would like to hear your opinion about what the Department of Fisheries and Oceans, and possibly other federal departments, should do to get things back on an even keel, to make the future brighter, to have people ready to carry the torch and to breathe new life into the labour situation. At the moment, all we hear is that, in 10 or 15 years, even more people will be leaving the villages in Quebec and elsewhere, and so on.

[Earle McCurdy]

Thanks, because I think that cuts to really the heart of the issue confronting coastal communities throughout Canada. I've had the opportunity to meet people from all provinces and I think with different details on the problems.

The basic issue, core issue, is much the same all over the country in coastal communities: you've got an excessive amount of debt, a high cost of acquiring licences, no proper financing mechanism to enable that to take place, the baby boom generation moving through the workplace. While, yes, there are some younger people interested in becoming involved, it's not nearly in the same numbers as the older people who are moving through.

The combination of those factors is really an opportunity there. We shouldn't inflict the next generation of licence holders with the same problems as the current ones, which are not enough resource to go around and excessive debt load, but that will only happen with a real commitment by the two levels of government. I think there's a shared responsibility.

A good place to start would be some of the fees, to say that we'll take on some of the fees. The Government of Newfoundland recently reduced the processing licensing fees that they administer quite dramatically. They had jacked them up a few years ago, and in light of the circumstances rolled them back to basically nominal fees. I would certainly challenge the federal government to do likewise.

The fees are a big part of the cost of running these operations. It's one thing, as Clarence indicated earlier, in good times when you live with that and I suppose you choke it down, but when you're really squeezing every last penny to survive, then they take on a bigger importance.

So there really is a need for a strategic plan for the intergenerational transfer. If not, what Ray described will be the case over and over again with these communities just shrivelling up and dying, and there's no need for it. They can be vibrant places, there can be a future, but it takes a coordinated federal and provincial response with both parties coming to the table not only with policy but with dollars, because tinkering with policy won't fix it. It will need a commitment of dollars. Industry will have to play their share in that as well, but there has to be a shared effort in that regard if we're going to have any kind of meaningful and vibrant future in those communities.

[The Chair, Conservative, Rodney Weston]

Mr. Wimbleton, do you want to make a comment?

[Ray Wimbleton]

Thank you. I'm glad to have this opportunity.

In regard to what Earle's talking about, in our small communities when we started fishing at our age, it didn't cost anything, any more than to gear up, you know what I'm saying, the boat and a bit of gear. But then, during the moratorium years, we created this thing called core. We made this listing of core fishermen, and with that came IQs.

I got in the fishery for an investment of labour and a bit of gear, but the one coming in behind me now has to go to me or some other licence-holder and say, I want to get in the fishery; you've got 11,000 pounds of crab, it's worth $80,000, and how can I pay for that and make a living off that at the same time?

We've robbed the next generation of a traditional, historic fishery, and I feel that when the government shut down the cod fishery because of mismanagement on the federal government's part in 1992, they didn't do their work. They did a little bit of buyout. They passed out of the TAGS program and the NCARP program. The buyout they did was absolutely wrong. They were just trying to get paper out of the system. They weren't trying to get a system created where it was more evened out. They just took your piece of paper, and your piece of paper; it all came from this one bag here, none out of that bag. So we're left in the same state we were before that.

If we're going to leave something for the next generation to take what we got and carry on at least to some degree a little bit of outport in Newfoundland, then, as Earle said, there's got to be a commitment on all sides of the table, because today around this table I hear a lot of discussion about our problems in the fishery, but the question I have asked from the beginning, and I still ask today, is who's going to fill our shoes? If we fix it for us and we don't fix it for the next generation, we're sort of wasting our time here, aren't we? For 10 or 12 years, it's not worth the headaches. We've got to look further ahead than me.

Thank you.

[The Chair, Conservative, Rodney Weston]

Thank you very much, Mr. Wimbleton.

Mr. Donnelly.

[Fin Donnelly, NDP, New Westminster—Coquitlam, BC]

Thank you, Mr. Chair.

We were talking earlier about pricing, and you wanted to make a comment, Mr. Small. Maybe I'll open the floor to you.

[Lyndon Small]

Mr. Donnelly, I'll go back to your comments and Mr. Blais' comments.

If we want to have a future industry, a very successful industry, it all comes back to what we're talking about here today: the return for the product. We have the richest fishing grounds in the world right off our shores, all encompassing Atlantic Canada, southern gulf, all the Labrador coast. We have a resource with unlimited potential. With any occupation, you have to get paid a good salary, a good return for the fruits of your labour. This is what this symposium here today is all about: receiving a higher return for your product.

We have a huge resource out there. If we can market and channel those returns back to the stakeholders in the industry, then my two boys, nine years old and five years old, can have a future in this industry. But if we continue to go down the path of the mentality we've always done, from say the 1960s until now in the new millennium, where it's all based on volume, it's all based on a load-and-go mentality instead of maximizing the benefit there.... We just look at the northern shrimp resource. Right now we've experienced a cut of approximately 28%. We fished that resource the same as we fished the groundfish--the cod and the turbot and the flounder and the halibut--in the same manner, a load-and-go mentality, low volume.

If Minister Jackman were here this morning, he would be talking about combining quotas. Yes, combining quotas is great, but if you're not receiving the maximum return for that product, then that amount of quota is useless. In the last seven to eight years, we've landed annually in excess of a million pounds of shrimp. We've kept six to eight men employed for six to seven months of the year, our fishing season. What do we have to show for it? You're making a meagre wage, taking part in the most dangerous occupation in Canada. When crew members, enterprise owners, skippers untie that vessel, you're putting your life on the line. Why would a young person want to engage in an industry where you're taking such risk, such uncertainty, without getting a return? It all comes back to getting the maximized value for that high-end food product we are distributing throughout this world.

[Fin Donnelly, NDP, New Westminster—Coquitlam, BC]

Thank you.

Maybe, Mr. Barnes, you could talk a bit more about your cooperative model and whether this is something that could be looked at as something we can expand upon, build on, support, and how that might work.

[Phil Barnes]

I'd say about a month ago I spoke with the Minister of Fisheries in St. John's, and I did raise that exact same question with him. Maybe the right model is a cooperative model, where you have an investment by fishermen, by plant workers, into your community, into your business.

I've worked with this industry for a long time. I've worked with FPI, I've worked with the Lake Group, I've worked with Bill Barry. I've been around this industry a long time. I left it for 10 years, moved to Ontario and then to B.C., and then moved back three years ago. I came back to the same turmoil that was there 10 years ago when I left. All these fishermen, every one of them, are right in what they're saying. We have to invest in our people, and I can honestly say that in all the businesses I have worked for in the fishing industry, the cooperative seems to be the right approach.

Now, we have our issues, there's no doubt about that, but I just think that if fishermen want to be involved more in the day-to-day runnings of their operations and what's going on in the plant, maybe the cooperative is the business model to look at.

I'd like, if I could, to touch on quality, because I worked a long time ago, when I started out, on the quality side of the business. That's what the Japanese buy; 65% to 70% of our product crab go into the Japanese market. They eat with their eyes; I've been to Japan a number of times, and colour is it. When they sit down to the table, it's colour, red, red, red, and the gulf crab is far superior in colour to our crab here in Newfoundland. You put them side by side and you'll see the difference.

Dockside landings are very important. Trucking fish across this island just doesn't work, so if you land it at the dock, that's one thing that we can preach to our markets in Japan and in the U.S. We have it landed daily at our docks. It's dockside. We don't take it, put it in a truck, and ship it 200 miles or 300 miles down the road for hours on end, and end up with dead crab at the end. So it's all issues in this industry. We have to stop the amount of trucking that's going on, and maybe that's what will bring back the vibrant communities. Process it where it is landed.

[The Chair, Conservative, Rodney Weston]

Thank you.

Mr. Allen.

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

Thank you, Chair.

Thank you to our witnesses for being here.

I have three questions I'd like to ask, to Mr. Barnes, Mr. Decker, and then Mr. McCurdy.

Mr. Barnes, you talked about access to skilled labour and we've talked about the transition in the fleet, but there's the other side of this, which is the skilled labour working in our processing plants—as you commented, the electrician. Immigration is not going to solve all this problem. I think we know that. There was a survey done recently in New Brunswick where 85% of the seniors would like to continue working as long as there wasn't a disincentive to do that, and some of our seniors are people who stay in our small rural communities.

The question for you is what thoughts do you have on incentives that may be in place that would allow some of our seniors to continue working, to keep that labour pool? That's the first question.

For the second question, as an accountant I'm interested in all things financial, so Mr. Decker, you talked a little bit about the individual tax implications. I wonder if you might take a few minutes to expand on that.

And Mr. McCurdy, you started bringing up in one of the questions the traps and the pot survey in post-season in conjunction with DFO. The question I want to ask, associated with this, is since that is done at the close of the season, is there potential for us to start having a discussion about earlier signals to the fishing community about what the tax should be for a coming year, as opposed to the week before?

Those are my three questions.

[Phil Barnes]

I guess I can start off. When you make reference to the incentives, are you talking government incentives or are you talking about industry incentives?

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

Well, right now, government has disincentives. Some of them have been taken away. Of course, seniors can make a little bit more money without clawbacks in their GIS, but also, potentially, we could make it more lucrative for them to stay in the labour market. There could be government or there could be other incentives.