Industry Committee on May 4th, 2020

[Sébastien Lemire, Bloc, Abitibi—Témiscamingue, QC]

That certainly is a catastrophe. It should be understood that milk consists of two substances: fat and protein. Sales of the fat, meaning milk and cream, are on the rise, while sales of the protein are in decline. The competition is fierce. One of the consequences is that the United States has just blocked the sale of milk powder on the global market. One solution proposed by your industry is, of course, tariff rate quotas.

Could you tell us what mechanism could or should be put in place to ensure the survival of our farms and our processors?

[Dominique Benoit]

I'm Dominique Benoit from Agropur. I can answer your question and add to what Mr. Froment said.

Regarding import quotas, I should point out that the demands of the processing industry are also supported by producers. Processors are calling for the vast majority of the import quotas to be granted to the dairy processing sector, because in Canada, that's the sector that will suffer the repercussions of the three agreements that were mentioned earlier. Products coming into Canada won't be manufactured here anymore. Milk won't be produced or processed here anymore. In our opinion, at the very least, the quotas should go to the processing sector.

[Sébastien Lemire, Bloc, Abitibi—Témiscamingue, QC]

That's why we're talking about food sovereignty. Thank you very much.

[The Chair, Liberal, Sherry Romanado]

Mr. Lemire, your time is up.

Our next round of questions goes to Mr. Masse.

You have six minutes.

[Brian Masse, NDP, Windsor West, ON]

Thank you, Madam Chair.

I'm going to continue with the dairy processors.

With regard to the current situation in terms of your business plan being altered by the trade agreements, did you have a business plan prior to COVID-19 that had some benchmarks or at least some established normalizations, so to speak, after the trade agreements came into effect and potentially some of the programs that were promised? Was that ever identified or developed by the industry itself in terms of a normalization period to adjust to the trade agreements, because they do have a negative impact on your operations in general?

[Gilles Froment]

Clearly, all along we had discussion on the compensation. Last summer we got into the discussion when CUSMA was going to be implemented, and we were promised a compensation package that never came. Now we're into a COVID-19 environment. There was a rush to sign the agreement. I think I can understand from an overall Canadian perspective, but from a dairy industry perspective, it's certainly not the best news we've received over the last number of weeks.

As I said earlier in French, we were looking for a package of $750 million per year, over a six-year period, that would cover our losses for the implementation of the three agreements.

[Brian Masse, NDP, Windsor West, ON]

I've been around long enough to have governments before this current one promise packages that were never delivered on other trade agreements. We'll leave that for another day.

Mr. Calcott, I want to note some of the distribution challenges you face. Part of our food security is our supply chain. Are you aware of what your American competition might be receiving in terms of supports from the U.S. at this moment?

You might not have that information right now, but can you in general give a sense of the competition you face?

If you cede your section of the market, there is no replacement.

[Robert Calcott]

My American competition has a great lobby, and I'm quite sure they have something in the works to help them. Let's face it: There are two sides of the food distribution network in Canada; one is retail and one is food service. We're in the food service sector, distributing to restaurants, and we're clearly going to need assistance. They have a very strong voice over in the United States, given the size of the companies that dominate that market.

As I mentioned earlier, I was speaking about my company, Morton Food Service, but there are about 20 companies similar to mine across Canada, relatively small and competing with Sysco and GFS, and they are all in the same situation we're in. If we don't get relief in the way I mentioned in my talk, it will leave Sysco and GFS controlling our marketplace. There's clearly some relief that needs to take place.

[Brian Masse, NDP, Windsor West, ON]

Would it be fair to say that you and similar operations that are regional in nature deal with more of the organic and local food supply chains, and that maybe some of the larger ones go to the chains or do not engage the smaller to medium-sized businesses?

[Robert Calcott]

I think all of my associates in businesses across the country use that as an advantage to deal and compete with Sysco and GFS. We deal with companies like Gray Ridge Eggs and Norfolk Potato Company. These are all Ontario companies like Shaw's Ice Cream and Ubbelea mushroom farm. They all use them as an opportunity to have unique products that Sysco and GFS simply can't carry. Without us, those companies would have no way of getting to market.

[Brian Masse, NDP, Windsor West, ON]

You've introduced the notion that this CEWS program may be extended.

I'm also curious to know if you were a recipient of any supports to shift your business. This is going to be one of the interesting things that take place. I think some of the restaurant industry is going to have a cultural shift from some customer bases that will require other businesses to shift as well. Is this something that you did on your own?

I know, for example, in industry in the past we've had support and development grants and a whole series of other things that have been supporting business. Is this an initiative that you did yourself? It sounds like you're transitioning your model a bit, and others might need some supports to do so as well to stay in business, because it won't be the same.

[Robert Calcott]

Well, Brian, instead of sitting still, we've tried to look at other avenues to sell our products. We have about $4 million of inventory in our Windsor warehouse. We looked at other ways of trying to start moving product and gain some revenue to cover some of our fixed expenses, so we started an e-commerce site with no support. We didn't ask for any support; there was no time to ask for support. We had to move as quickly as we could, so we launched that e-commerce site last week, and we're starting to sell directly to the public. I'm in contact with a number of other distributors across the country, and some of them are starting to do the same thing.

When you get back to the restaurant end of the business, if they don't have some sort of incentive to reopen their business.... An incentive isn't just a reopening, because if they reopen, they have to pay wages, fixed expenses and potentially severance pay to employees that they can't keep on. They simply won't reopen, so I don't know how they are going to segue out of COVID-19, but without significant assistance they won't be able to.

[The Chair, Liberal, Sherry Romanado]

Thank you very much, Mr. Calcott.

Our next round of questions is five minutes, and I give the floor to MP Patzer.

You have five minutes.

[Jeremy Patzer, Conservative, Cypress Hills—Grasslands, SK]

Thank you very much, Madam Chair.

My questions will be for the Canadian Federation of Agriculture.

I'm just wondering how concerned you are about the state of agriculture and what the forecast is looking like as the 2020 crop is being seeded.

[Keith Currie]

Certainly there's a lot of uneasiness in our industry, as there is right across the country in all industries. The horticultural sector in particular really has to do individual business analysis on what they're going to do in terms of production. In a lot of cases, it's cut back dramatically. I live north of one of the major fresh vegetable-growing areas in Ontario. It supplies about 90% of the fresh vegetables. It's called the Holland Marsh. They're at anywhere between 50% and 60% production right now, which is very scary.

I think the bigger picture for agriculture in general is that part our ask here today isn't just about helping us keep our heads above water, which is part of it, but it's also about what happens after COVID-19. If we're looking at a reduction in horticulture products.... For example, if we're looking at culling of herds and culling of livestock, that doesn't serve well for the long term. Agriculture's very well positioned to be that economic driver going forward, because although a lot of industries just aren't going to recover quickly, the food production system is great in this country, and we need to really enhance that.

The reality is that we have a moral obligation as a food exporting country that also helps feed the world, so those opportunities beyond COVID-19 are extreme, but if we don't get the help now, there are going to be opportunities lost. Not only are we going to lose producers; we're going to lose those economic opportunities for the country going forward.

[Jeremy Patzer, Conservative, Cypress Hills—Grasslands, SK]

Thank you for that.

You mentioned the risk of losing farms, and it's reported that as many as 15% of farms could be lost by the end of this year if we don't see any relief package. The agriculture minister, as we heard last week, said it was too soon to comment on any aid relief for agriculture. I'm just wondering when it will be too late. When is it going to be too late for an announcement or for any kind of relief to come to our farmers and producers who are looking for help to get the crop into the ground and to get this season under way?

[Keith Currie]

We're looking for action now. We've been calling for action almost since this started, and we haven't had much of a response. As you heard earlier, our current suite of business risk management programs aren't working for anybody. We've been asking for the last four and a half years to get adjustments and changes to our business risk management programs, and nothing has happened. To hear that's their road of perhaps salvation for the industry is very discouraging, because it's not going to work. It doesn't work now because people don't enrol in a lot of the programs because the programs are not effective and they're slow in reacting.

AgriStability is a safety net program that has been very underutilized because it's not effective and it's not time sensitive. That's the big problem with AgriStability. It's not effective in a lot of sectors in the industry.

We need action now, not only to keep our people's heads above water but also because we're going to see the long-term effects of this. There are a lot of people who have invested in their businesses, and facilities are being built. Mortgages have been taken out on those new facilities, but with cutbacks, people are not able to make their mortgage payments consistently. Destruction in the industry might lead to people exiting the industry long beyond the near future. It might go on for several years as people struggle to get out of this.

[Jeremy Patzer, Conservative, Cypress Hills—Grasslands, SK]

Yes, it's definitely a huge concern.

Another concern that people have been raising with me is that there are massive delays in processing loans through the Canadian Canola Growers Association, and it just began because of COVID-19. Everybody's working from home. There have been some delays and issues because of that.

One of the other issues that has arisen because of it is the loan limits being increased from $400,000 to $1 million. There were some additional regulations put in place that are proving to be a huge barrier for people to get access to capital through these loan programs.

I'm wondering if you're hearing those same concerns out east, because I'm definitely hearing them a lot out west.

[Keith Currie]

Yes, we're hearing very similar comments from our colleagues about the increased amount. I don't know if it's because people are working remotely from home. I don't know if additional security is being asked for.

If you look at the year 2019 in general, you see it was a very tough year for agriculture based on a number of things out of farmers' control, such as trade issues not being handled well and rail blockages. These were all things that weren't the fault of the farmer, but we are bearing the brunt of the financial impact of them, so we've had to bear big financial costs. To ask us to go deeper into debt is very troubling as well.

[The Chair, Liberal, Sherry Romanado]

Thank you very much. Unfortunately, that's all the time for that round.

Our next round goes to Nathaniel Erskine-Smith. You have five minutes.

[Nathaniel Erskine-Smith, Liberal, Beaches—East York, ON]

Thanks very much.

I'd like to continue with the Canadian Federation of Agriculture. I want to make sure I have this right. With the closure of meat processing plants for human safety, I understand there's now a significant backlog of animals. The Canadian Cattlemen's Association mentioned a backlog of 100,000. Presumably in other sectors of livestock there are backlogs as well.

What will happen to these animals?

[Keith Currie]

That's something that's very concerning to everyone. We have a slowdown in all meat processing facilities, whether it's pork or poultry, and essentially farmers are going to try to keep these animals as long as possible. When it comes to poultry, market birds or market hogs, that time frame is very short.

The producers are going to have to make a business decision to depopulate, because not only is it troublesome for the animal, but with no income coming in and the same costs being incurred in keeping these animals, there's a decision that has to be made. The last thing we want to see is euthanasia, but in some cases it's the only answer to solve this problem.

We're looking for the government to help these processing facilities as much as it can by introducing more PPE and whatever they need to keep the processing at whatever normal is in today's world.

[Nathaniel Erskine-Smith, Liberal, Beaches—East York, ON]

Not all farmers are in a similar situation, obviously. If someone is a canola farmer, or, like my father-in-law, has soybeans.... There are obviously economic considerations for all farmers; however, for livestock farmers, there's this additional consideration of animal welfare. To your knowledge, have any steps been taken to prioritize animal welfare? Are your farmers who have livestock looking to prioritize animal welfare?

[Keith Currie]

Absolutely. I'll maybe let Bob jump in here too, but animals are like family to producers, so certainly animal welfare is of grave concern.

You talked about grain and oilseed producers. Right now they're planting, but they don't know what their market's going to be in the fall—

[Nathaniel Erskine-Smith, Liberal, Beaches—East York, ON]

Of course.