Good morning, everyone. Thank you for the opportunity to appear before the committee.
I'm the CEO of the Acadian Fishermen’s Co-operative. The Acadian Fishermen’s Co-operative Association was formed in 1955 in Abrams Village, a small fishing community on the south shore of Prince Edward Island. This area of P.E.I. is well known for cooperative movements, and the creation of AFC followed the rural trend of farmers, fishers, and other groups banding together for economic reasons.
We owe our success to those pioneers who plowed the waves before us, namely Jean Gallant in Mont-Carmel and Phillippe Arsenault in Egmont Bay. Jean and Phillippe had two cooperatives, both in existence since 1944. They amalgamated in 1955 to form what we know today as the Acadian Fishermen’s Co-operative Association.
We've been successful for the past 57 years, with our business growing exponentially, and AFC is now one of the largest processors of seafood on Prince Edward Island.
Here are a few facts, just to give you an idea of what we do.
AFC is a seafood processing company specializing in lobster and crab, but it also produces several other species, such as scallops, herring, mackerel, etc.
AFC is 100% owned by 99 shareholder member fishermen. All member fishermen are from several ports in area 25. These fishermen have been hit very hard by the decline in the shore prices over the last several years. Figures from the Department of Fisheries and Oceans indicate that the average net income of fishermen from area 25 is 87% lower than that of north-side fishermen in area 24.
Sales for our co-op for 2011 were close to $24 million. Plant payroll for 2011 was $3 million, and an additional $1 million was paid out to fishermen's helpers, for a total of $4 million.
The total number of T4 slips issued to plant workers and fishermen helpers totalled over 400. We have had fishermen retire lately with over $40,000 in share capital that they've invested in our co-op. Fishermen investment stands at close to a million dollars.
Some of the challenges that not only we as a co-op but the seafood industry in general face right now.... The main things we've faced over the last three or four years, and many of you have probably heard it in the media...we've had a very difficult time, especially in the processing sector, with the many challenges that every exporter has, I guess, the obvious ones being the exchange rates and the world economy.
Another issue we face is with tariffs on processed products. That's something we've been trying to push for as much as possible. We'd really like to have more markets opened up to more products, especially in Europe, where some of the tariffs are as high as 17%, 18%, and 20%, especially on certain forms of processed lobster. That cuts off a lot of trade for us at a time when the landings are really high in the lobster industry in general. The more areas we can open up to get into, the better, obviously.
In terms of the landings in both Southwest Nova and the U.S., but especially this year in the U.S., they're having a very difficult time. Lobster is down to a low of around $2. I could probably buy lobsters today delivered into Prince Edward Island for $2.50 or $2.60 a pound. That's putting a real downward pressure on the industry in general. Obviously when the price goes down that low, the price for a finished product follows it. So it's pushed down the value of the product, obviously, and caught within Canadian waters as well.
In terms of some of the issues for our co-op, the owner-operator issue in the new fishery reform is certainly something my members are looking at. Obviously if bigger companies down the road can buy up lobster licences especially, it certainly goes against the whole co-op movement and what we stand for.
We also have other issues as far as having an uneven playing field. Certain provinces pay subsidies to their processors, and that allows those companies to sell product cheaper into the marketplace and it drives the price down for the finished product in general. We would like to see the provincial governments stay out of the subsidy business altogether.
As far as being a co-op ourselves, we would like to make it more beneficial for members to keep more money in the company, even though they are struggling themselves. We have fishermen who probably only stock $70,000 to $80,000 per year. Out of that comes their boat payments, their hired men, which is generally $750 a week during the season, their bait, their fuel expenses—all of that. So we have people who only clear in the area of $20,000 to $25,000 a year.
When it comes time to get every penny they can out of the product, from the co-op itself, unless they are very good members, it's very difficult to try to convince them to leave money in the co-op where it can grow the business. That's certainly a challenge, especially in our business.
We pay out huge amounts of money to buy the product for the payrolls, and it's in a short period of time—within a four- to six-month period—yet that product takes a whole year to sell. When you're putting out at any given time.... Our company, for instance, would probably borrow anywhere from $11 million to $12 million just to service the cost of being in business.
Certainly we've had tremendous help from our credit union system in general. We certainly would not be in business today if it wasn't for the support of our credit unions on P.E.I. They've done a tremendous job keeping us in business. To be perfectly honest with you, with the margins that we've made and the difficulties that the industry in general has had over the last three or four years, if we were dealing with a regular bank, our 57 years would probably have ended within the last few years.
It's very important that the credit union system stay strong for the co-ops because it's very difficult to get the interest with the low margins that we have in this industry. The interest from the commercial banks is very difficult to achieve.
As for co-ops in general, processing co-ops have had a very difficult time in the last few years. At one time there were probably eight to ten processing co-ops between P.E.I. and New Brunswick. There have been several of them closed over the last three to five years. So we are getting down there, as far as the number of co-ops that are still actually processing lobster.
I don't think that's a very good thing. We have a situation right now, for instance, with the two co-ops on Prince Edward Island. When the season opens this fall, on August 9, if it wasn't for the co-ops, there would be a lot of fishermen who would not have a home for their product. There are a lot of companies that are not even going to buy the product out of the season that starts August 9. We, ourselves, will take a fair amount of that product, along with—