Proceedings of the Standing Senate Committee on
Fisheries and Oceans
Issue 11 - Evidence - November 6, 2012
OTTAWA, Tuesday, November 6, 2012
The Standing Senate Committee on Fisheries and Oceans met this day at 5:15 p.m. to study the lobster fishery in Atlantic Canada and Quebec.
Senator Fabian Manning (Chair) in the chair.
[English]
The Chair: I am pleased to welcome you this evening to the meeting of the Standing Senate Committee on Fisheries and Oceans. My name is Fabian Manning. I am a senator from Newfoundland and Labrador, and I am the chair of the committee.
Before I ask the witnesses to introduce themselves and make their opening remarks, I will take a moment for the benefit of our witnesses here to have each senator introduce himself or herself individually and tell you where they are from to get a picture of what we have to deal with here.
Senator Raine: I am Senator Nancy Greene Raine, from the interior of British Columbia.
Senator Unger: Betty Unger, from Edmonton Alberta.
Senator McInnis: I am senator Tom McInnis from the eastern shore of Nova Scotia.
Senator Harb: Senator Harb, from Ontario.
Senator Hubley: Senator Hubley, Prince Edward Island.
Senator Poirier: Senator Rose-May Poirier from the east coast of New Brunswick.
The Chair: We have several other senators that make up the rest of our committee. They could be tied up in other meetings and may join us later. When they get here, we will make sure they have the opportunity to introduce themselves.
The committee is continuing its study of the lobster fishery in Atlantic Canada and Quebec. We are pleased today to hear from representatives from the Lobster Council of Canada. We started our study last week and heard from members of the Department of Fisheries and Oceans. We are delighted that you three gentlemen have taken the time to join us here this evening. On behalf of the committee, we thank you and welcome you here.
I understand that each of you has opening remarks you would like to make. The process is straightforward. We give you the opportunity to make some opening remarks and tell us about yourselves and your involvement, and then we open the floor to questions from senators here.
With that, I would like you to introduce yourselves first and then begin your opening remarks.
Geoff Irvine, Executive Director, Lobster Council of Canada: Thank you very much for having us. My name is Geoff Irvine. I am the Executive Director of the Lobster Council of Canada. I grew up in Digby, Nova Scotia. I have worked in the seafood industry for 20 years in many different fields. I am delighted to be here.
Leonard Leblanc, Chairman, Lobster Council of Canada: Senators, thank you very much for having us appear before you. As the chair mentioned, my name is Leonard Leblanc. I am a French-speaking Acadian from my village of Chéticamp on the western side of Cape Breton. As I say to everyone I meet, come and visit us and we will take your money. We are easy.
I am a harvester. I have been fishing nearly all my life, for 36 years now. I am quite familiar with the subject we will be discussing tonight.
Stewart Lamont, Managing Director, Tangier Lobster Company Limited, Lobster Council of Canada: Good evening, senators. My name is Stewart Lamont. I am the managing director of Tangier Lobster Company. We are located on the eastern shore of Nova Scotia. We are a live lobster exporter. Internationally, we ship to 18 countries around the world. I hope to bring a marketing perspective to our discussions this evening.
The Chair: Thank you very much. Whoever wants to start can begin.
Mr. Irvine: As the only paid person on this panel here, it is my job to start.
We will talk tonight about the challenges but also about the opportunities facing the lobster industry in Canada. We look at it both ways every day. I am going to read this because I have prepared it, so bear with me.
As you are all very much aware, the lobster industry is unlike any other seafood sector in Canada and therefore faces quite different challenges and solutions. This industry involves over 9,500 people like Mr. Leblanc, fishing from their own boat from their home port in five provinces with 41 lobster fishing areas in four DFO regions. The fishery is one of the most important economic drivers in Eastern Canada, as we all know, and was last year, in 2011, a $1-billion export industry for export value.
The export activity involves sales to retail and food service customers in over 60 countries, although our main focus is in about 15 countries, which is where the bulk of the exports go, where we sell hundreds of different types of lobster products, including live products. Live shipping and processing companies involved in this export come in all shapes and sizes, from large corporations to small family businesses. We have a large system of shore buyers and dealers that assist to bring the product from the harvester to the live shippers and the processors.
From Chandler to Meteghan, Grand Manan to Green Island Cove in Newfoundland and every coastal community in between, the lobster sector truly drives rural economic activity in Eastern Canada. As we like to say, it is as common as asking about the weather or what you are doing this weekend to say, ``What are the lobster prices like today?'' It is a very common thing in Eastern Canada, as many of you know.
There have been many studies and extensive research conducted in the last six years looking at the industry challenges and solutions. We have been involved in some of them in the last few years. I have provided some graphs and a number of illustrations to the committee to highlight some of these challenges and realities for further discussion. We are truly facing a perfect storm in the lobster industry, with our strong dollar, our increasing volumes of landed product, the warming of the oceans and the continuing global recession that has kept demand for our products weak, at pre-recession levels. It is a challenge.
It is within these realities and challenges that the Lobster Council of Canada was established. We were established to take on these challenges and we began operations in early 2010. I was the first and only employee. Our initial funding was provided by the five eastern provinces and DFO and has now evolved with an industry membership dues program replacing the DFO portion. Last year, this fiscal year, we raised $50,000 from the industry to augment the money from the provinces.
We are looking at options to facilitate a check-off system or dues program to replace all of this. We are working on that right now, and in the interim we are working with the provinces and the industry to continue the current funding program. We also work closely with Agriculture and Agri-Food Canada on funding options for some upcoming projects, which I will talk about more in a moment, involving quality standards and branding. We have worked closely over many years with ACOA, ECBC and Agriculture and Agri-Food Canada.
At the end of the day, we need to find a way to secure core funding from within the industry that is fair and equitable to all participants. We are confident we can do that because we are building support on a daily basis.
The council is made up of members from all harvester groups, representatives from the live shipping and processing sectors, shore dealers and First Nation communities. The provinces and federal government sit at our table, as well as representatives from Agriculture and Agri-Food Canada and DFO. We have a board of directors that is appointed. Mr. Leblanc is our president and chairman, and Mr. Lamont is our treasurer. Our board of directors is broken down among harvesters, live shippers and processors. It is 50-50, so it is unique in the industry for that. Also, we have an executive that manages day-to-day activities.
We do not have any legislative or authoritative powers. We must lead and show the way for proof of concept for the things we do. We trust and hope others will follow, and they are. These issues are complex, and we are working on them together.
To talk quickly about our day-to-day activities, they basically come under about six different headings. The chief thing we try to do is promote Canadian lobster. That is what we were set up to do. We do that by working with federal and provincial funding partners to do events with chefs, journalists, culinary students and consumers.
We also work almost on a daily basis on things that have to do with the structure of the industry. My friends will speak more about the challenges we face. Many of them are structural in nature. We have a credible product, we have a great reputation in the industry, we have bountiful landings, but we have a hard time making money. That is something we will talk about later.
With respect to market access, we are faced nearly every day with a new market access challenge, whether it is animal husbandry problems or concerns in Germany and Austria, to recent challenges in Sweden, to other challenges in the Far East. We constantly have to manage those types of market access issues: traceability, eco-certification, and all of these things that are challenging us on a day-to-day basis.
This is an industry of 10,000 harvesters and thousands of private companies that love to work on their own, independently, in silos. We try to break down those barriers and communicate and spread information as best we can, within the industry and then out to our customers all around the world.
We work on projects for the industry: processing technology, traceability. Things like this we do for the benefit of the whole industry, and we drive that from our office.
That brings me to the two main focuses of our work today. Three weeks ago, in Chéticamp, we held our fall meetings and we decided to focus on the industry response to the challenges on branding and quality standards. I hope we can talk more about that with you tonight. That is our focus. Three pillars came out of the long-term value strategy study: quality, brand and price. We have reached good industry consensus to focus on quality and branding. We are beginning outreach to the industry to ensure that we follow up those projects correctly and in the best way possible.
I think that is about all the time I have. I will defer now to my friend Mr. Lamont.
Mr. Lamont: As the marketer in the group, I would like to take the opportunity to remind myself, and also to remind you, that lobster is a world-class product. Canadian lobster sits well in the international marketplace, as well as anything you can imagine. I consider myself very fortunate to have spent over 30 years now marketing lobster internationally. I might have been selling swampland in Florida, but I am marketing Canadian lobster. It is a glorious product. It has gone through a bit of a difficult period lately, but it is a product that is widely respected and internationally well received.
Our resource is in incredibly good shape. The Canadian catch — along with the American catch, for that matter — has increased dramatically in the last three to four years. We have increased that catch by 35 or 40 per cent. We are marketing more lobster into a more challenging international marketplace. Lobster is often considered a celebration food, and you might argue that internationally there has not been all that much to celebrate recently. Southern Europe, which is in a perilous condition nowadays, and the United States, which continues to have its economic challenges, are both difficult or more challenging markets today for Canadian lobster than they used to be.
Someone broke into my office in 2008 and stole the exchange rate that we used to be able to rely upon. We had a business model in our industry that was based on a 35 to 50 per cent exchange dynamic with the United States dollar. That made life quite easy. Unfortunately, I think as an industry we relied on that too far and to too great an extent.
I could pay Mr. Leblanc, who is a harvester, $6 per pound Canadian; I could sell his lobster for US$5.25; and I could achieve a 15 or 20 or 25 per cent gross margin. Nothing could be easier. Post-2008, not only do we have declining international markets in some instances, but we have a par dollar, plus or minus 3 per cent.
What our industry is facing more than anything else — and I do not think we give this aspect sufficient attention — is that we are trying to replace that 35 to 50 per cent value for the sector that disappeared in 2008. We are not the only sector that has that challenge. Every Canadian commodity group has a similar challenge with the exchange and what has transpired. Nevertheless, it is important to draw that to your attention.
I take a glass-half-full approach to this industry. We have our challenges in southern Europe and the United States, but we have huge potential in the Asian markets, in particular. We have always been strong in the live lobster sector in Europe, but the Asian opportunity is growing all the time. We have 1.3 billion Chinese. Generalizations are unfortunate, but generally that market loves seafood, and in particular it loves shellfish.
The stars have lined up for us to do an increasingly good job in Asia, and China in particular, to introduce and consolidate our gains in that global market. We do have a premium product that they want. More and more Chinese are moving to urban settings. They have greater disposable income. We have better and better logistics to get the product from Canada to China. We have a Chinese audience that now can go online. They can watch CNN on a nightly basis. I have a 14-year-old niece who lives in Beijing, and there is nothing she lacks in Beijing that she would have in Toronto, Montreal or New York. She has access to the best of the West, as anyone else might have. She is aware, as are many people living in Asia today, that Canadian lobster is a premium product.
As Mr. Irvine has suggested, we are searching to put value back in our sector, and it is based on quality and branding. Our Canadian-quality lobster is demonstrably superior to American lobster, and that is our great competition. However, American lobster is significantly less expensive. The harvesters are given a much lower price, it is sold at lower prices through the market, and they have very good air freight logistics from Boston or New York to Europe or Asia on essentially an overnight basis.
Therefore, we have to demonstrate our quality. Our quality is a superb hard-shell lobster, a fine dining experience because the meat content of that lobster is greater, and a survivable lobster, both in terms of air freight internationally and air freight on location in Europe or Asia. We have to build those quality components into a program that will allow us to objectively say, ``Our lobster is better.'' We have to combine that with a branding program. The Canadian brand is an underutilized asset. An assessment made a week ago found that the Canadian brand is the second strongest brand anywhere in the world, second at this moment only to Switzerland. The United States of America is number 7 or 8 on the list; Canada is number 2. We think there is huge potential to marry premium quality standards with a branding program that will be accepted in the international marketplace.
I have been asked to comment on the impacts of open net pen aquaculture upon the lobster sector. In Nova Scotia in particular it has been a highly controversial subject in the last year or so. Governments at both levels, with the best of intentions, I am sure, are looking for ways to sustain coastal communities. Jobs in coastal communities and the survivability of coastal communities is increasingly at risk and, at both levels, governments have chosen open net pen aquaculture as a means to provide additional jobs.
I am a member of 116 organizations in Nova Scotia that have stood up and said, ``We know your intentions are honourable, but please let us have a moratorium on additional approvals of open net pen sites in Nova Scotia.'' The risks are just too great. The model does not produce the jobs that open net pen is alleged to produce. We can demonstrate that substantially. There are significant environmental risks associated with it. A typical open net pen farm generates thousands of metric tonnes of waste in a production cycle.
We have science issues that have to be considered, metallic content that has been attributed to feed aspects and location aspects near fish farms. Pesticides are frequently used for the treatment of lice in farm-raised salmon, and pesticides are potentially lethal for lobster in infancy. We have an economics challenge coming in that Chile, which was the lowest-cost world producer of farm-raised salmon and whose supply crashed over the last 10 years, is now coming back with a large volume of cheap fish to put on the market.
I am sure you are all very aware of the Cohen report findings last week in British Columbia in which Mr. Justice Cohen, a highly respected authority who has looked at this in a pretty comprehensive way, said the federal authorities really have to take a second look at how they are managing wild species, the impacts of fish farms, and so forth.
Without prolonging the topic, as a proponent of lobster and what I see as huge lobster potential, I am very concerned about the impacts of open net pen.
Mr. Leblanc: Senators, speaking after these two gentlemen is a pleasure but leaves me very little to say, which is fine by me, being a harvester.
In1988 a crisis hit the lobster fishery. Markets were crashing all over the world and the industry was faced with the major challenge of having ample supply but very low price. Here we are in 2012 with the same situation facing us, if not worse.
In between, we have had an industry-and government-led buyback, led by then Minister Gail Shea, who is currently the acting minister. That was greatly appreciated. In the gulf we spent in excess of $32 million buying back lobster licences. In New Brunswick we spent $12 million, in P.E.I. $10 million and in Nova Scotia $9 million. This was much appreciated by the lobster industry and we never thought it would happen. We had visions of changing our fishery, but we never thought we would have a government-and industry-led buyback, although it was our dream way in the back of our heads. About 269 licences were bought back.
I have been a harvester for 31 years and have seen many ministers come and go. I have seen many changes in conservation measures and in fishery management. However, one thing we have never done until now is to change our way of thinking with regard to fishing. I will explain what I mean by that.
When I bought my licence, I brought my lobster to the wharf and gave them to the buyer, who sent me a cheque, and that was it. Nowadays we have to be aware of what the consumer wants at the other end to make sure we are landing the proper product of the proper quality within the proper time frame. That is a challenge for us because we have to change our way of thinking. When you have 10,000 harvesters to educate, it is a very complicated exercise.
The Lobster Council of Canada was formed, again under the leadership of Gail Shea, who is obviously a very smart woman. We came together about three years ago, and you can imagine the interesting dilemma that was created, because we had partners in the industry who did not even look at each other let alone talk to each other. We had the harvesters on one side and processors and live shippers on the other, and we had to sit in a room and be nice to each other. That was the first challenge.
Three years later, we are starting to understand everyone's problems and concerns. We have grown quite a bit in three years, probably due to necessity more than anything else. There is nothing like a crisis to bring people together, and that sure happened in the lobster fishery.
We have before us a window to enable us to modernize our fishery. As I have said to the council, and it is not news to my members, there are two ways to modernize. First, a price increase would partly fix the problem, but we also have to look at tools that we can access to modernize our fishery. There are two ways of doing it. The consumers will not fix all of our problems; there are other tools at our disposal.
When Minister Ashfield came up with supporting the owner-operator fleet separation, he left a window of opportunity for industry, within the owner-operator fleet separation, to modernize, and we thank him for that support.
We have a lot of individuals who are committed to doing this. As Mr. Irvine said, he is the only one who is paid. The rest of us are volunteers putting in long hours in the evenings and on the weekends trying to find a solution to our collective problem. It is not a harvester problem; it is an industry problem.
We came together in Chéticamp, a place with which I am quite familiar, as I was born and raised there in a family of 19. We did our share to populate. I was raised to get along, share and consider other people, and having 12 sisters, I grew up with great respect for women.
In Chéticamp we devised a road map or a toolbox for our future, branding and quality, which will give us the upper hand over the U.S. They are branding a generic lobster. We want to tell the world why we are better. We are in the process of establishing working groups with industry to formulate our strategy in those two categories.
We believe these are the two key elements that are missing from this industry on the marketing side. There is other stuff to be done on the structural side.
I will leave it at that for now.
The Chair: Thank you. That certainly gives us a great overview of your involvement and a greater overview of the lobster industry itself. We usually go to Senator Hubley first, but Senator MacDonald is with us from Nova Scotia and he has to leave for another meeting so I will give him the opportunity to pose the first questions to our guests.
Senator MacDonald: Thank you for coming here. It is an important area of study. There are so many questions to ask; I will start with a few. You talked about quality and branding, but when I look at the numbers I think there is always a relationship between supply and demand. One cannot help but notice the landings of lobsters in Canada and America as opposed to 30 or 40 years ago. How much of effect is the great supply of lobster on the price you can get in the market? I assume it would be influential?
Mr. Lamont: It is a significant factor, there is no doubt. We have a number of issues to cope with. The single greatest one is decline in the European and American economies. Individuals in both of those regions are less likely, in this economy, to purchase something that is seen as a special occasion premium product.
At the same time, we are producing significantly greater volumes. We have responded to that in two ways. We have pushed down on the initial price of the product so harvesters are getting far less for lobster today, and it is an unsustainable model over time. We have pushed up to the market and asked our customers worldwide to pay more. You can only do that so far on a special occasion product in a difficult economy.
The volume we are producing is a wonderful thing. It is a reflection of good husbandry and regulatory practices by all the stakeholders. We do not want to suggest that the significant increase in lobster catches is a negative thing; it is a wonderful thing. However, it is challenging in terms of the business model in a difficult world economy.
Senator MacDonald: It is a wonderful thing as long as we are sure it is not affecting the long-term viability of the stocks.
Mr. Lamont: Agreed.
Senator MacDonald: An eye must be kept on that. I am sure that any lobster fishermen would agree if you could work less and get more return for product everyone would be further ahead.
I had a great experience last January at the Tokyo fish market at six o'clock in the morning. It was a wild spot to be at with the activity and the volume of seafood going through the place. You mentioned in the remarks that if you have a product that is high quality — and of course we know this is true now — and there is demand for it over there, they will pay for it. I went to the supermarkets in Tokyo and Seoul last January and was blown away at the price of a lobster or a snow crab, especially comparing it to what we purchase them for over here. I am curious about your reflections on why we have not been more aggressive in developing what I believe is a much more lucrative market for us in Asia and Japan. You mentioned China, but it seems to me from what I saw over there, the prices are already there. Why are we there in such low volumes?
Mr. Lamont: The volumes are substantial.
Senator MacDonald: Percentages I should say.
Mr. Lamont: Historically, the volumes were significant in Japan going back 15 or 20 years. The Japanese economy has had its challenges. The issues of the last two years have impacted on the marketability, and we have technical, biological issues associated with Canadian lobster in Japan that have been temporary barriers that have lingered on.
In China, which gives me great enthusiasm today, our competition is the Australian rock lobster. That sells regularly in China at $35 to $40 a pound. Canadian lobsters, with duties, freight and everything else in, sells at $15 or $18 a pound. If we took a blindfold test or submitted the products to neutral third parties, I am confident our Canadian lobster would stack up well. However, there are three or four generations of Chinese chefs and opinion leaders who say Australian rock lobsters are the best. You do not change that opinion overnight. Frankly, it pains me to say that we have been our own worst enemies in the industry. We have undercut in terms of our pricing structures in Asia generally and China in particular because we saw the substantial market opportunity.
A big order for me to sell as a live lobster exporter by air freight in North America is 1,000 pounds. A big order in Asia, particularly in China, is 6,000 or 8,000 or 10,000 pounds, reflective of the scale of the population and everything else. Some companies, in their desire to take advantage of that volume opportunity in China, have undercut other companies, and we have left serious money on the table. Part of our branding and quality process needs to be education to allow Canadian exporters with a terrific product to feel confident enough to charge more for it. That is a work-in-progress.
Senator MacDonald: We have retired some 260 lobster licences over the last number of years and bought them back; should we buying more back?
Mr. Leblanc: That is an interesting question. At the present time I think there might be another 5 per cent that could be bought back. These are gulf numbers, by the way. There is a potential for more. We have to be careful we do not buy to the point where we eliminate fishing communities or harbours, and we must have a balanced approach.
Senator MacDonald: On our total landings, are we tied in? Are we restricted to keeping volumes at a certain level and keeping an eye on the American volumes and landings at the same time? Is there a direct correlation between their landings and the marketing of the entire product? Do you follow what I am saying?
Mr. Irvine: There is no control of the landings because the only effort to control is the trap limit and season, so there is no quota. The harvesters here and in America go out and catch what they can. That is the extent of it, and it is probably due to the good management of our fisheries that we are catching more on the scale we are every year.
Senator MacDonald: It keeps the supply relatively high.
Mr. Irvine: It keeps the supply very high, and we have done a good job to move it through the system based on what we are catching.
Senator MacDonald: Is a lot of lobster we sell to the U.S. being dumped into cheap markets like Red Lobster or these types of companies? I assume we will always get more money overseas than going to the United States for our lobster. Is that a correct assumption?
Mr. Lamont: I think it is a very correct assumption. I relate lobster marketing to Olympic diving. It is a bit of a leap, forgive the pun, but bear with me: The more difficult the dive, the better the return. It is fairly easy to put lobster on a truck and have it in Boston tomorrow morning. It is very challenging to have lobster in a container that is temperature controlled, properly packaged, properly documented, that arrives in Shanghai in a timely fashion. That is a more difficult dive.
Senator MacDonald: That is for the real margins?
Mr. Lamont: Correct. We have to shift more of our stock into the higher-demand, higher-return markets, but to do that we had better establish the quality components of our program that we have agreed to as a council, because you need absolutely to back up in reality what you are promising on paper. That is where the quality comes in.
Lobster shipments in the live format, with which I am familiar, take 42 to 48 hours to get anywhere in Asia, in particular, and with Canadian logistics, 36 to 40 hours anywhere in Europe. You really need a premium quality lobster to have very low mortality rates on arrival. Quality should be the underpinning of everything that we do and it should bring us the greater dollar value that we are seeking.
Mr. Irvine: To follow up on that, we need those new high-value markets, but we also very much need those chain store markets in the U.S. and other markets because of our volume. It is very important that we produce the products they use, certain specific processed products, in a lot of our small communities as well. It is a balance. Every day we go out to the market and try to find the balance.
Senator MacDonald: I just want us to get the most for our lobsters that we can. It would be great for the communities.
Mr. Leblanc: You referred to landings, senator. We cannot forget the environmental factors we are facing, especially last year, which have been totally not normal. There has been a very high temperature in our water; therefore, lobsters were feeding a lot more than ever. That is a contributing factor to why the landings spiked so high last year, and it should not be forgotten.
Senator MacDonald: I apologize for having to leave. I have to be in two meetings at once. It is the annual general meeting for Canada-Korea. I will try to see if we can sell them more lobster.
The Chair: You touched a moment ago on the quota system. In other fisheries, IQs work very well in regard to increasing the value of an enterprise. We seem to have a different opinion on how that will work in the lobster fishery. Does someone want to touch on that?
Mr. Leblanc: Quotas in the lobster industry would be a very hard sell at the present time. It would be a logistical nightmare to try to justify anyone's quota of what it should be. I might catch more than my next-door neighbour. Does that mean my quota should be higher? We would rather have an even playing field where we have the same amount of traps and we fish the same area and the same number of days. It has worked thus far and we would like to leave it as such at the present time.
The Chair: That answers that question. We had the Department of Fisheries and Oceans people here last week and we asked some questions in relation to the lobster fishing districts and the organization of the fish harbours in those different districts. For those who may not be aware, there seem to be some different agreements or rules that happened in each district. From a coordination point of view, from the Lobster Council's point of view, and not necessarily bringing up everyone under one umbrella but at least to have, as you touched on it, a level playing field where everyone is doing the same thing, how do you address the concerns, the discrepancies among the lobster fishing districts when you are trying to have a coordinated effort in developing the lobster fishery and promoting and marketing?
Mr. Irvine: Do you mean the difference in volumes?
The Chair: Yes. Some areas had better organization in relation to how they do things than other areas. Maybe I am reading that wrong, but that seemed to be the message we got from DFO.
Mr. Irvine: That is a very fair comment.
The Chair: I am wondering from the Lobster Council's point of view, because I posed the question to DFO and they advised me to pose the question to you people. That is why I am doing this. It seems they are trying to organize things to develop in the proper way as you are trying to do in regard to branding and marketing. If you do not have agreement among the people out on the water, it is difficult to do. How are you dealing with that?
Mr. Irvine: I will take a stab at it. Our members are made up of all the principal associations, so Mr. Leblanc's association, and Ian MacPherson is here from the P.E.I. Fisherman's Association. There are many areas that are very well organized, but you are right; there are very key areas that are not well organized. It is a big challenge for us, to be frank.
LFA 34 has 1,000 fishermen in the richest fishing area, that is from Digby to Cape Island, the richest lobster fishing area in the country. They do not have a dues-paying organization. It makes it difficult for us to represent them and have them represent relative to us. The province of Nova Scotia is amending their mandatory dues legislation. They are hoping to bring it out shortly and have another vote. It is a big challenge.
Newfoundland, where you come from, has the FFAW. That is very convenient to work with. PEIFA, which Mr. MacPherson works with, is very convenient to work with, but it is a challenge.
Mr. Leblanc: Our organization is legally recognized by the provinces. We collect dues. There are two different zones in Nova Scotia that they recognize under the act. It is a problem for the council to approach areas that are not well organized, but all we can do as a council is promote and try to advise them as best we can, and try to lead them into being organized and showing the benefits of being organized, and show them what other associations are accomplishing by being organized. It is all we can do. In some areas it is getting better. There are younger harvesters taking over associations that see the light at the end of tunnel when it comes to being organized. It is slow, but it is evolving.
Senator McInnis: You said earlier, and I wondered about this, that there were 9,000 harvesters in all the processing groups and so on. When you speak today, what percentage would you say you speak for in terms of all of those various groups?
Mr. Irvine: We say we speak for them all, but you are correct, we speak for our direct members, so it is a hard question to answer. They do not all pay dues. We have an equally difficult problem on the live shipping and processing side where there are few associations that represent, for example, Mr. Leblanc's group. We have private companies on our board and our council and they really speak just for themselves. However, as Mr. Leblanc said, we are trying to build consensus and build some momentum here. We say we speak for the whole industry, and in general we do.
Senator McInnis: You are a relatively new organization, too.
The Chair: Together you will swim, I guess.
Mr. Irvine: We will do our best.
Senator Hubley: I think there is some positive information coming our way. It gives us a better sense of what the industry is doing. I would like to say hello to Ian MacPherson, who is sitting up back. It is nice to see you.
I will come back a little bit to the work you are doing on establishing a quality standard system and a branding program for the Canadian lobster. I just had a couple of questions where I am wondering whether it is things you are considering or things you are doing. I will use the P.E.I. experience, which I love to do, just to make a point.
We have on Prince Edward Island lobster suppers, which everybody does. Everyone around the Maritimes has lobster suppers. What sort of quality control, and I will ask questions on a couple of these, does your organization have to influence how that lobster is presented? I would like to do the same thing for the seafood festivals, which also are popular, and major festivals like Fall Flavours on Prince Edward Island. Lobster is still one of the things that people visiting Prince Edward Island must have; they must have a lobster dinner.
The other concern I have, and that I would like you to comment on for me, is the amount of lobster that may be imported. It may come in from Maine. How is that being used in the Canadian lobster or the Maritime lobster or the Island lobster? Is it branded the same way? Can we brand that the same way?
Finally, are you establishing standards for a lobster stew, a lobster roll, a lobster sandwich, which we see now in all the fast-food restaurants? Sometimes they are not what I would consider up to standard. I think they could be better. I am wondering if that is one of the challenges your industry has and how influential you can be in encouraging people who serve lobster to do it in the best way possible.
Mr. Irvine: I think it is safe to say that it is our goal that every single person who eats a Canadian lobster has a fantastic experience every single time. We all know people who have bought the product and had an unhappy experience with it. We do not ever want that to happen.
I see this starting right at the wharf. The dealers and the harvesters will work together on a system to grade lobster out so that it goes into the proper channel. That is how I see that starting, so that the lobster suppers on P.E.I. will have the best possible product to serve to tourists or visitors, and it will be sold that way to them by their dealer or distributor.
This happens now more or less anyway. There is a quality grading program at everyone's plant. Mr. Lamont certainly has one. The processors on P.E.I. have them. They use that to move lobster of different qualities into different streams. It happens today. What we are talking about is formalizing it and making everyone understand that there is a big educational piece to this.
In terms of the main product that comes to Canada, in Canada we buy a significant amount of lobster from Maine. It goes into the processing sector mostly and is processed into many different products. Frankly speaking, you can call it ``product of Canada'' after you change it in some way, and that is what we do. It is a significant, important raw material for our processing plants in P.E.I., New Brunswick, Quebec and Nova Scotia.
Mr. Lamont: It is important to note that the export of lobster is a two-way street between Canada and the United States. Substantial volumes of our Canadian lobster go into New England markets and are then redistributed and exported internationally. As Mr. Irvine suggests, because of country-of-origin legislation, once product is legally and properly imported into a country, it then becomes product of that country. Canadian lobster ends up getting exported to the international markets as American lobster. Correspondingly, American lobster gets imported into Canada and gets processed, and then becomes product of Canada.
We are great trading partners back and forth between our two countries. On the one hand, the Lobster Council of Canada has a very firm policy of demonstrating both branding and quality to create benchmarks internationally, but we need to tread a somewhat cautious line because our Canadian processors, overwhelmingly located in Prince Edward Island and New Brunswick, need American catch as part of their processing program; and we, as Canadian suppliers, need the American market — the immediate market in New England and the ultimate market in California, New York and the southern states — as part of our export program. We have to do a little bit of both.
Senator Hubley: How does that, then impact on a traceability program? I will use again an Island example of the Island mussels, the Island Blue. Even on Channel 5 in the Maritimes, when the cooking shows come on, they are using P.E.I. mussels. It is amazing that they have been able to market that small product, get it into the markets and still maintain the quality. It is there because of its quality, no question about that. It is an amazing story, as far as marketing goes, to see a product like that being able to establish itself within the huge marketplace we have. Is that something lobster can do?
Mr. Lamont: Absolutely. It is something we are doing right now. Traceability can be looked at as a challenge; we prefer to look at it as an opportunity. We have the capability in many of our plants and export facilities right now to isolate and designate product by source. We are obliged, through certain European requirements, to have traceability at least back to the community, to the port level — not specific to a boat yet, but that is coming.
There are some hugely innovative programs. One that I will draw your attention to, with which you may already be familiar, is a program called This Fish. This Fish presents a technical component where seafood, and now lobster, is tagged.
In lobster, the tag is placed on the claw. The tag has a computer code. I deal with harvesters who apply these fish tags to their lobsters and they give me only the hard-shell, strong market product. I market that product right now on two major programs internationally, one in Las Vegas and one in Holland. When our consumers receive our Canadian ``This Fish'' tagged lobsters, they can go online, reference the tag number and see the individual harvester who caught that product on a given day, from a given port. Here is an example of the tag, with the computer code on the back.
Correspondingly, the harvester can go online and find out where his or her lobster under that code has wound up anywhere in the world. It could be in Beijing, Seoul or Chicago. In this Facebook world, more and more consumers are concerned about the origin, traceability and quality of their product. For the price of about a 10-cent tag, and with current technology, it is a wonderful traceable avenue.
The industry is making some advances in these areas by leaps and bounds. We just cannot keep up with a challenging economy and a catch that has gone up 40 per cent, but we are making process.
Senator Poirier: Thank you for the presentation and the good information. I will start with a few questions, and if there is time for round two, I will try to get back on. In your draft discussion paper that you presented in October 2012, you talked about the three points we just talked about — the quality, the price setting and the brand building — as a plan of action. The purpose of doing that was to basically increase the percentage of the industry wealth for the industry participant to reduce the money left on the table, and there were other things.
I also noticed that you mentioned in your report phases 1, 2 and 3. Phase 1 was the immediate phase; phase 2 was the intermediate phase; and phase 3 was the implementation phase. What is your time frame to accomplish the three phases?
Mr. Irvine: We do not exactly know yet, Senator Poirier. We are also not exactly sure that we will adopt those exact phases. This was a consultant's report that was presented to us, and we are using it as a road map or a toolbox of options. We have not yet decided exactly how to proceed with that.
Our plan is to run with whatever we do immediately, after consulting more with the industry. I see us rolling out these two major projects, branding and quality, over the next three to six months or however long it takes. We want to make sure we do it correctly.
Senator Poirier: One of the comments you made is that in 1988 you had a good supply but no price. Here we are in 2012, and we still have good supply with no price.
In my home province of New Brunswick I am very familiar with zone 25. I am sure you are aware of the problems we heard about over the summer and some of the concerns of the fishermen. The concerns there had nothing to do with overfishing. They had to do with price, with lobster coming in from the United States where the price was lower than it was here. Global warming may be part of the problem, with quality of product in Eastern Canada being another part. Would you like to comment on that?
Mr. Lamont: Yes. First, I think the dividing line is roughly 2008. Prior to 2008, there were smaller catches but higher prices. In 2008 we began, in a significant way, to lose the exchange advantage that we had for 30 years. Prior to 2008, generally speaking, in Atlantic Canada, Quebec and the United States, catches were lower and prices were higher. Prices were higher in part simply because there was less supply, but in part because we had the advantage of an exchange-based competitive situation.
Thank God that in the last four years catch rates have increased, because from a harvester's standpoint, if you are going to be paid a low price, you had better catch a significant volume. There are areas in Atlantic Canada that have not caught significant volumes, but, generally speaking, the catch rates throughout the entire region have been extremely good lately. It is just the exchange rate that has caused us huge pain.
Senator Poirier: Also in New Brunswick this year one of the problems was that even if the catch was good there was not a buyer for the entire catch. A limit was put on the quantity they would buy from each fishermen, which caused a huge problem. Has your industry been able to work with New Brunswick fishermen on this specific issue to find solutions so that we do not face the same problem next summer?
Mr. Leblanc: Working groups are being formed in P.E.I. and New Brunswick to talk specifically to this subject. The Lobster Council of Canada had a strong membership from New Brunswick in Chéticamp to talk about the continuing crisis in our lobster fishery, and their concerns are on the minds of all the members of the Lobster Council of Canada. We are trying our hardest to mend the problem for everyone. We know what the problems were in New Brunswick. As a harvester, I can tell you that it bothers me, because I know their pain, I know what they and their families are going through.
There are two working groups from P.E.I. and New Brunswick, and some from Nova Scotia, that are about to start a good dialogue and hopefully come to a solution in that area. The council is open to helping them in any way we can.
Senator Poirier: Is there any collaboration between your industry and the American industry? Are there communications between the two countries? Obviously some of the problems are caused by things happening in both countries.
Mr. Irvine: We talk to our colleagues in the United States all the time. We have regular discussions with the Maine Lobstermen's Association and dealers there. Mr. Lamont works with people down there all the time. The harvesters join together a lot. There is a fair amount of bilateral discussion.
We have also talked frankly in the past about working together to promote Homarus americanus, because we share it with the Americans. This is something that gets tossed about from time to time, and it is a real question mark. Should we be working with them more closely in marketing this product that we share? As of today, we have decided to market Canadian lobster. In fact, our friends in Maine are embarking on a promotional campaign to market Maine lobster. It is a competitive environment.
Senator Poirier: With lobster being such a delicacy food, has the economic recession in the last few years been one of the major problems faced by the lobster industry with regard to pricing?
Mr. Lamont: It has been the single greatest challenge. There is no question about that.
Senator McInnis: Thank you for coming. Your report to us was a pleasant surprise. You have quite a challenge to bring all the various parts of this puzzle together to make it work. I hope you can do it. Obviously, branding a product can be very expensive if you want to do it effectively. With the number of harvesters, processors and shippers that are involved, you should be able to amass quite a budget, and that will be necessary.
As we have seen with a number of other products, you can promote through television, radio, newsprint and all of that, but it is very costly. I wish you luck in that regard.
I was intrigued when I saw in the report the Lobster Academy that you are talking about and the education that will be required for the fishermen because they will have to be part and parcel of all of this in order to bring in a quality product. You might want to speak to that.
I want to pick up on open pen salmon farming. Mr. Lamont, you spoke about your niece who is 14 years of age and has access to all of what is going on in America and Canada, as do those in China and Asia. If these controversies, which seem to be prevalent in Nova Scotia, continue, how will that affect the quality of the product that you are attempting to brand? Do you understand the potential dangers?
Mr. Lamont: We understand the dangers all too well, I think. The world is a very small place today. China is an interesting example. China has more domestic aquaculture than any other country in the world. I should be very specific. My comments are with reference to open net pen fish farming. We think aquaculture in general is a superb addition to the product mix. We think it has benefits now and that it will grow in the future. We think there are ways, on land, with closed containment aquaculture programs, to generate the products that the world needs in terms of protein, and seafood specifically, without environmental degradation.
I am in the pristine business. All over Atlantic Canada we have unspoiled coastal waters that produce some of the finest seafood in the world and, ironically, we are just now being recognized for it. People in China with resources increasingly shy away from their own domestic aquaculture product because they are scared from a food safety and food risk standpoint. We just have to go back to the milk scare a couple of years ago in China and you can appreciate what I am referring to.
I think it is the wrong policy at the wrong time in the wrong industry completely. Part of my marketing approach as a marketer of Canadian lobster is that whether it goes to Belgium, Dubai, Korea or anywhere else in the world, you are getting the best of the best. Not only is it a terrific product, but it is coming from an environmental background that is second to none. We are well aware of the risks. We are speaking about it and hoping various levels of government will consider these very serious concerns.
Mr. Leblanc: I would like to come to the education part of your question, which is a daunting task to say the least. We have to understand our clients, who are fishermen. Fishermen are quite stubborn and set in their ways. That is our nature. The sea and the salt air make us tough.
The Chair: I thought that was only in Newfoundland.
Mr. Leblanc: It is everywhere. Having the entire industry, especially harvesters, develop the quality standard and being part of the discussion will make it not quite as hard to educate fishermen because it will come from them. It will not come from us telling them what the standard should be; it will come from the bottom up and the harvester on the boat telling us what quality he needs based on what the consumer is buying presently. There is no point in producing oranges if the consumer is buying apples. It does not make any sense. We must understand what the end use is. You start from there and work your way back to the harvester and explain why he has to change his way of doing business as opposed to how his grandfather did it.
In that sense it is going to be daunting, but I sincerely believe it is a task that we cannot afford to fail at because too many communities are depending on a better future. I have an enterprise that I will want to sell one day. Right now I cannot afford to sell it. I would take such a loss that I cannot afford to sell it. On the flip side, a new entrant cannot afford to buy it at the price I want because he would not make up the return to pay for it. Therefore, we cannot afford to fail. We need to straighten this industry out somehow. It is too big, too huge and too many people depend on it.
Mr. Irvine: I will follow-up on the Lobster Academy. It is happening today. We have had something like seven groups of buyers, journalists, food influencers go through the Lobster Academy, which is located in St. Andrews, New Brunswick. We have a residence there operated by the Huntsman Marine institute. East Coast Seafood has a plant on Deer Island and they take participants through their plant. Harvesters take them out on their boats. We just brought 20 international journalists from 11 different countries and got some fantastic press around the world. The Lobster Academy is happening now and it is very positive. The idea and plan is to use that facility to educate our industry, ourselves, dealers, buyers and harvesters.
Senator Raine: Thank you very much. It is a real pleasure to have my eyes opened about the lobster industry. I am not a coastal person. I just know that it tastes good. I have this big fear that if it tastes good, spit it out, it is bad for you. There are all these people out there telling you what to eat and what not to eat.
Mr. Lamont: This is the rare exception, senator. This is not only tasty but also good for you.
Senator Raine: How well does the public know about the food value of lobster and how good it is? I am sure there are differences among live lobster, fresh lobster and processed lobster. Is the food quality maintained throughout the different kinds of lobster?
Mr. Lamont: As an industry, I do not think we have done a very good job of telling that aspect of the story, either. Lobster literally sold themselves for years and years. There is a myth associated with them. There is lustre associated with them. Many years ago, governments of various levels had promotional dollars to assist us with that effort, but in recent times not nearly enough has been done on the promotions side, and particularly on the food value and comparative side. You are right to draw attention. We have work to do in that regard.
Mr. Leblanc: We met with Agriculture and Agri-Food Canada this morning and came to the conclusion that we need to tell the story of the fishing industry, the 2012 version. There are many customers now who are high-tech and savvy and they want to know what they are eating. I think we may have failed. It is time we get together with federal and provincial governments and write the story of the lobster industry. It is one that would pretty well write itself, but it must be articulated. I think it is time we do it.
Senator Raine: I wanted to find out about the food value because when you are going out to market something as we move into an era where we know we have to take responsibility for our own health — we have to stay healthy and we want to eat healthy — we can trace our food. The ability to say that this is coming from a pristine market source is very valuable. Again, I am concerned that you might be putting it at risk with the open pen fish farming. Hopefully any expansion of fish farming is being monitored. You cannot have one industry that hurts another without its being somehow wrong.
You mentioned that in Asia the Australian rock lobster outsells the Canadian lobster price-wise and that we have gone in and, instead of pricing it one dollar less than theirs, we have beat each other up and have driven it to the bottom. Now we have an image of being not as good as. Who decides what is as good as?
What is a hard-shell lobster? Is it the hardness of the shell that protects the quality of the meat? Is it the amount of meat on the lobster? What determines a really good lobster?
Mr. Lamont: Would you have sufficient time to be marketing director of our company? I like everything you are saying.
Premium quality is detected in a number of ways. There are objective criteria. One is called blood protein. We take samples of lobsters and analyze the blood protein in those individual samples. There is a correlation between blood protein level, shell quality, meat content and survivability. In general, we are trying to achieve — this is a gross generalization — high blood-protein lobsters. When you examine a lobster that has a high blood protein, you will find it has a rock-hard shell, is extremely well-meated and has good survivability characteristics domestically and internationally in export. We have identified the objective criteria of premium quality lobster. Mother Nature has given us that lobster, although now there are environmental issues associated with global warming, warmer water temperatures and so forth. We are trying to create a standard from which we can market and sell our brand.
Senator Raine: Following up on that then, when you do your educating of the harvesters, will you ask them to leave the soft shell lobsters out swimming and only bring in the hard shells? Is that what you are looking at doing?
Mr. Lamont: Not initially, because the current income levels in harvesting are not such that we can confidently ask harvesters to leave stock behind. We do not ask; the federal government demands under a certain carapace length and so forth. We have the legal requirements of fishing, but in terms of soft shell, hard shell, we need to have harvesters and the industry designate that the portion of the catch that is not appropriate as a premium dining experience go to a different category. It must be processed whereby it can be turned into a premium-quality product. There is nothing wrong with the meat in a soft-shell lobster; there is just less of it. If we accumulate all the meat from all the soft-shell lobsters and produce a premium food product, it is the best of the best as well. It is a designation issue, not a harvesting issue.
Senator Raine: With regard to the survivability — I like to think of it as the virility — how long can they live when they are in their tanks being properly looked after?
Mr. Lamont: The industry now has a very sophisticated long-term holding capability. It has been driven by the fact that our customers worldwide demand 52-weeks-of-the-year supply. As a marketer of lobster in Europe and Asia in particular, I am not allowed to tell my customers, ``Sorry, we are out of product this week.'' That is not in the mix. To have product between seasons until the next production period comes we have as an industry developed long-term holding capabilities. Think of the long-term holding capabilities as condominiums for lobster. Lobster are individually stored in individual units that replicate the conditions that lobsters find themselves in on ocean bottom. Lobsters are territorial. They like to hide between rocks, under ledges and so forth, so we create a condominium in which the lobster does not confront or deal with any of its fellows. We have hospital-like conditions to hold those lobsters for the long term. We monitor temperature to the half degree. We monitor oxygen to the greatest extent possible. We filter the water system so there is no ammonia whatsoever or virtually none in the water. We monitor salinity so that the salt content in the water on land is the same as on the sea.
We can very successfully as an industry now hold lobsters in essentially hibernation for up to six months at a time. We now have the capability to make certain that lobsters caught in May can be sold through June, July, August, September and early October, until the next production season starts in Atlantic Canada. Once again, we have made many technical advances.
Senator Raine: This chart that I looked at here shows the seasonality of the prices. You should be able to bring that down now and not have so many spikes or dips on it.
Mr. Lamont: Spikes can be a good thing. For the profitability of the industry, we need the occasional spike, which reflects less supply and a greater price in the market.
We are trying to get at a level, instead of the $3 or $4 price level from the harvester, and move the value chain up from there. We want to get to a $4.50 to $5.50 a pound price level and move the value chain up from there. We have had to go down too low because of the large volume of catch and the challenging economic conditions. The solution is market-based. We simply have to find more market. There is wonderful opportunity to do that in Asia. You just do not do it overnight.
Senator Raine: Prince Edward Island has done a fantastic job of becoming known in Japan through Anne of Green Gables. Maybe we need to have a sequel to Anne of Green Gables talking about her father being a lobster fisherman. Asia knows the West Coast of North America but not the East Coast as well because it is a lot further away.
To Asia it is 42 to 48 hours shipping, and to Europe 36 to 40, so significantly less. Would there be any opportunity to build some lobster condos on the West Coast? It would be a little closer.
Mr. Lamont: Yes. The trouble is from a freight perspective. Our company could ship to Vancouver and temporarily refresh the product, and after 48 hours reship it on to Asia. The challenge is that the cost of packaging and incremental freight cost make it unattractive. The Americans tried that many years ago with shipping product to Hawaii first and then it would go on to Japan. They had to drop that because it was not cost-competitive.
I like your idea of Anne of Green Gables. I want to combine Anne of Green Gables and Dr. Norman Bethune. Dr. Bethune is known and respected in China even to this day. I am joking, but I am not. There are some iconic images that help to market product internationally, and we need to embrace them.
Mr. Irvine: One way that we are dealing with these foreign markets and distant markets is with our processed products. Well over half of the value of Canadian lobster is in processed form today. That means it is mostly frozen; it can be fresh or pasteurized, but the frozen product can be put in a reefer container and sent to China with absolutely no problem with the quality and no difference.
To your question about our processed products tasting different from live and fresh products, the answer would be that today there is very little difference. We have come a long way in our processing technology. We can deliver a beautiful whole cooked lobster or a green tail or meat products that taste every bit as good as something we cook and prepare at home. Also, there is the convenience factor. The modern consumer in every market wants to be able to get at their food much easier, so the processing sector is responding to that.
New Brunswick, for example, exported $400 million worth of lobster last year, and $348 million of that was processed, just to show you how dramatic it is in New Brunswick. P.E.I. has very big numbers as well.
The Chair: Earlier in your testimony you mentioned that when the Canadian lobster enters another country it becomes that country's product. I wonder about the challenge you face when that happens. Can you touch on that? When it leaves here, in regard to getting into the market in that country, what are the challenges there and what avenues do you have to ensure that your product stays the top-notch quality it is when it leaves here and enters that market?
Mr. Lamont: There is no doubt that it is a challenge. It is particular and specific to America. Our borders are such and our trade back and forth is such in a product like lobster that it emerges regularly.
Things take place like this: An American exporter can buy Canadian lobster and combine it on a case-by-case basis with U.S. domestic product. The U.S. domestic product may be 30 or 40 per cent cheaper, so that you could blend the two lobsters in the box, sell those lobsters internationally, allegedly as Canadian lobster, and have lowered your cost average such that Canadian exporters cannot compete.
There are official ways where product travels back and forth between the two borders. If I import legally and take all the proper efforts with importing lobster into Canada and bring it to our facility, it is quite legitimate. I do not happen to think it is a terrific policy, but, in terms of country-of-origin legislation, it is perfectly legitimate to import product and sell it as product of one's own country under certain circumstances.
Our job is to educate our consumers and our wholesale distributors worldwide as to what the real qualities associated with Canadian premium product are and have them looking for it when they buy it. Generally, it is like everything else in life. You get what you pay for. If the price seems too low for Canadian premium hard shell, you are probably not getting 100 per cent Canadian premium hard shell.
Senator Raine: The American lobster is not hard shell, or not all hard shell?
Mr. Lamont: It is not all hard shell. American lobster is generally caught and exported on a post-moult basis. Lobsters shed their shells on an annual basis, and that frequently takes place in July and early August. American lobsters are starting to be caught in the traps in a very serious way from mid-June onward. Their lobsters tend to have recently shed their shells, taken on new shells, and they are referred to in the trade as shedders. They are medium shell, some hard shell, but overwhelmingly a medium shell at best, and a lot of them are soft shell. Their attraction is price. They are much less costly. In a Walmart world, where it says on the door, ``We sell for less,'' that is popular in a lot of markets. We have to be in the quality business. We cannot compete on price with a post-moult, soft-shell lobster. We have to sell premium hard shell, and we have to ask more for it. The only way we can ask more for it is if consumers know that they get a better experience from it.
Senator Raine: I guess I am a bit obtuse here. Are the American lobster harvesters happy to have less at the wharf than the Canadians?
Mr. Lamont: They are not happy at all to have less, but they know reality. Not any of us individually sets prices. The market sets the prices, and it is generally determined, the so-called Boston price for lobster, and on any given day, 90 per cent of the time and not 100 per cent of the time, a Canadian lobster is worth $1 to $4 more a pound than the American counterpart. It is not because customers want to give their money away to Canadians but because the market objectively recognizes that ours is a better product. There are all kinds of caveats to that, but that is generally the case.
Senator Raine: I was involved this past year with a maple syrup motion. Again, you have a group of producers, Canadian and American, who got together as an industry and said there were a lot of different ways of grading maple syrup, depending on the jurisdiction. It was very complicated. They started seeing their market being eroded. Europeans would buy maple syrup, cut it with sugar water and pass it off as maple syrup. They got together to protect that. Once it is protected, they will then market jointly to the world in terms of grading it, and properly graded. United, they would go forward stronger. I guess you are not quite ready to get together with the Americans on a grading system that you could both live with?
Mr. Lamont: With the biological gaps, it would be challenging, to say the least, but that is the kind of thinking that we have to embrace sooner rather than later. We compete with American harvesters and American exporters, but it is not like we do not want them to be successful. We are all in the lobster business. We want our enterprise and our business model to work. If we can work cooperatively to make the two work better, we are good with that.
The Chair: I may have missed a comment you made. My understanding is that we combine our lobsters going to Asia, Europe, with the Americans. Is there a combination of American lobsters and Canadian lobsters in one box?
Mr. Lamont: I am saying it is quite possible and happens semi-frequently that American exporters can buy Canadian lobster and import it perfectly legally — this is not illegal activity — into the country, but they can blend the two lobsters on a per case basis. Average down, they can sell it as hard shell lobster. They may not be able to sell it as Canadian lobster at that point, but they can blend down their cost average because the American one third or 20 per cent in the box is substantially less expensive inventory.
The Chair: I wonder how much of that goes on and how much is going into the market stamped ``Canadian lobster.''
Mr. Lamont: It is just anecdotal. I did not mean to imply a widespread phenomenon. We have an education job to do to make certain that our product is 100 per cent and well known and documented and respected.
The Chair: As Canadian lobster?
Mr. Lamont: Correct.
Senator Unger: Thank you, gentlemen. You sure presented us with a lot of information. It is a lot for me a lot to digest. Pardon the pun.
The committee will be issuing a report in the near future. From everything we have heard, do you have key recommendations that you would like the committee to consider?
Mr. Irvine: Your committee?
Senator Unger: Yes.
Mr. Irvine: From our perspective, we would like you to maybe ingest some of the things we presented here and keep in mind that the solutions are complex. From our perspective, sitting at the Lobster Council table, we think they all revolve around quality and branding and price. We have the three pillars that we believe in, and there is lots of information in our report. That is what we are going to be focusing on. We would like all the different levels of government and the people of Canada to support us on that.
The summary would be that it is complex. The solutions are different in each different sector. The processing sector has some different challenges than the live sector, and harvesters in different areas have different solutions as well. Any solutions we come up with, and we talk about it every day, have to be flexible based on the unique situation in each area.
Mr. Leblanc: I would like to add to what Mr. Irvine just mentioned. It is important that all levels of government join us in the strategy. The industry by itself cannot do it on its own. We need financial commitments from the provinces, the federal government and the industry to arrive at a solution. The industry by itself, in the financial crisis it is in, cannot commit the entire portion of the money that is necessary to do this job. It will take a substantial investment to do it right, because we may have just one chance to fix it. It is kind of a small opportunity that is before us right now. We have a little window of opportunity, with all industry sitting together, and the last thing we need is to have governments putting up roadblocks that would stop us from succeeding. We need the cooperation of all levels of government. We met with the provincial fisheries ministers, and they are on side. We met with all five of them two weeks ago. We need the Department of the Environment, DFO, Agriculture and Agri-Food Canada and all of you to join us in getting the job done.
Senator McInnis: Earlier, you mentioned that the membership dues have now offset DFO's financial contribution. Is that correct? However, what you are saying is you want DFO back?
Senator Raine: That is just for governance.
Mr. Irvine: That is the core funding.
Senator McInnis: No, the funding.
Mr. Irvine: Our core funding for governance to keep the lights on, not for the marketing programs.
Senator McInnis: However, the provinces are still involved, all four Atlantic provinces?
Mr. Irvine: The four Atlantic provinces and Quebec are involved in supporting us with the core funding. In terms of marketing dollars or promotion money that we can come up with, we have to leverage that from other programs.
The Chair: You have listed today several challenges that you face, and many opportunities also. Could you zero in on a couple of the major challenges that the lobster industry faces today and that the federal government could assist with? I do not necessarily mean only from a monetary point of view, but include that also. At the end of our study, we hope to be able to make some recommendations to the Department of Fisheries and Oceans — and to other departments, if need be — on how to assist and how to address some of the challenges that you face.
We have an opportunity here. I realize you may not be able to address all of that here today. If after you leave here something comes to mind, feel free to write us or get that message to us.
I am asking you to look at a couple of the major challenges that you have and what you would put forward as something that the federal government could assist you in doing.
Mr. Irvine: I can take a shot at a quick one right now. There are many challenges, but this one comes to mind based on some of your questions, and that is helping us find a way to raise money from our own industry to help ourselves. We talked about it earlier today.
We have a challenge in the long-term funding of our efforts because we do not have a mechanism to collect — a check-off, for example — from our industry. We need the federal government or the provinces to help us find a way to collect that, whether it is through legislation, regulation or some type of system.
We went through a process about a year and a half ago of polling the industry members about their willingness to pay a penny a pound. We said that if we can raise a penny a pound, we can fund all our activities and promotional activities. There was generally consensus that, yes, the industry would be willing to find a penny a pound, shared between the harvesters and the buyers. However, what hit us is that there is no mechanism to collect it. We were leaning on the provinces to help us try to come up with some legislation as they regulate the buyers, but we need to go back to that. Potentially, that is something the federal government could help us with. We do not know, but we need to have an open mind about that, and that would be a big help.
Senator Raine: My understanding is that in the West they have a tagging system whereby if you catch wild salmon, you must purchase a tag. Part of that money goes to DFO and part goes to the Pacific salmon conservation organization.
Mr. Irvine: You have to love the West Coast.
Senator Raine: It would be easy to put a tag on the lobster, and you cannot get into the chain unless that tag is there.
Mr. Irvine: That is a good idea. There are lots of ideas.
The Chair: That is the purpose of discussing.
Mr. Irvine: Exactly. It is a good one.
Mr. Leblanc: Another issue we have is the stacking rules between the federal and provincial governments. If we get too much from one level of government, it takes away from potential funding we could have on another level of government. That is an obstacle we have faced since day one. We are dealing with ACOA and other federal departments and the provinces. That is an issue that could be addressed to make it easier for us to get funding. There are some pockets where we had the chance to access funding, but because of the stacking rules, the federal government could not give us any money, although they had money to give us. Because of the rules, it was prevented. That is an issue. I will leave it at that for now.
Senator McInnis: Do you have a budget?
Mr. Irvine: Not for marketing, not yet.
Senator McInnis: No, a budget for governance.
Mr. Irvine: Yes, we do. We are going to be making a proposal to the provinces to support us again, augmented by dues from the industry.
Mr. Leblanc: I would like to come back so it is clear for you to know how much industry has invested, in dollars. Last year was probably the first year in dues that were voluntary. The industry committed $50,000 in cash. On top of that, we have all contributed our time in kind as free.
Mr. Lamont and I have devoted many hours during the weekends and nights on emails and conference calls, and paying our own way — gas, rooms, the whole works — besides taking away time that we would spend on our own business at home and away from our family. In all, you could easily add the entire contribution from industry in the $200,000 to $250,000 range, if you were to add everybody's pennies that they have invested in this exercise. It has been fairly extensive, in trying times, for people to actually put money toward something that will benefit them at the same time.
Mr. Lamont: I feel as if we are among friends here, Mr. Chair. All senators have reflected a sense of what the considerable value is now and in the future of our lobster stock in Atlantic Canada and Quebec. Therefore, what I would ask of both levels of government is this: Please reconsider your enthusiastic support for open net pen fish farming.
The two activities are not compatible. In terms of the market potential for lobster, when I speak with my customers in China, one of their first questions is to ask, ``How many lobsters do you harvest in Canada on an annual basis?'' I tell them. ``How many lobsters do they harvest in the United States?'' I tell them. Their immediate reaction is, ``Oh, my God, you do not have enough,'' because they can see and I can see a day coming very quickly when Asian markets will want and pay a premium for what we produce in Atlantic Canada.
Not to belabour the point, but we should not do anything now in the formative stages to jeopardize that resource. Farm-raised salmon can be raised anywhere. I can buy farm-raised salmon for $2.70 a pound today on a wholesale basis. They can be raised on land. They can create jobs. They can do a lot of things. However, our Atlantic Canadian lobster stocks are unique. They do not exist anywhere else.
My request of the federal and provincial governments would be to say: Look, let us put this thing in perspective. Hold off on your enthusiastic promotion. We know you want to sustain coastal communities, and so do we, but there are other ways to do it other than promotion of open net pen fish farming, because we think Canadian lobster is very vulnerable as a result.
Mr. Irvine: In terms of answering your question, we will reflect on that and respond with some formal comments.
The Chair: We appreciate that very much.
Senator Poirier: Part of what I was looking for has actually been answered, and it was about the recommendations you could bring to us for what we could do.
I have a couple of things I would like to share with you. Basically, I am curious to know whether any discussion is going on within your industry, looking again at the problems that are faced with global warming, with the moulting of the shells that happens in July and August, knowing that it is also the soft-shell industry that the Americans lobster fishermen are dealing with right now.
Has there been any thought, consideration or discussion whatsoever among the harvesters about looking to see whether there is any possibility of pushing back the beginning of the lobster season, which usually starts in mid-August, to maybe a few weeks later? In doing that, because of the global warming, you will definitely get a stronger lobster; it will not be as weak because of the temperature of the water. You will also have a stronger lobster because it is not moulting. Is that being considered? Is there openness about that among the harvesters? Has it been discussed with government?
How long do you think it will take us to make the lobster industry sustainable?
Mr. Leblanc: I will take the easy question. Discussions are entertained. Mr. MacPherson and the MFU are currently entertaining all possible solutions. I was told before this meeting that the Senate committee might be going to Moncton. I can assure you that they will appear before you and will explain exactly what they are entertaining. I believe that is one of the questions being asked.
Senator Poirier: Because the soft lobster in the United States is cheaper, they are shipping it to the processing plants at home and, because the processing plant is full with their lobster, our good quality lobster is having a hard time getting in. That was part of the problems we had this summer in New Brunswick as well as in zone 25. Our lobster was having a hard time being sold into our processing plant.
There were rumours that if that was going to be a problem, perhaps the United States would start looking at building their own processing plants. That is creating another problem because it will affect jobs. We need to have a certain quantity of food brought to keep our fish plants open for a longer period of time so that the workers in New Brunswick have jobs. That is another thing we need to look at.
Mr. Irvine: Those are great questions. This summer was unique. The Maine shedders hit around July 5, which is about six weeks earlier than normal. Usually the New Brunswick plants and the P.E.I. plants have time after the spring season to shut down, refit and give the workers a break, but this year the shedders hit at a weird time because of the warmer temperatures. That is what backed up the supply and caused what happened in zone 25. I think that is pretty well known by everyone.
In terms of Maine getting into processing, yes, what happened this summer has made them realize that they cannot rely on our plants for their entire product. Yes, the folks in Maine are taking that very seriously and are attempting to expand their processing. We will see how successful they are. It is very difficult to process lobster. It is very labour-intensive; the profit margins are slim to none; and it is tough to find labour. I guess we wish them luck.
This summer a perfect storm of things happened, and much of it relates to the warming of the water. I think it is obvious that DFO has to spend more money studying what is happening there. Private academic institutions are studying it. We will see what happens. A working group has come together with New Brunswick, P.E.I. and Nova Scotia. They have a meeting coming up in 10 days. All the provinces have started to work on solutions, and they are talking about changing the season date.
Senator Poirier: How long do you think it will take to make the lobster industry sustainable?
Mr. Irvine: I was hoping you had forgotten that one.
Senator Poirier: No, I have not forgotten it.
Mr. Lamont: I want to go back to your earlier question. Collectively we had better be somewhat cautious in what we wish for. I will give you an example. The prices paid in Atlantic Canada this spring for seasons that started in Newfoundland and the eastern shore on April 20 or thereabouts and seasons that started in the gulf and Cape Breton on May 1 and beyond paid significant prices from a harvester's standpoint. Most harvesters got the better part of $5 a pound for their lobster in the challenged world economy to which we have referred. That took place for a variety of reasons, but the bottom line was that harvesters got, for the volume that was caught and in the circumstances of the world economy, what I consider to be a very good price.
Processing companies buying Maine and Massachusetts lobsters in June, July, August and beyond have been able to average down their inventory costs with a much less costly American product. Frankly, I believe they would have suffered substantial losses based on the Canadian part of the catch alone at the prices that were paid. On an annual basis, companies are able to pay higher prices for Canadian product because the lower American prices help to subsidize, cost average or lower the cost. I would just introduce that minor note of caution into our analysis.
In terms of how long this will take, I would estimate three years. If we embrace this tomorrow, if we get the support that we are hoping for from all levels of government, if we do the things within our sector that we know we have to do immediately, I think we will notice benefits before three years, but I think that within three years we will see significant benefits. Three years is a lifetime when you have an unsustainable model, but it is not forever. As I get older, three years roll around more quickly. I think three years is a reasonable target for all of us.
Senator Poirier: Thank you.
The Chair: I wish to thank all committee members and our witnesses. You provided us with very worthwhile information. If there is something that you would like to follow up on, feel free to send us any correspondence you wish.
Yes, we are planning a visit to Moncton to hear from people in that area, and certainly we encourage any group or individual that would like to make a presentation to us to contact the committee. We have not finalized our dates yet, but we are hoping to do so later this month.
Once again, thank you for taking the time to be with us here this evening as we continue our study.
I would ask committee members to remain for a five-minute in camera session to discuss travel plans.
(The committee continued in camera.)