Proceedings of the Standing Senate Committee on
Fisheries and Oceans
Issue 12 - Evidence - November 29, 2012 (morning meeting)
MONCTON, Thursday, November 29, 2012
The Standing Senate Committee on Fisheries and Oceans met this day at 9:10 a.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 morning 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 chair of this committee.
I would like to invite the members of the committee to introduce themselves.
Senator McInnis: Senator Tom McInnis from Nova Scotia.
Senator Unger: Senator Betty Unger from Edmonton, Alberta.
Senator Poirier: Senator Rose-May Poirier, New Brunswick.
Senator Hubley: Senator Elizabeth Hubley, Prince Edward Island.
The Chair: Senator Mac Harb from Ontario will join us this afternoon.
Honourable senators, before I continue, I would like to ask the committee if it agrees to allow media to record proceedings while we are here in Moncton and if there is agreement that covers electronic media of the committee's public proceedings with the least possible disruption of these hearings be permitted.
The Chair: Agreed?
Everyone is agreed.
The committee is continuing its study of the lobster fishery in Atlantic Canada and Quebec and is pleased to be in Moncton today and tomorrow to hear from various participants in the lobster industry, including provincial government representatives, who will be our first panel this morning; lobster harvesters, buyers and shippers; seafood producers, industry associations and researchers. The meetings in Moncton are an opportunity for the members of the committee to gain a better understanding of current strengths and weaknesses of the lobster industry, emerging threats and opportunities. We have had several meetings in Ottawa and more are planned for December, but the opportunity to come to the region to hear from people firsthand is always a positive for the committee.
I am very pleased this morning to welcome the Honourable Michael Olscamp, Minister of Agriculture, Aquaculture and Fisheries for the Government of New Brunswick, and his officials.
I ask the minister to introduce his officials and to bring some opening remarks.
Hon. Michael Olscamp, MLA, Minister of Agriculture, Aquaculture and Fisheries, Government of New Brunswick: Mr. Chairman, thank you for the opportunity to meet with your committee, some of whom I have known for awhile. I am a little disappointed Senator Munson is not here because we went to school together, if you can believe it. I had a nice chat with Senator Unger about Gary Unger, and she asked, "How do you know all about that?" I said, "I was doing hockey cards when I should have been doing geometry." It explains why I became a history teacher.
With me today are Gilles LeBlanc, Senior Processing Development Officer of the Business Development Branch of our department and Joseph LaBelle, Director of the Policy, Advocacy and Strategic Projects Branch. I also have sitting behind me my EA, Maureen Conley, whom some of you might know because she worked in Ottawa for a fair period of time.
My presentation will be short, and then we are at your disposal to respond to any questions.
For New Brunswick, the lobster fishery is very important. That is an understatement. We experienced the seventh wave, if you will, this past summer in terms of the problems associated with the lobster industry, in our LFA 25 in particular, and that is why we are very happy to present to you our position, where we are, where we are looking at going as we move forward.
I assume that you have your folders. We were supposed to have a visual presentation, but because of no electronic equipment here I trust that you will be able to follow closely from the handouts we have given you.
The lobster fishery, as I have mentioned, plays a significant role in the economy of New Brunswick. There are currently 1,408 primary core lobster licences that are divided between the Gulf fishery and the Bay of Fundy fishery.
[Translation]
The lobster fishery plays a significant role in the economy of New Brunswick. New Brunswick is not just the largest exporter of lobster products in Canada; it is also one of the leading processors of the product.
There are currently 1,408 primary core lobster licences that are divided between the Gulf and the Bay of Fundy.
[English]
Landings have increased from a critical low of 6,500 metric tonnes in 2004 to over 11,000 metric tonnes in 2011. This represents an increase of approximately 65 per cent since 2004 in both the Bay of Fundy and the Gulf region. As you can see from the slide, New Brunswick processes a great deal of lobster, 65 to 70 million pounds. Of this, only 21 per cent comes from the New Brunswick east coast where most of our processing facilities are located. Over the past two years we have been developing new markets and have put over 50 per cent more of this high end product onto international markets. We remain very confident that there is still significant unrealized potential for economic growth in this sector.
It is important to note that if we were forced to rely only on locally landed lobster or if for some reason Maine lobster was no longer available, the effect would be a substantial reduction in the number of processing plants in our province. Without the processing plants, current gluts would worsen as product currently channelled to processing plants would have to find markets on the already overtaxed live market.
New Brunswick lands lobster valued at $84.6 million per year. Our exports of lobster products are $455 million or 44 per cent of the Canadian total. New Brunswick is the single largest exporter of lobster products in Canada. The export numbers represent our success in importing product from other jurisdictions, adding value in re-exporting it to market. Last year the U.S. exported 52 million pounds of lobster to Canada, with the majority of it going to New Brunswick processors. At the same time, in the last year we have diversified our export destinations and dropped our reliance on the U.S. from 93 per cent to 88 per cent.
New Brunswick's approach to fish and seafood development is outlined in our fisheries renewal framework, of which you have been given copies that include annual work plans.
[Translation]
New Brunswick has provided $1 million in loans to fishers' organizations on the east coast to reduce licences as part of the DFO's Atlantic Lobster Sustainability Measures Program, and 161 licences have been retired.
[English]
New Brunswick provided $11 million in loans to fishermen's organizations on the East Coast to reduce licences as part of DFO's Atlantic lobster sustainability measures program. One hundred sixty-one licences have been retired from the fishery.
We have seen impressive results by working with producers to develop new markets. Our primary focus has been on China. We have gone from virtually no sales four years ago to a projected $12 million in sales for 2012. We have successfully launched harvester, buyer, plant worker and processor workshops on quality lobster handling practices, and we have provided support in a funding mechanism for fishermen to organize and fund their organizations since the early 1990s.
Lobster landings show no sign of slowing. The challenge we face is how to put the best product onto the market in a sustainable manner.
A number of issues need to be addressed. One issue is that our fishing seasons do not always coincide with when lobster is at its best in terms of size and quality, especially in LFA 25. Poor handling all along the value chain is robbing us of value. As well, very high daily landings adversely affect the lobsters' condition and increase the overall cost to the system. Also, different products require different lobster in terms of size, meat fill, minimum production lots, et cetera. We have recently seen increasing market resistance to smaller lobster. These are lobsters under 76 millimetres in carapace length. The market for small canner lobsters has difficulty absorbing the supply, putting downward pressure on price for all lobster. Market demand and sustainability should dictate carapace size.
In terms of market conditions, we have increased our reliance on lower priced markets. As a result, our vulnerability to economic downturns has increased. There are also challenges in terms of industry structure. Many small undercapitalized enterprises compete with each other for sales to fewer and fewer larger distributors in our destination markets. Too often, enterprise has tried to buy market share for volume or are forced to sell inventory for cash flow.
Fisheries management does not directly consider the issues facing those who take the product from the wharf to the market, nor does it effectively involve them in decision making. In the past, fisheries management relied only on the harvesting sector to set the pace of any adjustment to customer requirements or market issues. However, I am encouraged by recent discussions that have involved all sectors, including the federal government.
So what is to be done? Fish when conditions are at their best. Fishing season should be set according to market demand and optimum lobster quality and condition rather than on fixed calendar dates. There needs to be recognition that optimum quality may vary for different products and sectors. For example, the requirements for processing versus live market are different.
Adjust the size to market requirements. There needs to be better acknowledgement of how the market has changed. Different sizes of lobster have different values because they are destined for different markets. Current size regulations reflect past preferences. An increase in the minimum size to reflect new market preferences will improve market performance and contribute to better resource sustainability.
Control the landing peaks. Landing gluts can lower the market price and significantly increase the working capital requirements to meet a few weeks of peak landings. Landing gluts also negatively influence the condition of lobster brought to market.
Improve the handling of lobster. Industry must reinforce the quality control of lobster from fishing boat to market.
What is to be done on marketability? Baseline standards: Most would agree that lobsters should not die before they get to market, that meat yield should reach certain minimums or that each lobster landing should meet certain minimum value yields. Lobster quality standards will not be easy to establish. High quality for one type of product or market is not the same as high quality for another. For example, a lobster that may not be top quality for the live market can still be high quality for the processed market. High quality must be determined by the quality of the final product.
Market diversification: Increasing our sales into the Asian and the EU markets will lessen our reliance on the traditional U.S. market and provide more protection against economic cycles in individual countries and against currency fluctuations. New Brunswick has had success in diversification by working in partnership with our producing companies and importing companies in the emerging markets.
For New Brunswick, lobster is the most significant part of the fish and seafood sector. We are experiencing challenges and successes in that sector. Our challenges are that we currently are not maximizing the potential of the lobster industry to provide the highest return to our economy. Changes are needed, such as modifying the seasons to ensure that we are fishing lobster when it is at its best condition and optimum size and recognizing the different needs of the live market versus the process market when setting standards. The industry needs to be better positioned to respond to events like climate change. We need to improve the way we fish to protect the quality of the lobster, including improving how quickly we land lobster and how we handle it from the boat to the market. Most importantly, we have to improve our products to generate value for the customer.
In closing, I would be remiss if I did not emphasize that lobster represents one of the only economic resources for many of our coastal and rural communities here in New Brunswick. A solution to the selling of lobster licences out of communities, as we have recently seen on Grand Manan, must be found. Over the past 20 years the lobster industry in New Brunswick has demonstrated it can adapt to difficult and challenging circumstances. We have grown to being the largest exporter of lobster products in the country. We believe we have the knowledge and skills to generate even more value from lobster to the extent that we can further adapt and innovate how we fish, ship, process and market product to generate value for customers.
I would like to thank you for your time and attention, and I and my staff would be more than happy to answer any questions you might have.
The Chair: Minister, you have touched on some very important topics here this morning. I am sure we have several questions from our senators, but before we do that, the purpose of our study is to find issues and concerns that are out there and hopefully make recommendations to the minister and the department at the end in relation to improving the opportunities and to address some of the challenges you have touched on here this morning. In regard to modifying the season, have efforts been made on that front, and, if so, in what way and have you received any answers or any cooperation in that regard?
Mr. Olscamp: As we sailed through the crisis of last summer, Minister Ashfield made a commitment that he would have staff investigate the changing of the season and the measure. To this point, I do not have any concrete information with regard to that, but my understanding is that is an ongoing process. We as a province are certainly expecting that the federal government will come to us with some recommendations. We see those two areas as being very, very important to the good health of our fishery, in LFA 25 in particular.
The Chair: You mentioned in your remarks the increase in the size, and we have also seen a great increase in the last couple of years in relation to the catch. I guess you are looking at the increase of the size from a quality point of view and sustainability point of view. Have you received any feedback from harvesters on that issue?
Mr. Olscamp: In LFA 25, since I have been the minister and I was critic prior to being the minister, there seems to be an appetite there for an increase in the carapace size. Market forces are dictating now that, in our area at least, there is not as much of a demand for canners. As a result, increase in the carapace size would address the fact that markets for canners are very soft at this point.
The Chair: You have reduced exports to the U.S. from 93 to 88 per cent. That seems to be a concentrated effort on your behalf. Can you touch on how you are diversifying a little bit more?
Mr. Olscamp: For many years, the American market was lucrative for lobster, not just from New Brunswick but for the entire Atlantic area. Because of the downturn in the American economy, there was a parallel downturn in the demand for the product, Until that downturn the American markets had been taken for granted, I guess is the best way to put it. Since that time, staff have been going full out, very dedicated. We have at least two people almost full time dedicated to establishing markets in Asia, in particular in China, and that is starting to pay dividends, as evidenced by the statistics we provided you. We had become too familiar with the Americans in terms of markets, not unlike a lot of other products, I suspect, and our response to that has been to increase markets in other parts of the world.
We have been very active and the results to date have been very good. Unlike the Americans, the Chinese are particular about how they want their product prepared, so we have sent chefs over recently to prepare the food to see if we can encourage them to buy more. We also have a lobster academy in St. Andrews where potential buyers are invited from all over the world to see how the industry works from catch to preparation. That is all starting to pay dividends.
Gilles LeBlanc, Senior Processing Development Officer, Business Development Branch, Department of Agriculture, Aquaculture and Fisheries, Government of New Brunswick: On the Asian market, I would add that New Brunswick has been going to shows, starting with Hong Kong back in 2004, I believe, Hong Kong being kind of the gateway into China. Initially it was for processed products, which is a frozen product. It was hard to penetrate the Chinese market because of the cold chain that was not there, especially going to the bigger cities, but also the secondary cities, which are cities below 30 million. Since 2010, it is unbelievable how fast they are developing infrastructure to handle frozen products. New Brunswick being primarily a processing province for lobster is providing opportunity for that market.
To come back to the carapace size and the seasons to add a little bit to the minister's comments, there is a working group established where all three provinces are involved — the industry, government and DFO — to explore solutions to try to prevent what happened in LFA 25 last year, and everything is on the table. There are discussions on sizes and starts of seasons, and there is, of course, when you have three provinces, you have diverging of opinions. That is where the challenge lies, but the working group is working and there are also working groups in P.E.I. and New Brunswick feeding into that process.
Senator Hubley: Welcome to you and thank you for your presentation this morning. It is nice to hear about the lobster and how important it is to our area.
The Lobster Council of Canada seems to be a successful body in working with the provinces and the industry. I am wondering if you will comment on their work generally. They are trying to establish a quality branding system for the Canadian lobster. I would like say Atlantic lobster because I think that is the best. To that end, I am wondering how imports from Maine will play into that branding system and given the amount that we import from Maine, are there standards for the quality of the lobster that has to follow that import?
Joseph LaBelle, Director, Policy, Advocacy and Strategic Projects, Department of Agriculture, Aquaculture and Fisheries, Government of New Brunswick: When we look at quality and the standards, we include the physical characteristics of the lobster that we are buying, and also the product forms, the reliability of distribution and supply. From our perspective, the brand has to represent something. It has to be the guarantee that we are making to our customer in both the fish itself and the physical product, but also how reliable we are in delivering it, delivering it over the full year, maintaining consistency of price, hopefully a high price that is consistently high, but avoiding some of those other pratfalls. Our experience in the processing sector is that the lobster that we are bringing in from Maine is excellent quality product for us to make the products that we want.
When it comes to standards, it is dangerous to have too limited a definition just at the wharf side. A lobster that may not store in a storage facility or a holding facility for three or four months until you are ready to ship it can make excellent top quality processed product, and we are seeing that now because we can produce some of the best world class frozen product, but that fish may not travel for 48 hours or 72 hours by plane all over the world and it may not store for three, six or up to eight months for the live trade. When it comes to establishing standards, it is important to realize that about 60 per cent of the value of lobster exports in Canada is from processed lobster, but there is also a very important market in the live trade as well. The standards will have to balance out what those are.
An incidental or indicative thing is shell hardness. At a certain point a very hard shell lobster ships very well. At a certain point it becomes more difficult to work in the process side without an extremely hard shell lobster. So that is just one example of how we will have to find ways of establishing standards that meet the requirements of the different products that we make as we realize that value growth, from our perspective, has to do with the future growth that we see in the processed product.
Senator Hubley: It was indicated that there are better times for fishing lobster. How difficult should it be to change that, or what structure should be in place to do that assessment on an ongoing basis to let our fishermen know that the season will be perhaps a week later or a week earlier depending on weather, climate, temperature and all the indicators? Is that something that is happening now and is it something that should happen? What would be the body to change that or to make it happen?
Mr. LaBelle: Our lobster seasons and our timing are part of the Atlantic Canada tradition. They date back to the 19th century basically when the logistics chain was different and the technology was different. Basically industry, including the people who are bringing the product to market, have to establish what their requirements are and have mechanisms in order to measure those before opening the season. There are lots of examples across North America of seasons that change depending on the condition of the fish. Unfortunately, lobster cannot read the calendar and they do not know that the first of May the season opens and they have to be in prime condition. We are seeing more and more variability of that, as well, as water temperatures change and things like that. As an example, the Dungeness crab fishermen on the West Coast in Oregon and Washington this month have delayed their season start by three weeks, four weeks because they have gone out and measured the condition of their crab and found that it is not adequate for market requirements. Collectively their councils — made up of harvesters, government regulators and the people who bring the product to market — said that they should delay it for a month to make sure they are getting good value.
Senator Hubley: Can that happen within the lobster industry?
Mr. LaBelle: It should.
Mr. LeBlanc: When it comes to seasons, it is a very complex thing and it is kind of a moving target. One of the factors is the gluts. If everyone were to fish at the same time, I mean if you land 225 million pounds on the northeastern shores of North America at the same time, it would not be good for markets or the industry in general. That is one thing.
The other thing is the complexity that we are seeing even within one LFA. Sometimes you will have one part of the LFA where the lobster are a certain way, maybe hard shell, and another part of the LFA where the lobster are soft shell. The other moving part is that it can change from year to year because, for example, we are seeing climate change. Another phenomenon is that the catches have been increasing exponentially, and many think the reason is that the lobster in general may be looking for an optimum temperature. You are seeing less lobster in the southern states, like New York and Massachusetts, and you are seeing more coming up the coast, which is good for Canada I guess in the long term.
Many of these factors, even for scientists who spend their whole careers trying to understand the biology of lobster do not understand it yet, create a moving target.
One other point, lobster feeds or traps better sometimes in a certain time of the year and what affects that can be, it is at a certain point and it is either at the molting stage or whatever and needs to feed because it is hungry. That is a factor. In the United States, most of the fishing is done in July, August and September. Many people would say that is really not a good time to be out there because a lot of the lobsters are soft shell, post-molt.
Mr. Olscamp: Getting back to your original question, although there were rough waters, I think the events of this summer were a watershed or turning point in the industry. I really do. I have made some copious notes about where we have been, where we could go. For too many years there was a disconnect between the fishers, the processors, governments, with all due respect, the federal government, because I do not have control over quota, over seasons or over licences. My role is processing and marketing the product.
However, since the events of this past summer — and my friends here sitting next to me can either agree or disagree — we have seen an improvement in relationships between those various groups. We have had some really good meetings. I have a roundtable on fisheries. The last one we had was a congenial meeting in comparison to finger- pointing in the past. I think all sectors of the industry have realized that this is crisis time, if you will, and one group of the parties involved in this cannot solve that problem by themselves. I am satisfied as that we have a good dialogue going at this point.
As Gilles has suggested, the whole biology of lobster is more complicated than getting five or six groups together, but at least that provides us an opportunity to go looking at, for example, why all of a sudden we have a glut. I see more positives as a result of what happened this past summer.
The Chair: In your closing remarks you mentioned the selling of lobster licences recently as seen in Grand Manan, and The Telegraph-Journal recently reported that the Grand Manan Fishermen's Association protested the transfer of lobster licences from the Grand Manan area in New Brunswick to Nova Scotia harvesters. The Department of Fisheries and Oceans have agreed to a temporary freeze on lobster licence transfers. I wonder for the benefit of the committee could you just expand on that a little bit; what happened and your concern with that situation?
Mr. Olscamp: Personally, I have great concern. The premier and I share the opinion that losing the licences equates to losing a natural resource that we see as ours. Every time we lose a boat to another jurisdiction, we also lose a licence, as you know, and we lose the ability to capture that product, be it lobster or any other product. As it cascades down, of course we lose employment.
If you speak with people from Grand Manan, which is a small island which relies almost exclusively on fishing, the loss of a dozen jobs or two dozen jobs is very significant indeed. As a result, we are adamant about protecting those licences for the good of, in this case, the economy of Grand Manan, but that could happen anywhere. As we speak, there could be a transfer of licences from my area, which is on the Northumberland Strait, to people who want to buy the licences on the P.E.I. side of the Strait and vice-versa. We are really concerned. We are very grateful to Minister Shea, as you know, for having imposed the temporary freeze. It gives us an opportunity to work with the people of Grand Manan in more detail.
My department has been very progressive in working with them, introducing what we think are good ideas, but they need to digest them. They are in charge of their own destiny from where I sit. All of that does not happen quickly, but all of that could be solved if the licences would be protected. I think there is a study right now to see if those could be protected based on the fact that we would lose natural resources if they should be allowed to move. Some bidders from Nova Scotia, for instance, have very deep pockets, and I know the Province of New Brunswick cannot get involved in that to the degree that they are.
I hope I have answered your question. Senator Unger is here. It would be like British Columbia or Alberta allowing its oil to be bought by another jurisdiction before Alberta can recover the cost of it. It is all right if you get your royalties, but we would lose everything in this case.
Senator McInnis: Why were the licences sold? Was it fishermen retiring and wanted to recoup?
Mr. Olscamp: Yes. You can see yourself as a fisherman who wants out.
I want to go back to the rationalization that I spoke of in my address. That did not apply to the Bay of Fundy. That was just the eastern part of New Brunswick. If you are 60 or 65 years old and you want out and someone comes to you and says "Look, I will buy your licence for $400,000," it is a pretty nice retirement package. The unfortunate part of it as it exists right now is that there is no opportunity for the community, if we are referring to Grand Manan, to counteract that offer. That is what we were looking at, models that could say to the Grand Manan people "Do not allow that resource to go. Compete with the bidders from other jurisdictions."
Recently too, there were some native fishers. There were 10 licences there, I believe. As you know, you cannot sell those licences but you can lease them. So people from Nova Scotia were leasing the First Nations licences and fishing with them. As a result, and I am repeating myself, the people of Grand Manan were not only losing the natural resource, but the human resource too, people who would have fished or crewed those boats.
Senator McInnis: I fully appreciate the detriment to the rural communities, having come from a rural community on the eastern shore of Nova Scotia. However, you face some real challenges in that for many fishermen that is the equity that they have built up in their boats, their licence and so on. I am just wondering how do you prevent this from happening. You either have an alternative, and the alternative quite often comes from government and the taxpayers, and quite often they are not able to be resold to a community like that. There are some real challenges there.
I fully appreciate what you are saying. It has a deleterious effect on these rural communities because of the fact that the lobster industry has picked up where the ground fishery has fallen off. Therefore, there is some real difficulty and challenges there in coping with that situation. That is why I was asking the question as to how possibly you might be able to do that.
Mr. Olscamp: I am not an expert on the residency clause that might have pre-existed, but that is being studied. Minister Shea has promised me that she would get an opinion on that. I am a firm believer in co-ops. Moses Coady was a bit of an idol of mine, and that is the idea that I proposed the staff bring to Grand Manan people, to pool their resources and possibly come up with enough resources to say "Joseph's licence is being threatened. He is being offered some money from someone and from another jurisdiction. Let us save it."
As a provincial government, we have a new entrant program. If there was a young fisher aspiring to fish off Grand Manan, with the pooled resources of the community plus what we could do to help, we might be able to save that licence. My feeling is that the Grand Manan people want to hang on. They are pushing for the residency clause. If there is a legal opinion that you can protect it through that, so be it. If there is not, then you need to have a back-up.
Senator McInnis: The other danger, in my opinion, is the concentration of those licences with a few large corporations. Speaking as a senator from Nova Scotia, that is what we have to be careful of.
[Translation]
Senator Poirier: I would like to thank the minister and the departmental officials for being here. It is always a pleasure to come back to New Brunswick to work and so to be here with you. I have a couple of questions to ask you. I am very much aware of the problems, as much as I can keep up with them, of what went on this summer. I talked to a number of fishers in the region who were concerned and worried about what was happening. I have a couple of questions I would like to ask.
The first question is on page four of your presentation, at paragraph five. It talks a little about what I wanted to discuss.
We know that last summer, the problems that happened that you had to deal with in area 25 certainly had to do with the price and also the number of lobsters coming from Maine to our fish plants. So because of that and because of the price, it was difficult for our fishers to get a good price and also to be able to sell their products to the plant.
Here you say: if for some reason Maine lobster was no longer available, what would the impact be? I recall that during the summer when the crisis was underway, one of the comments we heard in the media and from other people was that Maine was also looking at the problem in area 25, because it affected them too, up to a certain point. At one point, there were comments coming from Maine itself to the effect that maybe it was time for them to start thinking about whether the solution might not be to build their own plants there. That was certainly a little worrying for me, since I know a lot of people here who work in the plants and earn their living there, because automatically, if they start opening plants in Maine, that means they will be sending less product here, and the number of weeks or months when there will be jobs available in our plants could be seriously affected. And that will certainly affect people's jobs here. I would like to hear your comments about that.
Mr. Olscamp: Thank you for the question. Yes, there are factors in play. We hear rumours, I think, and my staff can talk about that after, that there is at least one application from New Brunswick to build a processing plant in Maine. I am told that processing plant is something that is very costly to build. As well, there is a technology, if I can put it that way, for processing lobster that seems to exist in the Atlantic provinces more than in Maine because they have not done much processing for a number of years. As well, senator, don't forget that the crisis occurred during an election campaign in the United States, and there may have been promises made, but there is no evidence. There would have to be several plants built before it would have a very significant impact on our ability to keep our processing plants open.
The importance of lobster from Maine is very carefully calculated, if you like, since without lobster from Maine, our processing plants would not exist. There would not be many left.
During the crisis, there were still all sorts of accusations like "why are you buying lobster from Maine?" We cannot stop Maine lobster from crossing the border from Maine-New Brunswick border. People did not know, or forgot, that even though we imported 70 per cent of the raw product from Maine, when the processing from Maine was finished, over 80 per cent of the processed product went back to the United States, and to have blocked that, because we could not do it, would have had very serious implications for our trade with the Americans.
There were big American players involved, who were spokespersons during that period. I was in contact with my counterpart in Maine just about every day and I spoke often with Mr. Binns, who is in Boston. My staff can tell you. Even if they build one or two plants, I do not believe there would be very significant consequences for our ability to produce. It is very costly, and I think we have a lot of skills when it comes to fish processing. Gilles once owned a processing plant, so I am going to let him talk about that, because it is very familiar with it. A good question, and I have to tell you I was initially afraid, but since talking to some processors, because I did my tour after that, they do not seem to be very nervous about it. Gilles can clarify it a little more than I can.
Mr. LeBlanc: Yes, lobster processing is concentrated. A 400-mile or so radius between here and Moncton, it would cover the region where 95 per cent of the lobster on the planet is processed: frozen lobster, homarus americanus, the American lobster. You have to understand that homarus americanus is a species. There are no American or Canadian lobsters. They have no passports. It is a species, and the lobster industry, Canadian and American, is integrated. The industry is really divided in half. The live lobster industry is the big strength of Nova Scotia, and the processing industry is the strength of New Brunswick and Prince Edward Island.
In the past, there was a lot of competition for lobster because catches were limited, and a lot of processors went bankrupt. In 1990, lobster catches in the United States started to increase. The increase has been exponential since then. That gave plants in Canada an opportunity to survive and diversify. There were plants that were processing snow crab and other species. When the cod were wiped out in 1992 or 1993, snow crab, shrimp and lobster started to increase, and that gave the plants in Prince Edward Island and New Brunswick, and now Quebec and Nova Scotia, an opportunity to diversify their source of lobster. Had it not been for that resource, there might have been two or three plants left standing and probably not even that, and they would be operating for only six weeks in the spring and three or four weeks in the fall. It is an opportunity. The increases in the lobster catches in Canada and the United States are an opportunity for our industry. That was the biggest factor for the economic health of the processing industry in Canada, to be able to get supply from American sources. But also, we see there is the same type of growth in Canada. There was a time when 60 per cent of the total lobster catch was sent to market live and 40 per cent was processed, but now that has changed. It is about 60 to 65 per cent processed and 40 per cent live. But that does not mean that volumes have declined, because there is more. That is how the industry works. One complements the other, and it is important to understand that.
Guys like John Risley and Colin MacDonald from Clearwater often said that, at our meetings. If it were not for the processing industry, it would be catastrophic. The 30 per cent or 40 per cent of the lobster that is strong enough, based on blood protein or shell tests, that can go and be put on planes and sent around the globe is important, and we have to maximize its value. But there is the other 60 per cent that cannot be put on a plane to travel around the globe. Something else has to be done with that 60 per cent. Its value has to be maximized, and the best way of doing that is to process it into the best possible product, that the best restaurants and the best customers on the planet will want to eat: if a restaurant in Paris wants to put this little lobster claw on its lobster bisque, that comes from a processing plant. There are all sorts of global opportunities. This is a product that the planet wants, and live lobster and the processing industry are complementary. That is how it works.
If the plants in New Brunswick — and there are 16 relatively large plants in New Brunswick — limited their activity to processing lobster from New Brunswick, there would be enough work, I would say, for about one and a half plants for 6 weeks. There are 16 plants.
Senator Poirier: Given the importance of the plants to the province of New Brunswick and to the economy of the province, certainly, now that the elections in the United States are over, are there ongoing communications with the United States? Do you communicate in particular with the Maine region, to perhaps find solutions other than letting them go ahead or encouraging them to go ahead and build plants?
Are there other solutions, working with our fishers, with the province, with all the partners at the table, to see what solutions there might be to deal with problems like the ones we had this summer, but also to find a way to protect our plants and make sure our lobster products are processed here?
Mr. Olscamp: During the crisis, as I said, there were communications every day. We also have to see that when it comes to the United States, as Minister of Fisheries, it is not my place to negotiate with them. It is the Department of Intergovernmental Affairs that does that. I have suggested that we should continue. At the end of the day, there are problems associated with that. Fishers in Maine fish almost eight or nine months a year. They have the opportunity.
Mr. LeBlanc: If I understand correctly, they have no season. They are the ones who decide when they will go out. In winter, they do not go out because of the weather. They really have no season.
Mr. Olscamp: Our fishers take 250 pots, and in the north they take 300 pots. In Maine, I believe they have lowered the limit to 700 or 800 pots. Right away, they have the opportunity to catch more lobster because their season is longer, and they have more pots for fishing. That does not mean it harms the lobster, because even with 250, they can fish. In English, they say "we fish hard". That is something that should be discussed. The Premier is aware of what has gone on, because he spoke often with Governor Lepage, and I have asked that our talks with them continue, but that is intergovernmental. Joseph might be able to add to that, if he wants.
Mr. LaBelle: I think one of the good things that came out of this summer is the discussions between the people who bring the product to market and the fishers. As Gilles mentioned, if we relied solely on the lobster that is landed in New Brunswick, we would have very few plants and a very short season. We now have a season that starts in April and runs until January of the next year. To illustrate the size, all fish and seafood exports from Canada come to about $4 billion. That is the sales figure for one company in the United States, Sysco Seafood, as it happens.
So when we do business with the distribution chains, we have to be able to deliver in the long term. We also have to provide work for our employees so they will stay. And there are also substantial depreciation costs in a modern plant. We have adapted to the new circumstances in New Brunswick, in processing, by expanding our supply. If we had not done that, all of that cost, to bring the product to market, we would have confined ourselves to $84 million in New Brunswick lobster, and there would have been a lot less money available for New Brunswick fishers. So if we lose the diversified supply we have, it is our fishers too, and not just our plant employees, who will suffer, but our fishers will be in very serious trouble.
On the question of working with the United States, obviously some of the people who were most concerned last summer were the people in the United States who import our products. There are very good relations on the processing side between the companies here and the companies in the United States. Throughout the crisis, the Fisheries Council of Canada worked very closely with the National Fisheries Institute, which is the industry organization in the United States. There are quite big importers in the United States that have plants here and in Prince Edward Island, and there is a lot of work done by the industry to keep the borders open.
And as Gilles and the Minister said, it is very difficult to generate a profit from operating lobster processing plants. A lot of people have tried. Up to now, the skills, the employees, who are one of our strategic advantages, and the knowledge about processing this species, which is very difficult, have mainly been concentrated in New Brunswick and Prince Edward Island. It is not like other things.
Mr. LeBlanc: I would just add to Joseph's comments, if I may. The biggest fear on the part of the processing plants in New Brunswick is probably when governments get into the game. In the United States, if the government of Maine and the American government give big subsidies to build plants, the plants in New Brunswick are going to have to compete against government money. That applies to the other governments as well. It applies anywhere. The biggest fear of plant owners in New Brunswick is having to compete against governments, whether it be the provincial or federal or American government. That is what changes the playing field. If the money is invested by a private party, the plants in New Brunswick are not afraid of competing against anyone on the planet.
Senator Poirier: My last question relates to a different subject. As a majority of us realize when we do our shopping, grocery bills go up year over year, and that means that costs are constantly rising. Here, we have a situation where the volume of lobster has risen by a fairly large amount, a fairly large figure. If I look at your presentation, it has gone from 6,500 in 2004 to 11,000 at this point. I wondered whether you could tell me, particularly if all food prices are going up, what the problem is with our lobster. Even though we have a good quantity of a product that is in demand around the world and is seen as a choice product, a quality product, why do you think the price is not going up and this is still a factor and a problem?
Mr. LeBlanc: The biggest reason is very simple, and we mentioned it earlier. It is the exponential increase in catches. Since 1998, more or less, the amount of lobster landed in the United States and Canada has doubled. It was fine up until 2004, and then what happened is the Canadian dollar started to get stronger and the American dollar got weaker. There was one point when the difference was 40 per cent, and it even went up to 50 per cent, so for each American dollar you brought into Canada, you had $1.50 Canadian. You could pay more for the resource.
Then there was the economic problem in Europe and Canada and everywhere. Markets shrank at the same time as supply doubled, and the only way to adjust quickly was to expand the market, and to expand the market, prices had to be lowered. You had a number of factors in play at the same time, a little like a perfect storm that exerted downward pressure. That is why Asia and the new emerging markets are so important. All of a sudden, you go into a new market that can absorb a lot of volume. When the Chinese discover the quality of the lobster, potentially, the idea is that demand and price will rise. Before 2004-05, the price had risen constantly. The price even got too high and restaurants in the United States were taking lobster off their menus. Lobster tails and lobster meat were selling for nearly $20 a pound. That was for frozen product. There was a lot of resistance to that price and a lot of markets shrank. Now, with these new prices, the markets have expanded, but the speed of growth in the catches and the speed in which the market is developing are a little out of sync. They are not marching in step. And the minute lobster catches start to decline, the price will rise. It will jump. Sancton has done its analysis every year, and Michael Gardner also did an analysis where you see that the majority, 75 to 80 per cent of the wholesale price of lobster, still goes to the fishers, so when the price goes up, fishers will get a better price.
Senator Poirier: Do you think it is going to stay like that for a few years, or are we starting to see the light at the end of the tunnel at this point?
Mr. LeBlanc: There are a number of factors in play, and it is the American and European economies, and also the Japanese economy, and we are seeing our sales to Japan rising; it helps us if those economies get stronger, and that is going to be a factor. The exchange rate is a factor. We don't know, but you do have to realize that this is the status quo. The big factor for lobster, the big opportunity, again, and we have all realized it in the industry for at least two years — it may have started in 2006 — is the Asian market.
Senator Poirier: Thank you.
Mr. LaBelle: As long as we are selling a product that is a foodstuff, we are going to have trouble creating a place for ourselves on the market and getting the value. For a year and a half, the market value of various sizes of tails has become more or less equal. A two-ounce or three-ounce tail sells for the same price as a four-ounce tail. Our customers ask themselves why they would put a two-ounce or three-ounce tail on the plate when they can get the same thing in four ounces. And we had a very big customer this spring who said, "Fine, this year we are not buying any two- to three- ounce tails at all. Deal with it."
So there is not necessarily a structured solution. It is a matter of being on the market and seeing what changes are happening and being able to adapt ourselves to the level of products being produced, in the processing we do, and that also sometimes means changing the way we fish. So there have to be fishers, processors, people in the market, who understand the market and who are also able to change over time.
Mr. LeBlanc: Just one more little comment. The Canada-Europe agreement is really important for lobster, because there is a 15 per cent tariff on processed lobster and snow crab products. I think that in the agreement, that tax is going to be lifted over a few years or several years, and that is really important because it could open up the European market to processed lobster.
Mr. Olscamp: I just want to add in English.
[English]
The talks occurring right now with regard to the European markets, if things go the way we are hoping, will open up opportunities for seafood product in this area. Again, it is always a question of supply and demand. As Mr. LaBelle mentioned, when a big buyer pulled the big contract for the tails — that is the way a processor described it to me — the American economy tanked. The American economy tanked for different reasons, but I cannot remember the names of those lending institutions. Fanny Mae, or whatever it was, they were kind of the catalyst that triggered the avalanche. It is not always just those companies.
What happened in the lobster industry at the time, as Mr. LeBlanc has mentioned, climate is a factor; we have identified that. Markets are a big factor. The decline in the American economy is a big factor. This big company that pulled the contract was the catalyst that really precipitated some of the problems that we had.
It was hard for me as a minister to communicate that. How do you tell an irate fisherman, and you saw them as well as I did, "Hey, you cannot throw American lobster around." You cannot say "Stop buying American lobster." We had to explain that we need that American lobster to keep those plants working. That in a way comes back to the disconnect that we are starting to shore up, that there did not seem to be in the minds of a lot of fishers that if they do not have those processing plants, they are not going to be able to sell their product. There was always a cool feeling between processors and fishers, and I think we have managed to make some very important inroads there to the point where they are now assuming ownership for the entire industry versus "You are doing us in." I am happy as a minister that we are able, with a lot of work on the part of my staff, to bring that all together.
There are so many factors, Senator Poirier, that enter the picture here. The American dollar tanked. As Mr. LeBlanc will tell you, although we are a big exporter we cannot declare war on the Americans in terms of lobster. There are already rumours that "Hey, we are going to stop buying potatoes from you." We are big potato exporters, but you cannot start playing that game. It is called protectionism. I am not an expert, but in my experience it has never worked. Some jurisdictions play a little more, but we should not get into a war of protectionism.
I go back to my thesis of a turning point, a watershed, at least from the human side of it, and hopefully Mother Nature will cooperate. I think my staff will agree that we need to continue moving forward. The industry is too important. However, we still have a lot of rough sea to manoeuvre through.
Senator McInnis: Did I understand correctly that with processed lobsters 70 per cent comes from the U.S.?
Mr. LaBelle: No.
Senator McInnis: What was the percentage?
Mr. LaBelle: Seventy per cent comes from outside of New Brunswick.
Senator McInnis: You said that you provided $11 million in loans to the fishermen organizations. Who pays this back?
Mr. Olscamp: The federal government had offered an $11 million grant to rationalize. We counteracted by offering an $11 million loan payable over a period of time. I will keep it simple. The MFU negotiated with us that those payments would come through their snow crab allocation money. So that is how the province will recover our money. Eight communities of the MFU get a certain allocation of the snow crab. They generate money that way and that is where we are getting our payments.
Senator McInnis: You say that poor handling along the value chain is robbing us of value. I read where the refrigeration of lobsters as quickly as possible, actually on the vessel, is best. Is that practical? Is it expensive? Is it something that we should really be doing more of?
Mr. LaBelle: We do not need elaborate refrigeration systems. Ice does very well. It is a question of in what condition is the lobster when you take it out of the water. Is it strong and vibrant? You have to keep the sun, the heat and the rainwater or fresh water off it. That can be done fairly well. You need to make sure that you have compartmentalization on your boat so you are not putting a lot of lobster into one bin and crushing it. These are all very practical solutions for most fisheries. For some fisheries in Southwest Nova in the first week, this week, it is difficult because there are 6,000 pounds coming in on some of those boats per day, so that becomes more of a problem. For most of the places, these are very easily addressed issues on the boats with minimum cost to the harvester. We have issues like what kind of bait is used. If you use fresh mackerel, it is very hard on the lobster because of the histamines that develop. Where there is going to be a cost is how do you generate all that ice, because we do not have it now. There are some issues about capacity for ice.
Senator McInnis: Is it prevalent?
Mr. LaBelle: This summer it started to become more relevant. Let us put it that way. There have been attempts in the past to doing things like recirculating tanks on boats, as well, but even there we find that if you have a recirculating system and you are coming into harbour and the water is very warm, that does not work.
Senator McInnis: Exactly.
Mr. LaBelle: Ice appears to be the best. We ran about 18 workshops on the East Coast this year and some in the Bay of Fundy. We brought in a veterinary and he talked about "If you do this, this is what it is going to do to the lobster." That was very good. We had very good uptake, very good response, and that involved fishermen, buyers on the wharves, people working in the plants, everybody along the value chain. He was good because he said, "I am not going to tell you how to run your boat, but I can tell you if you do this to a lobster, this is what is going to be bad." We are very comfortable the fishermen will find innovative cost effective ways not to do those bad things to lobster.
Mr. Olscamp: Quality has been identified by every player in the sector as being important. We had humidex readings in the high 30s, low 40s this summer in August, if you can believe it, in this part of the world. For the Maritimes that is unusual.
Senator McInnis: Quality is one of the three pillars that Gardner Pinfold in the report to the Lobster Council identified. If you are going to brand your product, it better have good quality if you are going to get good prices.
Another matter I think will really be a challenge, it is interesting to hear that you are working on it, is fixed calendar dates. The word "fixed", would it rather be floating dates, and who would monitor these dates? Would they be different? Would the fishermen have to wait to see what time of the year they are going to go fishing when the calendar turns January 1? How would that work?
Mr. LaBelle: Some very interesting work has been done in Southwestern Nova in terms of their pre-molt studies that the AVC Lobster Science Centre was doing where they actually go out early in the year and they start monitoring. They have some test traps and they monitor the hardness of the shell and when it is going to molt and what the blood content is like. They did it long enough that they were predicting very clearly what the quality would be in three weeks. It would be possible for industry, and it is done in other fisheries, to say, "We are not going to start on August 8 this year because it looks like the cycle is later and we should be targeting August 16 or September 1."
It is done in other fisheries. I mentioned the Dungeness crab fishery on the West Coast. At one time in New Brunswick we used to do it for herring roe where we would go out and measure and see what the maturity of the herring roe was before we would fish it, rather than fish it by calendar. We do not lack the science and the ability to have the data and the information to make the decisions. What we lack is the ability collectively to actually take those decisions.
Senator McInnis: Since your province is responsible after the lobster gets ashore, it has been observed that ACOA recently sponsored trade missions and had chefs come out in Florida and so on. It has been said by some that private companies pay their own way to do this. I think it was Michael Gardner who actually said that it seems to be unfair that they have to pay their way and yet the Government of Canada is sponsoring others to put on these trade missions. Obviously benefits accrue from that, but people wonder why the national government would be paying when the private sector is paying on their own.
Mr. LeBlanc: It is a good question. What we found even within our industry, take Asia for example, in 2006, 2007, 2008, the way we see it, government has a role to play when you are trying to develop a new market. Once a market start maturing and business-to-business relationships have developed and are maturing, then it becomes very dangerous if government keeps on promoting, bringing buyers and all that. What has happened, and we have seen that over the last couple of years, is that sometimes you will bring in somebody, introduce him to a whole bunch of processors or whatever, but this guy has been doing business with this other guy and they had developed that relationship over the last 10 years. That is very dangerous, so the line we are trying to develop is emerging business, new markets.
Even if you go to China, certain cities are more mature, say Shanghai, and some people are concentrating on second tier cities that are 30 million and below; some are on the coast so they are already seafood hungry, if you can put it that way. It comes to understanding the market, understanding what has been done in that market, and then trying to complement or diversify and not compete.
One of the worst things is somebody is successful in Canada, let us say one company. Everybody follows in that path and fights for the same customer. The market is big enough for this industry. This resource is limited to the Northwest Atlantic from the Atlantic Ocean point of view. It is the only place in the world where we have homarus americanus. The world is big and we have a good product, it is a luxury product. I think we should start on that premise and work at distributing it enough that we obtain the top value from the marketplace.
Mr. Olscamp: I will just give you the political answer to that.
Senator McInnis: Good. I was waiting for a political answer.
Mr. Olscamp: We are all operating under economic stress. The federal people are and we are. We see our role in marketing as opening the doors, but our philosophy is to wean eventually. Given the limited budgets that I have, I think our department is being very generous in dedicating the number of staff we do to the marketing of this particular product. I am all in favour of weaning, if you know what I mean. If only I had more money. Mr. LeBlanc is right in saying that if you keep supporting the private sector, they will come back. I think we have been pretty successful in opening doors because we have been able to grow the markets, as you saw from the statistics. If new markets are identified, then we still will be there to introduce producers to the possibility of establishing those markets, but there is a cue point there where we need to wean.
Mr. LeBlanc: Where we find success is when government takes a generic promotion position, and if you promote Canadian lobster in Asia, the whole industry can benefit from that. For example, they made videos that were on the Chinese TV stations and the Chinese cooks were preparing Canadian lobster, talking about Canadian lobster, Canadian lobster. That is generic. Everybody benefits. If you look at that on the Internet, it is amazing. It is a cooking show in China and they are talking about Canadian lobster. Those types of activities benefit the whole industry and we try to focus on that type of activity.
Senator Unger: My questions have already been asked, but I would like to say, minister, your reference to Alberta's oil was a very good one. We are obviously both having problems getting our product to market. So good luck to you, and I know you would wish the same for us since many folks from your region are working in Alberta.
The Chair: I thank the minister and the officials. Certainly it has been an enlightening presentation and the questions and answers have been great and will add very much to our study. Hopefully some of the ideas and suggestions you have put forward will be a part of our recommendations at the end of the day to improve this very wonderful industry. It is full of challenges but also full of opportunities. Thank you for your time.
We knew we were going to have a long day but we are over a half hour behind already after our first panel. We apologize for that and thank Minister MacKinley from Prince Edward Island and his officials for their patience.
Minister, please introduce your officials and make your opening remarks.
Hon. Ron W. MacKinley, MLA, Minister of Fisheries, Aquaculture and Rural Development, Government of Prince Edward Island: Richard Gallant is my deputy minister, and Barry MacPhee is the Director of Fisheries for the Province of Prince Edward Island.
It is a pleasure to be here today, to sit before the Senate Committee on Fisheries and Oceans and present some of the initiatives and incentives that the Province of Prince Edward Island has been undertaking to support our lobster industry.
Before we get too far, I heard New Brunswick talking about carapace size. Apparently from what I know about it, and I stand to be corrected, is the processors in New Brunswick were having a hard time selling the canner lobsters so they requested from DFO that it look at raising the carapace size. I think the fishermen support it. However, in our case, our processors have no problem selling the canner lobsters or the smaller lobsters because they are more delicate, they are more efficient. If you are in a place like China where they give you a cup to eat dinner out of or something, they give you a plate about half the size, you know what it is like, it keeps the costs within the range. Of the total canner lobsters caught in Atlantic Canada, 80 per cent are caught in P.E.I., 20 per cent are caught in New Brunswick, and I believe there are none in Nova Scotia and Newfoundland, or not enough to size up anyway. The canner size is very important to us because 65 per cent of our lobster, on average over the last ten years, have been canners.
Let me put it this way, if you were in Newfoundland and the Alberta government came down with a rule to say Newfoundland cannot sell this oil and that oil, when Alberta does not have any of that oil to sell, or very little of it, but they figured they would try to drive up the price, it would not sit too well with Newfoundland. That is where we have the problem with New Brunswick on that particular issue. A lot of issues we agree on, but in this particular situation we have a problem. One of the solutions would be, given the fact they only catch about 20 per cent, to raise their own sizing mechanism through their fishing association and let those lobsters walk away because their processors are having problems processing them. In our case at that time of year, the lobsters are coming in and our processors are pretty well filled up trying to process.
There is another problem I see with the lobster industry. Great strides have been made in Atlantic Canada for new markets. Whether it be New Brunswick, Nova Scotia and even as far away as Quebec, they are getting new markets. For instance, the United States is 330 million people. Canada is 38 million to 40 million. China has 1.3 billion and they love fish. I just came back from China and it is unbelievable the amount of fish and the different fish products they eat.
We are going in the right direction. It is not a problem, but when New Brunswick and Nova Scotia, in my opinion and I am a business person, I am not a fisherman, tied up their boats, the price of lobster seemed to go up and they seemed to hold up. Then the spring came and I am sitting there praying because I am a new minister, not a fisherman, hoping the price will go up because it will make my life and my job much easier if the price goes up. The price did go up in the spring. It went up about 27 per cent. In the spring we had about 1,000 boats fishing. The vast majority is caught in the spring. The catch went up 35 per cent, I believe. If the catch is up in P.E.I. by 35 per cent, well it is going to be up in New Brunswick and Nova Scotia.
We came out of that really good. The lobsters were all sold and processed. Then the fall season hit and the price went down and that is very hard on the fishermen in that particular area. The fortunate thing is the fishermen sort of understood because out of 210 boats, 160 belong to co-ops. Co-ops is where you look at your own books or whatever. You have the Royal Star, which is a very successful co-op, and you have Acadian Fisheries, another co-op. Then we had about 60 boats in the middle there that were like open market boats. The catch went up quite a bit for them too. Do you know how much it was?
Richard Gallant, Deputy Minister, Department of Fisheries, Aquaculture and Rural Development, Government of Prince Edward Island: Twenty-five per cent.
Mr. MacKinley: The catch went up and the price still went down to around $2.50 to $2.75 a pound. You just cannot make any money. When you look at that, marketing is where it is all at for the lobster industry. I remember being in meetings with our fishermen in LFA 25, and they were talking about climate change, the heat and all this. In Southwest Nova, if you talk to Minister Sterling Belliveau or with the fishermen, and the difference in climate change compared to when they started fishing, whether the water is warmer or the fish are trapping easier, whether seals are eating all the other fish and the lobsters are hungrier, I do not know what the answer is. That is something that we are working on and trying to find out. In the meantime, our catch is up. It is good that the catch is up because that shows you that there are lots of lobsters there.
Another thing is, and I am looking at the bright spot of it all, that lobster is going to move. Some fishermen got a bad price and for Nova Scotia it is not too good right now, about $3.50 a pound. One of the things I see is that the fishers and government have to watch that we do not cry too much about the price being down, because consumers in China are going to look for things to be cheaper. You do not see Alberta coming out and saying the price of oil is too low. You do not see Shell saying that. The lobsters, farming, fishing and tourism here are like the oil is to Alberta. My sons are working out there. It is a great place to be working if you are young. It is a tremendous place. The boom is just unbelievable, and you have to give them a lot of credit for that. It is great that we have oil in Canada and it is great that we have got it in Nova Scotia and Newfoundland and anywhere else we can get it because that is all money that is coming in here.
These are things that I see facing the lobster industry. The lobster issue in our government has been front and centre. At one time in the province of P.E.I. the Minister of Fisheries and lobsters was with agriculture or something else. One of our commitments was we would have our own Minister of Fisheries. If you look at the second most important industry in the province, it is fisheries. Not only lobster but fisheries. It is important to have a minister responsible for that, and that is one thing that our government has done.
Since being appointed minister responsible for fish and aquaculture our government has done more for the sector than any government over the history of time. That has nothing to do with the politics, that just means that you have a minister there full-time looking after the industry and dealing directly through his deputies or his staff. It gives you more time to get out and listen to the fishers and hear what they want. We have fishermen in our Liberal caucus too and we are very fortunate for that. We have Charlie McGeoghegan and Francis Buck Watts. Charlie is a young fisherman and has been fishing probably ten years. I think Buck Watts has sold his gear. He retired and he sold it to his son or something. They are very invaluable to bringing fishing issues to the attention of government. Both are very passionate about the fisheries and work very hard for their consistencies and all the fishers to and ensure their issues are known and understood by the government.
Lobster is the most valuable sector of our P.E.I. fisheries, involving more than 1,200 boats in total for nearly 60 per cent of the landing values. When I get into landing values, one of the problems we have is that the federal government right now is coming down hard on unemployment with new regulations, and that could be devastating. They have also come down hard on us in quotas. Our halibut quota was cut back. We go out to fish halibut right now and we can fish our quota before dinner. How do you keep working if you are not getting your fair share of the quotas? That is one of the things that has been bad for Prince Edward Island. Prince Edward Island does not have gas, we do not have oil. I am not complaining, it is just the way we are made up. We are surrounded by water and we have a tremendous fishing industry and people working there. Today over 6,000 people are employed in the fishing industry on the Island.
Lobster alone contributes more than $250 million to the P.E.I. economy. We will today talk about how the provincial government has worked with the lobster sector to address the challenges faced by the industry as a result of a major downturn in our market in the United States. We will also explain how our support programs will help build a stronger fishery for the future. As everybody knows, one of the problems with 80 per cent of the Canadian lobsters are going to the U.S., the U.S. went into a recession, the dollar went up to par, all that affects trade. This is maybe where we fell back some.
If you are a processor and you are used to selling the market, you are taking your commission, you are making your profit, things are fine, but we were not prepared to get with the Chinese and that early enough, maybe if we got in there earlier. We are there now and we are putting the drive on it.
When we were out in Western Canada and Alberta, we put on a lobster demonstration out there and what we found is that they like their lobsters live and they want them in the shell, but you do not have the expertise for cooking and freight is dear. We are looking at equipment right now that the processors can pick up the lobsters, keep them fresh for 32 days and load a tractor trailer. By the way, we are getting into the Calgary Stampede with a corporate tent next year. We are going to have a lobster boil and I hope the senator will come to that. We will make sure you get an invitation. We have to find new ways of doing things too, and that is where the federal government or provincial governments can come in and help us. New ideas, new ways and then talk. You have to get the fishers on side and you have to get the processors on side.
You talk about quality as I was talking about earlier, our fishermen this year, due to the hot days, 30 degrees, had boats coming out and taking their catch after so long, so much of the catch and taking it back in with ice in order to keep the lobsters in better condition. The quality is very important, and it is very important when it lands on the wharf. They started a shuttle service. When it comes to handling and looking after lobsters, the fishermen are more astute than anybody else and adapt to the conditions that they are in.
We recognize that industry restructuring, recovering of existing market, developing new markets and other improvements cannot happen overnight. We also recognize that we are one player in a lobster industry that involves almost 10,000 fishery enterprises in Atlantic Canada and a large fishery in the State of Maine. We made a commitment to work closely with the industry and provincial governments while improvements are made.
We are here today to stress importance of the federal government's role as a partner to support our lobster fisheries while the market recovers and industry restructures. The provinces cannot assume responsibility for all the work needed to support the sector through these difficult times. When I talk about the ways the federal government can help we need to find new ways to be able to deliver fresh lobster, longer life. Today, if you cook a lobster in Prince Edward Island, it has to be kept at a chilled temperature, and 72 hours later it has to be consumed. Europe has products where they get that particular lobster in 32 days. I was talking to them and they guarantee their customers about 22 days. You have a lobster, fresh on your plate, shell and all. I thought, when I first got into looking at this, that it should be bagged meat because that is the cheapest way to sell the meat. When we did a study of the market, especially the Western Canada, they want the lobster in the shell, the same as in China.
Those are things that the federal government can help with.
We are here today to emphasize that the federal government needs to step back and take a second look at the recent announcement to modernize the fisheries, such as online licences, distributing of tags for traps and other measures such as EI reform which I mentioned earlier. That will cause further hardship for those who work in the fisheries. Our federal government, in particular Fisheries and Oceans, need to stay at the table and find ways to support market development, diversification and other measures in the coming months.
Deputy Minister Richard Gallant will make a short slide presentation on some of these initiatives. Following that, we will entertain questions.
Mr. Gallant: Mr. Chair, we are certainly pleased to be here today to present in front of your committee, particularly around the very important topic of lobster.
We have a short slide deck and I will go through it quickly. The first slide was just a statement on the mandate of the department.
As the minister indicated, we are a separate department in government, that being Fisheries, Aquaculture and Rural Development. The mandate was passed out in the slide. The focus of the presentation is on lobster. We have 1,225 licensed fishers in the province and they employ over 1,800 helpers. On the water alone fishing lobster, we are looking at over 3,000 people. Forty-five fishing harbours are maintained and managed, by and large, by fishermen through harbour authorities. The province tracks lobster landings so we have fairly up-to-date information, and in 2012, 27 million pounds of lobster were landed with a value of $113 million. The minister had indicated that is almost $250 million to the provincial economy and that is very significant for a population of 140,000 people.
We harvest lobster from three LFAs, 24 on the north shore, 26A southeast P.E.I., and 25 which is called the fall fishery in the Northumberland Strait.
Landed value by species in P.E.I., in 2011 lobster represented about 60 per cent of the landed value of the entire fishery. You will note that in 2011 the landed value of lobster was $79.5 million. It speaks to every $.25, $.50, $.75 cents or $1 a pound of landed value has a huge impact on the landed value and the dollars that are paid to the fishermen and end up in the economy. Our fishery used to be about $100 million landed value and in one year, in 2009, it declined to $75 million. That was $25 million in one year of landed value out of the pockets of the fishermen who were harvesting the resource and that is very significant in these rural areas.
The next slide is on lobster landings, a 26-year average, 1987 to 2012, the point being that the resource fundamentally in Prince Edward Island is in good shape. There are areas of low landings, but overall, the big picture is that the resource is fundamentally in good shape and we are pleased and proud of that.
The next slide is a running total on canner lobster which shows that, as the minister said, — and that lobster this year is from 71 millimetres to 81 millimetres, next year it is going to 72 — canner lobster is a very important component of the fishery in Prince Edward Island. Markets have been developed around that product. We represent about 20 per cent of the Canadian lobster landings.
The key role of the department is in licensing and inspection. That has been our traditional role when the lobster hits the wharf. There are about 48 companies buying lobster. There are about 166 licences in the spring that are issued for buying lobster, that is one licence per buyer per wharf, so 166 locations, and 23 licences buying lobster in the fall. There are about 19 processing plants eligible to process lobster. There has been a moratorium in place since 1994 on lobster processing and licensing, but 19 can process and about nine are active in the province.
People also peddle lobster roadside and there are 36 peddlers. Our government made a regulatory amendment to allow the core fishermen to peddle their own catch and that was put in place in 2008 and we have about 19 fishermen licensed this year to peddle their own catch and about 17 non-fishermen that peddle lobster. We have two fishery inspectors that enforce our legislation.
The next slide, one program that is very unique to Prince Edward Island is a lobster resource monitoring program. We have been collecting data on the status of the lobster resource since 1998. It began as a partnership between us and DFO and the industry and, by and large, it still is a partnership. Over 100 fishermen collect information on the lobster resource and that is anything from the size of lobster in the traps, to the abundance of lobster in the traps, to the type of bait that is used, water temperature, whether they have egg-bearing females or not, how many lobsters are in the window size that the fishermen throw back. Fishermen collect information on the resource which is invaluable and it is the only program in the Southern Gulf where that information is collected. If you do not understand the resource, making management decisions in a vacuum just does not work.
By and large, the department funds the entire program now, but without the program we would know very little about the structure of the resource in the southern gulf.
New Brunswick referred to overall lobster landings, 2011, between Canada and the U.S., nearly 260 million pounds of lobsters were landed. If you go back to 2007, that is almost a 50 per cent increase over 2007. The minister referenced market development and this is one reason why markets need to be expanded and new markets developed with the increased landings of lobster between Atlantic Canada and the State of Maine.
The next slide was just on the exchange rate. We do not need to spend much time on it other than saying with the dollar at par our processors have been at a disadvantage over the additional dollars they made on that product that was exported a number of years ago.
The next slide is on spring lobster prices. Again, the crash in prices in 2009 with the recession in the U.S. and a recession in Europe and the exchange rate at par drastically affected shore prices. Shore prices have improved in the spring fishery somewhat and the minster referenced some improvements again the spring of 2012, but they have not returned to the levels of $5 and $6 a pound lobster that we have seen between the period of 2000 and 2007. When we listen to the fishermen in the media say they need $5, $6 a pound lobster, that certainly was the price between the period 2000 and 2007.
Fall lobster prices, again, are separated out here and the very low price of $2.50, $2.75 certainly does not cut it in terms of the fall fishery this year. We do acknowledge that discussions are ongoing to look at the season, modify the season in LFA 25, the fall fishery. There are different views. Our sector, our industry in P.E.I. is comfortable with the canner lobster going to 72 millimetres but not going anywhere beyond it. Our co-ops have developed markets for that canner lobster and they want to continue to service those markets, but adjusting the opening day of the season is something that is worthy of discussion.
I just wanted to roll back to 2009. In response to the lobster crisis the province had launched a five point lobster plan. It included a number of elements to support the sector. I want to focus a little on the low-interest loan program on marketing, and rationalization, and we will mention something around EI.
A program that was unique to Prince Edward Island was the low-interest loan program. Basically, fishermen who had net available cash below a certain level, $40,000, were eligible to apply to the P.E.I. lending agency and receive loans, consolidate fishing loans at 4 per cent interest. It was originally offered to fishermen in LFA 25 and 26A, and was expanded to fishermen in LFA 24 when things crashed in 2009. To date over 300 fishermen of the 1,200 have participated through that program. They have had interest on their loans at 4 per cent extended over a six year period. The savings alone — because a lot of their debt was at higher levels, some at financial institutions at 6 per cent and 7 per cent, others financed their debt on credit cards at 18 per cent and 20 per cent, others at processors because they can borrow money sometimes from processors at 18 per cent and 20 per cent — is in excess of $10 million in interest payments, and almost $47 million was loaned out to that sector.
Fleet rationalization, the province was instrumental in assisting our associations in the province to hire consultants to develop sustainability plans, to access funding under DFO's Atlantic Lobster Sustainability Measures Program. In LFA 25 the Prince County Association borrowed $3 million from the province to match a $3 million grant from DFO and retired 34 licences. In 26A they had a permanent reduction in traps which leveraged funding under the DFO program and they retired 31 licences, and they have funding for two more licences that they would like to retire. In LFA 24 they did not retire any licences or reduce any traps but they did implement a quality program to improve handling of lobster from the harvester to the processor.
The minister referenced market activity. We are highly export dependant in Prince Edward Island. Our department, Innovation P.E.I., focuses on promoting products to new markets and expanding volumes in current markets. There has been a solid investment in this area and a solid investment continues to be made in this area because it is of strategic importance. The minister mentioned promotions in some Canadian cities. I think it is important to promote lobster across Canada. He was recently in Calgary and Edmonton and before that we did some work in Vancouver, Ottawa and Toronto.
With regard to international trade shows, we have a solid presence in Boston at the Seafood Show and the European Seafood Show in Brussels. We have worked hard with New Brunswick the last several years to expand the presence at the Seafood Expo in China. The minister was recently back and led the mission from Prince Edward Island to China and maybe he will make some comments on that later.
We have also accepted incoming buyers' missions and buyers from all over the world and chefs and media. It is very important to get the message out through chefs and media on lobster, as New Brunswick said in their presentation. We have had delegations from India, China, Japan, United States and Europe come and learn firsthand what fishing lobster and lobster generally is all about; how it is handled, sustainability and those kinds of things.
We wanted to put a slide in on Lobster Council of Canada. It is an organized industry group of buyers, processors, fishermen. It represents all of the sectors. It has the ability to provide and coordinate the Canadian approach, the Atlantic Canadian approach to marketing and addressing other measures in the fishery. The provinces have been on side for the last three to four years supporting that lobster council. The federal government has provided some support, although they have struggled somewhat in terms of sustaining their support to that lobster council and they really need to look at that.
We wanted to mention also a program that is very unique to Prince Edward Island called a Future Fishers Program. It is for new entrants who are buying an existing fleet, to provide them mentoring and some financial support to become more knowledgeable about the complexities of the lobster sector and better position them for success. We have had over 74 entrants, male and female, approved under this program since 2009. They do several training things around quality handling, biology of lobster, marketing, processing, managing their business, the value chain and marine safety. They are eligible for a maximum of $10,000 financial assistance, and that is tied to their loans that they have at recognized institutions, but that is only $3,000 a year. It is an incentive for them to come and do the training elements in the program and get to meet each other and get to know who the players are in the lobster sector.
There is one slide on additional challenges. The minister referenced EI reform. The Temporary Foreign Worker Program has some real potential, depending on how far this EI reform goes to impact workers on the boats, fishermen and workers in the plants. Our plants do rely on some foreign workers because we have an aging demographic and with increased landings of lobster, we need workers in the plants to process these products to get them into the markets. As New Brunswick said, the market for processed lobster is increasing, so we need workers to process that lobster in an efficient manner.
DFO's changes in fisheries management programs have the potential to cause further hardship. I guess we are not against change, but when an industry is struggling to get back on its feet in terms of markets, rationalization and all of these other measures, and you add more requirements on licensing, tags, log books, observer coverage and these things it is cumulative and it could impact the sector.
The minister has mentioned the lack of access to other fish species like halibut, tuna, snow crab and gulf shrimp in our P.E.I. waters. If we do not get lobster right, we have not been able to advocate strong enough to get access to these other species to make a difference on the 1,225 fishermen harvesting fish in our waters.
In summary, lobster continues to be the most single important seafood species in Prince Edward Island, and the government will continue to partner with the industry to develop and foster market development, innovate, strengthen our organizations and enhance the viability and sustainability of the sector. The federal government has a key role to play as well.
The Chair: We are hearing some very worthwhile suggestions and advice here, and I am looking forward to an opportunity to explore some of the things you have laid on the table.
I would like to touch on the Lobster Resource Monitoring Program. It was initiated in 1998 and seems to be creating great success for you. I think I caught what you said when you said it is the only like it in Atlantic Canada. If you could just elaborate on it a little bit for us. It is a partnership between the province, DFO and the industry. I am just wondering why it has not caught on in other places to that extent?
Mr. Gallant: Well, I think the comment Atlantic Canada, I know Nova Scotia is now operating a similar program. In the southern gulf it is the only program that is collecting that volume of information on the lobster resource. I am not able to answer the question of why similar programs have not been implemented in the other areas but this program takes an investment from the province, one full-time lobster biologist, and we have a full-time lobster technician and two casual staff to run the program and collect, analyze and input that level of detail and information. It does take a significant commitment on behalf of the province to do that.
Mr. MacKinley: One other thing, too, if I might add.
The Chair: Go ahead.
Mr. MacKinley: Since 2007, P.E.I. has had a full-time minister responsible for fisheries for the province who is dedicated to fish and aquaculture. It is easier to get things through cabinet when you have explained the whole thing. Having a full-time Minister of Aquaculture, Fisheries and Rural Development has been a great idea of ours.
The Chair: Is information that is gathered shared with the Lobster Council of Canada?
Mr. Gallant: The information that is collected is inputted into a computer, it is shared with DFO, and an annual presentation is made to any of the fishing groups that wish to have it, including the lobster council. Have we formally presented to the lobster council in the past? I do not believe so, but elements of the information that is collected could be used and discussed in various matters when we are talking about lobster with the lobster council.
The Chair: There seems to be a bit of a contentious issue in regard to adjusting the opening day of the season and the season versus what processors may be asking versus for and what harvesters are asking. What feedback is your government receiving from all the players?
Mr. MacKinley: For the processors they closed the season for an extra three days, I believe, was it not? Did they not back the start of the season up three days?
Mr. Gallant: This year.
Mr. MacKinley: Yes, and it was a very late notice. I know it cost one large processor a lot of money because he had the crew coming in and his freezers were all flying high to be cold, and he lost three days when he had to pay all of these people with no work. That was one complaint. I have not heard anything from the fishermen. Have you heard anything on the fishers?
Mr. Gallant: Yes, I think on the fall season, LFA 25, the fishermen are having discussions. I believe they are going to present here today. They have discussed either leaving the season where it is or moving it back earlier and maybe getting ahead of the molt. There are concerns that if they push it back and start in the fall, while the lobster may be recovering after molt and the meat starting to fill out in the shell, the quality of the fishing days are getting limited. If the season is later, there are areas in the strait, and this is very complex, where fishermen feel that those lobster will already have moved out to deeper water, particularly in areas around Egmont Bay. Again, we do not have a lot of good information that suggests where the lobster may be at certain times. It is a very complex discussion.
Mr. MacKinley: I met with the fishers, and they know more about whether the season should be opened or not. I asked, "If in the spring there are good lobsters, why do we not just back it up?" However, if you back up the season in the fall, there are no lobsters there where they fish. That is what they tell me. They would not get any lobsters. Now, you can back it up a certain percentage but if you come back too far, there are no lobsters there. It is just not as easy as it looks.
I mentioned to some of them that maybe they should move and fish other ground. Well then they said the fishermen in that area do not want them in there. It is not as easy as it looks. Whatever you do, we have got to be well planned. Processors could lose $50,000 or $100,000, or whatever, and that has to come out of the fishers because you are not going to get it out of the market.
There has got to be better planning than just a quick notice. If we go too late in the season, unlike New Brunswick which apparently is more sheltered, ours is more open and we cannot get the fishing days. It is just not an easy thing to figure out. That is where I have got to go with the fishers' advice, and they will be talking about it later. I am certainly not going to listen to my bureaucrats on that one. I will listen to the fishers.
The Chair: I am sure that is music to their ears.
Senator Unger: Regarding your Lobster Resource Monitoring Program and Future Fishers Program, are they shared other provinces and if not, why not?
Mr. MacKinley: Well, the thing is we saw a need. Our fishers are getting older and we saw a need where we had to entice people to get into the fisheries. It is a big business. You have to be a bookkeeper, an environmentalist, you have to know where the fish are, et cetera, so we came in with an incentive up to $10,000 over three years. Basically, it is $3,000 a year. It is not very much money, but it got fishers involved around the table and involved in new technology.
I was very pleased that at the last meeting about 40 per cent of the new fishers were females. They have their own boats, their own captains of boats, and that is a really good thing too because it is great to have people from all walks of life out there. Maybe 50 or 30 years ago you would not see as much of that, but we are definitely seeing that. It is a good program.
If other provinces want to do it, they can, but we do not work with other provinces in something like that. We are the province of P.E.I. It would be the same thing as Alberta being unable to work with B.C. regarding that pipeline, so it is hard.
Senator Unger: No, it is not quite the same.
Me. MacKinley: Pretty close. They can copy us. We will give them plans anytime they want. Anytime the minister of New Brunswick wants plans I will ship them over to him. It is not very far.
Senator Unger: For the betterment of all of the industry as a whole, and as you now know there are some senators advocating for one province —
Mr. MacKinley: Yes, but that poor senator, the problem with him is he was out of touch so long with reality in P.E.I. I know him. He is a great fellow, smart, but he lived all of his life away and then he is never home much, only maybe to give a cheque out now and again. He is mostly still in Ottawa. He loves the area and I will get him around this summer. Actually, I am a pupil of his. When I was on the Canadian Horticultural Council, Duff, Bill McKnight, and others used to hang out at the Press Club. I call myself sort of a pupil, but I have got my feet on the ground in P.E.I., so I would not get into Senator Duffy's —
Senator Unger: I am sorry I mentioned that, but I still see a great advantage to working together. These are great programs and if you truly are the only province doing them then, again —
Mr. MacKinley: Yes, but there is nothing stopping the other provinces.
The Chair: There may be different types of programs in different provinces. It just happened that your program was called the Future Fishers Program whereas in other provinces there are similar programs, maybe not exactly the same.
Mr. MacKinley: I do not know. He probably just did not explain it as well as we did.
The Chair: New Brunswick touched on something there earlier this morning, and it may take a collection of all of these ideas together to form something that works for everybody.
The thing is, Senator Unger, in Atlantic Canada, and I know it from Newfoundland and Labrador, what works in P.E.I. may not work in Newfoundland and Labrador and vice versa sometimes, so we take the best of each of them and hopefully come up with a program that works.
Mr. Gallant: Both programs certainly are shared with Nova Scotia and New Brunswick. The Future Fisher Program in P.E.I. was modelled after a Future Farmer Program that has been in place for a number of years and the Fishermen's Association had come forward and said we are interested in two things, a way to rationalize and take some of the older fishermen out of the industry but we cannot do that alone, and we want to support some of the young fishermen that need to come into the industry. The solution is not just rationalization, also you need to attract some of the younger ones and work with them. Because they have been fairly vocal with the province, we very quickly kind of implemented a program and that is kind of the history of it.
The Chair: You will find the same thing happening in the crab fishery in the Newfoundland. I live in a community with almost 70 boats. There are very few people under the age of 50 on those boats, and in the plants we have the same problem. The average age is 54.
Mr. MacKinley: That is where we are getting into the same thing.
Senator Poirier: This program that you are talking about, the $10,000, is that a repayable loan or a grant?
Mr. MacKinley: No. That is a cheque of $3,000 a year.
Senator Poirier: It is a grant?
Mr. MacKinley: Signed by the minister in a letter. It is not a grant. A grant is when you give somebody something that they are going to develop something or do something or do nothing. This is mandatory. They have to go attend all of these meetings and they have got to learn, it takes them three years. So they get a cheque for $3,000 each year.
Senator Poirier: That they do not have to reimburse?
Mr. MacKinley: No. You would never make them reimburse if you are going to train them and bring them into the industry. It is very little when you say it is $10,000 for somebody to learn, come in and spend different days and then go around and talk to other young fishermen. It is very cheap for the province, one of the best investments we have ever made.
Senator Poirier: I was not arguing it.
Mr. MacKinley: No, no.
Senator Poirier: I was just getting clarification. Each province has different programs that are unique and answer to their needs. I was just looking for a clarification on your program.
Barry MacPhee, Director, Department of Fisheries, Aquaculture and Rural Development, Government of Prince Edward Island: The $3,000 a year adds up to $9,000. The other $1,000 would be for travel expenses for the participants to travel to meetings and participate in those meetings, some of which are out of province, also in New Brunswick and Nova Scotia.
Senator Poirier: Are these conditions obligated to anybody getting a new licence? Is it an obligation that they participate into this program of training?
Mr. MacPhee: No. It is not for the new licence, it is an obligation under the program. As a requirement to enter the program, you must be a new licence holder.
Senator Hubley: Thank you for your presentations today. It is certainly nice to see Ron MacKinley again. We shared some seats in the legislature at one time, and I believe he is the dean now of the Prince Edward Island legislature and has been for many years. Welcome to you all.
Sixty-five per cent of island lobster is in the processing sector.
Mr. MacKinley: Sixty-five per cent is the canner.
Senator Hubley: Canner.
Mr. MacKinley: The average. Last year it could be 60 per cent, another year it could be 54 per cent and could be as high as 70 per cent, but when you take the lobsters in, our total production last year was 65 per cent.
Mr. Gallant: Probably 95 per cent of the lobsters that landed get processed.
Mr. MacKinley: Yes, most get processed. Let us say that you had 100 per cent, and all of a sudden you lost your canners, that would take you down to 40 per cent of your normal catch, and 40 per cent of a $250-million spin-off takes you down pretty low, to something like $80 million, and it would be a disaster. The difference between us and New Brunswick is of their total catch, 80 per cent are for markets, 20 per cent is canners, and in P.E.I.'s situation, we are roughly 40 per cent markets and 60 per cent canners.
Senator Hubley: The percentage of the lobsters that are marketed as live lobsters and the percentage of those that are marketed as processed lobsters, either canned or in some other form, what are the figures approximately?
Mr. Gallant: It is probably 90 per cent to 95 per cent. It is kind of a misnomer because a canner is a lobster right now between 71 and 81 millimetres, and the market is 81 millimetres and up, but many of the market-size lobsters are processed. So they could be taken as green tails and meats from front ends or it could be processed as splits or into different packs. The bulk of our lobster landed in Prince Edward Island is processed. Some plants rely on imports of lobster from Maine for processing as well. That Maine lobster is very important to P.E.I. as well.
Senator Hubley: Just getting to the process sector, because it is an important part of the industry on Prince Edward Island, what innovations have you been able to see within the industry in the last while, whether it is new ways of handling lobster, new ways of processing it? I would like you also to comment briefly on the need for skilled workers within our fish plants and how the EI system is going to impact on that, and what percentage would be temporary foreign workers within the lobster industry, especially in the processing plants?
Mr. MacKinley: Perhaps the next time you are down in P.E.I. we can take a tour of some of these plants. It is amazing for me, not being a fisherman or a processor, to go in and see where they are today given where they were ten years ago. For instance, they have machines now that will take the meat out of lobster legs. The knuckles are automatically done through a machine. All of those machines have been invented in P.E.I. The same as our mussel industry. It is just amazing to go in there and see how they have adapted for the tuna and stuff like that.
Five or six years ago back they were lugging the tuna and now they have developed ways to take that tuna off before it hits the line. They are entrepreneurs and in order to run a processing plant or even a fishing boat, you have to be a mechanic, a businessperson and a fisher besides. A lot of these processing plants are run by what you call entrepreneurs and they come up with ideas and it is amazing.
Senator Hubley: What is the funding? Do you get funding for that, minister? Are you able to fit into programs that allow you develop these ideas?
Mr. MacKinley: A little would be through ACOA. It would not be through the province. We do not have the finances to fund something like that.
Mr. Gallant: The average age of employees in the fish plants is in the range of 55 years plus. The chair referenced that Newfoundland is very similar, and Prince Edward Island, I am assuming, is similar to New Brunswick. It has often been said that the last generation of fish plant workers are working in the plants now. The younger generation does not aspire to those kinds of jobs.
We are very much at a crossroads where the processing sector needs some significant change in direction to greater automation. Some strides have been made, but many of the processes that the plants use are very similar to what they used 25 or 30 years ago. There needs to be a significant investment in automation recognizing that the labour force is not there.
What many plants are using on a temporary basis are a lot of Newfoundland workers, Cape Breton workers and foreign workers. Those workers are invaluable to getting the work done, to process the lobster that are landed into the packs that the marketplace desires. Any significant changes in that could turn kind of seafood processing upside down.
These are seasonal jobs, highly reliant on EI. The plants are reliant on foreign workers to fill the gaps left by good quality workers that they cannot get. Radical changes could have a significant impact on seafood processing, and it could be the unskilled jobs or the skilled jobs. If you have a power engineer who runs your freezer and you are only able to employ him six or eight months of the year, and with these changes he is forced to head West or find a job someplace else in another area, then where do you get a new power engineer if you live in Tignish, Prince Edward Island? There could be some real issues here for the seafood processing sector.
There needs to be investment in innovation to get better processes so that we are not as reliant on the aging workforce that is not being replaced by young workers.
The Chair: Those are very good points. The entire fishing industry all of our provinces is facing that situation and power engineers are becoming an issue as we go forward.
Senator Poirier: Thank you for being here and for your presentation. Going to your presentation sheets under the slide that says "Licensing and Inspection," I am just curious. On your third point, there are 36 peddlers, 19 core and 17 non-core. What do you mean by peddlers? Are these actual lobster fishermen who instead of selling to the buyer sell to industry or local Islanders? If that is the case, then how does it work price wise? Are they determining their own price or do they have to follow a market price that is set? Are they getting the same price that the buyers are giving the other fishermen?
Mr. MacKinley: The peddlers have a licence. We have a peddler licence with Nova Scotia, for instance. Anybody who comes in gets inspected. Core peddlers would be the fishers. The 17 non-core peddlers can be anywhere in Nova Scotia, maybe New Brunswick, P.E.I. They sell whatever price they want to sell at.
The Chair: Are we talking about people who sell at roadside?
Mr. MacKinley: Out of the back of a half-ton truck at a K-mart; we license them and they are inspected to make sure that they have quality control. We have to make sure they have ice, basically they need the right things. We have to make sure the lobsters are not overloaded. It was funny; they warned me when I became Minister of Fisheries, do not go buy unless they have got a licence. Nova Scotia lobsters were in around Christmas time. I went to buy some, and everybody who was there saw me. I said, "I hope you got a licence." and they said "Yeah, the minister just signed it yesterday; it is on the dash of the truck." so I could buy the lobsters. Basically, the peddler licence is just to make sure that the lobsters are live, they have the right ice and everything else.
Senator Poirier: Okay, but your 19 core are fishermen? They are fishermen who have their own boat; they go out and fish their own lobster?
Mr. MacKinley: They can sell their own lobster.
Senator Poirier: Do these fishermen sell to buyers?
Mr. MacKinley: I would not say they would never sell to the buyer. They would never sell all their own. I would say that what they would do is, on a weekend or something, go to Canadian Tire or somewhere with say a tub of lobsters and sell them. They would still be selling to the buyer too.
Senator Poirier: Is that a disadvantage to them in a way?
Mr. MacKinley: No. It is an advantage to them because they can sell their own lobsters and instead of getting $3.50 or $4.00 a pound at the wharf they get around $5.50, $6.00 so they are getting more money.
Senator Poirier: But don't they make their EI by selling it to the buyer?
Mr. MacKinley: Well, EI is unemployment insurance. Maybe the fisher is doing some other fishing too of some other product. The person in the boat is not selling the lobster, it is the fisher himself. So that fisher himself is selling the lobster and, yes he would not get any stamps for that, but the way the season was this year and you have got 40,000 pounds at $4.50 a pound, you do not need that many lobsters for a stamp.
Senator Poirier: Is there a limit of how many core licences that are available or any fisherman can do this?
Mr. MacKinley: No. If you want to come in tomorrow, we will get you a licence, providing you follow the details.
Mr. Gallant: I just want to clarify something. Until 2008 all peddlers in the province had to buy their fish from a licensed registered processing facility, and that is for quality control reasons. We changed the regulation to say a core fisherman could sell his own catch and not have to go through a licensed fisherman provided it is only your catch. You can sell your own crustaceans, lobster, crab or gutted ground fish but nothing else. It has been beneficial because the fishermen then can go out and peddle their catch, talk to the consumer. They are not selling huge volumes, the big volume is processed to the buyer and into the processing plant. However, they are able to go out and talk to the people who are buying. and they are learning a lot about the value chain and about the value of lobster and what people really want.
Senator Poirier: So your non-core then, that is not a fisherman, they would buy it from the processor, the buyer?
Mr. MacKinley: No, they could buy it from the fishermen.
Mr. Gallant: They have to buy from a processor.
Mr. MacKinley: Well, they could buy it from the fishermen if they have a core licence. I would say a lot of them would buy from the core fishermen or a processor. You can also buy them on the wharf from the fish buyer who just marks them up about 25 cents a pound. You have the processors, and some processors will buy directly from the fishermen but also they have these buyers on the wharf and they get roughly 25 cents a pound for buying them and catching them, handling them and bringing them in. If you are a non-core fisherman, I would say they buy them from the buyers on the wharf at about 25 or 30 cents mark-up, maybe 40 cents, something like that.
When you talk about unemployment, it is important to the people who are working in the processing plants, driving trucks or crewing on boats. Once the fisher makes a certain amount of dollars, his unemployment is clawed back. Basically, unemployment insurance is for the fisher if he has a bad year. Once you make a certain income all of your unemployment is all clawed back in income tax.
Senator Poirier: My next question is on the slide that was entitled "P.E.I. Five Point Lobster Plan." You talked about the five points, but the first point, there is really no explanation for that. I am curious about the purchase and storage of canner lobster. Who is the purchaser and who arranges storage, the provincial government?
Mr. Gallant: Yes. In 2009, a large volume of lobster was being caught, markets were depressed and the shore price was down below $3.00, $2.75. It was chaos. The purchase of canner lobster was one of the initiatives in our five point plan. It was a pilot project where the province bought 40,000 or 50,000 pounds of lobster. It was a pilot project to buy them and store them until sometime in June when landings declined and the processors would buy them back. It was set up to take the pressure off because lobsters were getting backed up in the traps and the processors were saying they could not handle all of this lobster. They told the fishermen not to bring them in, to bring in only 500 pounds a day. It was an initiative of the government to say, "We will enter this business, lease space and buy them, and when conditions are right we will sell them back and recover our costs from the processor.
Senator Poirier: Were they stored live?
Mr. Gallant: They were stored live.
Mr. MacKinley: They are called holding tanks. We have a program called Island Community Fund whereby if a cooperative or somebody came up and wanted to put in a holding tank, we would assist them maybe up to 30 per cent or something. I know one processor who has the holding tanks. They grade these lobsters, so they have, say, one pound then maybe a pound a quarter or a little over that and then they have another one. When the phone rings, especially in the summer in the tourist season — when the lobster season starts, our tourist numbers are not high — they go up in July when we are not fishing — they draw on these holding tanks. They keep the water very cold in the holding tanks and it keeps the lobster from deteriorating. It also helps during a depressed market, all at once, because you can manage better. Nova Scotia, I believe, is big on that. In Southwest Nova, they are using the sea because it is colder down there. To build a holding tank in P.E.I. you pretty well have to go into salt groundwater and bring it in to get the temperature. If you take it out of the sea you would have to chill it, and that has been working good too.
Senator Poirier: Is that the only year you have done the pilot project or was that pilot project in place again this past summer with the problems of zone 25?
Mr. MacKinley: No, but Mr. Gallant knows more about that.
Mr. Gallant: New Brunswick referenced in their presentation there needs to be an orderly flow of product into the processing plants. In the lobster sector, in the spring, there are two or three weeks when landings are very large. The conditions, if they are good and the water temperature is good, the lobsters trap really well. Either you need to leave the lobster in the water or you need to store them temporarily so that you can get them in the best packs to get the best value out of the marketplace.
Yes, it did happen somewhat this fall. One of the co-ops in P.E.I. told their fishermen to only bring in 800 pounds a day. Leave those lobsters out in your traps. That helped create an orderly flow of product into the plant. The other option would have been to bring them in and we will store them, but the fall lobster, because it is coming out of very warm water, does not store nearly as well as the spring lobster. They tend not to put it in wet storage in the fall. I believe there were some restrictions on some of the New Brunswick boats as well.
Senator Poirier: From my understanding, that also created other problems because if you leave a certain number of lobsters in the trap then you have to lift the trap and re-feed those lobsters because they do not have access to food. Some of the fishermen were telling me that leaving some in the traps was actually bringing their costs up. Could you please comment on that?
Mr. MacKinley: If the processor is only taking 800 pounds, you have three choices to make, find another buyer, let them go where they caught them or feed them. It may drive the cost up but at least they have a profit.
Senator Poirier: That is why I was asking about this pilot project you had done in 2009 in storing some of the canned lobster, if you had done it this summer during the crisis time.
Mr. Gallant: We did not do it this year. Lobsters are cannibalistic and will eat each other in the trap unless they are banded. It is not a perfect situation. The fall lobster would not store as well on land in refrigerated storage as the spring lobster. There are challenges there.
Mr. MacPhee: I have one point on that. This year there was no request from the processors or buyers in the fall to assist in this area. Whereas in 2009 in the spring, the buyers and the processors were saying that there is too much lobster and they needed something to sort this out.
Mr. MacKinley: One processor requested funds to look after storage of frozen lobsters and our answer to them was no. He wanted financing to store lobsters because he was not selling them quick enough, but we said no.
Senator Poirier: You mentioned a made-in-P.E.I. machine that was made to help the processing of lobsters, and you talked about the knuckles of the lobster going through the machines. Has P.E.I. looked at selling this machine or sharing this idea to help the economy? Is that another industry that could help other processing plants? Is that something that is available?
Mr. MacKinley: You would need other processing plants; maybe they already have them. I am not that familiar with other areas, and they might have their own machine. I was touring Acadia Fishery with the federal minister, and it had this machine. Royal Star had the machine for taking the meat out. Other processing plants down East have the crab coming in and the body of the crab is going through. So the shells are going out here and the meat is coming in here, and that was invented in Atlantic Canada. Those particular knuckle things were invented in the province of P.E.I.
What is the name of that company in the industrial park that makes that stuff?
Mr. Gallant: Charlottetown Metal Products.
Mr. MacKinley: Charlottetown Metal Products makes stuff that is sold all over the world. I would not know because that comes under development, but they are putting stuff all over the world.
The Chair: In many processing1 plants innovation is alive and well and people adapt to what you need to adapt to, just like the fishermen on the water. They can find ways to adapt when you need to adapt.
Mr. MacKinley: I will finish up like this: This young fellow came over from Newfoundland and he was working with me in a snow removal business. He was waiting to get into Holland College for an electrician course or something. Once you knew he came from Newfoundland you knew you were going to hire him because I have never seen anybody lazy come from there before in my life. One night I go out in the building at three o'clock in the morning, and he had the front end of the plow all apart. I took a look at him and I said, "How in the world do you know that?" Well, he says, "Where I come from in Newfoundland, if you cannot fix your own rigs, you walk." He took that machine apart, put it back together, and it was going an hour and a half later. He is over in Moncton, one of the top people in one of those places that works with refrigeration units.
The Chair: My next-door neighbour has been in P.E.I. for over 12 years working in the lobster industry.
Touching on the peddlers, we have them in Newfoundland and they are alive and well too, but I am not going to discuss them here.
Senator McInnis: If the Conservative's national convention is in Calgary the same time as the Calgary Stampede, would we be welcome in the big tent?
Mr. MacKinley: You guys would be welcome anywhere.
Senator McInnis: Good.
Mr. MacKinley: It is not my tent. It is actually a corporate restaurateur out there who we met on the Calgary tour. I said to him that it takes 10, 15 years to get in the Stampede. He said, "I have a corporate tent." He tells me that Harper and a group of them out there eat at his restaurant on a regular basis, so you would have no problem getting in the tent.
Senator McInnis: As you know, we will be doing a report. P.E.I. has three lobster fishing areas. You have 24, 25 and 26A, and when I look at the map that was provided to us, it looks like 25 covers an area from New Brunswick to the shores of P.E.I., and it even touches a portion of northern Nova Scotia. And 26 covers a portion of P.E.I. and runs into the northern part of Nova Scotia, up around Pictou County. You mentioned smaller lobsters, and I did not quite get exactly what you were talking about in terms of increasing the size by regulation. Could you elaborate on that? If it is between you and New Brunswick, how could it be done without affecting both provinces, particularly if you are looking at 25?
Mr. MacKinley: You would have to draw a line or something.
Senator McInnis: Where would you draw a line?
Mr. MacKinley: That would be a great bit of confusion, where you would draw the line. What you would have to do is, look at our total production of 26B, 26A, 25, those areas. When we put in the traps and take them out, at the end of the year roughly 60 per cent are canner lobsters that come out of that particular area.
Senator McInnis: Out of what, 26?
Mr. MacKinley: Twenty-five, 26A and 26B, when you add them, the total catches of all of them together.
Senator McInnis: You are in the ocean, how are you going to draw some kind of line?
Mr. MacKinley: With GPS today, they can do anything they want to do. The thing is that if New Brunswick wants to go to bigger lobsters because their processors apparently want this; that is where I read about it first, the processors had problems selling them. So if the processors do not want the smaller canner lobsters in New Brunswick, all the New Brunswick fishermen have got to do is put on a bigger escape mesh and the lobsters will walk out. They will get out of the traps.
Senator McInnis: How does the United States feel about this, the Maine lobster fishermen?
Mr. MacKinley: We do not have a clue. They fish year-round there.
Senator McInnis: Yes.
Mr. MacPhee: What Minister MacKinley was referring to in terms of a line or additional lines, is that would involve a regulatory change.
Senator McInnis: By the federal government, DFO?
Mr. MacPhee: Yes, DFO would have to make that regulatory change. There is a simpler way, without making a regulatory change. You have a minimum size right now of 71 millimetres; it will be 72 in 2013. There is no regulatory requirement for a buyer to purchase lobster at 72 millimetres. They are free and able to purchase whichever product they want. If they are not interested in a smaller size lobster then perhaps they need to negotiate or speak with the fishermen they buy from and say, "We will not be purchasing these size lobster and we will only be purchasing these sized lobsters." It is a business decision and a business choice. Whereas in Prince Edward Island the processors and buyers have indicated to us that they, in fact, have sales for all of their product and there is not an issue with a 72 millimetre size lobster.
What makes this country great is that we are all different and we are from all walks of life, and you have a choice to participate or to conduct whatever business you would like to without imposing on other individuals or other bodies. If you want to make a choice and practice a different business model, you are free and able to do so without imposing on other folks in the same area. You do not have to change the regulatory environment to make that business transaction happen.
Senator McInnis: You are saying let the market do it?
Mr. MacPhee: That is correct. The market will dictate what the market wants. If companies from New Brunswick are indicating that the company or companies that they sell to want a larger size lobster they can get it.
Senator McInnis: Those companies are located 80 per cent where?
Mr. MacPhee: Primarily in the U.S. I understand.
Senator McInnis: Are they consensual to that?
Mr. MacPhee: I cannot answer for the New Brunswick processors, but what I understand from meeting with them, as Mr. LeBlanc referenced in LFA 25 working group, the main buyer for them indicated that they wanted a three and four ounce tail which would correspond to an increase in the carapace size. Again, as a business choice, you are free and able to make that change. You do not necessarily have to make a regulatory change to force the rest of the people in the industry to go along with your change. The business model in P.E.I. is currently working. If at some point down the road, the market says to the P.E.I. processors that we are not taking these size lobsters any more, I guess then the P.E.I. processors will have to make a decision as to what to do.
Senator McInnis: Is the smaller size harmful to the species?
Mr. MacPhee: No, it is not. At 72 millimetres, size at maturity will be 50 per cent. That means 50 per cent of the lobster that you remove from the fishery at 72 millimetres would have spawned once. The 50 per cent size at maturity for Prince Edward Island is far and away higher than other areas.
I do not want to pit area against area, but different fisheries from different areas are affected by climate, weather. The size of maturity in LFA 34 is under 20 per cent. Yet, that is a thriving fishery. They may have some issues with the fishery but certainly not a real issue in terms of stock. In 25 at 72 millimetres, 50 per cent is the size at maturity. At 72 to 81 in 34 it is roughly under 20 per cent. It is not a sustainability question, it is a business question.
Mr. Gallant: I just want to add to what Mr. MacPhee is saying. Over the history of the lobster fishery, particularly in the southern gulf, carapace size has been an extremely contentious issue. To support what the minister from New Brunswick said on this issue, right now at least all the players are at the table. The fishermen and processors from New Brunswick and the provincial government were at the table with our processors and fishermen and provincial government and Nova Scotia interests and DFO. All of these discussions are happening now. We all recognize that some things happened in LFA 25 last fall and we would like to see some changes made that make things more orderly and whatnot. What they are, we do not know. You may be able to compare it to the collective bargaining agreement in the NHL, they do not know where they are going either. The important part is at least we are talking.
Senator McInnis: Normally when you are dealing with areas that encompass more than one province it simply can be done by regulation. I rather suspect it would not be driven by market. That is the clarification that I wanted and that is good. We did not hear much from New Brunswick on that.
There seems to be no concern in P.E.I. with respect to the extraction of licences and the reduction of traps and that type of thing.
Mr. MacKinley: We had done that.
Senator McInnis: You did not do any last year.
Mr. MacKinley: No1.
Senator McInnis: So you are happy and there appears to be no problem in P.E.I. in that respect?
Mr. MacKinley: If the federal government wanted to give us some more money we would probably take it.
Senator McInnis: That is what it is about, is it?
Mr. MacKinley: That is what it is about, is it not? We are out of money. If they want to come down with another $6 or 7 million, we would definitely give it a try.
Senator McInnis: It seems to me that under the sustainability agreement there is a sizeable block of money that runs through until the year 2014, and I rather suspect that it has not run out. Is it gone?
Mr. Gallant: The funds under DFO's program have been fully allotted. The fishermen in LFA 25 in P.E.I. got off the mark. They were the first plan approved in Atlantic Canada, so they retired the 34 licences back in 2010, I believe.
Senator McInnis: Our researchers will have to put the date of 2012, not 2014.
Mr. Gallant: All of the measures that were approved have to be implemented by March 31, 2014.
Senator McInnis: If monies were available, would you still continue to reduce?
Mr. MacKinley: We would look at it, definitely look at it. The fisher who owns the licence will make the final decision.
Senator McInnis: Exactly.
Mr. MacKinley: If you can get Harper to send us down another cheque, go right ahead. We will even give him a free lobster dinner out there in Calgary.
The Chair: The process has been completed for now. It has been a very thorough process, from what I understand, and anybody who wanted to participate has had the opportunity to do so. Those who have not have decided to stay in the industry, and I think they have reached a level where everybody seems to be comfortable at the present time. We certainly would like to see more reduction in maybe fishers and traps, but people decide whether they want to stay in the industry or not. It is not a forced retirement, it is totally voluntary.
Mr. MacPhee: Mr. Chairman, I would just like to make a clarification. You had asked earlier about the lobster resource monitoring program and as the deputy indicated carapace size has always been a contentious issue in the southern gulf. This program was actually started in 1998 because of a proposed carapace size increase, and the lack of information that was available to fishermen as to what effect that carapace size increase would have on their catch. The province indicated to DFO, that they need to do something, that they are going to put some money on the table to find answers for this. That was the genesis of that program.
The Chair: Hopefully in the future we are proactive instead of reactive.
Senator Poirier: Following Senator McInnis' line of questioning a few moments ago, we were talking about zones 25, 26A and 26B.
Mr. MacKinley: And 24.
Senator Poirier: Right. There was a comment that maybe part of the solution, because of the size of the lobster tails the people want, would be moving the lines. Did that suggestion come from the fishermen?
Mr. MacKinley: I do not know. We were just giving you a suggestion there.
Senator Poirier: I am wondering if it was something fishermen shared with you, that they would like to see.
Mr. MacKinley: I have heard them talk about it. You can ask them. They do not want to do it.
Senator Poirier: Thank you.
Mr. MacKinley: They are going to be here this afternoon.
Senator Poirier: Yes, I just wanted to clarify.
Mr. MacKinley: They do not want anything to do with raising the carapace size either.
Senator MacKinley: I had not heard about it down on my end either and I was just wondering.
The Chair: I am sure we will hear about it this afternoon.
Thank you once again. It has been another interesting panel with some different perspectives that make our study all the more interesting. I think we are all of the same goal, to try to improve in any way we can the lobster industry, which is a very important part of your province and a needed part of Atlantic Canada and the country as a whole.
Mr. MacKinley: I want to thank you for having us here. It is a good effort and very informative for me too. Every time I go somewhere, not being a fisherman myself, I pick something up. It was great to be here.
The Chair: We had Nova Scotia and Newfoundland scheduled for presentations this morning but due to flights, the Newfoundland delegation did not make it here. The flight was cancelled out of St. John's, and we are rescheduling Nova Scotia for later. We will reconvene at two o'clock.
(The committee adjourned.)