Skip to content
AGFO - Standing Committee

Agriculture and Forestry

 

Proceedings of the Standing Senate Committee on
Agriculture and Forestry

Issue 24 - Evidence - Meeting of October 25, 2012


OTTAWA, Thursday, October 25, 2012

The Standing Senate Committee on Agriculture and Forestry met this day at 8:03 a.m. to examine and report on research and innovation efforts in the agricultural sector (topics: role of intellectual property rights for innovation in agriculture; and innovation in the agriculture and agri-food sector from the producers' perspective).

Senator Percy Mockler (Chair) in the chair.

[English]

The Chair: Good morning, and thank you very much for being here this morning. We have an opportunity to hear the first panel with four witnesses.

On behalf of the Standing Senate Committee on Agriculture and Forestry, thank you very much for accepting our invitation and to share with us your vision, your opinions and your recommendations so that we can look at innovation in agriculture going forward. I welcome you to the Standing Senate Committee on Agriculture and Forestry. We have a mandate to look at innovation.

My name is Percy Mockler. I am chair of the committee and a senator for New Brunswick. At this stage, I would ask all senators to introduce themselves to the witnesses.

[Translation]

Senator Robichaud: Fernand Robichaud, Saint-Louis-de-Kent, New Brunswick. Hello.

[English]

Senator Mahovlich: Frank Mahovlich, Ontario.

Senator Plett: Don Plett, from Manitoba.

Senator Buth: Good morning; JoAnne Buth from Manitoba.

Senator White: Vern White, Ontario.

[Translation]

Senator Maltais: Ghislain Maltais, Quebec.

[English]

Senator Braley: David Braley, Ontario.

The Chair: Thank you.

The committee is continuing its study on research and innovation efforts in the agricultural sector. The Standing Senate Committee on Agriculture and Forestry was mandated by the Senate of Canada to look at developing new markets domestically and internationally, enhancing agricultural sustainability and improving food diversity, security, safety and innovation.

This morning, honourable senators, we have the following first panel: Ed Levy, Adjunct Professor, Intellectual Property and Policy Research Group from the University of British Columbia; Emily Marden, Research Associate and Lecturer, Intellectual Property and Policy Research Group from the University of British Columbia as well; Andrew Casey, President and Chief Executive Officer of BIOTECanada; and Steven Fabijanski, President and Chief Executive Officer of Agrisoma Biosciences Inc.

I have been informed by the clerk that the first presenters will be Mr. Casey and Mr. Fabijanski to be followed by Dr. Levy.

[Translation]

Andrew Casey, President and Chief Executive Officer, BIOTECCanada: Thank you, Mr. Chair, honourable senators, it is always a great pleasure to be able to testify before you.

[English]

Thank you very much for the opportunity to provide you with some input as you undertake your study. I am Andrew Casey, President and CEO of BIOTECanada. BIOTECanada is the national trade association and the national voice for Canada's biotech industry. We have about 250 members across the country and we span three sectors. Obviously, the biopharmaceutical side of things is a well-known component of our industry, but also we have significant representation in the agricultural and industrial sectors.

I am joined today by one of our member companies, Mr. Steve Fabijanski from Agrisoma. I will give him a good chunk of the floor because I think his testimony will provide significant value for the committee as it undertakes its study.

If some of you are looking at me and I look familiar to you, it is because I joined BIOTECanada only three months ago. I spent eight years prior to that at the Forest Products Association of Canada. It was in that role that I became familiar with this committee and the work that this committee can do. You undertook a significant study of that sector. I know full well the constructive and positive impact that that study has had for the industry and certainly in government policy. For that, I welcome this undertaking on this particular front for my members now as I move into my new role with BIOTECanada.

I will take a global perspective and then get more specific as I pass the floor to my colleague Mr. Fabijanski.

We have a growing challenge. We have population growth expected to go to 8 billion over the next decade and possibly up to 9 billion by 2050. As you know, given that you looked at the forest products industry, this is putting huge pressure on our planet from an environmental standpoint and from an industrial standpoint. How will we live in that changed environment? It is creating pressures for our health. We have to find a way to address those challenges, to live differently, to live smartly and to live more efficiently.

One of the things I am beginning to learn about our industry, and it is the three parts of our industry, in fact, is that we are providing a solutions base for some of those challenges. We are helping people live in a healthier fashion. We are helping industries grow crops, for instance, in terms of meeting the growing demand for food out there. We are growing crops better and faster. They are less susceptible to things like drought and pests, and we are adding nutrients to crops as well.

We are also moving quickly into the industrials here where we are trying to find ways to address the growing energy demands out there in this world. It is an exciting time for our industry.

If you look at the membership, my members represent a broad spectrum of companies. You have large, well- established companies in the biopharma and also in the industrial and agriculture sectors, but you also have a number of emerging companies. Many of those emerging companies are really just very good ideas that come out of people's heads and are being worked on in labs. Many of them are being worked on in shared labs with the universities. When you are looking at the world and other countries that are supporting their biotech industries, things like patent protection and intellectual property become important attributes that need to be looked at. For that reason, we welcome this study.

As these ideas move from the lab to commercialization, a critical part of that will be finding capital, and access to capital is absolutely paramount. The one way to ensure you have access to capital is to provide a sound policy framework or hosting conditions, if you will, in the country in which those ideas are growing. For that reason, we very much welcome this study and look it forward to contributing it to it.

We have a patent expert obviously that you will hear from later on, but also you will hear Mr. Fabijanski's perspective about exactly how he took a great idea that is now very much a reality and the potential that that represents for our industry and for our country.

With that, I thank you again and look forward to your questions. I will pass it to my colleague Mr. Fabijanski.

Steven Fabijanski, President and Chief Executive Officer, Agrisoma Biosciences Inc.: Thank you for the opportunity to address the committee. Agrisoma Biosciences is a company that has benefited from Canada's unique agricultural environment. We are developing and have commercialized new crops that provide energy solutions and enhanced opportunities for the Canadian farmer. We are a Canadian company. We are capitalizing on Canada's outstanding reputation for its expertise in oilseeds, and we have commercialized a crop that produces what we call renewable oil; not a food oil, but an oil that can be used to replace petroleum, at the same time addressing the changing environmental demands and a solution for clean transportation that Mr. Casey mentioned.

Moreover, we are targeting the production of these new crops in marginal land areas using production techniques with low inputs and a low carbon footprint. As a company, we are focused on providing new income opportunities for Canadian farmers and new opportunities for export markets. We have sought to integrate ourselves into the unique Canadian agricultural community, which is quite innovative, working with Canadian farmers to achieve a number of important milestones for the future growth of agriculture. We believe that new revenue opportunities can occur without the disruption of commodity food production.

Our company started in 2001. We have faced many challenges and have overcome them to become what I believe is Canada's largest wholly Canadian agricultural biotechnology company. Although we are small by the standards of multinationals, we have 15 trained professional scientists in Saskatoon as well as 5 senior managers across Canada who interface with the industry.

We have benefited from the support of Canadian organizations such as Sustainable Development Technology Canada, Agriculture and Agri-Food Canada, the National Research Council and a number of other federal and provincial organizations that have supported us over the last decade. Our focus is to provide a new source of energy for commercial transportation, clean and sustainable energy that can be grown on the farm and integrated into our commercial transportation sector providing us with a greener form of transportation.

We use our technology to grow oil that can be used in commercial aviation. Our technology for improving crops to do this is also being applied to development of new food crops such as new varieties of canola that have higher value oil that provide additional revenue to farmers.

We are focused on commercializing products that can be produced on large commodity scales to be able to benefit farmers in multiple regions. We are combining agriculture, energy and aviation in a new value chain that benefits Canada.

Our company is becoming recognized as an innovator not only in Canada but also by our neighbours to the south and by countries offshore. We are the only company in the world that has been able to demonstrate a value chain that has delivered petroleum-free jet fuel that is being used to fly the world's first civilian jet flight without petroleum power. This will be done on Monday here in Ottawa at the National Research Council's flight research laboratory. It will be the first time in the history of aviation that a jet powered flight has been done without the use of fossil fuels.

We have managed this process from growing the seed in Frontier, Saskatchewan, to producing certified fuel that is going into this flight that will take place this coming Monday. We have managed the entire value chain. We are the only company and only country in the world that has been able to accomplish this.

Quite simply, we believe that this shows what agriculture can do and how these new opportunities for agriculture can quickly gain traction and address many societal issues. This can only be done through the use of innovative techniques and solutions being applied in a timely manner. For us, biotechnology is not just about the technology; it is about being able to deliver real solutions to society.

As a result of this, we plan to deliver the following to farmers and Canada: We will provide the farmers income diversification; the opportunity to grow a new cash crop in areas where they currently cannot grow that crop. We will provide the ability to have enhanced rural economies through additional economic activity associated with the production of these new energy crops as well as collection, processing and eventual distribution. We will provide better use of land resources, capturing carbon, rehabilitating soil and using land that currently does not produce food. We will provide a greater degree of sustainability in greenhouse gas benefits as a result of these products.

To be successful, the entire industry needs to have the government engaged with us and supporting us. We are not asking necessarily for cash or special consideration. We are seeking assistance in two primary policy areas. The first is to encourage private sector investment in Canadian agriculture and mechanisms to leverage private investment. Sustainable Development Technology Canada represents one tool that we have used successfully, and we believe it is a very good model for what can happen in the future.

We also look to rational regulatory policy to enable commercialization of new agricultural products. We look for this regulatory process take place in a rational and well-defined fashion to provide certainty that will allow us to leverage investments into this space. We also look to have policy that supports the role of introducing these new industrial crops into the agricultural system and supporting them such that the farmers and the local economies can benefit.

Lack of clearly defined policy adds significantly to our risk, which forces private capital into less risky investments. In agriculture, the technical risk for our products is quite low. They work quite well and they are very beneficial to farmers. The challenge is always whether we have a sound regulatory policy that encourages the investment and allows commercialization of these policies.

Currently, agricultural technologies occupy over 2.5 billion acres of crop land planted around the world, so these are proven technologies. They are safe and effective and provide significant value for both farmers and consumers. Thus, we seek to have the assistance of an effective government policy in introducing more of these innovations into agriculture and to encourage further development of the agricultural sector.

In summary, biotechnology brings the following benefits to agriculture: We believe we can add new value at the farm gate through new economic benefits and income diversification that is critical to the agricultural economy. We can offer product diversification, which includes healthier foods, as we have seen now quite clearly with the canola industry, as well as energy solutions. Agriculture can provide energy solutions for society as we go forward. We can provide environmental solutions, providing a cleaner environment and the sequestration of carbon in the soil, solutions that provide significant greenhouse gas benefits and also solutions to global food prices and supply. Through income diversification and enhancement of the agricultural system we can continue to deliver high quality food at prices that people can afford.

Thank you for your time.

Emily Marden, Research Associate and Lecturer, Intellectual Property and Policy Research Group, University of British Columbia: Mr. Levy and I are honoured to be invited to appear before the Standing Senate Committee on Agriculture and Forestry. By way of introduction, the Intellectual Property and Policy Research Group, which we co- founded, is situated at the Faculty of Law at UBC in Vancouver. It is an interdisciplinary group that researches the range and implications of intellectual property and regulatory regimes for genomics.

Since coming together in 2006, we have participated in four projects funded by Genome Canada and have published widely on topics ranging from open source licensing and patent pools to the intellectual property and regulatory complexities posed for innovations arising from agricultural genomics. Our current project is part of a large-scale study based at UBC called the Genomics of Sunflower which, among other things, aims to sequence the sunflower genome with the goal of providing the knowledge to improve this large plant family. As a result, many of our current examples involve sunflower, but the analyses and conclusions are more broadly applicable.

I am a research associate and professor at the UBC Faculty of Law and I teach a biotechnology law course, among other things. I have also long practised law, both as a member of a law firm and in various bio-pharmaceutical companies.

Mr. Levy taught philosophy of science at U.B.C. and then joined QLT Inc., a biotech company in Vancouver. He served as Senior Vice-President of Corporate Development there until 2002, and is now an adjunct professor at the UBC Centre for Applied Ethics.

Today we want to make that few remarks about the importance of a balance between, on the one hand, approaches focused on proprietary rights and, on the other, those focused on maximizing sharing when trying to stimulate innovation at the early stage of agriculture research.

We will then point out that there is a critical need for this principle to be applied with respect to research data sharing in agricultural genomics. In addition, we will make some comments about the need to regard the regulatory and intellectual property regimes as complex and, finally, the importance of having realistic expectations about the prospects for commercializing research and development.

Based on our work, we believe that intellectual property rights are undeniably important, but we hold the view that they must be balanced with shared resources. Further, in our view, the appropriate balance between the two depends on the specific community and the proximity to realizing commercial products. For example, in our research we have found that public domain sharing — that is, no intellectual property at all — can produce high levels of innovation in a small research community with shared community norms.

At the same time, we have demonstrated that innovative sharing mechanisms, such as open source, that allow for proprietary interests to develop even while mandating sharing of foundational materials may not provide sufficient incentives or sufficiently reliable knowledge transfer for the development of commercial health care products. We are happy to comment further on this point, as open source is often offered up as a way of jump-starting innovation in the life sciences, just as it did in the information technology sector.

Concerning agricultural research, we believe that proprietary interests, whether in the form of plant breeders' rights or patents, must be better balanced in Canada with robust sharing of basic research. Specifically, we believe that mechanisms to facilitate sharing of research data at the appropriate point along an innovation continuum should receive greater government attention and support.

What is the appropriate point on the innovation continuum? There is no bright line rule for this, unfortunately. However, the further along the development continuum that research can remain accessible without negatively impacting incentives for investment or commercialization, the better. Indeed, there are many examples where stakeholders have recognized this. For example, it has been documented that industry and academic arabidopsis researchers came together to establish a consortium so that sequencing data and insights made by industry could be broadly shared.

The industry stakeholder in this case, Cereon, had initially balked at such sharing without a strong legal mechanism because of its concern about losing proprietary rights. However, after much discussion amongst all the stakeholders, the various parties agreed that greater access for all would benefit innovation on all fronts, and ultimately a shared research resource was developed with no need for strong legal mechanisms.

As noted, our view that open sharing is more critical in the innovation continuum points us to the need for more policy direction in this area with respect specifically to data sharing and agricultural genomics. We know that Canada currently funds millions of dollars of high-quality research in agricultural genomics which, in turn, yields rich quantities of data that can be used in a wide variety of ways to understand, manipulate and develop novel agricultural products. At present, government grants support the generation of this data and, indeed, often do obligate the sharing of the data. However, the same grants do not generally fund the sharing or provide a mechanism or platform for this sharing to take place.

To be sure, certain communities have found ways to surmount this issue by organizing consortia or charging for access to data. In our own arena, for example, academic sunflower researchers developed a consortium in which interested industry partners help support the sharing of data from the project. However, this arrangement does not ensure that such data will continue to be available once the grant ends.

We recognize that most granting bodies include obligations to share within certain time frames, though anecdotally we have seen that this sharing does not always happen.

We are also aware that researchers or industry may have insights and make discoveries that could be the subject of proprietary protection. Allowance clearly must be made for this. However, taking a page from open source approaches, where underlying source codes are widely available, we wonder whether any such proprietary positions should include an obligation to ensure that data and source material remain available to other users.

We are currently developing a collaboration with international organizations, such as the Bioversity organization in Rome and the Global Crop Diversity Trust in Bonn, to explore whether currently existing germplasm repositories — that is, seed banks — can be leveraged to facilitate this data sharing. For example, Canada has its plant gene resource centre in Saskatoon, and that centre is already part of an international treaty on sharing of plant genetic resources.

We urge the committee to explore ways to ensure sharing is a component of Canada's intellectual property regime in order to maximize levels of innovation.

Before we close, we want to make two brief additional points relating to agricultural innovation. The first relates to intellectual property and regulatory complexity and our inability to solve one without addressing the other. I know the committee has heard a lot about this.

Generally, biosafety regulation — for example, the plants with novel traits regime — and IP are regarded as separate silos. The reality is, however, the intellectual property and biosafety mechanisms collectively impact incentives for and potential outputs of agricultural genomics. Any attempt to adjust one to improve innovation must consider issues with respect to the other.

We have seen instances where a research team develops a novel agricultural trait that could be the subject of proprietary protection, but when looking at the applicable regulatory requirements decides instead to donate the innovation into a public resource outside of Canada.

We have one final point we would like to make about the realities of getting to commercialization. I will turn it over to Mr. Levy for that.

Ed Levy, Adjunct Professor, Intellectual Property and Policy Research Group, University of British Columbia: Finally, we want to make a brief point relating to the realities of getting to commercialization.

We believe that government efforts to promote commercialization and translational aspects of innovation often embody unrealistic expectations about the magnitude and timing of returns on investment. For example, after passage of the Bayh-Dole Act in the U.S. in 1980, Canadian universities followed suit and set up technology transfer offices, TTOs, on campuses in order to capture the value inherent in research results. The outcome? Thirty years into this experiment, revenue from licensing research results remained small compared to the research funding received. For example, 60 per cent of American universities do not earn enough from their licensing activities to cover the costs of their own TTO operations.

Research funders seem to have elevated expectations as well. For example, Genome BC, one of the regional centres of Genome Canada, directed each funded project to set up a business advisory committee so that commercialization results could be directed. Eventually, these committees were disbanded or forgotten about as the realities of the development process sunk in.

Our aim is bringing up these examples is not to claim that TTOs, Genome Canada or Genome BC failed in their commercialization efforts. We certainly do not claim to be experts on performance metrics. Instead, our point is that our research and our experience as biotech practitioners convince us that the underlying cause of these results is that the processes of translation and commercialization in research-based fields such as biotech are far more complex than is assumed in much funding legislation. We think these examples offer valuable lessons that would bear upon any new funding or stimuli for innovation this committee would consider in the field of agriculture and forestry innovation.

We thank the committee for inviting us and are happy to address any of the points raised in more detail.

Senator Buth: Thank you very much for being here. We have heard from quite a few witnesses talking about the difficulties of going from the bench to commercialization. That is partly why you are here; namely, we are trying to get a handle on what it is the government can do in order to facilitate that.

Mr. Fabijanski, you have some real examples in terms of how you have been able to do that. Could you comment on what more we could do to ensure there would be more innovative products coming to the market in Canada?

Then the same question in a different way: You have talked about some of the mechanisms that you have that might work, yet I do not see any clear recommendations in terms of what you could tell us. What should this committee do? What should the government do?

Mr. Fabijanski: I can only speak to our experience, which is related to commercialization of new oil seed. I am sure you are familiar with some of the difficulties associated with that.

I wanted to point out that our success is largely based on the past investment of the Canadian government in oilseed research starting in the mid-1970s, I would say, when canola was first developed. This crop that we have commercialized actually came from an Agriculture and Agri-Food Canada program, where we took over and worked with government to commercialize it.

There are many examples of this type of opportunity within Canada that are largely restricted by some of the challenges of going from the bench to commercialization. We had a unique solution to that handed to us with the environmental issues associated with petroleum use; and so we are able to look at it a little more broadly than just the research component and the farming component. We are able to look at the needs of society as a whole as well as at what industry is looking for and synthesize much of that together into a cohesive story. Doing that was not easy.

Currently, 15 different partners have helped us to commercialize the products. We need to encourage policy that allows cross-discipline activity. Last summer, we were walking around Frontier, Saskatchewan, with a number of farmers; and on Monday we will be sitting with a bunch of guys flying jets in Ottawa. We are all connected through the project and this collaboration. One of the things that government should probably encourage is this multi-disciplinary collaboration to access new opportunities and things that may not be necessarily obvious to begin with. Certainly, as you dig deeper into it, it will become more obvious as to the way a variety of diverse industries can work together to develop solutions.

Mr. Casey: The government should be recognized for the support it has provided to industry. There have been significant investments in the past, which Mr. Fabijanski alluded to, that have directly benefited his company and a number of other companies in our world.

Looking forward, Agriculture and Agri-Food Canada has announced that a bioproducts value chain committee they are establishing will bring companies together to look at how to develop an industrial biotech strategy for the industry. The first Growing Forward Framework Agreement and the second one recently announced will provide significant investments for the industry. All those programs are welcome and will help to grow the industry.

We have to avoid growing something only at its early stages because it does not take much for an idea to get up leave. We want to find a way to keep those ideas in Canada so that commercialization takes place in Canada and the jobs are realized in Canada. That is where something like intellectual property comes into play to keep step with other jurisdictions that are taking measures to ensure that property is protected and given a sound grounding in the jurisdiction in which it resides. We need to maximize those investments to ensure that the intellectual capital stays in the country in which it was developed.

Mr. Levy: There is no straightforward easy answer to this question. We are trying to remind the committee that when setting up new funding structures and arrangements it is important to be cognizant of what the technology transfer offices are realizing across the country and North America. Traditional measures or metrics of success, which are returns on investments through royalties, the number of spinoff companies and the number of patents filed are not necessarily the best indicator of what success should be. We are not experts in performance metrics, but we have seen from the inside that there is a range of ways to set up a cooperative arrangement. For example, the University of British Columbia Liaison Office has developed ways to share, such as Flintbox. One other factor to consider is that collaborative agreements often take a great deal of time to set up. A more standard way of doing that needs to be developed.

Senator Buth: I have another question for all of you on plant breeders' rights. What needs to be done in Canada?

Ms. Marden: Relevant to the question you asked before, I want to add that harmonization of some of our intellectual property and regulation to be in line with other countries would help Canadian innovation. Plant breeders' rights can be discussed in that regard. We adopted the 1978 International Convention for the Protection of New Plant Varieties, UPOV, which has farmers' privileges; and that can be a great thing. However, it is out is step with certain other countries. Patent rights have developed further in terms of plants in the U.S. and the EU. Canada effectively has patent rights for plant developments in some cases but in a kind of backdoor way that the Supreme Court has decided.

To your previous question, we need more certainty around what intellectual property rights we have in Canada, both on the proprietary end so that plant breeders' patent rights look like other countries' patent rights and on robust sharing that everyone understands is in line with the International Treaty on Plant Genetic Resources for Food and Agriculture with regard to not only germplasm but also data.

I do not want to claim that I know we should adopt a more recent 1991 version of the UPOV Convention and change our plant breeders' rights. Clearly, an economic analysis has to be done of the cost to farmers of any change and benefits to the breeders of any change. Certainly, it should be on the table given that Canada is not necessarily harmonized with other countries. I view the regulatory front from the same perspective. How does the regime of plants with novel traits affect developers when they look at what they need to do in Canada versus elsewhere? If the challenges are too high, you need to be a very large company, and then it becomes a challenge to be a small company dealing with that or being an academic researcher, who wants to bring a novel idea forward. They look at the regulatory and IP regimes and throw their hands up and literally give away innovations, which we do not necessarily want to see.

Senator Buth: Do they give away innovations because it is easier to commercialize and get what they need in other countries?

Ms. Marden: I am talking about academics. The top of mind is not necessarily starting a business but aiming to apply great ideas to solve problems. If there is a way of getting the idea out there that does not take 10 years of pulling one's hair out applying for another grant to do something else, that may be better.

Mr. Levy: Specifically, the sunflower group set out one of their goals to develop a sunflower that could be used for both fuel and food. We undertook a study to see how to get that out into the world, but it was a morass.

Ms. Marden: When we presented the results, they said that they were giving that one up. It is interesting in its facts. That is not to say you should do away with regulatory regimes because we have them for a reason. However, the Canadian regime is different than other regimes, such as Europe's. It is not that you can solve all the problems, but it may be the time for revisiting some of those and the impacts on innovation, which you are asking about.

Senator Buth: Are there any further comments on plant breeders' rights?

Mr. Casey: When you move to the commercialization phase and are looking for access to capital, you find that investors are like fickle travellers who look for the most comfortable hotel that puts a chocolate on the pillow. If you have uncertainty and lack of clarity in this jurisdiction, the money will flow to another jurisdiction where there is greater clarity. When you are going to that commercialization phase, it is easy to pack up your idea and move it to another jurisdiction and you will do so if that is what you think will take it to commercialization.

Senator Buth: Mr. Fabijanski, how hard would it be for you to pack up and move? You could put it on a plane, I guess.

Mr. Fabijanski: We would not want to move because we are locked into what we think is Canadian expertise. The bottom line is a level playing field with your other partners and adequate protection against the emerging economy so that there truly is a level playing field. At that point, Canada will certainly dominate; but if you are at a disadvantage, you will have to make up that disadvantage as well.

Senator Buth: We need an agricultural biotech Dragon's Den for regulation and venture capital.

Senator Robichaud: Mr. Fabijanski, you moved one type of oil produced from plants to an aviation fuel. Where did the research originate and how did you get through the ``valley of death''? This is the question that is being put to us. It is that part we are having problems with.

Mr. Fabijanski: The research originated in Canada around the oilseed and the commercialization on the farm. We have a collaborative agreement with two U.S. companies that are involved in converting plant oils into jet fuel, so we did cross-border collaboration there. As far as the ``valley of death,'' I am hoping we are passed that valley. This year was our first commercial year. It was small by many standards: only 6,700 acres of production, and next year we will be at 50,000 acres or more.

One of the ways we managed to do that was to collaborate with a major commercial partner in Canada called Paterson Grain. Early, strong commercial collaborations with organizations that share the same vision allow you to get past that. I do not think anybody gets past the ``valley of death'' that you speak of, in terms of this industry, without a number of strong partnerships.

That goes back to the playing field. If you have a level playing field there are strong partners that can join with the agricultural industry and the emerging companies to be able to have a successful team to go forward. Agriculture really is a team business that you have to assemble.

Senator Robichaud: You still had to associate with partners in the U.S.?

Mr. Fabijanski: That is correct.

Senator Robichaud: There were not any partners in Canada that would have caught on to what you were trying to do?

Mr. Fabijanski: At the time we went out, the number of partners that were able to accomplish what we needed was zero in Canada. Since that time, it has changed. There are two other partners we are now working with in Canada, but a lot of this is how quickly you run. In agriculture if you are not running you should not be even in agriculture.

We had to make decisions based on best available partnerships and an ability to move as quickly as possible.

Senator Robichaud: You say this has changed. There could be partners for that type of venture now in Canada.

Mr. Fabijanski: We have those partners and we also have U.S. companies interested in coming to set up shop in Canada based on what we were able to demonstrate. The unique Canadian ability to deliver agriculture at scale is something that people do not have in the U.S. One of the interesting things is we have more calls from people in the U.S. saying they want to work with us, now that we have been able to pull this together. We are looking to bring people into Canada to set up shop here to further develop this industry.

Senator Robichaud: Mr. Casey, you made the comment that IT should be encouraged to stay in Canada. That is kind of a ``chicken or the egg'' situation here, is it not? If you keep it here for some processes, you have less chances of getting it through commercialization. Is that an obstacle?

Mr. Casey: I am not sure I share that perspective. Capital is global and will move to wherever it gets the best return. If you put in place the hosting conditions in a certain jurisdiction and it looks like it provides certainty and clarity for that capital, it will come here.

Mr. Fabijanski's case in point is they had trouble at the early stages, but we know that there is a far more robust venture capital market in the U.S., and they may have more appetite for some early risk. Sometimes that is where you need to go to find your partners. As you start to move closer to commercialization and are beyond that ``valley of death,'' you obviously become a more attractive candidate domestically.

Part of your question is also how you get through that ``valley of death.'' It is important to recognize that the government has put in place a number of programs that have been helpful to the industry in getting through that phase. Much of that was done on agriculture and industry. It is not really specific to any industry, but it has been very helpful. We would hope to see those programs continue because they put in place the conditions for growth, yet they do not decide winners and losers. You do not want to get into that world of trying to pick a winner and loser. You want to let the marketplace decide that for you.

When you have a successful company like Mr. Fabijanski's come into the fray and you need to get it over to the next place, those things can help jump-start it and are helpful.

Senator Robichaud: You just said capital will follow but you need certainty and clarity. Are we not there yet?

Mr. Casey: I think in terms of considering what to do with intellectual property and how to protect it, keep in mind that having good protection for intellectual property is a very important part of the equation in terms of attracting capital. I understand Ms. Marden's point that you want to create a little bit of energy in the marketplace from a sharing standpoint, but there is a fine balance and you want to be sure to provide some certainty. As you are considering this, just keep that in mind where capital will go. They will look for that level playing field, as Mr. Fabijanski said.

Senator Robichaud: Ms. Marden, you mentioned we have to have a balanced approach, maximizing sharing, robust sharing, an innovation continuum and a strong legal framework. You said there was sharing, but you made the comment that you are not sure that sharing will continue when the grants run out. Why do you need a grant to share data?

Ms. Marden: It is a detailed point, but what I was talking about is we are funding all these genomics research projects. For example, large-scale sequencing and mapping of traits provide the raw materials to allow you to work with traits, develop new varieties, et cetera. It is the groundwork for a lot of innovation.

Genomics generate tremendous amounts of data. My understanding is that this data is all very useful to people who want to look for these traits and want to make changes, but it is very expensive to host the data on websites. When people get grants, the grants may provide — may demand — the sharing of data during that grant cycle of four years or whatever it is, but they do not provide funds to continue hosting the data.

When you talk to different research teams they are scratching their heads as to what to do with the data after that. Certain forms of the data — it gets very technical — can be sent to GenBank, but they will only take certain things. Other things will not be accepted. Sometimes it is too expensive to host data or make it available via publications.

When you get down into the weeds, data sharing is all over the place. What happens is you do not need a grant to continue sharing the data, but the grant ends, there is no more money for that specific project and you have all this data and there is no money in the lab or department to continue hosting these expensive data-hosting sites. It literally can get put on a shelf which is ultimately, from a funder's perspective, kind of a waste because you have spent a lot of money on it.

It is a simple point. There are resources out there, like GenBank that I mentioned, that are hosted by different institutions, but there is no common platform. It is a problem that needs to be solved. Where does this data go and who is paying for it? It should not be those grants continuing, but it should be something.

The proposal that I was alluding to is we have resources right now for seeds, essentially, germplasm. Canada has a national resource. Most countries do. There are these international and national centres established for sharing. What about considering using those, leveraging those? They are not tremendously well funded. They are quite well used, depending on what they have, but leveraging those to also include data. This is worth exploring so that the benefits of the funding we put into research and development remains available. That is what I was getting at.

Does that answer the question?

Senator Robichaud: Yes, but you are looking for funds.

Ms. Marden: It would require some funds from somewhere.

Senator Robichaud: Where should the funds come from? Should it come from industry or government?

Ms. Marden: It is probably a combination. For Canada, look at the Plant Gene Resource Centre that we have. Most of the funds we have come from government, but my understanding is that they could use more funds.

If we are putting in more innovative data that everybody can share, where else can we get that funding? Unfortunately, I do not have a direct answer to your question right now. ``Since everyone is benefiting, can others put in funding?'' seems to be the question.

Senator Robichaud: If we had direct answers to all the questions we are asking, our report would be simple and right to the point. Thank you.

Senator Mahovlich: These emerging economies would be interested in countries like Brazil, China and India. Have they been approached; can the government approach them? I am sure they would be interested in investing in something like this.

Ms. Marden: There is an international treaty on plant genetic resources that was signed by a number of countries, including Canada. Various developing countries are very interested because they can get material out of these kinds of seed banks. Yes, they are participating. Who is funding the whole mechanism? Canada has chipped in its share, but it is a question of balancing out funding. It is really a work-in-progress, but it is very popular.

Senator Mahovlich: It is difficult to be sharing. In my career, I had a difficult time sharing. The owners did not want to share; no one wanted to. It is a very difficult thing.

The Chair: We will stick with agriculture.

Mr. Casey: When it comes to sharing, you will know from your study of the forest products industry that one of the challenges is that if you share with the emerging countries like Brazil, suddenly you could end up with them growing trees with no branches that grow in eight years. Suddenly, they are displacing our industry.

There is a caution there in that you do not want these things to go too far because, at the end of the day, it is a global economy and we are direct competitors with a lot of those countries, as well.

[Translation]

Senator Maltais: My questions are for Mr. Fabijanski. Our committee is studying research in agriculture. It seems to me that, according to what you have said this morning, there is a revolution occurring in agriculture. I am very pleased to have heard your presentation.

What are you using to manufacture this new oil, if we can call it that? What type of plant are you using?

[English]

Mr. Fabijanski: The type of plant we are using is an oilseed crop. It is a cousin of canola and it is an oilseed crop that grows under very harsh conditions in areas where canola does not grow. Given its similarity to canola, it allows the farmer to use existing agricultural equipment to plant, maintain and harvest the crop.

[Translation]

Senator Maltais: Could this type of oil compete with conventional oil?

[English]

Mr. Fabijanski: Our goal and that of the industry is to have a renewable product that is competitive at an economic level with petroleum. I think that is absolutely essential. We do not believe that the use of subsidies to underwrite the biofuel industry as it reaches scale is a viable option, so our goal is to reach what we consider to be parity with petroleum.

[Translation]

Senator Maltais: Have you any examples of tests that you have conducted? For example, we know that farmers use tractors and other type of machinery. Have you tested this new oil on agricultural land?

[English]

Mr. Fabijanski: In terms of a test for the production of the crop, we are currently at the commercial level. We have grown the crop this year with 40 growers across Western Canada. Each of them is doing a quarter section or section, which is 160 or 320 acres each. With our commercial arrangement with Paterson Grain, these have now been consolidated into grain terminals and put on trains to be processed into oil. That oil is moved to the manufacturers that produce the fuel being used for these flights.

[Translation]

Senator Maltais: At the start of your presentation, you stated that you were running some tests using a particular type of airplane. Would this be a prototype or an ordinary plane?

[English]

Mr. Fabijanski: This airplane is a Dassault Falcon 20, a twin-engine business jet. It has been fitted with the various instruments by the National Research Council. It is their research plane, but it is based on a platform that is a commercial jet plane. It has conventional jet engines in it.

This is a plane that they use in a variety of different applications, including zero-gravity flights for astronaut training. This is a commercial, operational jet using this fuel, and we have done work with them in past to do a 50 per cent blend of biofuel and commercial jet fuel this summer. They did six flights and emissions testing that demonstrated a significant reduction in emissions associated with the use of renewable fuels.

This is scientific work in a collaboration being published in the various journals, but this has been ongoing for some time now.

[Translation]

Senator Maltais: This is truly revolutionary, in that you are taking soil that is almost unfit for agriculture to make oil which can be marketed. The Greens will not be able to accuse you of using agricultural land to produce oil, as has been the case in other sectors.

Could this type of agriculture be done throughout Canada or only on the type of land that you have selected?

[English]

Mr. Fabijanski: We see the potential for this in the southern region of the Prairies. There are around 16 million acres of what is called ``dry brown soil zone.'' It has a large degree of summer fallow of land that is vacant because of the need to rotate crops and the lack of a convenient rotation opportunity.

We believe this crop is largely targeted to these dry and warm areas of farming production. We believe that there is also a large opportunity to move this crop and this technology into the United States, as well as other regions around the world.

Our goal is to build this out in Canada but also look at other markets for the technology.

[Translation]

Senator Maltais: If there were an award to be given this year in the area of agricultural innovation, I really think that you should get it. You have done something wonderful which is not well-known. Perhaps other areas of Canada know about this, but I am finding out about it for the first time this morning.

It would be in the interest of the aviation field and, indeed, any sector that uses oil, to contribute financially and support you because this sector has a promising long-term future. I wish you the best of luck and I hope that the financial sector really gets behind you.

[English]

Senator Mercer: I find this study quite a challenge because there is a lot of terminology that we are using that we are not familiar with and that is the nature of the business.

Mr. Fabijanski, you say you had 6,700 acres in production this year and hope to have 50,000 acres next year. Did I hear you correctly?

Mr. Fabijanski: That is correct.

Senator Mercer: Has this land not been used before?

Mr. Fabijanski: This is land that is essentially left fallow in the summer because the majority of the crops grown in this region are wheat. If you look at real farming, you cannot do back-to-back wheat for long without having disease pressures, et cetera. This land is typically left fallow and the benefits of this crop for the rotation strategy are that it returns carbon to the soil, preserves moisture and provides you with a boost on wheat yields in the subsequent year. This is part of a sustainable farming practice in these regions. We have gotten a lot of traction from growers because they recognize that they would rather have income from land that is currently sitting fallow.

Senator Mercer: I do not blame them. What motivated my question is that we were talking about 9 billion people and we have to be creative about how to feed them. You are talking about growing something that will replace petroleum — which is also a good thing — but my concern was that we were robbing Peter to pay Paul. The good news is that it is land that is not in production right now.

This plane is flying next week and using this fuel. That is very exciting. I wait to hear the results of the test flight, but what is the potential from a commercial point of view? Will we see a time in the future where our jet planes will be fuelled this way on a large scale or is it limited because of the limited availability of land?

Mr. Fabijanski: The potential resides in two areas. I will go back to your first question. For us it is not about food versus fuel. About 50 per cent of the yield of this crop is oil; 50 per cent is a high protein meal that goes into animal rations. We are actually producing both feed and fuel off of this crop.

Senator Plett: It is getting better and better.

Mr. Fabijanski: In terms of the commercial potential, we see around 2 million to 3 million acres of production in Canada at a scale which will represent roughly 800 million litres of fuel and around $3 billion of economic activity. The 800 million litres of aviation fuel could have you flying all the planes in the Prairies on a zero carbon basis.

We see the opportunity here. Although you can look at this from a large global basis, we see a lot of regional opportunity for this crop which can be replicated into different regions.

Senator Robichaud: You answered about the residue after you produce the oil but you said you tested this summer — the fuel and 50/50 — and you had a significant reduction of emissions. How significant was it? The greens could be happy with that.

Mr. Fabijanski: To be honest, it was more than 50 per cent; it is probably closer to 70 per cent. I am not an expert on greenhouse gas emissions. The National Research Council scientists have done the analysis and the trailing of the plane. This emission reduction was done by having a sniffer plane fly behind this plane and sniff the exhaust of the engines at altitude. They are going into all of those things, which is a bit outside of my wheelhouse in terms of being able to explain it to you. However, they were significant.

Senator Robichaud: That is very important.

Mr. Fabijanski: It is.

Senator Braley: I have some comments and you might not have time to answer, but the first thing is that all the intellectual property things should be harmonized. There is no question about that. It is a deterrent to a pile of things. I own a lot of companies. Sometimes we go for patents; most of the time we do not because we get a jump and no one can read what we have done. We get a jump of two, three, four, five years with the automotive industry and others on some items. There are two sides to that coin. In about one third to half of my cases we do not do any intellectual property protection.

I get one to three plans a week and I probably invest in one or two. I have a big portfolio of investments. There is no business plan to speak of; there is no management of how to get from point A to point B. The details are wrong. There is no cost-effective manufacturing of the product. I do not know whether the jet fuel has a manufacturing net cost effectiveness compared to the current product or if one is double the price of the other. If so, where are the trade-offs?

Capital is there to be had, but our nation developed our universities strictly by government. They did not want private investments until about 15 years ago. Harvard and Stanford and all the universities in the states have all the companies right there like a little enclave. They are working with the intellectual property as it is being developed and they are saying, ``I want to do that; leave Harvard and join us.'' Those are the ways that things are being developed in the United States. We have a passive basis because our education system has been developed in a much different fashion than theirs. We do not have those centres of influence. If any of you want to comment, that is fine.

The National Research Council is an advantage for you right now because a large percentage of the research will be sent outside; it may be half over the next five years. There is an opportunity. I also believe research funds are being put in place. You should have a private amount equal, that way things get the attention. Rather than taking five years to do something, sometimes they are done in three.

Senator Robichaud: Senator Braley, you are on. A lot of people are watching you and hearing your comments.

The Chair: Do you have any comments to share with the committee?

Mr. Casey: In response to Senator Braley, in some respects you have hit on something that I noticed as I have travelled to meet with my members; there are some great ideas being developed in universities. The comment Ms. Marden said earlier is that a lot of these things are in the labs and you are dealing with chemists and scientists who are not natural business people, yet we developed a lot of these things in business schools and law faculties.

Why are we not doing a better job of bringing those three together so that we can get outside of the initial phases, go to more commercialization and tap into the expertise that is already in those schools? Some of schools are getting there. It is encouraging. UBC is definitely one.

Ms. Marden: Yes. To follow up, there is an interesting program going on at UBC to do that through the technology transfer office. It is training people with all these excellent ideas and bringing in potential industry partners to those same training sessions to try to get people together using the business school, students and faculty. What you say is definitely in the air and is a great idea.

Senator Mercer: Dalhousie in Halifax has a similar program.

Mr. Levy: There are other models being developed as well. At UBC there is a Centre for Drug Research and Development, and for those research bases you need an incubation and development arm. The government has been enormously helpful in funding that to get the ideas from the university researchers to get started on its way to commercialization.

Ms. Marden: They have brought in mountains of industry funding now, too, because it is a great idea.

The Chair: Witnesses, thank you very much for your information. With the comments and questions from Senator Braley, I encourage you to look at it again. If you have any additional information that you want to provide the committee, please do not hesitate to do so through the clerk, Mr. Pittman.

The committee will now hear from the second panel. Honourable senators, at 5 minutes to 10:00, I will be asking the committee to go into an in camera session for five minutes before we close the meeting at 10 o'clock sharp.

Senator Robichaud: Why will we go in camera?

The Chair: There is an item that I will bring to the committee's attention in camera. The details will be given for our future agenda. That said, we have two witnesses.

Witnesses, on behalf of the Standing Senate Committee on Agriculture and Forestry, I want to take the opportunity this morning to thank you for accepting our invitation to share with the committee your comments, your views and your recommendations on innovation in agriculture going forward.

Honourable senators, we have with us Mark Davies, Chair of the Turkey Farmers of Canada; and Phil Boyd, Executive Director of the Turkey Farmers of Canada. I am being informed by the clerk that Mr. Davies will make the presentation, which will be followed by questions from the senators.

Mark Davies, Chair, Turkey Farmers of Canada: I appreciate the opportunity. This is a follow-up presentation for us. We were here in February, so hopefully we can provide a little more clarity on some of the issues brought forward and some of the questions that we did not have ample time to address.

As I have just stated, this is our second appearance before the committee. We plan to focus this presentation on recent developments and initiatives at the Turkey Farmers of Canada and in the Canadian turkey sector and to elaborate on some of the discussion points that emerged during the February meeting.

The background information and industry statistics that have been provided were given in February and can be made available again as the honourable senators wish.

We are happy to answer any more questions related to those or to the topics we raise today.

I will give you a quick snapshot of supply management. I am sure that you are well aware of it, but, just to put things in perspective, under supply management, the turkey farmers work together to match what they grow with what consumers want and need. The market is also open to a predictable level of imported turkey. Processors receive a stable supply of products at stable prices, allowing them to plan their production accordingly. Consumers get a reliable supply of high quality, safe and nutritious food at reasonable prices and farmers earn their returns from the marketplace without relying on direct subsidies.

The stability of the Canadian turkey industry under the supply management system and its cooperative environment have allowed reinvestment in farms and across the industry as a whole. Proactive work by TFC toward the development and delivery of on-farm food safety and flock care programs to ensure high standards in food safety and animal care is at the forefront. So is investment in poultry industry research. These developments help to ensure that Canadians enjoy safe, high quality turkey products from Canadian farms at good prices year round.

Canadian turkey farmers contribute more than $412 million annually to the Canadian GDP, and more than 5,200 jobs are directly linked to our industry.

Our farmers also contribute approximately $60 million in annual tax revenues to federal, provincial and municipal governments. I think that, because it is a farm-based industry, the impact that it has on rural Canada goes without saying.

The research investment creates long-term benefits to the sector and is important for the future sustainability of the industry in terms of productivity improvement, economics and competitiveness, food quality assurance and societal concerns about farming and food production, such as the environment, bird care and food safety.

There was great interest, at our first appearance, in the scientific research undertaken by the Canadian poultry industry, with particular regard to research funding, the way that that funding is supplemented by the government and the way that specific research projects have improved the industry.

We at TFC have a research committee that is specifically concerned with increasing and sustaining turkey-related research for the benefit of the industry and the consumer. Poultry research has been declining over the past 20 years due to decreased funding, fewer scientists, and closure and consolidation of infrastructure at research facilities, and that is inclusive of the federal government's facilities. Of course, this has created a great challenge, as you can well appreciate.

Our response as an agency has been to implement a formal TFC research strategy that lays out a viable program specific to the needs of the industry. The identified research priorities include bird health, welfare and productivity; food safety and quality; environmental concerns; and new product development. These research funds are taken from the general revenue of the agency, which we want to be clear about, which is funded by levies remitted by turkey farmers on each kilogram of turkey marketed.

The TFC research contribution in 2012 was more than $164,000. The breakdown of that is just over $94,000 to the Canadian Poultry Research Council, CPRC. This was jointly established by us, the Chicken Farmers of Canada, the Egg Farmers of Canada, the Canadian Hatching Egg Producers and the Canadian Poultry and Egg Processors Council, which is the processor end of it.

The CPRC mandate is to coordinate national poultry research, increase funding, ensure that research money is used in the most efficient way possible, and to provide technical expertise to our farmers. CPRC manages a poultry science cluster on behalf of the poultry sector, which pulls together scientific and technical resources to support enhanced profitability and competitiveness. This will reduce the time needed for new products, practices and processes to reach the market. In short, we streamlined the process to get it to the grassroots farmer and to the processing industry as expediently as possible.

To date, CPRC members have committed over $2.5 million in support of 50 research projects at universities and federal government laboratories across Canada. Funds from other sources, which are mostly government sources, totalled over $10 million. The CPRC dollar is matched or ``leveraged'' at a ratio of 4:1. The specific resources of funding would be the industry groups and, in some cases, individual firms; the Growing Forward program; and the Natural Sciences and Engineering Research Council of Canada, NSERC.

The other piece of the pie is the over $70,000 that went to projects outside of the CPRC. This was a turkey research workshop, with additional funding provided through NSERC, which I just mentioned, as well as turkey research at the universities of Montreal and Guelph.

Projects supported by industry, government and educational institutions have contributed to the advancements in the turkey industry, including biosecurity and bird health, food safety, meat quality, and the modernization of husbandry practices.

Science serves as the basics for our on-farm programs, so our investment is critical to ensure that the programs stay current and equip our farmers to keep pace with technological advances and society's demands.

Our program is broken into two specifics, that is, the On-Farm Food Safety Program and the Flock Care Program. At the current rate, 70 per cent of the farmers are certified on the Food Safety Program; and the Flock Care Program, which came in later and is being implemented as we speak, is at the 26 per cent level. It is a work-in-progress, and we are hoping to attain 100 per cent within the next year or so.

These programs put scientific knowledge into the hands of turkey farmers in a useable form and provide the platform for auditable programs across the provinces. TFC also provides fact sheets on research findings that hold implications for on-farm practice. More than 20 are currently available on our website. For example, some of these would be barn cleaning, water quality, organic and niche production. More fact sheets are being developed, the next one being on composting.

Some examples of current research, if I could take a moment, would be the day length and its impact on turkey welfare and productivity. This research is being done at the University of Saskatchewan and refers to the fact that a lot of the birds are housed inside. The research involves the amount of light and how often, and the intensity that the light should be for optimum growth and welfare for both the bird and the producer.

Current research is also investigating methods of assessing fitness for transport, about which we have heard of issues in other commodities in the past few years. The public is focused on that, so it is our obligation to ensure we are on top of that.

Other research involves determining the genetic relationships between feed efficiency, production traits and greenhouse gas emissions in turkey, in collaboration in Hybrid Turkeys, as well as investigation into the environmental sustainability of turkey production.

Moving to market development and promotion, the industry has been met with changes in consumer preferences and has come a long way since the days when a whole bird was all one could buy at the grocery store. Industry has evolved to offer a wide variety of turkey cuts, including a whole bird, boneless breast, skinless breast, bone-in breast, thighs, wings, drumsticks and ground varieties. This is a topic of conversation wherever you go. The glass ceiling we have been trying to break through is to get people off the idea of having turkey only two or three times a year and that it is just a festive meal type of meat. We are trying to make it an everyday thing that the consumer will adopt.

Turkey farmers use a variety of production methods to meet specific consumer demands. Some of these are free run, free range, organic, and omega-3. It is worth noting that the dynamic demographics of Canada create an opportunity for the development of additional product to address ethnic preferences, and companies are working through these changes in developing these products. One of the most obvious examples would be the halal product in turkey. A number of firms are doing research on that now. This vast diversity of product offerings strengthens the Canadian turkey industry's sustainability and allows it to adapt to changing consumer preferences.

TFC's role is to create a platform where individual enterprises, from the farm throughout the value chain, can continue to develop their own competitive edge in the domestic market. To that end, we have established the Turkey Market Development Committee. Its focus is on creating opportunities for farms and firms by researching the needs and wants of consumers and food service outlets, increasing turkey representation in store, and extending the application of social media with such things that we are well aware of, such as Facebook, Twitter and YouTube. We are heavily engaged in this at this time. Our followers are gaining in number, and we see that as a positive thing. That is the way of the future. That is the way people communicate now. I am certainly no expert on it, but we have people in our organization who are.

The Turkey Market Development Committee members include producers, processors, dieticians, chefs, and representatives from the Canadian Restaurant and Foodservices Association, as well as the Retail Council of Canada. In fact, they are convening a meeting as we speak now, in Toronto. I will be joining them, along with Mr. Boyd, after we leave here, so it is timely to bring it up at this juncture.

Domestic branding is another important initiative. TFC received approval to use Agriculture and Agri-Food Canada's Canada brand identification in November 2011, along with the words ``Raised in Canada.'' ``Raised in Canada'' was chosen over ``Product of Canada'' because part of our industry is the procurement of the poult, which is the baby turkey. Some of those are imported from the States. It was easier because of that, and for some business practices within the processing industry it became almost a threshold too high to reach to say ``Product of Canada'' 100 per cent, because of the nature of the business environment we live in today. Therefore, our processing industry was quite happy with ``Raised in Canada'' and were able to work with that. That provides the insight that, without having the exact figure, 90 to 95 per cent of the production, the costs and the inputs are within Canada.

Graphics are in place on our agency website to generically promote Canadian turkey and the Canadian turkey industry, as you would well expect.

We are proud of our partnership with Food Banks Canada. I believe the invitation to attend here for the second time came out of the breakfast that Food Banks Canada had a few months ago. We were in attendance. The attendance from some of the members is much appreciated.

2012 is the fourth year in a row of our partnership with Food Banks Canada. We sponsored the breakfast I just alluded to on the Hill in May. We donated $50,000 again in October 2012, plus another $12,000 from three of our provincial members, from Ontario, New Brunswick and Manitoba. Support is also provided to local food banks across the country by provincial marketing boards in processing sector members throughout the year. The October media event in Ottawa with Parliamentary Secretary Pierre Lemieux is once again an example of how we can raise awareness for the issue we have in our society.

Continued engagement with Food Banks Canada, including their hunger awareness initiative, will be, in our estimation, a long-term partnership.

Some of this would be the market information arising out of some questions from our last engagement here. Hopefully it will go a long way to addressing some of the concerns and queries that were made.

Consumption would be first on the list. Since the inception of our agency in 1974, per capita turkey consumption has been relatively stable between about 4 to 4.5kg per capita. That is part of the glass ceiling that we have been struggling with. Our percentage of total meat consumption in Canada remains steady at 5 per cent to 6 per cent; we are maintaining that level.

We found that there is little relationship between live prices and retail prices. Live prices have been increasing since 2001 due to increased production costs, and retail prices are dictated by local and chain retailer strategies. Retail prices for commodity whole birds have declined marginally over time. Consumer turkey prices across the country and over the years vary depending on retailer strategy, just as they do in the U.S. or other jurisdictions. Over time, retail pricing in Canada and the U.S. have been relatively the same. Since 2001, our analysis shows that Canadian prices have been lower on average than in the U.S. in 6 of those past 11 years.

We thought it was worth bringing that to your attention because you will hear the criticism that everything is cheaper in the United States. Usually, we are targeted during the festive seasons. When you dig deeper into the issue, you find that the retailer puts a loss leader out that people will focus on. However, the whole story has to be told to realize that when you compare apples to apples, we are the same if not cheaper.

Another question was on import and export data. The focus on supply management is a domestic market, but the Canadian turkey market is not a closed one. The total value of imports was $15 million in 2011. It is worth noting that we hear the criticisms that supply management is a closed system and that we import more than some of our detractors in other countries import. Again, let us compare apples to apples.

The total value of exports was $23 million. Much of this is dominated by low-value parts that are surplus to the demands of the Canadian turkey market, which is for white meat. We are seeing a change in the trend, in part because of some of the economic realities that hit some families over the last couple of years, although we fared much better in Canada than others. The downturn affected families so they were looking for cheaper cuts. Much of the dark meat that was being exported is now kept in Canada. We see that as the silver lining in a bad situation where they are starting to develop products that otherwise might not have been looked at.

I am sure that you are aware that feed cost is a huge volatile part of any protein business, specifically poultry. The volatility became the norm for the livestock sector. In early June 2012, the average cost of feed in Ontario was about $463 per metric tonne. At the time, there was reason to be optimistic that the in the upcoming year feed prices would drop because it was expected to be a good year. By the end of June, that optimism evaporated as the heat wave and worst drought in decades blanketed most of North America, in particular the U.S.

Instead of declining prices, as had been expected, the cost of a tonne of feed rose to $550 as both corn soybean prices shot up in response to lower yield prospects. Increased feed costs translated into higher production costs for our producers and, of course, higher live prices. How this ultimately works through the chain to food service and retail consumers will be seen in time. That is the great unknown at this time. Retailers also struggle with it as feed costs and prices continue to climb. They have to be concerned about their bottom line with their consumers; and it is no different than us.

In conclusion, I hope that we have answered all the questions posed to us last February and to our colleagues at Chicken Farmers of Canada. Mr. Boyd and I will be pleased to take any questions.

Senator Plett: Gentlemen, thank you for coming here. I am sure you answered all the questions from February but you also raised a whole bunch more. I will ask only a few of them, obviously, so that my colleagues may ask some as well.

I believe that you said the number of farmers in Canada has declined. Did I hear you say that in your presentation?

Mr. Davies: No. In fact, the number of turkey farmers has been fairly steady over the years, within about 5 per cent. We are a small industry with about 545 to 550 growers, give or take a few. It is pretty standard.

Senator Plett: How are they divided across the country?

Mr. Davies: The bulk of them are in Ontario and Quebec. The percentage mirrors many other feather industries, such as chicken. Mr. Boyd, do you know the exact numbers?

Phil Boyd, Executive Director, Turkey Farmers of Canada: Ontario would produce about 42 per cent to 43 per cent of the national total; Quebec is in the order of 23 per cent of the national total; B.C., Alberta, and Manitoba would be mid-sized with 10 per cent to 12 per cent; and Saskatchewan, New Brunswick and Nova Scotia after that.

Senator Plett: With cattle and hog production, one of our biggest challenges is processing. How do turkey and chicken processes compare? Where are most of our turkeys processed?

Mr. Davies: It is funny you should mention that. A new plant was opened in Nova Scotia two weeks ago. It has the first dedicated turkey line in the province in approximately 40 years. It is great news for the chicken-turkey plant. It is spread out across the country with the bulk of the processing and further processing is focused in Ontario, Quebec and a little out west. At this time, there is a processer in every province except New Brunswick, which ships to Quebec.

Senator Plett: We process in Canada what we raise.

Mr. Davies: Pretty much, yes.

Senator Plett: Toward the end of your presentation, you mentioned feed costs. I had the opportunity earlier this week to visit Western Canada's largest independent raiser of hogs. He said that one of the larger challenges in feed prices, such as corn, is the production of ethanol not the drought. Do you concur that the production of ethanol plays into that?

Mr. Davies: It is a huge factor and has become the tipping point. This is the first year that around 50 per cent of corn, if I am not mistaken, has not gone to a food system or the many other things in our daily lives. The argument is that if it were to stand on its own with no subsidization, it would not have as big an impact. There are huge lobby efforts in the U.S., which the turkey industry has been a part of, to point out some of the misgivings of the program that is in place now. The pressure is felt across North America to a huge extent.

One of the advantages we have in the poultry industry is the conversion rate because it takes fewer pounds or kilograms of feed to produce a kilogram of meat than it takes for a larger animal. The burden might be less, although I think my growers would disagree because it is a huge burden at the present time.

The figures I brought up, the 450 is in Central Canada. If you go to either coast, B.C. or Nova Scotia, you can add another $80 or $85 to that.

Senator Plett: My last question is one typically asked of all witnesses. You have talked about some of your concerns. Other than our country maintaining supply management, what would you be asking of us to help your industry? I think supply management is a huge thing, and a good thing, in the industry. Other than that, what can we do to further assist the turkey industry?

Mr. Davies: I think our big thing is just support for the industry. The industry itself, if it is healthy and in place, has the tools to manage itself, and it is not to give a blanket answer. We have often said it is our business risk-management tool, supply management itself, when we go through the Growing Forward consultations and things like that, the past versions of that. There were different names.

What has always been the hallmark phrase you would hear from the supply management industry is you hear about programs and subsidies — if they are needed that is fine, I have no quarrel with that — but in our industry, we get it from the marketplace. As long as our industry is able to maintain all its pillars that I listed earlier, then it is a healthy industry in and of itself. That is not specific, but in that we can operate.

Again, maybe it is the education end of it. We have a lot of detractors, and you have seen it in the press in the last six months. There are a lot of different versions of the truth, so getting the facts out there and, as I stated earlier, comparing apples with apples and having people fully understand supply management, it is an education thing.

Senator Mercer: Thank you, gentlemen, for being here. You have answered all the questions we posed back in February.

You indicated in your presentation that the demand for omega 3 and organic is increasing. How different is it from the production side? When you are growing turkeys that qualify as organic or omega 3, is there a huge difference in terms of the operation on the farm? Is it driven by different types of feed or by different conditions in which the birds are kept?

Mr. Davies: I will start with what is similar, and that would be that the flock-care and animal-welfare aspects would be the same.

The biggest difference specifically for organic would be what is in the feed: usually no meat by-products. Without having the regulations in front of me, in general that is what it would be. It is what you would expect, based on its description.

As far as free-run and free-roam, there are different iterations of that as you go to different jurisdictions and provinces.

It is usually a higher-cost product to produce, and that comes out of a niche market or consumer demand that, hopefully, is being met.

Senator Mercer: I think with the free-run and free-roam it is obvious that you need more land.

Mr. Davies: Yes.

Senator Mercer: Waste management becomes a bigger issue, I suspect. When they are grown indoors it is a little easier to manage that.

Mr. Davies: Yes. In fact, some provinces, like Quebec, have mandated it. They used to have a lot of birds outside, ``free range'' in the sense that they were actually outside, and they have now been mandated inside. That has been in the last four or five years.

Senator Mercer: All Quebec turkeys are grown inside?

Mr. Davies: Yes.

Senator Robichaud: You say they are all grown inside in Quebec. This is for the management of waste?

Mr. Davies: As you are aware, after the outbreak in B.C. of avian influenza and the exposed risk, especially in areas where there is a concentration of poultry — because that is the nature of the industry — where you have the processing plant usually within a reasonable radius of your growers, it was, in their minds, doing the due diligence.

I am not saying there are not birds grown outside in Quebec, but as far as we know on the commercial production side they have all been mandated. They have had government assistance because some people had to build barns. Their barns would be full all year round, and this is something they had done for years, the outside range. I believe Manitoba still has some outside.

Mr. Boyd: On the question of organic, in the Canadian Organic Standards there is a requirement that the birds have access to out of doors to be certified organic. This goes to what is in the feed, no medications, and those kinds of things that one would associate with organic production.

As Mr. Davies indicated, the cost of production for those birds is substantially higher than the traditional, commercially grown turkey. That commands a premium through the marketplace as the consumer makes their selection.

If I could add to Mr. Davies' answer in terms of what our industry needs, I think he has covered the waterfront in terms of what we need in structure. In terms of research and innovation, one of the things we touched on in February was the need for consistency of government involvement in terms of facility, expenditures and funding for research.

There are several parties that join our industry in research funding, including federal and provincial governments: the Advanced Foods & Materials network, the Canadian Technology Network and the Agricultural Institute of Canada. All these contribute, but our focus for research and innovation is really to work with government and officials to ensure the funding is sustained over time and that we can continue to advance technologically.

The difficulty with research, of course, is, it often takes a long-term view of the world, to have research actually become part of everyday life on a turkey farm. We cannot afford short-term views of the world.

Senator Mahovlich: What about these wild turkeys north of Toronto? Are they considered organic and are they edible?

Mr. Davies: I have been asked this question more than once. There are quite a few of them around. In fact, I have had this conversation with you at dinner before.

Senator Mahovlich: They are worse than the deer; you have to be careful when driving.

Mr. Davies: They taste better.

Mr. Boyd: The wild turkeys, I would not call them organic or anything. They are wild turkeys. It is like game hunting, but they are certainly edible. Hunting a turkey takes quite a remarkable amount of skill. There are many of them around.

Senator Mahovlich: You have to sit on a stump and wait.

Mr. Boyd: I do not do it, but it can be a long day. That is what I understand.

We know the Leafs will not miss the playoffs this year, by the look of things.

The Chair: Mr. Mahovlich scored again.

[Translation]

Senator Maltais: Just to reassure my friend Senator Mahovlich, wild turkey is very good to eat; we have a regulated turkey hunt in Quebec. This is a very good turkey, providing excellent meat.

My question to our witnesses is as follows: what percentage of turkeys in Quebec are raised outside as opposed to inside?

[English]

Mr. Davies: As I stated earlier, as far as the commercial end of it, none. They are not supposed to be. They brought them inside with legislation, I believe. As far as the organic side of it or free range, I have to get back to you on that. I am not sure.

The Chair: You can provide that information through the clerk.

Senator Buth: I would like to switch the conversation, as Senator Maltais did, back to turkeys rather than hockey. We tend to stray at times.

I appreciated your information in terms of exports and imports. Many people do not realize that supply management has those two components. You mentioned $15 million in terms of imports. Can you give that to me in terms of a percentage of total value in Canada, and also maybe the 23 million? In terms of imports, what percentage would that be of what we have in Canada?

Mr. Boyd: The $15 million is largely based on the imported product, which is boneless, skinless breast meat, which is the higher value cut from the turkey carcass. We take that in terms of its yield off a carcass. That import level is equivalent to about 6.7 million kilograms live weight. That would equal the production of Nova Scotia and New Brunswick, in that ballpark, in terms of combining those two production levels. That is 6.7 million kilograms live weight out of a total production of about 190 million kilograms live weight. That is the percentage. It is significant, but it is assured access to the Canadian market by exporters through their importer colleagues on this side of the border.

Traditionally, the bulk of the imports would have come into Canada from the United States. Within the last five or six years, that has changed significantly, and I would say maybe not quite half but close to 50 per cent of those imports would be sourced from the Chilean turkey industry.

Senator Buth: My next question was going to where they are coming from. Why Chile?

Mr. Boyd: Anecdotally and not from anything we have seen, we understand that the meat provided from Chilean exporters is right to the spec of what the customer is looking for, so there is very little waste. Transportation is reasonably efficient. Lead times are a little longer than they would be for the United States, but certainly doable. With the right kind of planning, that seems to be where a couple or three of our importers have gone to source their raw material. It comes in under the minimum market access.

Senator Buth: Can you tell me what the average age of the turkey farmers is? Do you have any issues in terms of attracting new farmers into the business?

Mr. Davies: No. Actually, supply management in general and specifically the turkey industry is very generational, for one thing. On the average age, I will go out on a limb. I think it is around 40 or 45, in that area. It is much lower than the average farmer age nationally. We can check on that for you. I am just depressed that I am over that age now, so I am not too keen on that any more.

It is one of the real good stories from supply management. There is no problem with maintaining the farm and it moving forward, and there seems to be no threat to the industry that way.

The Chair: Thank you for sharing your comments, witnesses. If you feel, as we go forward, that you want to send additional information, please feel free to do so.

We will now have a five-minute in camera meeting.

(The committee continued in camera.)


Back to top