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Proceedings of the Standing Senate Committee on
Agriculture and Forestry

Issue 22 - Evidence - Meeting of December 4, 2014

OTTAWA, Thursday, December 4, 2014

The Standing Senate Committee on Agriculture and Forestry met this day at 8:05 a.m. to study international market access priorities for the Canadian agricultural and agri-food sector.

Senator Percy Mockler (Chair) in the chair.


The Chair: I welcome you to this meeting of the Standing Senate Committee on Agriculture and Forestry. Before we officially introduce our witnesses, my name is Percy Mockler, a senator from New Brunswick and chair of the committee. At this time, I would like to ask senators to introduce themselves.

Senator Tardif: Claudette Tardif from Alberta.

Senator Merchant: Pana Merchant from Saskatchewan.


Senator Dagenais: Jean-Guy Dagenais from Quebec.

Senator Maltais: Ghislain Maltais from Quebec.


Senator Beyak: Lynn Beyak, Ontario.

Senator Unger: Betty Unger, Edmonton.

Senator Oh: Victor Oh, Ontario.

Senator Ogilvie: Kelvin Ogilvie, Nova Scotia.

The Chair: Thank you.


The Chair: Today, the committee continues its study on international market access priorities for the Canadian agricultural and agri-food sector.


Canada's agriculture and agri-food sector is an important part of the country's economy. In 2012, the sector accounted for one in eight jobs in Canada, employing over 2.1 million people and it was close to 6.7 per cent of Canada's gross domestic product.

Internationally, the Canadian agriculture and agri-food sector was responsible for 3.6 per cent of global exports of agri-food products in 2012. Also in 2012, Canada was the fifth largest exporter of agri-food products globally.

Our first panel, I want to take this opportunity to say thank you to the witnesses for appearing. We have been mandated by the Senate of Canada to have witnesses like you share your thoughts, your experiences and your visions on international markets.

This morning, from the Turkey Farmers of Canada, we welcome Bill Mailloux, Vice-Chair, and Phil Boyd, Executive Director.

From the Canadian Poultry and Egg Processors Council, we welcome Robin Horel, President and CEO.

Thank you very much for accepting our invitation. At this time, I will ask Mr. Horel to make his presentation, to be followed by Mr. Mailloux. Following the last presentation, we will then move to questions.

Robin Horel, President and CEO, Canadian Poultry and Egg Processors Council: Thank you. Good morning. My name is Robin Horel and I'm the President and CEO of the Canadian Poultry and Egg Processors Council, or CPEPC. Thank you for the invitation today to provide CPEPC perspective on international market access priorities for the Canada agriculture and agri-food sector.

The Canadian Poultry and Egg Processors Council is the national trade organization for Canadian chicken and turkey processors, hatcheries — for day-old broiler chicks, egg laying chicks and turkey poults — egg graders and egg processors. Our council is 65 years old. We have member companies in every province of Canada. Our member companies include some of the largest agri-food corporations in Canada and process over 90 per cent of Canada's chicken, turkey, eggs and hatching eggs. My written brief includes figures on retail sales, investment and employment. We are a significant part of Canada's agri-food industry.

CPEPC's member companies work within the supply managed system for chicken, turkey, eggs and broiler hatching eggs. Although CPEPC's strategic plan restates our support for the system, it also notes that we are "committed to building the long term competitiveness of the Canadian poultry industry. A foremost priority is to modernize the supply management system to ensure continued broad consumer support, mitigate processor risk and to better respond to market pressures and the competitive environment.''

Both exports and imports are critical components of the supply managed system for poultry and eggs in Canada. In chicken, Canadian consumers prefer breast meat and wings. Industry meets that requirement by importing additional breasts and wings, over and above what is produced in Canada, through TRQs. In addition, export programs in the chicken sector result in the export of thighs and drums. The result is a market that is kept in balance. Natural production is approximately 52 per cent breast and wings and 48 per cent legs. We change that ratio through the imports and exports to approximately 57:43.

In 2013, Canada was a net importer of chicken, largely breasts and wings as noted. When measured by volume, it is approximately 3 per cent of our production. The few stats on imports and exports that I reference today and that are noted in my written brief are all based on data from CFIA as compiled by Agriculture Canada. The stats behind this net import for chicken are that we exported approximately 142 million kilograms of broiler chicken, about 13 per cent of our production, and imported more than 170 million to result in the net imports of about 3 per cent. This activity is significant.

In turkey, we see a similar consumer preference. In addition, more than half the turkey market is further processed products. The vast majority of these use breast meat. In turkey, most of our imports are breast meat, while most of our exports are residuals, like drums, wings, tails, frames, et cetera. Last year, Canada was a net exporter when measured in volume of approximately 8.5 per cent of our production, but in terms of value, we are net importers. Just like in the chicken example, exports are much higher than the 8.5 per cent noted — and my colleagues will give you more information, I'm sure — but are offset to some extent by imports to result in the net amount.

In eggs, our imports are used primarily to balance the market during periods of increased demand or lower production. In 2013, we imported between 5.5 per cent and 6 per cent of our production of shell eggs. We are both importers and exporters of processed egg products, and in 2013 we were net exporters.

In broiler hatching eggs, similar to table eggs, we use our imports to balance the market during periods of increased domestic need or lower domestic production. Our international commitment on broiler hatching eggs means that we import approximately 20 per cent of our requirements.

CPEPC's membership also includes some primary breeding genetic companies. In the turkey and table egg layer business, these companies supply product to the domestic market but also export eggs or day-old chicks or poults to a number of countries. For these companies, exports are a critical part of their business. They would not be in business in Canada without these exports.

The major points to note from these high-level snapshots of imports and exports in our sector include: In turkey, we are a net exporter by volume but a net importer by value; and in processed eggs, we are a net exporter, but for eggs in total, we are a net importer. In total the Canadian poultry and egg industry is a net importer, but exports are significant and very important to all sectors and to CPEPC members in particular.

Both exports and imports are critical components of the supply management system for poultry and eggs. They are used to balance the domestic market, to meet Canadian consumer preferences and to fill periods of increased demand for lower production. Exports of some products like eggs or day-old birds from genetic companies or processed egg products from some of our egg processors are not residual products but are important value-added products.

I understand that this committee's study will focus on four issues. I will spend a few minutes to discuss each of them at a high level from our point of view.

First, diversity, food security and traceability: Our industry is proud to produce a wide variety of safe, nutritious products for Canadian consumers. I think it's pretty clear that food security and traceability benefit from the system that we work in.

Second, the competitiveness and profitability of Canada's agriculture and agri-food sector, including producers and processors: Supply management was set up to allow farmers to receive fair compensation for their products. It has been successful when measured against that goal. CPEPC member companies support the system, provided it also works for our part of the value chain. Processors, graders and hatcheries benefit from a consistent supply of safe, quality poultry and eggs. For the most part, the system has been good for CPEPC members over time. It has certainly been good for farmers. Ensuring ongoing competitiveness is one of the key goals outlined in the CPEPC's strategic plan.

Third, sustainable improvements to the production capabilities of the supply chain: Consolidation at the processing level has occurred to some extent over the past decade. However, the systems that result in commercial poultry and egg farms in every region and most provinces of Canada do not lend themselves readily to economies of scale in processing. Understanding the benefits of the system, processors do not advocate changing history, but allocation of future production in our growing industries is one of the challenges that the agencies must manage. It is one of the key elements of modernization.

Lastly, the expectations and concerns of stakeholders from the Canadian agriculture and agri-food sector: The expectation from poultry processors, egg graders and processors and hatcheries, as represented by CPEPC, is for the Canadian government to support policies that allow for the ongoing sustainability of our industries. Of course, this includes many domestic policies. However, for the purposes of the Senate Agriculture Committee regarding international market access priorities, our expectation is that Canada continues to support rules-based trade. We have noted how important both exports and imports are to our sectors, even though we are domestically focused.

To conclude, first, our members operate within the supply managed value chains. These systems have benefits, and our members support them with the understanding that we need to look for efficiencies where possible and strive for competitiveness. Second, both exports and imports are important to the maintenance of the systems and are critically important to our members. Third, Canadian poultry processors, egg graders and processors and hatcheries would not be competitive internationally if open access to the Canadian market was granted without structural realignment of the system. Lastly, CPEPC and our members need the Canadian government to continue to champion rules-based trade agreements.

Thank you very much, and I look forward to your questions.

The Chair: Thank you, sir.

Mr. Mailloux, please proceed.

Bill Mailloux, Vice-Chair, Turkey Farmers of Canada: Thank you very much. It's certainly a pleasure to be here, Mr. Chair and honourable senators. Do not be fooled by my last name. I don't speak French, although my granddaughter is trying to teach me.

We want to thank the committee for having us here today. We appreciate the opportunity to participate in this study on international market access priorities for the Canadian agricultural and agri-food sector.

Turkey Farmers of Canada represents more than 500 turkey farming families across the country. By working cooperatively with other members in the supply chain, our organization has managed the supply management system for turkeys since 1974. Our board is comprised of eight farmer-elected representatives, one from each province where turkey is grown, along with two appointed members from the primary processing sector. One is this distinguished gentleman next to me representing the processors and one is from the further processing sector as well.

Together, the board works to fulfill its obligations as laid out by the Farm Products Agencies Act, which are to promote a strong, efficient and competitive turkey production and marketing industry in Canada and to have due regard for the interests of both producers and consumers of Canadian turkey. That's a very important point we always look at, not just the farm side of things as we have buyers of our products and consumers are some of the buyers, and we always consider their needs in this.

Over four decades, supply management has helped us to do both. With the assurance of a fair return from the marketplace, our farmers have been able to reinvest in their farms and in the industry by way of world-leading research, innovation, food safety — and we have food safety programs in our industry that have to be done on farm and flock care as well — and the promotion of Canadian turkey. Without relying on direct subsidies, as you have heard from other witnesses in recent days the stability provided by supply management also goes a long way toward creating jobs and stability in rural communities and economies across the country.

There are some misperceptions about supply management that we would like to address before the committee today, the first being that supply management raises consumer prices for Canadian poultry, egg and dairy products. Supply management helps to ensure that farmers and processors receive a fair price for their products, but the prices at their local grocery store or restaurant are not controlled by farmers. Those are decided by retailers and food service providers, who make the decision based on company-specific strategies and local market conditions. Farmers have no control over that. This is why there are often large price variations on the same product between regions and even between stores.

As for questions about how the price of turkey in Canada compares with the price of turkey in the United States, the numbers are comparable. Over the last 14 years, the average annual retail price for whole, frozen turkeys in Canada was $2.97 per kilogram compared to $3.26 per kilogram in the U.S. That's 9 per cent less. This doesn't mean that Canadian turkey prices are always lower than U.S. prices, but it does mean that prices are within the same relevant range in both countries.

I live about 20 minutes from the Ambassador Bridge in Detroit. Certainly you can run over there and buy cheap turkeys at times. They advertise the price, but the ads also say that you have to spend so much. So people sometimes get confused on the real bargain that they think they're getting. When we ran these numbers, it clearly showed the true price of turkey and not all the ads that go with it.

Next we want to address the idea that supply management has somehow limited the export potential of other Canadian commodities. This I always find interesting. Consider the fact that Canadian exports of pork and beef have both risen considerably since supply management was first established in the 1970s. From 4.3 per cent of total pork production, it went to 63.53 per cent in 2013. From 6.42 per cent of total beef production, it went to 32 per cent in that same time frame. In fact, we have recently heard from Farm Credit Canada that Canada is the world's top agriculture trader compared to all other countries on a per capita basis. The point there is that our sector has not hindered other sectors from doing what they want to do in the trade negotiations. These sectors of Canadian agriculture, to their credit, have chosen and been able to engage in world markets, and supply management has not been an obstacle to them being able to gain market share.

Despite its domestic focus, the Canadian turkey market is far from closed. We are the ninth largest producer of turkey in the world, the fourth largest exporter of turkey in the world and the seventh largest importer of turkey in the world. Canadian turkey hatcheries had a net trade surplus of 21.7 million eggs and poults in 2013. We are primarily a whole bird and breast meat market, so our exports consist of lower value products such as wings, drums and frames, things like that. As a result, our exports increase as the number of turkeys that we bone for further processing goes up.

Canadian turkey farmers have called on Canada's government to continue to defend supply management at the TPP and the WTO and within the context of other ongoing international trade negotiations as we have seen the effects of increased access into our market before. Taken together, the results of the Canada-U.S. free trade agreement in 1987 and the Uruguay round in 1995 equal approximately 3,000 tonnes of additional access to the Canadian turkey market and foregone domestic production of roughly 4 per cent. That's just a dead giveaway.

As a result of white meat yield, every kilogram of turkey meat imported into Canada is the equivalent of 4 kilograms live taken off a Canadian farm. This affects farms and processing plants by reducing the throughput in those plants and productivity. It can also negatively affect exports because fewer turkeys boned domestically means fewer off-cuts to export.

The recent agreement between Canada and the European Union will see no increase in minimum market access and no reduction in Canada's over-quota tariffs for turkey meat products. It will allow the EU to export turkey meat under our existing tariff-free quotas at a preferential in-quota tariff of zero per cent and also allow them to export products that are not subject to import control, such as prepared meals and specially defined mixtures.

On the export side, the EU will eliminate its tariffs on turkey, eggs and poults and eliminate its tariffs on further processed turkey products, such as prepared meals and TV dinners. Given that the Canadian turkey hatching egg industry is a net exporter, CETA should provide some additional opportunity so long as no new non-tariff measures are implemented in the interim.

In the case of further processed turkey meat exports to the EU, the potential is limited to two main factors: sanitary and phytosanitary measures and the domestic "further processing'' industry's ability to manufacture and market further process products that will appeal to European tastes across 27 countries.

In summary, the Government of Canada has stated and demonstrated consistent support for supply management and a strong commitment to stand up for Canadian farmers and industries by defending supply management in all international forums and bilateral negotiations. The Turkey Farmers of Canada remains confident that the government will deliver on its commitment, and we continue to support the government's balanced trade position and look forward to working with the government to uphold effective supply management domestically in all current and future trade negotiations.

I respectively thank you for the time. If there are any hard questions, my colleague will answer them, and I'll get the easy ones.

The Chair: If Jean Béliveau were here, we would call that passing the puck. Thank you very much.

Senator Tardif: Thank you for your presentations this morning.

Before proceeding to my question dealing with today's presentations, I would like to ask Mr. Horel for his comments further to the quarantine that has been placed by Canadian officials in regards to the avian influenza outbreak in the Fraser Valley. What affect will this have domestically and internationally?

Mr. Horel: It is early days. When we heard about it from the Canadian Food Inspection Agency, it was Tuesday and today is Thursday. There's a lot of scrambling around on the ground in British Columbia, and we're not exactly sure where it's going to end up at this point.

We've been through this a few times since the crisis in 2004. In the intervening number of occasions, we've always done — by "we,'' I mean the industry and CFIA — a very good job of controlling it in every situation except for the 2004 incident. We've controlled it to the indexed farm or farms. We have stamped it out. Consumer confidence remains good. We have had some international trade restrictions, and we've already got some now. I got an email last night, and we've already got international trade restrictions now, but the support of the Canadian consumer has been really good. They've trusted the system and the way that we manage the situations.

We frankly need, as quickly as possible, to depopulate the infected farms once we know what the virus is and to set up control and movement zones in order to control this.

Senator Tardif: We wish you the very best because we know this can have a devastating effect if it goes any further.

Mr. Horel: It won't have a devastating effect if we can manage it. It certainly has the potential.

Senator Tardif: Regarding the presentation, you indicated that you import a fair bit of turkey, and some of this is tariff free. You are a large importer of turkey meat around the world, but you also export a fair bit of turkey meat annually. You also mentioned that it's important to modernize the supply management system to take away the advantage of access to international markets. How can you do that without reducing economic opportunities to producers in supply-managed industries?

Mr. Horel: Yes, that was certainly the point. We are big importers and big exporters in all four of the commodities that we're in, including turkey. When people think of supply management, they think that we only fill the domestic market and we're net importers. In total, we do concentrate on the domestic market — that's our focus — and in total we are net importers, but there's a lot of export and import and a lot of balancing.

Frankly, I don't think we need to change anything in the way the government has to date approached international trade agreements. As long as the rules are fair and consistent so that imports are under the same rules as exports, then we can operate within that system.

We've debated this system for a long time. The supply management system wasn't set up for us; it was set up for Bill and for the farmers. But 40 years in, we support it. We've lived in it for a long time. I've got members who have built businesses in it. We support the domestic focus. We need the relief valve, the balancing, the ability to export some further processed products or value-added products like genetics from the turkey companies that are in Canada or further processed egg products and chicken products. Status quo might be the wrong way to phrase it, but we need the balance. We need the fair trade for both imports and exports.

Phil Boyd, Executive Director, Turkey Farmers of Canada: I have just a couple of points. As Robin has indicated, it's about balancing in terms of the domestic market. In the turkey sector, as Bill pointed out in his opening remarks, our market, like in the U.S., is driven by white meat. So we end up with offcuts like turkey backs, necks and maybe some wings. There's not a big demand in Canada for those. Those are exported. It goes to the balance in the domestic market that both Bill and Robin have spoken to.

In our sector, when Robin described it as big exports and big imports, by way of context, the last numbers that I saw in terms of what we export out of the country is probably 1 per cent or less of global trade in turkey meat. So it's not big in a global sense, but that doesn't undermine or understate the importance of the flow in the domestic sector.

In terms of the value, our imports exceed the value of the exports by, off the top of my head, probably 15 to 20 per cent. In value terms, we're very much a net importer, because we draw in higher-value cuts, like white meat, which is a higher-value market than backs, necks and those kinds of offcuts.

I'd like to underline Robin's point that over time the governments have negotiated 40-odd free trade agreements or freer trade agreements, all the while keeping intact the fundamental principles of supply management that allow the system to run as it is intended, in that kind of appropriate balance. But at the same time it is not preventing market access for other Canadian agri-food and agriculture products around the world. Some of the statistics go to that in an empirical sense. Again, to underline the tactic of trade negotiation that the government has followed over the past several years, in agreement with what Mr. Horel said, it seems to be an approach that works well.

My final point is that in terms of investment in our industries, at times, antagonists toward supply management will say that it stifles investment. If we come back to the evidence, there are new processing plants on the East Coast, within the last five years, for chicken and turkey. There has been significant investment in hatcheries in the turkey sector over time, and we know of additional investment being undertaken in other parts of the country. So there is investment on farms. About half of our producers, from a survey recently completed, anticipate investing further in the short term, in terms of their operations, and that's the same as we go downstream.

Mr. Mailloux: Phil is right about the investment. Because of our on-farm food safety programs and our flock care programs, farmers, as I am, continue to invest in upgrading the facilities that we house them in, inside the barns and outside. It's a constant investment that we make to keep up with those programs.


Senator Maltais: Welcome, gentlemen. Spent fowl is only used in processing. Why does Canada import so much spent fowl from the United States? Does our production not suffice?


Mr. Horel: Thank you for the question. There are a number of reasons behind that.

The first one is that we have a negotiated trade agreement through NAFTA that says we will import a certain amount of product. Whatever the product is, it will come in that way.

We have some programs, though, in Canada. When I talked about 140 million kilograms of imports — 140 or 170, whichever it was — a lot of that product is imported and then further processed in Canada and then re-exported — so import to re-export. So it's not at all fair, in my estimation, to say that we are importing recycled product. We are doing a lot of the recycling or the further processing. We've got a nice, vibrant, small, as our country is small, further processed industry, but we are doing a lot of that further processing in Canada. In fact, by far the lion's share of chicken imports are raw, primary processed product that we then turn into further processed product — the lion's share, 90 per cent. Very little of the chicken that we import is just imported and sold the way it is; it's further processed in Canada.


Senator Maltais: Mr. Mailloux, it is tradition in the United States that the president pardons a turkey on Thanksgiving Day. Could we not do something similar in Canada on Christmas Eve to show we love the turkey for its meat, but through a symbolic gesture, we are protecting it and saving it for next year? Have you thought about introducing that tradition?


Mr. Mailloux: Perhaps we should. More of my time is spent getting people to try to eat turkey all year round, but perhaps we should do that with the Prime Minister.

Mr. Boyd: What we have done for the last five years to honour our industry and Canadians is that our agency has committed $50,000 along with our provincial partners and with some of our downstream partners, who have topped up that donation. It's been in the range of $55,000 to $60,000 a year, in advance of Thanksgiving going to Food Banks Canada. Food Banks Canada then has its hunger count. We make sure that those donations go to rural food banks across the country, in all provinces and the territories, so that families that may not be able to obtain a turkey on their own for Thanksgiving are able to get one through their food bank.

We've done that for five years, I believe, and have plans to carry on doing it. We figure that there are 6,000 Canadians who will have turkey at Thanksgiving that otherwise may not. We do honour our protein on that basis. The letters we receive back from clients indicate it is extremely important and well received.


Senator Maltais: What you are doing is all well and good, and I congratulate you for it, but it is simply a gesture we are speaking of. I do not think it would stop Canadians from eating turkey at Christmas, far from it. It is a tradition. We appreciate the bird at Christmas. This symbolic gesture would promote turkey farmers across Canada, and would further show that we do not simply process the fowl, but also take care to protect it and use it wisely throughout the holidays and the rest of the year. It is a symbolic gesture on two levels, and I think it worthwhile for you to look at it more closely.

The Chair: I thank you for your comment, Senator Maltais.

Mr. Boyd: It is a good idea, sir!


Senator Merchant: That's what Senator Maltais wanted to hear. Good idea.

I have two different questions; one is about traceability. Do you think that maybe you need some kind of traceability system that might improve our competitiveness in international markets?

Mr. Horel: The first point is that we do have traceability systems. My organization, as you gathered from the brief and my presentation, is in four commodities: chicken, turkey, eggs and hatcheries — hatching eggs. We have traceability and it varies in each system, but we have traceability in all those systems.

In a recall situation for chicken, we can get back to the flocks that we procured from a certain plant within half a day. In turkey, it's the same sort of thing — maybe one day. So we will know how many flocks we procured in that day. In eggs, it is the same sort of thing, but we're working with egg farmers to potentially stamp eggs and trace each individual egg, but cost/benefit is the issue. We do have traceability.

One of the points I tried to make in my summary is that the supply management system certainly lends itself to making traceability easier. We know where all the farms are. We know where all the production is. We've got all the food safety systems from on-farm right through our processing plants onward. We have traceability.

Mr. Mailloux: This has always been my pet peeve. I'll tell you what I have to do on my farm. I've got a deep binder to keep daily records on some issues. I have to report that I've got a generator that works. I have to test it monthly. I have to test the water and do all kinds of things. We keep track of that, and it's available to our auditors who audit the farm. We just had an audit a couple of days ago. We have to do all these things.

Because you asked that question, it comes to my pet peeve that, yes, we do all these things but nobody knows enough about it. We do all those things, and auditors come in. They look at us and scrutinize the barns and all that stuff. Obviously, if you asked the question, we don't advertise it enough. That's probably our fault, although I don't know how we'd do it better.

Mr. Horel: What Bill said just reminded me of something else. I don't want to stray too far from your traceability question, but our sector of the industry came together and declared that food safety and animal welfare, which we'll set aside for a minute, are non-competitive issues. Purposely, and I think it's the right way to do it, we don't advertise that our food is safe, that one thing is safer than something else.

On the animal welfare side, we don't say that this is more animal welfare friendly than something else. We believe that's table stakes. In the Canadian industry, consumers expect safe food. They expect food to be raised with good animal welfare. We don't start putting a bunch of advertising on labels or in the marketplace that simply will confuse people and lead all other purveyors to do the same thing. Yes, maybe we've hidden our light under a bushel; I'm not sure. Our belief is that it's a non-competitive issue — it's table stakes.

Senator Merchant: In this day and age we see so much on television when something goes wrong on a farm. Recently, programs have shown all kinds of unsavoury pictures of animals that don't look too well. You may think that consumers have these expectations, but you may have to blow your own horn a little bit in counterbalance; it's up to you, of course. You know what you are doing.

Some stakeholders that have appeared before us have talked about a shortage of skilled labour. Are you experiencing anything like that? I'm thinking of Saskatchewan in particular, where we have an oil industry that demands skilled labour. Sometimes you lose workers to higher-paying industries.

Mr. Horel: We do experience it. It appears to be regional, or there is a regional component to it. We experience it in two parts of our business. To some extent, it's more minor than what you would have heard from the beef and pork companies. We experience labour issues in some of our western plants, but certainly not to the same extent as my colleagues at the Canadian Meat Council.

We also experience it in the link between us and the farmers — what we call poultry catching crews. Catching crews do a difficult job working through the night. They go from farm to farm to catch poultry and put it on trucks. The trucks then come to the processing plant. The shortage of labour in that area is pretty acute. Depending on the region, sometimes more than 50 per cent of the catching crews are temporary foreign workers. We've received not an exemption but a ruling from Employment and Social Development Canada that allows those catching crew temporary foreign workers to continue to be employed. Certainly, we have to pay fair wages and we have to do the housing and all that stuff, which makes sense. However, we're not subject to a 10 per cent cap, which frankly would have put that part of the process out of business.

Senator Unger: My supplementary question regarding traceability is to Mr. Mailloux. How often are audits done? What happens when there's an outbreak, as we're seeing in B.C.? What happens to your farm, if anything?

Mr. Mailloux: We have an audit about once a year, I think. We have a partial audit, a supplementary audit and then the next year a full audit of all operations. If I'm wrong on that, I'll correct it, but once a year we have something going on, whether it's just the paperwork you have to prove or the full audit.

If we fail an audit and don't correct it on our farms — and this is in Ontario, and I believe we're getting a little bit more common across the country — your quota allocation will be reduced. There's a penalty if you do not conform to the rules.

Mr. Horel: You referenced avian influenza as an example, for obvious reasons as it is current. To make sure there are no loose ends around avian influenza testing, Canada has a multi-pronged approach to testing for avian influenza. We have passive surveillance, which means that if Bill or any other farmer finds something such as increased mortality in their barn, they talk to their vet and those birds are now routinely tested. But that's passive, in response to something.

We have active ongoing surveillance. We have wild bird surveillance. We have ongoing surveillance in every flock in the primary breeding companies in Canada. We have surveillance through what we call pre-slaughter. My members send information to the CFIA that says when the birds will come to market. Prior to those birds coming to market, on a random basis the CFIA tests those birds. We are testing for avian influenza all the time, over and above the kind of food safety program that Bill is talking about.


Senator Dagenais: Thank you to our witnesses. I have two questions.

I do not know if you are aware, but last week, Radio-Canada broadcasted a story on grocery store chains. Now, suppose you have a packed poultry product, with the best-before date on it. In order to avoid losses, some franchisees, and sometimes the large chains themselves — I am sure you are aware of this — repack the meat and slap another date on it to extend its shelf life for another four to five days. Obviously, this is going to affect your market, as customers could come to feel a sense of insecurity regarding your product. Have your organizations thought about approaching those grocery store chains and warning them against such actions that could lead to serious consumption problems? We know that sometimes, in these cases, it is the franchisees who act entirely of their own volition.


Mr. Horel: Thank you for the question. Yes, I certainly noticed the report.

The way my council works, my organization, my members have absolutely talked to their customers. I have not. I have not done that on their behalf. My members have talked individually to the customers, including the ones that were implicated, et cetera. So, yes, there has been some outreach.

I think you're exactly right. We have to take seriously anything that undermines consumer confidence, and that's how we're doing it. I think you're also right when you say the burden is on the retailer to make sure that practices are correct.

The Chair: Mr. Boyd, did you wish to comment?

Mr. Boyd: My comments were actually a question ago, on the matter of outbreak and traceability.

The Chair: You can comment on it, please.

Mr. Boyd: I just wanted to identify that they are two separate issues.

At Turkey Farmers of Canada, we have two programs. One is the On-Farm Food Safety Program that makes sure that when birds leave, they're not going to contribute to any food-borne illness. We mitigate the risk of that through a program. As Bill has indicated, it's subject to audit.

Secondly, we have a Flock Care Program, which is also subject to audit. It goes to the question of animal welfare and the seriousness with which our organization and our producers take that whole set of issues and deal with it.

At this point, about 99 per cent of our farmers are certified on the On-Farm Food Safety Program and 75 per cent are certified on the Flock Care Program. In each of the provinces, both programs will be mandatory at some point in 2015.

On the question of traceability, for example in the outbreak that Senator Unger had mentioned and Robin alluded to, if a problem is identified, within hours the local marketing boards in the province — so in Bill's case, Ontario — would have a map of the poultry farms in the area. They would know how many birds are on that farm and in each barn and the age of those birds, which is really important to understand in terms of containment. Once that's all identified, then decisions on depopulation can be made very quickly and contain the outbreak.

In the case in front of us right now, that map was done within hours of notification of an avian influenza infection, and the focus becomes on what's in that area and how we increase biosecurity immediately to clamp down on movement and make sure that the spread is reduced. It's proof of how effective the traceability system is in terms of that particular kind of situation.


Senator Dagenais: I am sure you are aware that Australia and New Zealand have deregulated their supply management-based production sectors. In turn, this has led to better prices for consumers.

What do you think of the Australian and New Zealand models?


Mr. Boyd: This is a recurring question, so we're pleased you asked it. I'm speaking not from the standpoint of the turkey industry specifically on these cases.

First of all, in the case of Australia, it's interesting that upon deregulation, the farm price for milk dropped and the retail price for milk increased. It's counterintuitive in the sense that if one buys the argument that supply management contributes to higher consumer prices, which we don't believe it does, there's a false premise, we think, that that's the case.

As explained in our earlier comments, consumer prices are set by the strategy of those that sell to the consumer. That's why we would see, as Bill pointed out, not only different prices for turkey in different regions of the country but different prices between stores in the same region, depending on the strategy of that particular merchant.

In terms of access to the New Zealand market, there's not much New Zealand has to offer Canadian exporters. It's a small market, a long ways away, and they're a small population. To chase access into the New Zealand market is really of no consequence. There's no payback on that that we've been able to identify.

They're exporters of dairy products, as you well know. You've had Dairy Farmers of Canada and dairy processors as witnesses, and you understand that dynamic. My recollection, and I may stand corrected, is that 90 per cent of the milk produced in New Zealand is essentially within the control of Fonterra, the large exporting entity out of New Zealand.

The second thing that's really interesting is that under the WTO rules, New Zealand also has guaranteed access into the European market for some dairy products because they have a country-specific TRQ. From our perspective, it's one thing to chirp away about wanting more access and open up competition, but if a nation has a country-specific TRQ into an affluent market like the EU, then they really don't face competition for that amount of access in that marketplace. Not to disrespect our Aussie or New Zealand friends, but at some level talk is a bit cheap. But for the antagonists, for people who are ideologically opposed to supply management, it makes great anecdotal evidence. We think it's pretty hollow.

Senator Enverga: Thank you for your presentations.

I was looking at the details about our import and export capacity and the supply management. Is there a possibility that we could increase the quota on your production so we don't have to import so much of the same turkey? Do we have the capacity, or will it be cost-effective?

Mr. Boyd: In terms of import access, under World Trade Organization rules, we're required to provide a minimum amount of access to the Canadian turkey market. That's a given. That is the result of a negotiation. In our case, it's about 5 million kilograms. That traces along. As our production increases, that number will start to increase as well. It's a given part of our supply. That number of millions of kilograms is a given part of our supply, so increasing quota to deal with that would be of no consequence. It would be of no use to do that.

In terms of increasing quota, we've had increases in the further processing sector because consumer tastes and preferences change over time, so our quota is really set as the significant part of the total supply. The guaranteed market access just adds to that. We gear our quota levels to the domestic requirements for a given year.

Senator Enverga: But with the opening up of new markets, would there be a need for increased quotas, or will your supply be just enough or just the capacity that you can handle?

Mr. Boyd: The increased market we're focused on is the domestic market, so we have the capacity to increase supply to meet those requirements.

As alluded to in previous presentations, our focus is really the domestic market. We look at international trade as a way to balance off our supply so that it meets the needs of the Canadian consumers and what they need from the Canadian farms and processing plants.

Mr. Horel: To add to that, first of all, it's a similar situation in all four poultry commodities. Phil talks for turkey, but in all four poultry commodities, we have commitments, either WTO or NAFTA, whichever one overrides. We have commitments, so we have to fulfill those commitments, and we do.

I sit as a member of an organization called the International Poultry Council. It's folks like me from 25 major poultry-producing countries in the world. Sometimes they look at me like I'm a lamb chop or a turkey on the table. They'd like to get more access. Having said that, though, they all, including the Brazilians and the Americans, say that the business relationship they have with Canada — they are exporting and we are importing — is the easiest one they have in the world. There's not a bunch of red tape and all that other stuff. Yes, it's a controlled amount, but it's simply a business transaction. I find a customer in Canada that's allowed to import. He imports. He pays the bill. I get paid right away. It's all good.

Supply management, and I know you've heard this before, operates on three pillars. Farmers have the responsibility to set the farm-gate price for poultry products, turkey included. There are of course tariff boundaries and an access that is set. But the third pillar is the responsibility, and we try to assist, to set the right amount of production for the domestic market. That's the system and that's what they're doing.

Senator Enverga: Mr. Horel, you mentioned that Canadian poultry processors, egg graders and hatcheries would not be competitive internationally if open access to the Canadian market was granted without a structural realignment of the system. Could you expand on that? What are we supposed to be doing?

Mr. Horel: Notwithstanding Phil's point, which I absolutely agree with, that the consumer price is not set by the farm-gate price, farm-gate prices in Canada, and I will qualify, are significantly higher than the major export market farm-gate prices are. I have to qualify that because our system is structured differently. If we use chicken in Canada and chicken in the United States as the example, chicken in Canada is produced by 2,000-and-some-odd farmers all around the country. They contribute to their local economies. They're independent business people. My members buy the chickens from those farmers at the price set by farmers, which is one of the three pillars.

In the United States, farms are operated by independent individuals, but the birds on a farm are owned by the company, the feed that goes into the birds is owned by the company, and management is all done by the company. The farmer supplies a house and labour. So there is no quoted wholesale or farm-gate price for chicken in the U.S. because it's the company's chicken, which just takes it off the farm that it contracted to.

The integrated nature of that versus the non-integrated nature of the Canadian system means it would have to be aligned. If the border opened tomorrow, my members would not be able to compete. I hope that answers your question. We could go for an hour on this.

Senator Oh: My question is for Mr. Boyd. In Canada, is there any control over distances between farms to be able to set up in case of disease outbreak?

Mr. Boyd: There is no control in terms of where farms can be located one to another. There may be provincial or municipal regulation that would have some bearing on where barns could be built in proximity to one another, but there's nothing at a national level that I'm aware of.

We see in a couple of parts of the country that obviously as it makes sense to have the supply of live birds reasonably close to the processing plant. In the Annapolis Valley in Nova Scotia, I'm guessing that the farthest farm from a processing plant would be two hours. Our chairman is from Nova Scotia and lives in the Annapolis Valley. I think he ships his birds 20 minutes from his farm to the new plant that was built and opened in the last 12 to 18 months. I think you would bump up against local regulation in terms of new construction at this time.

Mr. Horel: I don't want to connect these dots in such a way to suggest that because of supply management it is a better system in Canada. However, I will point out that in the American system or the Brazilian system, where they have complexes with millions of birds — pick a species, eggs for egg production, chickens and turkeys — that are all within close proximity. That works well from an economic basis. You standardize and keep everything close so costs are kept in line, but there are trade-offs.

In Canada, we have poultry producers of one sort or another in every province in Canada. I have members in every province in Canada. I'm not going to say that we set it up to spread it out and spread the risk, because that's not the case. That's just how it has evolved. It is an interesting point that we are much less densely concentrated than integrated systems in other countries.

Senator Oh: You mentioned that you sell a lot of white turkey meat in Canada. What do you do with the dark meat?

Mr. Horel: We do a few things. We are working, marketing and doing research and develop on products that can be made with dark meat. There is more dark meat product in grocery stores and restaurants than there used to be. Ground turkey is dark meat usually, but not always. We are working more on further processed products that use dark meat. But the North American preference for white meat still rules, so we are working on that. Yes, we are trying to upgrade by selling more products made with dark meat, but in the meantime, to balance the market, we export a lot of offcuts, which are predominantly dark meat such as drums and wings.

Senator Oh: Where do you export them?

Mr. Horel: To a number of countries, but the United States is our biggest export destination.

Mr. Boyd: We have noticed, as the Canadian population changes through immigration, a larger demand for dark meat. As people come from other parts of the world where dark meat is what they like to eat, we starting to see the change in preference. Boneless thigh meat is a great source of protein with great flavour. We're not exporting thigh meat anymore. It stopped about five to seven years ago because our domestic demand for that is changing.

Also interesting is that in 2008 when we had the recession, Canadians still wanted turkey meat but found that dark meat was a lower-priced protein than white meat, so we saw a nice uptick in dark-meat consumption. We're seeing that in backs and necks and other offcuts; it's not the pure muscle meat as it used to be.

Senator Beyak: Gentlemen, those were excellent presentations. You answered most of my questions on food safety.

For the benefit of those watching at home, could you tell me if there is new research into how and why these viruses occur and new initiatives to deal with them?

Mr. Mailloux: I'll pass that on to Phil. We do spend a great deal of money on research.

Mr. Boyd: Not long ago, the Canadian Poultry Research Council appeared before the committee, within the last 12 months or so. They provided honourable senators with an overview of poultry research in the country.

In our specific case, we have a broad set of priorities for research, as you can imagine. At the top of that is animal welfare research, which is very important, and biosecurity is very important.

Bugs occur, so the focus on biosecurity is how to mitigate the risk of that virus or infection occurring in turkey barns or other poultry houses. We look at that to determine what measures we can take on the farm to mitigate the risk of any outbreak. Sometimes things happen, as we're living now and as we've seen a couple of times since 2004.

It really comes down to biosecurity, which can come down to housing systems. Research is ongoing into those kinds of things in order to mitigate the risk of any significant outbreaks.

The Chair: I'd like you to answer a question briefly here or in writing to send to the committee. Does or will country-of-origin labelling impact your industry?

Mr. Horel: Certainly, I'll take the opportunity to follow up in writing, but off the top of my head, there can be a few effects. One is that Canada has sent the United States a list of products that we intend to or could possibly retaliate with. Poultry products are on that list. There certainly will be some impact on that.

Regarding country-of-origin labelling, my organization certainly supports the government's position. It is a red meat more than a poultry meat issue for sure, but we certainly support our colleagues in the red meat industry as well. The American response has been completely unfounded.

The Chair: If you have additional comments, like you said, we would appreciate, through the clerk, if you could send something in writing.

Thank you very much, witnesses.

Mr. Mailloux: I would just like to thank you again for having us here today. We appreciate the opportunity.

The Chair: If you feel that you want to add anything, please don't hesitate to do so in writing. Thank you.

Honourable senators, to our second panel of witnesses, we thank you for accepting our invitation. I've been informed by the clerk that Mr. Kuhl will make a presentation and then we will go to questions.

Mr. Kuhl, the floor is yours.

Keith Kuhl, President, Canadian Horticultural Council: Thank you very much. As indicated, my name is Keith Kuhl. I'm a potato farmer from Manitoba and currently the President of the Canadian Horticultural Council, which in the presentation we will refer to as the CHC.

Mr. Chairman and committee members, thank you for the opportunity to appear and speak to you within the context of your order of reference, dealing with international market access market priorities for the Canadian agriculture and agri-food sector.

The Canadian Horticultural Council represents producers from across Canada primarily involved in the production and packing of over 100 fruit and vegetable crops. Members include provincial and national horticultural commodity organizations, as well as allied and service organizations, provincial governments and individual producers. The CHC represents members on key issues such as crop protection, access to a consistent supply of farm labour, food safety and traceability, fair access to markets, research and innovation, and government programs to ensure more innovative, profitable and sustainable horticultural industry for future generations. Our mission is a commitment to ensuring that strong Canadian farms will continue to be able to provide safe, secure and healthy food for families in Canada and around the world.

The horticultural sector has been an engine for economic growth and can be a foundation for continuing job growth. It is a growing industry. The overall economic contribution of horticultural production in Canada has doubled in the last 25 years. Horticulture is one of Canada's largest agriculture production sectors. Today, farm-gate sales with additional processing, supply chain, and associated financial impacts create an economic footprint of over $11.4 billion in real GDP, according to a recent Conference Board of Canada report labeled: More than a healthy habit: Accessing the economic contribution of Canada's produce industry.

Horticulture is a vital contributor to the health and wellness of Canadians. Consuming fruits and vegetables as part of one's daily diet has been proven to be an essential part of an overall health care solution. Fruits and vegetables have natural attributes that have been shown to help prevent disease. The sector is a contributor to Canada's food security, the health of Canadians and is well positioned to share these attributes with consumers beyond our borders. We are strong proponents of a national fruit and vegetable nutrition policy for Canada. Canada is the only member of the G7 without a national nutrition policy.

With respect to your order of work, I am pleased to offer the following comments for your consideration.

Our industry priorities have been consistent for a number of years: financial protection for produce sellers as a means to achieve a competitive parity with our colleagues and competitors from the U.S. through the U.S. Perishable Agricultural Commodities Act, often referred to as PACA; market access; standardization of maximum residue levels and sanitary and phytosanitary issues as potential barriers to trade; invasive alien species; food safety and traceability. These are important issues for the horticulture industry. Our efforts in these areas have been significant but, as is often the case, progress is difficult to measure.

The Canada-U.S. Regulatory Cooperation Council — also known as the RCC — agreement provided tremendous opportunity to advance Canadian horticultural trade issues with both the Canadian and U.S. governments. For horticulture, the long-standing need to establish a PACA-like mechanism in Canada to address financial risk mitigation for the sale of fresh fruit and vegetables remains a top priority. The recent withdrawal by the U.S. of preferential status for Canada within this framework is a significant blow to horticulture and is an indication for horticulture that Canada is not living up to the commitments that were contemplated within the framework of the RCC.

Some progress has been made in the area of fresh fruit and vegetable unified licensing regimes, and this is aligned with the horticulture sector's long-term vision when the dispute resolution cooperation was established. The shift to single licence by the CFIA for produce sellers with a mandatory membership in the DRC will greatly benefit the produce industry in that it will ensure that we will have the tools needed to deal with slow pay and no pay.

The final piece of the puzzle, and the most important, is to allow us to get paid when buyers become insolvent. We must find a way to accomplish this, and anything short of Canadian fruit and vegetable growers and shippers having the same avenues of recourse available to them in Canada as in the U.S. is simply unacceptable. Furthermore, any move to implement security requirements in the form of insurance, bonding, et cetera, as a solution is not acceptable.

To us, and certainly our U.S. competitors and counterparts, despite horticulture's deep concern and frustration that this issue remains unresolved, we would like to recognize the efforts of so many to find a path to success on this, as they are unprecedented, and those involved deserve our collective thanks for their persistence and commitment.

Canada has achieved recent success in market access for Canadian-grown cherries and blueberries to new markets such as China. There are opportunities for greenhouse vegetable products in ASEAN countries — the Association of Southeast Asian Nations. While volumes remain relatively small at present, the opportunity for increased volumes in the future is promising. These are positive developments, and we look forward to other market access success for our crops. It takes a dedicated team to open new markets, and it is imperative to ensure that all of the necessary resources to do so are in place.

Free trade negotiations continue with the conclusion of the Canada-Europe trade agreement and continue to progress with the Trans-Pacific Partnership. It is often difficult for horticulture to find its niche in such agreements as the focus tends to be on other areas of business overall, as well as other sectors of agriculture. We will continue to engage in discussion and look for opportunities in these markets.

There are a number of areas where we see and experience obstacles. Before new markets can be assessed, in most cases a phytosanitary agreement between the plant protection organization of the importing country and the Canadian Food Inspection Agency must be completed to establish the plant health requirements that must be met for exported Canadian produce. Phytosanitary requirements can act as effective barriers to trade. Phytosanitary requirements are becoming increasingly onerous at a time when resources are diminishing for CFIA. As an example, seed potato exports to Mexico declined from over 6 million in 2005-06 to zero in 2013-14 as Canadian exporters could no longer tolerate the unpredictability and expense associated with meeting import requirements for that country. My farm was part of that loss.

The increasing number of trade agreements and the general expansion of export markets call for enhanced participation of the CFIA to support horticultural producers. Ensuring alignment of sanitary and phytosanitary requirements with trading nations is needed if Canada is to take advantage of these agreements. Further, and perhaps more importantly, once these agreements are established, ensuring appropriate adherence to the established requirements by foreign jurisdictions is a natural extension that Canadian producers must be able to rely upon but is often lacking.

There is often little regard to adequate effort to maintain and enhance existing markets, such as in the United States. We must never forget that the U.S. is and probably will always be our largest trading partner.

Access to technology: There continues to be disparity between crop protection products available to our U.S. counterparts. Products that are not approved within Canada, although readily approved in the U.S. and, in many cases, if so approved, at lower pricing in the U.S. on certain crop protection products, creates an unlevel playing field for Canadian producers.

Canadian growers are extremely concerned with the recent reevaluation decisions published by the PMRA that propose to discontinue several older pesticides that are vital to the management of pest resistance in horticultural crops. It is important to note that the proposed discontinuation of most of these pesticides in Canada is contrary to the recent re-registration decisions by the U.S. EPA that fully support continued use by growers in the U.S., further widening the competitive gap.

Adding to this disparity is the fact that horticultural crops produced south of the border or elsewhere that have used crop protection products not readily available or registered in Canada are imported nonetheless, adding additional disadvantages for domestic producers.

Access to a reliable and consistent workforce: Labour constitutes a major portion of producer expenses, especially in horticulture. Labour accounts for an average of over 33 per cent of the cost of production for fruit farmers, 31 per cent of vegetable farming costs and nearly 20 per cent for potato farmers. Compared to the Canadian average of just below 10 per cent for all agricultural operations combined, labour is most definitely a key horticultural success factor.

For horticulture, the key is access to a reliable source of labour. History has shown us that foreign labour is paramount in this equation, as Canadians will not, do not and cannot be forced to fulfill the domestic demand. The current Seasonal Agriculture Worker Program is a long-standing achievement in this regard and a program well worth maintaining.

This is supplemented by the agriculture stream of the Temporary Foreign Worker Program that fulfills needs for agricultural labour where no bilateral agreements exist with foreign jurisdictions under the Seasonal Agricultural Worker Program. In the recent past, as you well know, the Temporary Foreign Worker Program has seen several challenges and changes that, while initially unintended, have affected the flow of agricultural workers through the agricultural stream. In fact, one example of this situation was seen this past production season in Quebec, where a lack of available workers resulted in millions of dollars of fruits and vegetables left to rot on the trees and in the fields.

Recognition of horticulture's need through the Temporary Foreign Worker Program is required, and this must be supported by available resources within Citizenship and Immigration Canada to facilitate the issuance of required documentation, including more flexible work permits that would allow a specific individual to be transferred from one farm to another within Canada's short harvest season.

Facilitating producer access to foreign labour resources in a timely and efficient manner, as well as ensuring that Canada remains an attractive alternative for foreign nationals, is a must for both industry and government.

I will now go on to food diversity, food security and traceability. Canada is recognized for having one of, if not, the safest food safety regimes in the world. CanadaGAP, internationally recognized for on-farm food safety for Canadian-grown fruit and vegetables, is a Canada-made collaborative success story. We must ensure that imports are required to meet standards which we must meet to engage in commerce domestically.

Biosecurity: Growers in the CFA are working cooperatively to develop on-farm biosecurity standards and producer guides to assist growers to develop and implement biosecurity management practices designed to prevent, control and contain pests and disease movement onto and spread within and off the farms. Biosecurity standards have been completed for potatoes and are under development for the fruit and tree nut sectors, as well as greenhouse, nursery and flora culture sectors. The Canadian Horticultural Council is a partner with the CFA in these initiatives, and the CHC members are integral contributors.

Canada has an excellent reputation globally thanks to quality products that are second to none and in demand. There are growth opportunities for horticulture in Canada and beyond.

Canada is an efficient but high-cost producer and there are a number of areas where policy changes would enhance profitability. Much has been said and studied, over time, relative to timely access to new crop protective technology, as well as the costs.

The June 2014 Ontario Farm Input Monitoring Project, done through the University of Guelph, reported that for 30 comparable pesticide products, prices were higher in Ontario as compared to neighbouring U.S. states. Prices for 27 products were higher by a range of 0.4 to 280 per cent. For example, Bravo, a common fungicide used in horticulture, was priced 33.5 per cent higher in Ontario. By comparison, the cost of diesel fuel was 13 per cent higher in Ontario.

In closing, Mr. Chairman, the horticultural sector includes many family farms that have continued to invest their returns back into their businesses. This commitment has allowed Canada to increase sales into foreign markets. Costs of production continue to increase and all too often it is the margins of the producer that get reduced, as it is difficult to increase prices. We must ensure that our producers continue to be in a position to compete in the global marketplace.

Thank you very much.

The Chair: Mr. Kuhl, well done. Thank you very much.

Senator Merchant: Thank you very much to our two guests. You mentioned the lack of workers for your farms. This Express Entry program that's now being implemented by the government, will that be helpful to you?

Mr. Kuhl: Are you referring to the headline in The Globe and Mail yesterday?

Senator Merchant: Yes.

Mr. Kuhl: I read that with great interest, but as I read through it, I noted that, if I'm right, it's specifically geared toward highly skilled workers. While we would consider the people that we're hiring highly skilled, I doubt they would fall within the criteria of government under "highly skilled.''

Many of the jobs that we're looking to fill are often referred to as stoop labour. When you're growing crops like cauliflower, broccoli, lettuce, cabbage, melons or strawberries, the people who are employed often end up working bent over all day long. That's why it's referred to as stoop labour. There have often been suggestions that we should hire Canadians to do these jobs, but the government has never put in place the requirement that Canadians must do these jobs. So the only alternative for us is to use foreign workers.

The foreign workers come in and do extremely well. If you look and listen to the success stories for many of these foreign workers, they come in year after year. They go back and their standard of living in their home country is enhanced. Their children receive an education and proper health care. In many cases, those children end up going to university, becoming teachers, doctors and leaders within their country.

Senator Merchant: Most of these workers would come, then, from the Americas?

Mr. Kuhl: It depends. The Seasonal Agricultural Worker Program has a bilateral agreement between the Caribbean countries and Mexico. The agricultural stream for the Temporary Foreign Worker Program does not have a bilateral agreement, so a lot of those workers end up coming from Guatemala, Honduras, Philippines and other countries.

Senator Merchant: You said that Canada needs a policy regarding health benefits — I forgot how you put it: a nutrition program. We all buy into the fact that fruits and vegetables are very good for you, nutritious and good for the waistline. But they're expensive. Not everybody can afford to buy a lot of fruits and vegetables. I live in Western Canada, in Saskatchewan, and most of the vegetables that I see in the supermarket are not Canadian; they come from somewhere else. All the fruits and vegetables that I see in the supermarket are uniform and the same size. Everything has to be so perfect. I'm sure that there are some fruits and vegetables that — why can't they be marketed in some way that may not fit this beauty standard, but that are equally as nutritious? Maybe they could be marketed less expensively. I don't know if they can. What do you do with misshapen tomatoes or cucumbers?

Mr. Kuhl: It is an excellent question. I'll use a home example. As indicated earlier, I'm a potato farmer from Manitoba, so I'm right next door to you. I assure you that the potatoes that we consume in Canada consistently, for most of the year, come from Canada.

In Manitoba, we have a cooperative marketing agreement between the farms. We market through a company called Peak of the Market. The producers provide product to Peak of the Market and they take off-product, or product that's not acceptable to our customer — the Loblaws, Safeway, Sobeys — and provides to organizations like Winnipeg Harvest, other food bank programs, and to the soup kitchens in Winnipeg. Through that venue, we end up providing most of the fresh fruits and vegetables that are needed to continue to drive the food banks in Manitoba. We've recently opened a distribution centre in Calgary and we're moving to take similar actions in Calgary. This is only one example.

As you look through our industry, you will find many examples where our industry is very active in trying to ensure that food products are provided. I believe the farmers at the Ontario Fruit & Vegetable Growers Association have an initiative that they started a number of years ago, providing fresh fruits and vegetables into northern Quebec. They're looking for governments to partner with them. As we've heard on the news in recent days, access to fresh fruits and vegetables is a significant issue in our northern communities. We know that if we were to provide better nutrition to these communities, our health care costs in those communities would go down.

There is tremendous incentive for government to work together with our industry to ensure that the consumption of fresh fruits and vegetables in Canada goes up. We're excited about it. We continue to work with Health Canada and Agriculture and Agri-Food Canada on this, encouraging them to buy in and become partners with us.

Senator Merchant: Thank you, and good luck.

Senator Ogilvie: I have two questions related to the documentation we received produced by the Canadian Horticultural Council.

Mr. Kuhl, the first one deals with an item you raised that is exceedingly important: the value of the farm cash receipts that determine whether farms will be successful on an ongoing basis. This document, published in the fall of 2013, indicates that the value of exports in 2012 for vegetables — all my questions will be specifically with regard to vegetables as defined by your documents — was $3.16 billion to the 12 top export countries. That would be most of it. I assume this would be considered the wholesale price of vegetables.

Can you tell me what the wholesale value of vegetables in that year was in the domestic market, even approximately? One way to approximate it would be the percentage of your vegetable crop output exported.

Mr. Kuhl: Do you have any information on this?

David Jones, Manager, Potato Industry Coordination, Canadian Horticultural Council: For example, the farm value of potatoes is about $1.1 billion annually for fresh product produced.

Senator Ogilvie: Is that at the wholesale level?

Mr. Jones: No, at the farm gate. The exports we trade for potatoes are primarily to the U.S.

Senator Ogilvie: I'm going right to the next question, because I'm having real trouble with these numbers. You indicated that potatoes alone were worth $1.1 billion, approximately in 2012. Your document says that the total farm cash receipts value for all provinces was $1.1 billion.

Mr. Kuhl: I haven't seen a copy of the document, senator, and I apologize for that. The numbers are definitely incorrect. As Mr. Jones indicated, for potatoes it is $1.1 billion. I know that the greenhouse sector is the second largest sector and is just approaching $1 billion in total farm-gate value.

Senator Ogilvie: I find the numbers surprising, especially since we have another document from you produced in 2014 covering the same periods of time. For example, in your fall 2013 number for Nova Scotia, farm cash receipts in the vegetable category were $21.3 million. Yet, the larger document says that for the same period of time total vegetable farm cash receipts were $31.6 million. Those numbers are reasonably close, but $10 million is still a lot of money. I guess I'm not going to get the answer to the questions; the numbers seem quite different.

Mr. Kuhl, I'll just leave it there. I was trying to get a sense of the markup value from the producer, the exit value from the farm, and the farm cash receipt relative to the wholesale level. While I can't get an accurate estimate here, it looks like it's a minimum of three times wholesale level compared to the farm exit value. Since this is only a part of the total value, the wholesale level is probably several times more. There is an enormous value added to farm products from the time they leave the farm to the time they get to the wholesale level. This has come up many times in many discussions: How does the farmer get a higher percentage of that?

Mr. Kuhl: Excellent question. It's a challenge we continue to work on.

Of course, most often production goes through at least two steps between the farm and the consumer: a wholesaler and then a retailer. The assumption in simple math is that every time the produce moves, the person handling it will assume a 35 per cent margin.

Senator Ogilvie: I know how that increases fairly rapidly.

Mr. Kuhl: Yes. We have to keep in mind that for the producer, the first dollar in to the last dollar out is often a two-year span. For the wholesaler and the retailer, it's a matter of days or weeks.

We will provide accurate information back to you on those questions.

Senator Ogilvie: I would welcome that.

The Chair: Mr. Kuhl, would you please provide the answer to the questions asked this morning? You can go through the clerk of the committee to provide that clarity.

Mr. Kuhl: Absolutely.

The Chair: Thank you.

Senator Tardif: I very much like your publication. It's very interesting and looks good — very appealing.

I read your message, Mr. Kuhl, which you alluded to in your presentation. It appears that in April 2013, Canada and the United States made an agreement to work together to align their approaches to providing financial protection for fresh produce sellers. It seems like things have not progressed in the direction that you would like. You've indicated that you would like Canada to have a system comparable to the American Perishable Agricultural Commodities Act. What's the problem? How much progress are we making? What recommendations do you have?

Mr. Kuhl: The Perishable Agricultural Commodities Act was implemented by the U.S. in the 1930s. It was implemented to ensure that producers of perishable products, such as lettuces, tomatoes, and other products that did not last long on the shelf, would receive payment. It initially dealt with issues of slow pay or no pay. In 1984, a component was added that gave the producers and sellers of produce super priority, in the form of a trust, in the case of bankruptcy and insolvency.

When a company goes bankrupt or becomes insolvent, the people who have provided or sold products to that company have the right to go to that company and demand to take back the inventory they sold to that company. In the case of horticultural crops, lettuce and other perishable horticultural crops will not remain in the business as the turnover is very quick; so they're sold out of the business.

The change in 1984 said that the inventory will be held within trust, within the accounts receivable, of the company that has become bankrupt or insolvent. That means the producer had the right to go to court, and the court had the right to demand of the receiver that the producer get priority on the receivables due from the sale of that produce.

The beauty of this system is that there is no bureaucracy, no administration, and no fund of money needed because everything is administered and done through the courts. The payments come from the accounts receivable of the company that's bankrupt or insolvent.

We've worked aggressively on this over the past years with Agriculture and Agri-Food Canada, Industry Canada and other government departments. We've looked at insurance; we've looked at bonding; we've looked at other solutions. All of the other solutions require either huge input of cash in order to get it going or will inevitably end up having a huge bureaucracy and huge administrative cost. So we continue to look for a solution that would give us something similar to what the U.S. Perishable Agricultural Commodities Act gave us.

Senator Tardif: So Canada does not have something similar?

Mr. Kuhl: We do not.

Senator Tardif: What is the financial protection, then, afforded to the producers in Canada?

Mr. Kuhl: In June 2015, when the Safe Food for Canadians Act is put into law, the laws of Canada will change and we will move to all produce buyers having to have a licence through the CFIA. As part of that licence, there will be a requirement that they also have a membership in the DRC, the Dispute Resolution Corporation.

The Dispute Resolution Corporation is a jointly governed and run organization with agreements between Canada, the U.S. and Mexico. The DRC has the ability to ensure that "slow pay and no pay'' is dealt with, so the part that was put in place in the U.S. in 1930 can be done within the DRC. What the DRC cannot do is they cannot allow us to be paid in the case of bankruptcy and insolvency.

So, currently, we continue to have better protection for payment in the U.S. marketplace than we do in our home market.

Senator Tardif: The U.S. department now has revoked Canadian access to the payment protection system to produce supplies under this Perishable Agricultural Commodities Act. How will this loss affect Canadian fruit and vegetable producers?

Mr. Kuhl: When the change was made in 1984, the opportunity for people to collect, in the case of bankruptcy and insolvency, was offered to all trading partners, but the trading partners that were exporting into the U.S. were treated differently than the U.S. producers. The U.S. decided that at that point they would treat a Canadian producer exactly the same as they would a U.S. producer.

So, in the past, if a buyer was not paying, we had the ability to call the buyer and tell them, "If you do not pay, we will file a claim under PACA.'' As soon as we file that claim under PACA, it hits the courts, and if they're financially unstable, they will probably be forced into bankruptcy. Just that phone call would often result in the company paying.

What the U.S. did — and I believe it was October 1 of this year — was they said, "We will now start treating Canada exactly the same as any other country.'' So if I now want to file a claim under PACA, in the case of bankruptcy and insolvency — and I'll just use an example of a claim of $50,000 — in order to file that claim with PACA, I now have to post a bond equal to double the amount of the claim. If I'm looking at a $50,000 claim, I have to now post a $100,000 bond. In other words, I have the $50,000 plus the $100,000 tied up. Many of our producers continue to have sales of under $100,000. For many of our producers, at that point they just walk away. It's easier for them to leave it. The burden that we put onto the small family operations is tremendous.

Senator Tardif: I could go on, Mr. Chair, but I will leave it there.

Mr. Kuhl: I'd love to talk off-line any time.

The Chair: We have approximately five minutes left. I'll ask the senators to be direct; and to the witnesses, to shorten the answer. If you want to add, please feel free to send us in writing additional information.


Senator Dagenais: Earlier you spoke about foreign workers. I sympathize with you, because I have friends who own a vegetable farm and who have trouble finding workers in Quebec. People on welfare sometimes go work there for two or three weeks to show that they are looking for work. But after two or three weeks, they leave in July right in the middle of the harvest period. This makes it difficult for producers. They need to call upon foreign workers. In Quebec, the unemployment rate stands at 8 per cent. In Canada, it stands at 6.5 per cent. Despite this, we still need foreign workers. It might be possible to implement programs to encourage them to go work for you during the summer. This is a difficult situation, and it does me good to speak of it.

Canada's brand image is a trade strategy aiming to publicize your food and agricultural products, among others, for export. In your opinion, has the Canada brand improved sales of your products? Do you believe that a follow-up program in your sector would increase your competitiveness on the international markets?


Mr. Kuhl: I think the food safety program that we put into place, often referred to as CanadaGAP, has been world renowned and has allowed us to become a leader in food safety within the world. We really appreciate the cooperative approach taken between industry and government in creating that document.

I believe that Canada continues to be seen as a supplier of quality product in the world marketplace, and certainly through the Canada brand we want to continue that. Again, this is a partnership relationship between industry and government.

On your comments on labour, as an industry, if we can find ways to encourage Canadians to take those positions, we are more than happy to work with government in doing that. We have to recognize, however, that when the crops are ready to be harvested, they have to be harvested the day they're ready, and we cannot allow for people to choose which day they will or will not come to work. We would be happy to engage further on either one of these topics.

Senator Unger: My question refers, Mr. Kuhl, to what you were speaking about with Senator Tardif. Without PACA access, Canadian companies — and you explained that. My first question is this: Why did the U.S. do that? Second, what is it exactly that Canada needs to do to level this playing field?

Mr. Kuhl: The agriculture in the U.S. I think has often been a higher priority than it has been in Canada and has a greater ability to influence the legislative agenda in the U.S. Having said that, we certainly continue to foster a very good relationship with government, and we work aggressively with Agriculture and Agri-Food Canada.

The reason that the U.S. put this system in place is that they realized that access to fresh fruits and vegetables is imperative for food security within the U.S.; and they wanted to recognize the fact that for fresh fruits and vegetables it's more difficult to ensure they get paid than it is if you're selling grains or corn or, very often, meat products, which can be frozen, just due to the nature of the perishability of that product. So they said because fresh fruits and vegetables is separate and unique, we have to provide separate and unique legislation for them.

I will not go into detail, but we are in the process and have provided a solution to the Canadian government. We will continue to work with the Canadian government on that solution. That would allow for us to have the same success in Canada that we did in the U.S. As soon as I'm done here, I'm going right next door to a meeting with the PMO to discuss that further.

Senator Unger: Would you be able to provide the committee with more information about this?

Mr. Kuhl: I certainly will. As we continue to work with Agriculture and Agri-Food Canada, Industry Canada and the PMO on this, we will continue to provide additional information going forward.

The Chair: Mr. Kuhl and Mr. Jones, thank you very much. It was very informative. If you feel that you want to add anything, please don't hesitate to do so through the clerk.

(The committee adjourned.)