Proceedings of the Standing Senate Committee on
Agriculture and Forestry
Issue 18 - Evidence
OTTAWA, Tuesday, September 30, 2003
The Standing Senate Committee on Agriculture and Forestry met this day at
6:25 p.m. to examine the issues related to the development and domestic and
international marketing of value-added agricultural, agri-food and forest
Senator Jack Wiebe (Deputy Chairman) in the Chair.
The Deputy Chairman: Honourable senators, we have invited officials
from the Department of Agriculture and Agri-Food Canada to discuss value-added
products. We will hear from Mr. Michael Presley first.
Mr. Michael Presley, Director General, Food Bureau, Food Safety and
Quality Team, Agriculture and Agri-Food Canada: It is a pleasure to be
invited to discuss with you the issue of adding value to farm production in
Canada. My title is Director General of the Food Value Chain Bureau, a recently
changed title. Within the scope of this recently created position the bureau
manages divisions within our department that provide market and industry
services to the agriculture industry, including grains and oilseeds,
horticulture, special crops, red meat, dairy and poultry industries through to
the food industry, including food manufacturers, retailers and food service
The idea behind the bureau was to establish programs and services that look
at the industry from a ``gate-to-plate'' perspective, and the opportunities for
synergies that could grow the entire Canadian industry.
I intend to start with a quick reference to some of the successes that have
been achieved in the agriculture and agri- food industry in adding value to the
industry and creating wealth in rural Canada.
I will note some of the trends in the structure of the industry that affect
how value is shared throughout the food chain, namely the concentration that has
occurred within the food industry.
I will follow that with a brief discussion of the changing consumer in
Canada, what they value and how that affects the markets that farmers,
manufacturers and food distributor's serve.
I will point out some of the successes and lessons learned regarding farm
businesses that have ventured into further processing enterprises.
I will close with a summary of the federal and provincial governments'
agricultural policy framework, and the strategies under it that support the
industry's efforts to create value on the farm and in the firm, which can
generate premiums in the market at home and abroad.
Agriculture and Agrifood Canada has worked in partnership with farm
organizations for many years to help producers realize opportunities to add
value to their operations. Historically, these efforts have focused on
diversification — helping to bring new crop and livestock systems into
Canadian agriculture. The department continually adapted its mix of programs to
meet new market realities and structural changes within the sector.
The creation of the canola industry in the 1960s and 1970s is perhaps the
best-known example of where the department's research and market development
programs helped to bring a major new crop into commercial production. It was a
development that also brought a significant new processing industry to Western
Canada. More than two decades of sustained effort was required to bring canola
from its origins as a minor crop grown for an industrial-quality oil to where it
is a billion-dollar crop that sets new standards in terms of quality in the
world's edible oils markets.
While canola is the outstanding example of what can be achieved, many other
examples can also be cited where a considered effort by the department and its
partners helped realize new value-added opportunities for producers. These
include: breeding and market promotion of special crops, especially pulses, such
as, field peas, lentils and chickpeas; meat quality improvement through genetics
and feeding practices, for example, beef and pork, to better adapt these product
to premium markets; breeding food-grade soybean varieties to complement
traditional feed-grade varieties and to supply Asian and domestic markets for
soy-based foods, for example, tofu and soy milk; promoting the potential of
high-value components derived from agricultural raw materials, for example,
nutriceuticals, drugs, enzymes, dietary supplements and cosmetics; and also
developing industrial fibre crops, like flax and hemp, and working with
manufacturers to develop uses for agricultural residues, such as cereal straw.
Besides assisting farmers to assess value-adding opportunities directly, many
of these efforts have stimulated subsequent investment in value-added
processing, which has provided for more jobs in rural Canada.
Traditionally, the Canadian food processing industry has provided a major
market for Canada's agricultural production. The structure of that processing
and distribution industry is changing, though, and the changes can have
implications for primary producers and their strategies to add value to their
The Canadian food processing industry evolved primarily to serve the domestic
market, and enjoyed significant tariff protection until the early 1980s when a
series of bilateral and multilateral trade agreements effectively ended tariff
protection for much of the industry.
Over the past 15 years, the industry has been marked by rationalization as
companies closed older, smaller plants across the country. The industry has also
seen marked consolidation as mergers and acquisitions significantly reduced the
number of active companies, particularly the middle range of firms. Companies
are now generally either large national players or small regionally-based
Similar trends have affected the food-retailing and food-service sectors. The
major difference is that market power has shifted increasingly toward this end
of the value chain. As a consequence, food processors have experienced
significant pressures on their margins while, at the same time, having to meet
increasingly stringent quality in terms of trade standards established by their
large retail and food-service customers.
In spite of significant barriers to entry caused by consolidation amongst the
larger firms, there continues to be opportunity for small entrepreneurs in the
food and beverage industry, especially if their products are innovative, of high
quality, and capable of being marketed directly to consumers. The department's
regional operations have often worked closely with individuals and groups that
developed such products, often based on a regional specialty.
An area of some promise for agricultural products outside the food industry
may be the industrial market. Growing interest in producing energy, fuels,
chemicals and building materials from renewable biomass may result in
significant investment and growth in what is sometimes characterized as the
``bio-products industry.'' Several Canadian companies are developing the
enabling technologies that are expected to make biomass-based businesses viable
in the future. A number of pilot plants are in place or in the process of being
Of course, if one wants to understand how to generate value in the
agriculture and food businesses, one needs to know what the customer wants.
Therefore, it is important to consider briefly the changing needs of the
consumer and what ``value-added'' means to them.
The domestic market for food has undergone significant change in the recent
past. Market demand for food is tightly linked to population size, growth rate,
and ethnic profile, and the convergence of these profiles has produced a market
growth of between 2 per cent and 3 per cent per year on a value basis. Some of
the trends that affect this marketing are the following: Disposable income is
growing at a slower rate over the last 20 years than it did in the 1960s and
1970s. Increased food spending is closely linked to what the consumer values,
such as convenience and improved nutrition. Population growth is only 1 per cent
annually. That is still higher than some other G7 countries but clearly not a
rapidly growing market. Our population is aging, which implies a lower overall
demand for food for an ever-increasing part of that market. The market is also
becoming more segmented, as consumers increasingly prefer foods that match their
lifestyles and ethnic backgrounds.
In short, the domestic market is and will continue to be extremely
competitive. New companies hoping to sell conventional products into this
increasingly tough market face major hurdles in achieving success. However,
market segmentation is clearly opening up opportunities for large numbers of
specialty products, especially those that appeal to health-conscious or
lifestyle-conscious consumers. Areas of opportunity include organic products,
and other forms of specific attribute products, for example, GM-free products,
products that meet animal-welfare standards, functional foods, nutritional
supplements and medicinal herbs.
The department works closely with the industry to help set standards for
these new market segments and to assist in the development of marketing
initiatives. The growth of these new value-chains provides outlets for
entrepreneurs across rural Canada and we have seen a wave of interest in
starting up new production at both the primary and the processing levels.
Examples include: specialty bakeries that produce organic and specialty breads
for people with gluten sensitivities, production of sweeteners from novel crops
such as stevia, and the development of herbal drinks from raspberries.
Farmers have had success in moving up the value-creation chain through a
variety of individual and cooperatively owned enterprises. Cooperatives are
another example of where farmer-owned enterprises have been successful along the
entire supply chain. Some specific examples of farmer cooperatives involved in
value-added processing include la coopérative Fédéré de Québec and its 100
local co-ops, and Agropur. Both of these cooperatives are dynamic and
influential industry players. These two cooperatives, through their value-added
activities, provide farmers with economic benefits.
Farmers also gain by collectively channelling their investments through a
cooperative in order to form strategic alliances with key industry stakeholders.
The Manitoba Egg Producers Co-operative was formed by a group of egg producers
who decided to invest in value-added activities. In 1999, the co-operative
entered into a three-way partnership with two other egg industry leaders. This
partnership is allowing farmers to be more influential in the development of the
industry, including science and bio-products.
Rural and farm communities often have a common purpose. The cooperative form
of enterprise can bring farmers and rural citizens together to achieve common
goals. A recent example is the Ontario-based Mornington Heritage Cheese and
Dairy Cooperative in Ontario. That cooperative was established in order to take
over a century-old cheese factory, and involved an initiative of a small group
of rural non-farming residents and farmers aimed at keeping local control of a
local enterprise and maintaining employment for its residents. It attracted 25
producer-members and 60 community investors. The cooperative produces 12
Unfortunately, other efforts to move up the value-chain by individual farmers
and groups of farmers have not always been as successful. Some of these ventures
have been under-capitalized or lacked experienced management skills, while
others were simply caught up in changing market or financial conditions which
they could not overcome. Although some of the ventures have survived after
restructuring the restructuring has sometimes meant the loss of control or
equity of the original founder.
With these sorts of cases in mind, the department and its portfolio partners
have endeavoured to help farmers pursue value-added opportunities by, for
example, providing advice, background market studies, and support for
Programs such as the Canadian Adaptation in Rural Development program, or
CARD, have been particularly useful in helping farmers explore adaptation
opportunities. The Co-operatives Secretariat, Farm Credit Canada, and the
department's matching-investment initiative, provide further support for
instances where innovative product development needs research support.
For many years the department has been engaged in furnishing programs and
services to industry to help realize greater value-added opportunities. However,
the programs and services were not as integrated as they needed to be to fully
serve the industry and help it remain competitive in the domestic and global
markets. With that in mind we developed, through federal and provincial
governments, the Agricultural Policy Framework, APF, to establish an integrated
approach to working with the industry. It is a framework of policies and
programs with an overall thrust to help farmers maximize value by emphasizing
and strengthening the fundamental quality attributes of their products. As our
farmers must compete globally for markets, any verifiable quality-attribute
advantage will help to differentiate Canadian products from those of
competitors. These product attributes include increased food safety and improved
quality, as well as non-traditional attributes relating to meeting higher
In selected markets, such differentiation may earn producers a premium. A
well-known example is the case of Warburtons, a U.K. firm that contracts for
significant quantities of western Canadian wheat at a premium price.
Under the APF, the department is developing programs to support the
validation of these core product-quality attributes. These programs include
support for on-farm HACCP, farm environmental plans, tracking and tracing
systems, and the development of national standards for wine, whiskey blends,
organic products, and voluntary GM labelling.
The APF approach has conducted buyer surveys at food companies, to determine
how they select their suppliers. We have seen that, over the last five years,
food safety is their number-one consideration when choosing their suppliers.
These requirements will get tougher in the next five years.
Suppliers will also have to meet quality assurance criteria, perform
electronic data transfers easily and deliver ``just in time.'' Our surveys
indicate that buyers are increasingly focusing on environmentally sensitive
production practices, animal welfare standards and the ability of suppliers to
supply organic products or non-genetically-engineered products. Over the next
five years, most companies expect their requirements in these areas will grow
and suppliers who can meet them will likely do well.
That APF places emphasis on putting HACCP-like systems development on the
farm, supports environmental farm plan development and the establishment of
national standards and certification systems for quality assurance for such
things as organic production, genetically engineered food labelling and wine
If we can work with the industry to develop and implement national standards
in these areas, Canadian producers will be able to differentiate themselves from
other suppliers elsewhere in the world and increase their sales in both the
domestic and foreign markets.
Finally, we have established industry value-chain specific round tables to
create venues where producers, processors, retailers and others within the value
chains are able to develop strategies to succeed in markets both in Canada and
internationally. These value-chain round tables have been established for beef,
pork, cereals, grains, oilseeds, special crops, fish and seafood, horticulture,
dairy and poultry. The round tables and have proved to be extremely useful to
both industry and government, and are in keeping with our APF vision to
collaborate across and within value chains to create more value added for
Senator Gustafson: Value-added agriculture is certainly something that
is necessary for our farmers to survive. We are well aware of the difficulties
that the farm community is going through in trying to meet their input costs,
and so on. I want to make it clear that they are in a very serious situation. It
seems that a lot of farmers feel as though they are drowning in the problems
they are facing and do not have solutions to those problems.
When it comes to value-added I have one concern. You mentioned that companies
are getting bigger. I have a concern that situation is snowballing out of the
grassroots. I am not sure we understand how far this is going. Fertilizer
companies, spray companies, chemical companies, and so on, are taking farmers
into different programs. It seems that every second farmer I talk to is in a
My neighbour is in a program that supplies him with seed, yet he cannot
reseed himself, even if he has his own seed. In addition, the program takes so
much an acre for the seed and a guarantee of 15 per cent of his net income. As
you know, farmers are not able to put up the money and banks will not give them
money for the input costs, and as a result the large companies take large
amounts from the farmers. Many farmers are looking at these options as a way to
finance their operations, but I see it as almost a sell-out to big industry and
to multinational corporations. This could change snowball and change the face of
Canadian agriculture forever.
Can you fill us in on what has happened for the dehydrators? They had a major
market to some of the eastern countries, specifically Japan. Do you have any
information on how they are doing?
Mr. Presley: There were two parts to your question. The first was a
discussion of the concentration issues and their impact; the second part was
specific to the market opportunities for dehydration. I will start with a
comment with respect to consolidation.
There is no question that there has been significant concentration,
particularly at the upper end of the value-chain the retail sector, for example,
the top five retail companies in this country represent 60 per cent of the
market. That is a very significant concentration.
I was at a conference recently where I saw that, compared to some other
retail sectors there is more room for concentration. In shoe manufacturing, for
example, there is still more concentration than in the food industry. There are
different views as to whether we have reached the level of concentration that we
will have for a few years or if there is room for more. There are limits that
the Competition Act places on how much market share one company can have.
There is a trickle down effect because we have concentration leverage at the
top of the retail sector, and as a result, food manufacturers have further
concentrated to respond to that buyer requirement. They have had to rationalize
and cut costs and become streamlined to do business in the present environment.
It is a tough industry and, as I mentioned before, the Canadian consumer-base
is not growing very fast. A 1 per cent growth rate per year makes it a
competitive industry within which to sell.
To put a context on it with respect to the level of concentration that we
have in the country we are less concentrated in Canada than in some parts of
Europe, but more concentrated than the United States at the retail sector.
However, the United States is moving in this direction as well.
With respect to markets for dehydrated hay, I cannot give you a lot of
specifics. We have a market development strategy that works with that industry.
I vaguely remember some of the elements of that strategy. It was new to me at
the time and it was before I took on my responsibilities, which includes this
area. I might be able to provide more information after on prospects and
long-term plans for pursuing market opportunities in Japan in particular.
Senator Gustafson: There again, I think many of the dehydrators had
agreements with individual farmers who were having trouble. They did the work
for the hydrators. They baled the feed and delivered it and did whatever was
necessary from the farming aspect, but then the dehydrators got the profit out
of it. Some of that is posing problems because they are into long-term contracts
that they may not be able to get out of.
I am concerned that farmers may become serfs on their own farm. Are we as
Canadians, going to accept that, or is it already done? Is it snowballing so
fast that we are on the downhill slope?
The Americans, on the other hand, are supporting their farmers through
subsidies and keeping them on the farm. The Europeans have been doing it for
years. I have come to the point where I almost scream when I hear some
politician say that we will keep our farmers alive with subsidies. It will not
In Saskatchewan, they were trying to make board out of flax straw. Are there
examples of where that has been successful?
Mr. Presley: My colleague, Harold Hedley, who is with our grains and
oilseeds division, will help me to answer that question.
With respect to the bleak prospects that some producers face in competing
with subsidized producers, such as the U.S. and the European Union, the
department and federal-provincial ministers recognized that it was a losing
battle because that type of situation generally escalates.
Instead we have developed a strategy that is more focussed on working with
producers to determine attributes around their products that can be
differentiated from the competition's, and trying to create premium markets for
those products. I will illustrate. We have round tables for special crops, which
includes a wide category of non-grains and oilseed products. The special crops
round table is composed of growers from a variety of different commodities,
manufacturers, traders, retailers, and the food service industry, in other
words, buyers and sellers as well.
The effort has been to try to look at what the buyer requirements are and
whether there are any opportunities for specialized categories that could be
established as premium markets. We have had a couple of meetings of this round
table, and we are looking at two strategies, one of which is to continue to
succeed in the low-cost category of production, which of course is an efficiency
discussion, the other, is to try to work through systems that would establish
tracking and tracing capabilities, and segregation systems for organic or
non-genetically engineered categories to see if there is an opportunity to be
able to pursue buyers who would pay a premium for those categories. That
strategy offers some opportunity to the farmers, and creates a forum where that
kind of strategy can be developed between industry and government.
Senator Gustafson: The organic category is one bright spot, but that
works for smaller farmers in mixed farming operations. It is easier for them to
get into it because they have not been using that many chemicals on their farms
and there is still a very good market for their product. In fact, I have a
neighbour who tells me he sold flax for $42 a bushel. That is an isolated
Mr. Presley: It is interesting. They are niche markets.
Mr. Harold A. Hedley, Director, Grains and Oilseeds Division, Agriculture
and Agri-Food Canada: Senator Gustafson, there is a facility in Manitoba
just southwest of Winnipeg that is producing fibreboard out of straw. I believe
Dow Chemical now owns the company.
Senator Gustafson: Many farmers have put their trust in hemp, and many
of the ones I know still have hemp on their farms. They have not succeeded in
getting a plant started and have not found a market for their product.
Mr. Presley: We have made a real effort to work in the category of
non-food products, bio-products, and hemp is one of the more interesting
categories. Gordon McGregor, who works in the food bureau, has been work
particularly in that category, which is what I call the ``industrial uses of
Mr. Gordon McGregor, Acting Director, Cross Sectoral Industry Affairs
Division, Food Bureau, Agriculture and Agri- Food Canada: As you know,
Canadian farmers have been enthusiastic about the reintroduction of fibre hemp
as a major crop in this country. One of the difficulties has been that you can
grow it, but you need the technology to process it. Many of the companies that
have that technology tend to be European, particularly German. A group I am
associated with is in the process of organizing a fibre mission to Germany,
which will probably take place this February.
The real dilemma is matching up the production base with this technology and
the markets. At the present time, North America is a bit behind in terms of a
commercial market for hemp materials, whereas the European car industry is
considering using natural fibres like hemp in all sorts of interior car
fittings. We are hoping to get some tips from the Europeans to see if we can
encourage this type of market here in North America.
Senator Gustafson: It seems Europe has been successful.
Mr. McGregor: They have been, but if you look at the way they fund the
industry you will note that it is heavily subsidized.
Senator Ringuette: I must admit that I am impressed with your
presentation and the approach of your department. Coming from the ``potato
belt'' in New Brunswick, I am desperate to get some kind of agency to help my
potato farmers segment their market. Right now, they sell in bulk to either the
potato processor, the two giants that we know, or they export to the New England
In our community, the small potatoes that are average size are put in huge
crates and shipped to New York for $15 a crate. The people in New York put all
those potatoes into small little crates and send them to market at $6 a crate.
The people in New York are getting 2,000 times the value-added that my farmers
could have had.
Is your bureau involved in New Brunswick? Can I get you people to put on
seminars in my region to help my farming communities?
Mr. Presley: We would be absolutely delighted to come and speak to
producers in your community about the department's programming and our efforts
and strategies to try to create value-added opportunities. We have worked
extensively with the potato industry, at both ends of the chain.
I have more recently become more familiar with the processors and their
issues. My department understand that the farmers have been trying to attract
investment for more production of everything from potato chips to table
I mentioned round tables, and I will probably mention them a number of times
this evening because we are turning to these round tables as important
instruments to help develop strategies to create value-added products.
One such round table will focus on Canadian horticultural issues. The idea is
to bring together Canadian and American producers, manufacturers and buyers,
from both the retail and the food service industries to discuss the attributes
that are being sought and valued in markets around certain categories of
potatoes. We will ask such questions as: What is the production practice that
would likely yield, if not a premium, then at least a secure market at good
prices for different categories of production?
Our hope is that when we establish this round table, some of the potato
producers in your area will be able to develop strategies to differentiate their
product based on attributes that would be more meaningful to that New York
buyer. I mentioned earlier the easy illustrations are to use organic or
non-genetically engineered production. There are other attributes around certain
categories of potatoes that are meaningful to a chipper.
That is part of the strategy, and we would be delighted to speak to your
group about a reference in that regard.
Senator Ringuette: If you are thinking of putting together a
horticultural round table, I am certain that my colleague from Prince Edward
Island and I would like to see it hosted in the Atlantic region.
How do you deal with trade barriers and subsidies? In the last few years we
have been faced with trade barriers from the U.S.
At one time, the Atlantic region had to dump potatoes because of a surplus in
the market, and yet, we as taxpayers were contributing to a food supply system
that does not recognize this very valuable nutritional commodity.
Have you looked into this situation? It is a market potential? If you have
not, will you? Is this issue part of your mandate?
Mr. Presley: An active part of our mandate is trade issues, trade
irritants, and barriers to trade particularly those based on food safety related
issues as they are posed.
A real illustration we are living right now is the BSE crisis. We have a
border restriction at the present time. Much of our effort is to generate
quality attributes that will distinguish the product so that we can be
successful not just domestically but also internationally.
We also know we are dealing with a sophisticated set of trade issues and
technical trade barriers to entry into these markets. This is the category of
issue raised so often.
We have tried to work closely with the Canadian Food Inspection Agency to
develop an advocacy strategy to be able to work in particular countries where
these barriers are emerging. We want to explain our science and become effective
at developing our systems to make the case that these products pose no threat
from a food safety perspective. We have moved aggressively on that front.
Our trade strategy with the technical trade barriers issue is a real
challenge that we particularly focused on, and is a major part of our strategy.
One of the things we have done is put an emphasis on developing food safety
systems at home. We are developing sophisticated tracking and tracing systems.
The reasons for those systems are that they then allow us to isolate a
particular problem with a product to a specific area and continue to have the
rest of the product move across the border. We think it is an important part of
our overall strategy, and it applies to potatoes as well as a lot of other
The Deputy Chairman: I want to make the comment about the round
tables. There was a beef value chain round table held last week. The round table
presented a recommendation that was rejected by both the federal and the
provincial ministers of agriculture. If that is the case, what is the value of
the round tables?
Mr. Presley: I was also at that meeting of the beef round table. I
think that if you were to talk to the industry members of the round table, they
would regard it as a very useful tool to them.
At that meeting, we looked at cows of 30 months and older. We had
representatives, from cattlemen, major slaughter facilities, major company
traders, and retailers around the room. All of these people tried to think of
how to develop a strategy to deal with cows 30 months and older. There were many
interesting strategies developed in that room because all the players involved
We did not create the round tables to be so much policy advisory bodies,
although it is a role that they play. On the BSE issue, it has proved to be a
valuable tool to consult industry on the approaches we are taking in government.
There are instances where the industry from the round tables recommend an
approach that the minister has not agreed to move on. Nevertheless, that
particular table has met at least half-a-dozen times, whereas most tables were
intended to meet twice per year. It has grown from a table of about 25 people to
more than 70. These are predominantly industry players, and it demonstrates the
value it has offered to the industry as a forum to be able to perform strategy
thinking. There have been many subgroups established from that table to think
through everything from market advocacy campaigns with respect to Asia and the
United States, as well as groups thinking through feed strategies, et cetera.
It is probably the best illustration of a round table that was there at the
right time to serve a useful purpose in helping develop industry-based
strategies to respond to this crisis, as well as a good forum for the department
and the government to be able to bounce ideas off of.
Senator Ringuette: I did not get a clear indication in regard to my
comments concerning the world food basket and the potato not being part of it.
I would also like an answer concerning your bureau investigating this issue.
Mr. Presley: I will look into that and provide with you with an answer
as to what the category the potato falls into.
I have learned from the BSE file that we work with CIDA to understand what
opportunities there were to be able to move product that otherwise would not be
used in food aid. I know the basic principle, which is that there is a category
of product that infrastructure in recipient countries can manage and serve to
people in that part of the world.
Many of the products that we would value in Canada are not valued in those
countries, or there simply is not the means to distribute the product safely and
in a manner that it can be digested. How it applies to potatoes, I do not know.
Senator Ringuette: There are a lot of politics involved there.
Is the market research that you do available on your Web site?
Mr. Presley: We have a number of Web sites that give information on
our international market development efforts. I am trying to remember whether
those Web sites detail some of the market research done for different
commodities in different parts of the world. I suspect they do.
We have a program called Canadian Agriculture and Food International Program,
CAFI. It is an export market promotion program where we match dollar per dollar
with national industry groups, in effort to promote generic product, and in some
cases company-specific products, to key markets around the world. We establish
as a condition of that money being matched that there be good market research
done in advance to ensure the dollars will be spent in markets where there is
opportunity. In some instances, we help finance those market studies on a
cost-shared basis. Those are the kinds of efforts we are involved with in the
Senator Ringuette: You do not do market studies on your own; it is a
Mr. Presley: We do many on our own but we prefer to do them in
partnership with the industry group. That way we have industry experts who are
making their money from pursuing these markets partnering with us in the
analysis. We do a fair amount of market analysis on our own. More and more we
have tried to partner with industry in doing those pieces. We find the analysis
ends up being used by the industry.
Senator Ringuette: We have had a serious concern with other situations
where the communication is not well established and, therefore, too many people
are missing quality information which, if it is being done in part or in whole
with taxpayer money, it should be made public. That is why I am asking about the
research being available on your Web site.
Mr. Presley: I was not sure whether all that research was available on
the Web site, but it is certainly available. We have contacts through which you
can get hold of that information. Certainly, anything that we would fund is
Senator Ringuette: Do you have a physical presence in New Brunswick?
Mr. Presley: Our department has a research station in Fredericton.
Senator Ringuette: I am referring specifically in regard to market
development, et cetera.
Mr. Presley: We have several people from our Atlantic office in
Fredericton, and they are co-located with the Fredericton research station.
Senator Ringuette: Are the same people who are located in the city
supposed to help the rural communities?
Mr. Presley: That is correct.
Senator Ringuette: How much time can you give me in order to inform
the agriculture community of New Brunswick of the programs you have and the
research you have done? How much time can you give me so that we can transmit
all this information?
I am sorry to say that the few people you may have in the city are not
transmitting the information to where it should be, which is to the rural
communities, where the farmers are located.
Mr. Presley: We will make as much time as necessary to be able to make
Senator Ringuette: Perhaps you could book the entire month of January.
Senator Hubley: I would like to talk about cooperatives or co-ops,
with regard to with the economies of scale.
We have already introduced ourselves as coming from the Maritimes, where many
of our potatoes, as they say, ``are all in one basket.''
On Prince Edward Island we grow many potatoes, and many of them go to
producers. This in and of itself adds value, and we benefit from the jobs that
are created by that production system.
When we are talking about value-added, there is a feeling that we are looking
for niche markets such as organic farming, that we are looking at a smaller
dynamic, perhaps a more sensitive use of farmland or more mixed farming. I think
you have the idea.
How important will cooperatives be to allow farmers to produce what they
would like to produce and not have to do the marketing and research?
I would like your comment as to whether cooperatives will be the body that
will fulfill that role.
Ms. Susie Miller, Director, Co-operatives Secretariat, Agriculture and
Agri-Food Canada: I think cooperatives can respond to that role in certain
circumstances, according to the wishes of the individuals who would be
interested in forming a cooperative themselves.
In fact, agricultural has the largest number of cooperatives in Canada
outside of the credit unions and Caisses populaires. Cooperatives are very
important to agriculture. The types of cooperatives that are developing now are
different from the traditional cooperatives in terms of marketing, especially in
the grains sector and in the processing of dairy and poultry products.
In Western Canada we see a trend in organic farming. There are farmers who
are cropping 2,000 acres of organic crops. However, when it comes to marketing,
the traditional marketing venues for grains and oilseeds are not necessarily
responsive to the needs of the organic marketing system, which has to be
segregated and have a very strong trace-back system. Some of the organic
producers are interested in using cooperatives as a means of collectively
marketing their product so that they can add other producers' crops to theirs.
Another area where there is great interest is in the herb and spice industry,
where the nature of the production is such that a number of people grow a small
amount. They are not large-sized crops. However, in order to access both the
medication market and the food supplement market, there needs to be a guarantee
of a certain amount of product, as well as certain standards. Many growers are
very interested in using cooperatives to put their product together for an
economy of scale that gets them into a market where individually they would
never be large enough.
Some areas where farmers may have traditionally marketed individually where
they are now going into cooperatives include apple production in the Annapolis
Valley in Nova Scotia. Over the years, the market power of an individual orchard
has deteriorated because of the high level of international competition. One
such cooperative is called Scotian Gold Ltd., where a number of producers now
work together, where they had once worked individually. They have joint storage
facilities. They jointly hire the expertise to do the marketing for them. That
is one of the many advantage that cooperatives offer.
I can give you an indication of the many groups, from Nova Scotia to British
Columbia, that are interested in using cooperatives to explore the marketing and
processing involved in the agricultural sector.
We have just introduced a program this year called the Cooperative
Development Initiative, CDI, and one of its six priorities is agriculture value
added. Of the initial applications we have received, 40 per cent are agriculture
based, although that is only one of the six priorities. It is still of interest
and it is actually increasing in interest, in particular when a number of
farmers move into a new area and try to enter a large market. As individuals,
they can never accumulate enough production to either break into the market or
to have enough market power to get a good price.
Senator Hubley: I will echo Senator Ringuette: The transfer of
information is critically important. The smaller farms need an umbrella
organization that is aware of their efforts, and that can educate them to the
advantages of working in a cooperative.
Ms. Miller: Part of the cooperative development initiative, one third
of the funding, is used for the delivery of advisory services, which are
delivered at the local level through the regional Canadian Cooperative
This is service will funded by our program in conjunction with the
cooperative sector and will provide advice and work along with individuals and
groups interested in forming cooperatives. That service will be available in New
Brunswick and in Prince Edward Island. Part of that work is focused on teaching
the small farmers about the advantages of cooperatives and how they can be used
to respond to their needs.
That program will begin in October or November 2003.
Mr. Presley: We have a Web site InfoHort, that is administered by our
horticulture division of the department, and I expect is linked to our general
Web site. The site provides a great deal of information about marketing
opportunities related to the horticultural industry. There is likely a fair
amount of coverage on current issues, such as potatoes, for example.
The Deputy Chairman: You mentioned that in Southern Ontario there has
been a development of a new cheese process or a new form of cheese. What is your
department doing to assist that small venture to patent their process? If a
product that they develop is profitable or popular, it will not take long for
some large operation to move in the niche market is lost to them. This is often
a problem for small producers.
Mr. Presley: I am afraid that I am not able to answer the question
about our role in patents. It is not likely a major part of our department's
mandate. I would imagine that we would path find for the small operation and
point them toward Industry Canada and the trade market legislation concerning
I will have to think about that and try to obtain an answer for the
The Deputy Chairman: Perhaps your department and the Department of
Agriculture and Agri-Food Canada should look at this area. If we encourage
farmers to develop niche markets, we should also provide them with the tools and
the knowledge they require to make it happen. If they develop a great product,
they need to know how to protect that product and themselves from the
I think in terms of agriculture and because we are heading into a global
market, the only way we can succeed is by being big. That is the only way that
we can compete successfully. That has been demonstrated in both the wheat and
beef sectors. We produce tremendous raw materials in Canada but we do not
process them here. The beef problem that we faced made us realize that we are
not capable of processing what we produce to keep the jobs at home.
The cooperative concept, whether it is called a cooperative or a corporation
or a mutual company, must be impressed upon farmers. Governments need to
convince farmers that they have to work together as an organization. If farmers
cannot do it individually, then they must do it cooperatively.
I wonder whether this committee and the provincial and federal governments
are leading some of our farmers down the garden path by encouraging them to
diversify their small operations and develop niche markets. Some find that two
or three or five years down the road they can no longer exist after
diversification. Have you looked at that issue?
Mr. Presley: I will ask my colleague Ms. Lois James to speak about
some of the programming that we have to help deal with farm business management
Ms. Lois James, Director, Renewal Programs, Renewal and Innovations Team,
Agriculture and Agri-Food Canada: One of the initiatives that we have
developed, with the provinces, is called the Canadian Farm Business Advisory
Service, CFBAS. It is being put in place and, as the implementation agreements
are signed with the provinces, we are beginning to deliver.
There are two parts to this initiative. First, we will be providing, to all
farmers in Canada with gross farm income over $10,000, up to five days of
consultant services to help them develop a business assessment and action plan.
The business assessment part allows the consultant to work with the farmer to
help them understand their current financial situation. The action plan helps
them to look at options and to develop some of the financial projections for
An additional part of that program, aimed exclusively at farmers, will
provide specialized services to farmers to have a full business plan developed
for their farm operation. It will also allow them to have services to develop
such things as a marketing strategy or a human resource plan. These plans are
especially helpful to businesses with many employees, such as in the greenhouse
industry, the potato industry and some of the more labour-intensive
Under this service, we will provide 50 per cent of the cost to develop one of
these specialized plans, be it a full business plan or a marketing strategy or
even a risk management strategy, up to a maximum of $8,000 per farm operation.
This next program may be particularly relevant to today's discussion. We call
it the Planning and Assessment for Value-added Enterprises, PAVE, program. We
will provide planning and assessment specifically for value-added enterprises.
Under this initiative, we will provide, depending on the number of farm
operations involved, 50 per cent of the cost of developing a full-blown business
plan up to $25,000. It would be $10,000 for one individual, $20,000 for two
individuals, and up to $25,000 for three or more. That would, of course, be very
much applicable to co-ops. This will develop the enterprise. This can be an
individual or a group of farmers who come together to develop a full business
Depending on the nature of the operation, we will hire consultants to do a
full business plan. We will see that all the financial aspects are taken care of
as well as the market exploration, mission statement and so on. One of the
objectives of this program is to help access capital.
Concerning patents we would work with the farmer to see if it was a viable
way to go in his or her operation. That is one of the things the consultant
would flag for them.
We are really paying for the services of specialized consultants. In this
case, someone doing business plans would work hands-on with the farmer or group
of farmers, to walk them through all the steps with the objective of helping
them to ensure that the business will be successful.
The Deputy Chairman: Has your department looked at all at the major
problem in regard to marketing, especially within Canada, as to how the farmer
gets around the problem of shelf space? It is pretty well impossible for anyone,
home grown, medium size or even large starting out to try and get shelf space in
the majority of our stores right across Canada. Unless you have shelf space, you
will not be able to move that product. How do we resolve that problem?
Mr. Presley: Listing in retail stores is a challenge that confounds
every food manufacturer with whom I have spoken. I have spoken to grocery
retailers about their interest in a local products, and almost every retailer,
including the big five, has expressed a policy interest in trying to promote
local products. They have also expressed a concern for shelf space.
Ms. Miller may wish to speak about the cooperative side of retail and whether
a different approach has been adopted for some of the conventional retailers.
Ms. Miller: There has been some success at using cooperatives as a
mechanism for introducing food products. In order to achieve acceptance and
generate a big enough market before entering the retail chains co-ops have used
the specialty meat shops and the farmers markets.
Most of the markets across Canada are cooperatives; not all of them are
farmers, per se. Most of them are locally produced, manufactured, processed
products. Many of them are even in federally registered establishments where
there is not enough market demand to convince the retail stores that they should
provide shelf space for them.
Farmers' markets have been an excellent way to introduce a product so that it
gets to the stage where there is sufficient demand to convince a store to carry
it. That is not the total solution, but it is one where smaller runs of products
can be tested and introduced. In some instances we have seen that solution work.
Mr. Presley: In our buyer surveys we have asked our retailers and food
manufacturers what they demand of their suppliers and what they expect the
increased demand to be over the next five years.
In every instance, companies want a food safety assurance system attached to
the product on their shelves. Other requirements include a commitment that
enough product will arrive on time; retailers need to know that they will be
able to meet the expectations of their consumers, once the loyalty to the
product has been established.
There are other elements such as electronic data interchange that requires
the farmers to meet the retailers' informatics requirements to move the product.
We have a number of initiatives that allows manufacturers of small, specialty
products, et cetera, to learn more about what it takes to enter these markets
and do business with these buyers.
The Deputy Chairman: This situation reminds me of what the Department
of Agriculture did in the 1920s. At that time, we encouraged many Europeans to
come over and open up the rural parts of Canada. We had tremendous extension
programs and workshops. Classes were held to teach people how to farm, how to
seed and how to take advantage of this new opportunity. Perhaps that is
something we should be looking at now. Perhaps we should put an all-out effort
to educate the farmers in the way of the future.
Education is the only way we will resolve this situation. The more people
that know of the opportunities that are available, such as the workshops, the
better off they will be. I believe the workshops will be far more effective than
advertisements or radio announcements.
You mentioned that you have a presence in every province. Do you hold
workshops to explain the value of cooperatives?
The reason I ask that question is that we are asking agriculture to go in a
completely different direction.
Mr. Presley: I will introduce Gilles Rousselle, who is with our
research branch. Mr. Rousselle is involved with the science community, in an
effort to take the bench science and the innovations that are developed in the
research station to the farm. He will outline the strategies that they have
We have been involved with a couple of efforts. In the Prairies, we have an
active roll with the Prairie Farmer Rehabilitation Administration, which takes
the responsibility seriously and is active in that regard.
We also work in partnership with our provincial colleagues to try to
distribute that information. We have learned that the ongoing challenge of
sharing information is best served by doing it in partnership with other levels
of government and also with the soil and crop improvement associations. We have
provided funding support for them as well.
Mr. Gilles L. Rousselle, Research Planning and Coordination, Acting
Director General, Agriculture and Agrifood Canada, : We talked earlier about
information sessions for farmers. One of the roles that the department's
research branch has played over the years has been to inform and give training
to farmers. We still offer these one-day information sessions in various
research centres, with the support of other colleagues within the department. I
could give the example of the one-day annual session that has been held in St.
Johns, Newfoundland, for the past several years, in cooperation with the
provincial department of agriculture, that event drawing over 6,000 persons to
the research centre.
It has been said that it is almost the whole city of St. Johns that is coming
to the centre where various research activities are explained and demonstrated
to farmers. We also have special one-day sessions together with the
In New Brunswick, we have information sessions in cooperation with the
Farmers Union, both in English and in French. In Quebec, these sessions are
organized jointly with collaborators from the provincial government and the
private sector. We have one-day sessions on fertilization and the best use of
natural and biological fertilizers. In Western Canada, in Brandon, the annual
daily sessions deal with cattle and crop production, and so on throughout the
country. We are still offering sessions. They are not as publicized as they use
to be, but both farmers and city dwellers come together on these occasions.
You raised the issue of protecting intellectual property. We help
collaborators to develop their own intellectual property when we work with them,
and we protect intellectual property that the department is developing either
alone or with collaborators.
We are currently putting in place an office of intellectual property. We have
commercialization officers working with collaborators at all of the research
centres across Canada. We do not offer a service of intellectual property to
non-collaborators. That is a different issue.
Senator Ringuette: One of our best success stories is ice wine, which
is a unique Canadian product. I certainly hope that the producers from the
Niagara Peninsula have put an international trademark on their product. Their
product is pre-sold to Asian markets even before it is ready. Trade barriers to
the European Union market have been removed because the consumers there want to
be able to purchase our ice wine like the rest of the world. Perhaps we could
use that success story as a prime example for farming communities across the
country to use as a model to follow.
I hope that the department will promote the example of ice wine, because it
has great value. It should be a great source of pride to the agricultural
Mr. Presley: I am working with the wine industry to develop national
wine standards. As you said, ice wines and late harvest wines are earning an
international reputation and international awards. They sell for $60 to $70 a
bottle in Taiwan and Great Britain, as well as in Canada. It is interesting that
international success sometimes translates into more domestic success. This is
an example of a product that is doing extremely well and it is a recipe that
could be followed by many other products.
A couple of things have happened in the wine industry. After the free trade
deal was struck there was a determined effort to produce excellent varieties of
grapes. When a lot of other product was coming into the country, we began to
grow grapes of a much better quality. The effect of that has been the production
of a world-class wine.
To support that, the department is working with the wine industry to make the
Vintner Quality Alliance standard in Ontario and British Columbia a national
standard. We want to market the ice wine under proper standards and quality
categories. A major part of the effort of our department is to provide support
through the development of those standards and a discipline around them to
support a quality reputation.
The Deputy Chairman: I would like to compare my definition of ``value
added'' to your definition, especially as it relates to Western Canada. You gave
an example of value-added canola.
A farmer who produces a crop, be it wheat, barley or any non-marketing board
product such as hogs, is dependent on the world price for that product. In order
to get value added, you have to get into the processing and marketing of the
product. In that way, you still get the world price for the raw product, over
which you have no control, and in addition you get the value from the processing
of it, over which you have some control.
Is that a fair definition of value added?
Mr. Presley: There are a couple of ways to interpret value added. One
is moving up the chain and doing further processing of the product. Another
approach is to produce a category of product that is valued more and to
demonstrate the attributes in a way that is valued more in the market.
We have illustrated some instances where, through cooperatives, farmers have
moved up the value chain. Our experience is, however, that more often than not
farmers want to farm, and not to process.
The skills and challenges that surround the business of processing change the
equation for the producers. Our emphasis has been inclined toward supporting
farmers to distinguish their product from that of their competitors through the
tracking, tracing, segregation and environmental farm planning initiatives I
The definition most relevant in terms of value added is to ask what the
consumer values. In my opening remarks I referred to the changing consumer. Two
thirds of our farm production is still sold to the domestic market, and a lot of
the production that is not sold in this domestic market is sold in the U.S.
When we ask Americans and Canadians what they buy and what they value and
will pay extra for, the answer is convenience. Both the American and Canadian
consumer places an extraordinary value on time. Today's consumers place a great
deal of value on a product that they can serve quickly. That is also why we are
seeing the food service industry growing quickly as a proportion of our total
Another element that is important to consumers is nutrition, and added
wellness attributes of a food product. The wellness issue is based and
translated into an interest in buying organic products. It is not necessarily
proven that the organic products are more safe and healthy, but there is a
belief that they might be healthier to consume. Therefore, you will see premiums
attached to that product.
If we could work with producers to be able to develop systems to
differentiate their products based on attributes valued by consumers, there is
more of a chance to generate more value-added opportunities on the farm.
I do not know if I have answered your question, but I have tried to interpret
the way the industry in valuing value added.
The Deputy Chairman: I can certainly see value added for the wine
industry or cheese market.
We are looking now at Kyoto, and a lot of emphasis has been placed on ethanol
and how it might help our farmers. The only way a farmer will benefit from
ethanol, whether it is manufactured by grain or manufactured by cellulose, is if
he is a shareholder in the company, or a member of a cooperative.
To give you an example, Saskatchewan decided to get into the ethanol
business. A company from Denver was going to build a huge ethanol plant and get
the value added. The farmer would get the same price for his grain whether he
sold it to the Canadian Wheat Board, his neighbour or the ethanol company.
I think the farmer has to be part of the whole system of value added; to
bring him part way up might be a mistake. We have to look at bringing him all
the way up, and cooperatives are one way to accomplish that effort.
You mentioned that farmers want to farm. That is true, but they can continue
to farm and still hold a share in a cooperative. Let them hire someone to do the
management; but value added is when that cooperative makes a profit, and as a
cooperative member, the farmer gets a share of that profit. In my mind, that is
I would like to see this government encourage the farmers to form
cooperatives. Perhaps that is something that this committee should look at. That
would help the wine producer as well as the grain producer.
I want to thank you all for taking the time to be here tonight. You have
certainly given us some wonderful food for thought. It is a great way to kick
off the new study.