Proceedings of the Standing Senate Committee on
Agriculture and Forestry
Issue No. 4 - Evidence - Meeting of March 8, 2016
OTTAWA, Tuesday, March 8, 2016
The Standing Senate Committee on Agriculture and Forestry met this day at 5 p.m. to study international market access priorities for the Canadian agricultural and agri-food sector.
Senator Ghislain Maltais (Chair) in the chair.
[Translation]
The Chair: Good afternoon everyone. Good afternoon to our witnesses. The Standing Senate Committee on Agriculture and Forestry is continuing its study on priorities in the agricultural and agri-food sector. My name is Ghislain Maltais, and I am chair of the committee.
[English]
I would like senators to introduce themselves, starting on my left.
Senator Merchant: Welcome. I'm Pana Merchant, a senator from Saskatchewan.
Senator Beyak: Senator Lynn Beyak from Ontario. Welcome.
Senator Tardif: Good afternoon. I'm Senator Claudette Tardif from Alberta.
Senator Unger: Betty Unger from Edmonton, Alberta.
[Translation]
Senator Dagenais: Jean-Guy Dagenais from Quebec.
[English]
Senator Ogilvie: Kelvin Ogilvie, Nova Scotia.
The Chair: Thank you very much, senators.
Thank you very much to the witnesses for appearing this afternoon. Your presentations are very important to this committee, and when you have concluded, senators will have questions.
It is important for us to produce a good report in June, and your presentations are important for that purpose and for you too, because we will receive more witnesses.
[Translation]
For us, it represents your long-standing interest in Canadian agriculture, and above all producers, as they are in charge of feeding Canada and, of course, part of the world, today and in the future.
[English]
Today we have Pulse Canada, Mr. Lee Moats, Chair; and Gord Kurbis, Director.
[Translation]
We will also be hearing from the Canola Council of Canada, with Mr. Brian Innes, vice-president of government relations, and from the Canadian Canola Growers Association, with Mr. Brett Halstead, president, and Ms. Catherine Scovil, director of government relations.
[English]
Welcome. We'll begin with Mr. Halstead.
Brett Halstead, President, Canadian Canola Growers Association: Thank you, Mr. Chairman, and good evening, senators, ladies and gentlemen. Thank you for your invitation to appear before the Standing Senate Committee on Agriculture and Forestry as you study Canadian market access priorities for the agricultural and agri-food sector.
As introduced, my name is Brett Halstead, and I farm at Nokomis, Saskatchewan, with my wife, son and father. We grow canola as well as a variety of other crops and raise a beef cattle herd, which my wife can attest to as she was home last night while I was travelling and had to put cattle back into their pens, a job that only happens when the husband is away.
I am President of the Canadian Canola Growers Association. CCGA is a national association representing 43,000 canola farmers from Ontario through to British Columbia. We work on national and international issues, policies and programs that affect farm profitability. We are also members of the Canola Council of Canada.
Canola farmers rely on international markets, as 90 per cent of the canola that we produce is exported directly as seed or crushed domestically and then exported as oil or meal. In 2015 Canadian farmers produced canola for over 40 countries, but 85 per cent of it was destined for just four markets: the United States, China, Japan and Mexico.
Our market access priorities are: one, to maintain and expand export markets; two, to address barriers in existing export markets; and three, to ensure canola reaches export points in a timely, cost-effective way.
Achieving trade agreements that help maintain and expand export markets is key. We need agreements that provide commercially viable access for canola and its products. The Comprehensive Economic and Trade Agreement between Canada and the European Union and the Trans-Pacific Partnership will provide new market opportunities for canola and ensure Canadian farmers remain competitive with their counterparts from other large oilseed-producing countries, most notably the United States and Australia.
Upon implementation, CETA will eliminate the tariff on canola oil, which will expand market opportunities for canola used in biofuels. CCGA looks forward to implementation of this in 2017, and working with government as legislation is introduced. The EU is a world leader in biodiesel consumption, and Canada's canola is an important, sustainable feedstock.
Canada's participation in the TPP is integral to our long-term viability. It ensures Canadian farmers remain competitive in accessing key Asia-Pacific markets. Tariff reductions for oil and enhanced rules for trade will create new market opportunities as well as increase cooperation and transparency in addressing non-tariff trade barriers related to biotechnology and plant health.
Exporting canola oil instead of seed means more value-added happens here in Canada, keeping economic benefits at home, creating a more viable processing industry, and supporting our rural communities through increased jobs, marketing options and services.
With TPP and CETA, Canada's free trade agreements cover 60 per cent of canola's exports for 2015, the big exception being China. China is Canada's second largest canola market after the United States, with exports totalling $2.6 billion in 2015. CCGA is interested in the Canadian government exploring closer trading relationships with China that would address both tariff and non-tariff trade barriers. There is also interest in exploring trade arrangements and market development opportunities with other markets, including India.
In addition to free trade agreements, addressing trade barriers in existing markets is key. Every country reserves the right to improve its crop inputs used in its own systems. As exporters, we have to ensure that products we use in Canada are also recognized in our export markets. Canadian producers wait to use new products and technologies until regulatory agencies in our major export markets also recognize their use.
While this serves to protect our export markets, it results in Canadian farmers not being able to use products and technologies which have been deemed safe and effective by our Canadian regulatory bodies. Mechanisms to address this need to be pursued.
Using China as an example, canola has seen remarkable growth over the last five years, but we increasingly face non-tariff regulatory barriers. Delays in China for approvals of new canola varieties produced with biotechnology or the establishment of maximum residue limits for pesticides create unnecessary unpredictability and risks for our entire canola sector.
For farmers, these barriers result in lost profit and prevent us from using new, innovative technologies on our farms. We need to find a global mechanism that allows trade to continue with the use of products that have completed regulatory approval in one country but not the other.
To capitalize on our export opportunities, trade agreements are needed, along with addressing these non-tariff trade barriers, but there are also pieces in Canada that can be approved to help our canola get to market. Farmers need solid domestic infrastructure to capture new market opportunities. Canadian farmers critically rely on our rail transportation system to deliver our products to international customers and the need for a world-class transportation and logistics system.
The Canada Transportation Act review was recently released, and we are taking the time to review the recommendations. We will be working with other rail users to put forward our views on getting the system right, not simply for now but for the future.
In closing, I want to thank you again for the opportunity to appear before the committee, and I would be happy to take any questions.
The Chair: Before we continue, I'd like to welcome Senator Terry Mercer from Nova Scotia, deputy chair of the committee, and introduce Senator Paul McIntyre from New Brunswick and Senator Victor Oh from Ontario.
Our second witness is Mr. Brian Innes, Vice-President of the Canola Council of Canada.
Brian Innes, Vice-President, Government Relations, Canola Council of Canada: Thank you very much for the invitation to be here this evening. Honourable senators, it's our pleasure to share the priorities of the canola sector when it comes to market access.
While canola is made in Canada, as Brett just said our success depends on international markets. Our industry appreciates the attention the committee is bringing to this important issue, because it's what's behind the stable jobs in our industry and the opportunities yet to come.
First, I would like to explain a bit about the Canola Council of Canada and our strategic plan.
The Canola Council is a value chain representing the canola industry. That includes the 43,000 canola growers, seed developers, canola processors who turn canola seed into canola oil and canola meal, as well as canola exporters who send canola for processing at its destination.
Our industry has a plan to meet the world's growing appetite for healthy oils and protein. Keep it Coming 2025 is our plan to increase demand for healthy oil, canola meal and canola seed, and to meet this demand through sustainable production and yield improvement, achieving 26 million metric tonnes of production by 2025.
Market access is a very important part of this plan. That's why stable and open trade is one of the three pillars in our strategy and why market access is critical for the Canadian canola industry.
As Brett said, more than 90 per cent of what farmers grow in Canada is exported as canola seed, canola oil or canola meal, and access to a variety of markets free of tariff or non-tariff barriers is important for our industry to earn the most value for our exports and provide resiliency should circumstances change.
We have had success as an industry improving market access by working with the government, and we have a plan to create more market access for the future. Cooperative efforts by industry and government to improve market access have been successful and must continue. The support of market access by the Government of Canada has been instrumental in achieving the success that we have.
The Canada-EU trade agreement is a good example of this. As Brett outlined the details, we were very pleased to learn last week that this will be implemented by the end of the year. This is good news.
But there is more to be done. There are three current opportunities for the Government of Canada to help improve market access for canola with China through the Trans-Pacific Partnership and by working on solutions so that biotech traits and crop protection products do not become trade barriers.
China is one of the most important markets for canola, and our industry sees significant potential for growth. Yet as Brett outlined, we face a number of challenges in this market. Enhanced economic engagement with China, as Australia has done with their free trade agreement, would provide significant benefits to the canola industry and to the Canadians that it supports.
Consider that today about one third of the canola that's exported from Canada goes to China. It's a market that's also poised to grow significantly in the future. As their population continues to have more income, become more focused on their health and place a greater value on a healthy diet, demand for heart-healthy canola oil and canola meal for livestock feed will only increase. In fact, the OECD estimates the demand for protein from oilseeds in China will grow by 23 per cent by 2024, and for vegetable oil, demand will increase by 24 per cent by 2024. That is significant opportunity for growth.
So the question before us today is how much of that growth do we want to come to Canada? Do we want that income and the jobs that come with it to come to Canada? If the answer is yes, we need to support enhanced economic partnership between Canada and China.
The Trans-Pacific Partnership is another opportunity in front of us that will support more jobs in Canada if we choose to embrace it. By eliminating tariffs on canola oil and canola meal in Japan and Vietnam, our industry estimates that we can increase our exports by approximately $780 million per year.
Canada needs to implement the TPP as soon as possible because with each year that goes by, Canada falls further behind Japan's other canola supplier, Australia. Through their bilateral free trade agreement, tariffs on Australian canola oil are being phased out. Canadian canola oil currently faces about a 3 per cent higher tariff than Australian canola oil. This difference will grow each year until the TPP is implemented. Without the TPP, we're giving away one of our most stable and valuable markets.
Lastly, we are working to have crop protection products and biotechnology traits approved at the same time in international markets as they are in Canada, which will improve access for canola. Biotechnology or GMOs have been valuable for canola. Over the last 20 years, they have allowed us to grow more on the same quantity of land using less energy, while preserving water and preserving the soil. Crop protection products have also been important to protect what farmers grow in a safe way.
As a crop that exports 90 per cent of what we produce, before Canadian growers can use crop protection products, they need to be approved and accepted by our export customers and their governments. The same goes for biotechnology traits. For crop protection products, this means there must be tolerances in place for the residues and they need to be established in our export markets. It's a complex challenge, one that requires the engagement of expertise from across the Government of Canada and across industry.
The good news is that the Government of Canada has been a leader around recognizing scientific standards in the world by continuing to lead and promote policies that enable predictable food trade. One of these examples is the Global Low Level Presence Initiative for the low-level presence of biotechnology traits in grain products. This initiative is leading the way for countries to recognize the scientific reviews of other competent governments and embrace science-based trading rules. But more remains to be done, and the Government of Canada needs to continue this effort.
In closing, canola has grown to be one of the largest sources of farm income in Canada as a competitive exporter. It contributes $19.3 billion to the Canadian economy each year and supports 249,000 jobs. Maintaining and growing prosperity will depend on successfully overcoming future market access challenges.
Thank you for the invitation, and I look forward to your questions.
The Chair: Thank you, Mr. Innes. Before going to the next witness, permit me to introduce another member of this committee, Senator Wilfred Moore from Nova Scotia.
Now from Pulse Canada, Gord Kurbis has the floor.
Gord Kurbis, Director, Pulse Canada: In fact, Lee and I will be sharing the presentation and Lee will begin.
The Chair: Mr. Moats, please proceed.
Lee Moats, Chair, Pulse Canada: Thank you very much, Mr. Chair and committee members. We appreciate the opportunity of appearing before your committee today.
My name is Lee Moats. I'm a third generation farmer from Riceton in Saskatchewan, and I serve as the chair of the Pulse Canada board.
While this is my first time having the pleasure to present to your committee over the years, I know you've heard from Pulse Canada many times. A number of Pulse Canada members are also in the audience today, as we're just wrapping up two days of meetings in Ottawa with a number of MPs and other government officials.
As you know — I hope you know — 2016 is the International year of Pulses, and we see a future filled with opportunity to deliver human, environmental and economic health outcomes. We've been happy to share that vision around Ottawa.
Pulse Canada is the national industry association funded by farmers like myself who grow peas, lentils, beans and chickpeas across Canada, as well as by the processing and exporting companies that export pulses to 160 countries around the world. Canada is the largest pulse exporter in the world, and Pulse Canada has been focused on market access as one of the members' top priorities for more than 15 years.
There are many outcomes that we would like to achieve on market access. Many of these we have in common with other associations like the ones here today, such as tariff reductions and finalization of Canada's low-level presence policy, but I would like to use our time today to go into detail on one specific market access issue that Pulse Canada has taken a leadership position on.
Before I do that, I would like to take a step back to provide a sustainability context.
Every day we hear things like, and I quote:
Food production will have to double by 2050 to meet demand. . . .
How will agricultural systems meet the challenge to produce more food without jeopardizing natural resources? . . . the answer is sustainable intensification, an agricultural approach that uses the best science and technology matched to the unique conditions found in large production operations and small family farms around the world.
What's interesting about that statement is that it comes from an environmental NGO, the Nature Conservancy of Canada. Like the World Wildlife Fund, the Nature Conservancy points out the importance of technology in making sustainable improvements to our ability to produce food.
So what is the linkage between the role of modern technology in sustainable intensification and market access priorities? We know that yield-enabling technologies like fungicides and herbicides are available to farmers only after they have been thoroughly evaluated from a human health and environmental safety perspective. We also know that a science-based risk assessment system is as important to farmers as it is to pharmaceutical systems and health care.
Unfortunately, misaligned approvals and maximum residue limits for crop protection products threaten several important things: our access to key markets; the ability that I have as a farmer to utilize technology on my farm; and food security in food deficit regions of the world, where predictable trade is necessary to make food available 365 days a year.
This is making it difficult for farmers like me to make sure that the grain I can grow complies with this multiplicity of different regulatory system on MRLs. And the risks are high. Each ship of grain that could be rejected is worth $10 million to $40 million. The risks are getting higher every year as well because testing gets more sensitive, now into parts per trillion, and as more countries are moving towards their own custom systems.
I have with me Gord Kurbis, Pulse Canada's Director of Market Access and Trade Policy. He is prepared to talk about some key opportunities in this area.
Mr. Kurbis: As Lee noted, the challenge that farmers and Canadian trade face is that neither the process nor the timing of MRL establishment is synchronized between regulators like Codex, at the international level, and other trading partners like the European Food Safety Authority and the Environmental Protection Agency in the United States. Rather than see a strengthening of alignment at the international level, we see more national approaches being taken, with several key countries even moving away from the globally recognized standard of Codex towards their own custom systems. Recent examples have included China, South Korea, Hong Kong, Turkey and Taiwan. Now the number of countries that are using national MRLs includes India, Mexico, United Arab Emirates, Indonesia and Vietnam.
While it's clear to us today that harmonized tolerances and standards of all types are important to facilitate trade, our key concern is what happens when the importing country has no tolerance in place. In those cases, zero or near zero default tolerances are commonly applied. If strictly enforced at the most sensitive technology testing that's available in laboratories today, this poses significant risks of trade disruption.
Since my time is limited, allow me to summarize what we see as key opportunity areas.
First, as the largest exporter of pulses in the world, the Canadian pulse industry is a strong supporter of ratifying the Trans-Pacific Partnership. The TPP is an opportunity also to improve the predictability of trade concerning trade tolerances for the use of technology in food production, as my colleagues here have noted.
In our view, it's critical that the committees created under the TPP are utilized to align pesticide maximum residue limits and policies on low-level presence. As well, if an importing country accepted another country's tolerance in cases where it would otherwise apply a zero threshold because an MRL has not been approved yet, a large majority of the trade risk that we're describing would be eliminated. We refer to this as recognition of scientific standards as it applies to MRLs.
Canada has an opportunity to show leadership to develop a politically, technically and commercially workable domestic Recognition of Scientific Standards, RSS, policy along with international outreach targeting adoption of the policy by Canada's trading partners. This is similar to Canada's leadership on low-level presence and will help food to continue to predictably cross borders as it moves from the world's food-surplus regions to food-deficit regions. Sound science-based processes can travel across international boundaries.
The Chair: Thank you very much, Mr. Kurbis.
[Translation]
Many senators want to ask the questions, and unfortunately, our time is somewhat limited. I will therefore ask senators and witnesses to be disciplined. It would be greatly appreciated if you could try to be concise in your questions and answers.
[English]
Senator Mercer: Mr. Halstead, you talked about ensuring canola reaches export points in a timely and cost-effective way. You went on to say that Canada could keep the economic benefits at home, creating a more viable process for industry and supporting our rural communities through increased jobs, delivery options and services.
When the European Union deal comes into effect, this will be a new market for you, shipping mainly from Western Canada. You'll be coming east as opposed to going west through Vancouver.
I want to put an ad forward for the Port of Halifax as your point of exit. The Port of Halifax has the facilities to handle what you want to ship. As opposed to our competitors in Vancouver and Montreal, the Port of Halifax hasn't had a labour dispute since 1972. It's a good, stable workforce of people who know what they're doing to get the product to market on time. I want you to think about that.
I also want to remind you that the Port of Halifax is closer to India, Turkey and Southern China than Vancouver is; and it's a one-day shorter sail through the Suez Canal than it is the other way.
My question is: Since you'll be getting into new markets, have you examined how you're going to ship and through which port?
Mr. Halstead: I am a farmer, so I don't do grain transportation and logistics. I have heard secondhand from some of the merchandizing and transportation guys in some of the companies that handle our product that ocean freight is extremely cheap right now. By rail we have had a difficult time getting product from Saskatchewan to the West Coast at times. Right now it's moving much better because of lack of demand for some other products, namely oil and potash. When you add more time on the rail to head to Halifax, I'm sure there are cost and time considerations.
I would like to see all the possible options for exporting our product, East Coast, West Coast, Churchill and maybe at times through the United States. I'm in favour of whatever will get our product to the market as competitively priced as possible.
Senator Mercer: Aren't we all. You may not be in the rail business, but you are in the shipping business. Any length of extra time it takes to get from Saskatchewan to Halifax as opposed to Vancouver is made up by a shorter sail from Halifax to the port of your customer, and with no labour problems. It's not going to sit on the dock as it might in other ports.
You raised the issue of rail. I met earlier today with the people from Pulse Canada. One topic was rail problems and the constant problem we have with so many empty cars travelling through Saskatchewan on their way back to Vancouver after dropping products in Ontario and Quebec or points south. Will this continuing problem have a dramatic effect on your ability to meet the demand that you foresee with these new trade agreements?
Mr. Halstead: In part that is why the Canada Transportation Act review is ongoing to ensure that we have better access to our markets through our rail system than we currently have. At times it can be really good and at times it can be a real problem. When it is a problem, it puts cash flow strain on producers and stress on rural communities. It's something we're constantly looking at to see improvement. The service levels are the big thing. We need better levels of service from railways consistently.
Mr. Moats: I think one of the near-term issues for us is relative to what happens between now and some of the provisions that might be implemented as a result of the review. We're very anxious that we don't lose some of the ground that we've made in recent times, and so we think it's important to maintain the provisions introduced under the Fair Rail for Grain Farmers Act, which is set to expire in August of 2016. Of course we would recommend that the government postpone the sunset of those provisions until whatever new changes to the transportation system are put in place.
Senator Mercer: You'll be pleased to know that people who visited me this afternoon covered that very subject. I agree, and it's an opportunity for the minister to avoid reintroducing legislation. I haven't done the detailed research yet.
We talked about canola getting to market. We talked about how important canola is, and we agree around this table. I've seen over the years I have been a member of this committee how important canola has become as a product to Canadians. Whether they live on farms or in cities, canola is important to us.
We've signed a new trade agreement with the EU. We're debating whether to sign the TPP or not. These will open tremendously larger markets and great opportunities for us. Can we produce the product?
Mr. Innes: Absolutely, senator. Our industry has come together to have a strategic plan that looks out over the next decade, to 2025.
Directly to your question, we plan to grow productivity, yields per acre and produce more canola in Canada in a sustainable way to meet international demand. To give you a sense of where we are right now, we're approximately 17 million tonnes per year, and we want to produce 26 million tonnes by 2025. We want to do that in a sustainable way by increasing yield, by making sure the risk for growers to grow canola is minimized and do what we can to grow the markets for canola at the same time we're growing productivity here in Canada.
Senator McIntyre: My first question relates to pesticides. I understand there is a pesticide for canola crops in Canada called Clever. My understanding is that Clever has been approved in Canada but has not been cleared in Japan and, as a result, Canadian canola products that contain a residue of this pesticide cannot be exported to Japan. What do you think should be done to address this type of problem?
Mr. Innes: Thank you for the question. Just to be clear on the record, there is a tolerance in Japan. As a sector we have concerns about meeting the requirements in China. Our exporters and processors have indicated that there is no tolerance, either internationally through the Codex system or in China. The concern there is that when, as Gord describes, a shipment leaves port in Canada and arrives at a port in China and there are detectible residues, what happens is uncertain.
To your question as to what we can do collectively as government and industry, I think our Pulse Canada colleagues went into the detail to some extent. I think it's important that we continue to work as a government and industry to support you in the efforts to harmonize and work on recognizing scientific standards internationally, and that our regulators have the ability and motivation to interact with their international counterparts.
Certainly the recognition of scientific standards is an important part of that, but dealing directly on a regulator-to- regulator basis is also important.
Senator McIntyre: My second question has to do with labour. Is labour a challenge for your sector? The reason I'm asking this question is because some participants have informed us that labour is one of the challenges that could make it difficult to improve production capacity and meet the demand created by Canada's free trade agreements. If labour is a challenge, what measures do you recommend to address this issue?
Mr. Halstead: Thank you, senator. Truly, at times labour is a very serious problem on farms. Accessing quality labour at an affordable price for an agricultural farm is an issue. Other times, depending on other sectors of the economy, it is easier to get that labour. Right now with the oil sector being down a bit there is more labour available for farms, but we don't want to see one sector hurt to improve our labour situation.
I don't have a specific solution. There has been some discussion on the temporary foreign workers aspect of it, but I'm not an expert on that so I'll leave it there.
Senator Merchant: Hello, and welcome to winter. You know we're having summer in Saskatchewan: We had 17 degrees just the other day.
You all expressed, I think, very strong support for open, stable markets and for the TPP. My questions are related to that.
Is the U.S. still our biggest trading partner, as far as you're concerned, with pulses and canola? If they sign the TPP, what will happen to us if we do not go along?
Mr. Innes: For canola it's critical that Canada is part of it. If the U.S. was to sign and Canada was not part of that, we would be excluded from a trade agreement representing approximately 40 per cent of the world's economy. We'd fall behind and be at a competitive disadvantage to other oilseed producers in the world, other farmers — like those in Australia and the United States — because they would have better access to markets like Japan and Vietnam than we would have in Canada.
It would be very detrimental to our ability to continue to support stable jobs in Canada, and certainly detrimental to our ability to grow in the future by adding more value in places like Clavet and Nipawin, Saskatchewan, that transform canola seed into oil. It would be very detrimental to our ability to add value here in Canada and sell processed products like canola oil in Japan.
Mr. Kurbis: It's a good question. From the pulse industry perspective, the U.S. is a significant market but an even more significant competitor with us, as are Australia and other TPP members. If Canada and the Canadian pulse industry were in a situation where all the other TPP members had ratified the agreement but Canada did not, we would wind up losing significant benefits.
First, we would be at a 5 to 30 per cent tariff disadvantage to Australian and U.S. competition. Second, we expect that the TPP will bring in what we refer to as 21st century trade rules, aligning SPS and other technical trade issues among trading partners, and if we don't ratify we won't be part of that. Third, we have cases where we have tariff escalation in TPP countries where raw product goes in at a lower tariff than processed product, which tends to "disincentivize'' value-added in pulse-growing regions in Canada. We would also lose out on relief from tariff escalation.
Senator Merchant: Several of you mentioned that it's very important for us to sign a deal with China. China is a huge market. We are very small compared to China. If the TPP were ratified, will that bring China in with a better set of rules for us? The TPP will set rules. Will that make it easier for us to deal with China?
Mr. Innes: I can start and maybe others would like to add.
The way we see the Trans-Pacific Partnership is really setting a new threshold for international rules. It's creating a system of 12 countries right now with more who want to join that believe in fair and open trade, like Canada does.
As that grows, whether it's countries like Korea or the Philippines, who have indicated an interest in joining, or China, as you say, we see through the TPP that we can have more fair and open trade around the world. I can imagine that as it becomes more significant, it becomes more attractive for countries like China to want to join.
Senator Unger: I have a question that I would like to direct to Mr. Moats, and it's a bit of a different approach.
In your remarks you spoke about growing peas, lentils, beans and chickpeas, something you would like to see expand across Canada. These strike me as very healthy foods. You also mention that 2016 is the International Year of Pulses, and you see an opportunity to deliver human, environmental and economic health outcomes. I think that's a great vision.
Yet the Senate committee's recent report on obesity in Canada recommended that the Minister of Health not include representatives of the food or agriculture industries in the process of revising the food guide. I understand this was due to concerns that the food guide not reflect the financial interests of the dominant food businesses, but it seems to me that locking producers out of this discussion, talking about what forms a healthy diet, is perplexing.
Do you have any comments on this? How would you reassure parliamentarians that allowing producers to have an advisory role in the revision of the food guide would strengthen rather than weaken the quality of the food guide?
Mr. Moats: Thank you very much, senator. That is a very good question. We have also seen the release of the report on obesity, and I think this business of excluding in an agricultural production sense is, as you say, perplexing.
We increasingly view that we as farmers are not just commodity producers; we're producing food that contributes to the health of people, the environment and our economy. It is big business for sure, but it is also something that the solution to obesity problems and other nutritionally related problems are quite likely going to come from food. It makes sense, then, that we as producers are directly involved in this discussion.
In the pulse world, we will tell you that if you consume pulses, you will be a healthier person. That has ramifications for many of the conditions affecting human health. If you look at the non-communicable diseases that are talked about by the United Nations, such as obesity and diabetes and cardiovascular disease, these are related to nutrition and diet. We have something to contribute there.
We talk a lot about sustainability and carbon emissions these days. We have something to contribute on that front, too, in the pulse industry. When you look at me, I'm not just a pulse farmer but a canola and wheat farmer as well. So it's about making our system meet the needs that society has in these areas.
I agree with you that agricultural producers ought to be involved in the conversation, and I would say that we are anxious to participate.
Senator Ogilvie: As a supplementary, I think we should clarify that. This committee is a committee of the Senate; it has no members of industry on it, but you are here testifying before us to make recommendations to the government. That is the sense of the recommendation in the obesity report.
The issue is that there should be a committee that recommends changes to the food guide to help Canada, but we say that industry should not be on that committee. That committee should hold hearings to get all of the input possible from all scientific bases and from industry input, and so on, and then it should make the recommendations free of influence from within the committee on the food guide.
I won't go further than that, but the history of the food guide is replete with concerns in this area.
Mr. Moats: Thanks very much, senator, for that clarification.
Of course I would agree with you that the interests of Canadians are the ones that should be taken into account with the food guide, and that's not a private industry business. We are saying that we have something to contribute to that social discussion, and we're anxious to do that.
Senator Ogilvie: As you do at this committee.
Mr. Moats: Thank you very much. Yes, absolutely.
Senator Unger: I was going to say in conclusion that I am from Alberta. I've eaten these types of products — pulses — for most of my life. These are the kinds of things I eat now and I think they are very healthy, so thank you.
Senator Tardif: My question will be to the representatives from Pulse Canada.
You've spoken about the health benefits of pulse crops, the legumes such as chickpeas, dried beans, dried peas and lentils, and I agree absolutely. But can you tell me, do pulse crops have a lower carbon footprint than other crops? Is there an environmental benefit to growing pulse crops?
Mr. Moats: Thanks for that question, senator. I just feel like you're setting me up for my commercials.
I want to emphasize that we, the producers sitting here, are part of a production system. So when I make commentary about the value of pulse crops, I'm making it as part of my production system. I don't want to leave you with the impression that I'm saying pulses are better than my wheat, because I have to grow both.
It is true that if I grow wheat in conjunction with my pulse crops and my canola that I will have a lower carbon footprint overall. It's this magic of nitrogen fixation that we get from the symbiotic relationship with rhizobium bacteria and the lentils. That means that they produce nitrogen from the air as opposed to having to add it as artificial fertilizer. As a result, when you look at the production system involving, in my case, lentil, canola and wheat and you add up the carbon footprint, it's lower when I grow lentils than when I don't grow them because I'm not adding that synthetic fertilizer, which has a very high carbon requirement as a result of its production.
So the answer to you is yes, the lentils, peas, beans and chickpeas have an important environmental benefit, and it accrues not just to the pulse component but to the whole production system that we use.
Senator Tardif: Why would you choose to not grow 100 per cent of your crops as pulse crops and to divide it up? Is it hedging your risk factors or is it a choice?
Mr. Moats: Sustainability has a number of different parts to it and everyone views it in a different way. But when you are a crop production system, you're exposed to a variety of risks. One of them is that disease, weed control issues and rotating crops from one crop type to another is important in managing an array of agronomic factors. Disease, insects and fertility are all part of that plan.
Most Western Canadian farms would have a diverse system. In our case on our farm it involves legumes, oilseeds and cereals, and that makes it more sustainable. There is tremendous risk to monoculture, and we choose to lower our risk by using a crop production system that has this rotation.
I would love on a year like this to have 100 per cent lentils. That would be where the money is, but unfortunately it's not something that makes practical sense over the long term.
[Translation]
The Chair: We have enough time for all four senators to ask questions if they can show some discipline. I will ask you to be disciplined in your answers as well.
Senator Dagenais: My question is for Mr. Innes. Canola is grown primarily in Western Canada. Would it be possible to extend production across the country to fully benefit from the trade agreements that are ratified, knowing that it could be good for Canada? Is it possible to grow canola in other regions?
Mr. Innes: It is true that most canola is grown in Western Canada.
[English]
But it's also possible to grow canola in other regions, and it is in fact grown from New Brunswick to British Columbia. We have canola in Quebec, in New Brunswick, and in British Columbia and many other provinces as well.
We know that canola prefers cooler temperatures. Just as Lee was describing, he's looking for a mix of crops that fits his soil zones and his rotation. Canola has a fit in areas where it's not so hot when canola flowers. As we look to free trade agreements, like CETA, certainly there is going to be more demand for canola from the eastern part of Canada, and we would hope that demand would encourage more local production in Eastern Canada as well.
[Translation]
Senator Dagenais: We know that exporting to the U.S. must not cost the same; distance is clearly a factor. Does profitability play a role in canola exports?
[English]
Mr. Innes: Yes. The profitability of Canadian industry depends on getting the most value for our canola from the markets that value it the most. With the United States being the most valuable market for canola, they are very close and have a large population with a large appreciation for health and the impact that food has on their health. It has always been a very important canola market and one where we still see opportunities to grow.
We also see incredible opportunity in the Asia-Pacific region, as I mentioned in my remarks in China, because they're a population that values health, has the ability to pay for a premium oil like canola oil, and will continue to grow. The profitability of our sector depends on getting the most value for our products in the markets that value it the most. Getting rid of trade barriers and improving market access allows us to get more value.
Senator Moore: We talked about the fact that Canadian producers must wait to use new products and technology until the right export markets also recognize the use. Will the TPP and CETA take care of those concerns for the 12 countries involved? Will those concerns be removed? You say they have mechanisms to address this and they need to be pursued. Are they not being covered off in those agreements?
Mr. Kurbis: Not in the text of the agreements. The recognition of scientific standards of MRLs and the low-level presence policy are two issues that have never been captured in free trade agreement text. We would like to see a future where they begin to become captured because the more success we experience in bringing tariff levels down — and we've experienced a lot of success as a country — the more we see non-tariff barriers rise up. So we see the inclusion of those factors in future free trade agreement text as a priority to pursue.
In the meantime, the opportunity to address these issues in the TPP is really the creation of scientific committees as part of the TPP agreement where these discussions could be housed between signatories.
Senator Moore: Are those committees provided for with that goal in mind? Are they provided for in the document?
Mr. Kurbis: Not on MRLs.
Senator Moore: How will we get there? This is the opportunity.
Mr. Kurbis: Correct, and this is what we're asking government for, which is to ensure that the TPP committees are utilized for these purposes.
Senator Moore: Mr. Moats says he would rather see a strengthening of alignment. At the international level, we see more national approaches, moving away from Codex to establish our own national system. Recent examples are China, South Korea, Hong Kong, Turkey, Taiwan, and now India and Mexico.
How do we fight that? Do we counter them? That's not what we're supposed to be doing. We're supposed to be free trading here. How do we counter that?
I was at a meeting back in December 2014 in Washington — the U.S., Canada and Mexico. The whole basis was to establish our own market here on this continent. How do we do that with this kind of approach?
Mr. Kurbis: The sheer number of countries that are moving in the wrong direction makes the case clearer. If we only had a couple moving in the wrong direction we could begin to imagine that those could be addressed through one-offs or bilateral discussions. It makes the case clear that we do need scientific risk assessments to move across national boundaries so that regulators in one country can reference or recognize the risk assessment work that is taking place by regulators in another country, obviously subject to that work being done to the appropriate international standards that would facilitate the recognition between those countries. This discussion needs to begin in earnest. We've had conceptual discussions but have not kicked off the process.
Senator Moore: Under which umbrella were you working on that?
Mr. Kurbis: The TPP is one opportunity to get that discussion started in a recognized form, recognizing that we have not yet ratified and the entry into force of the agreement would still be a ways off.
We have a domestic policy leadership position in the case of low-level presence of GM crops, along with global leadership, and we need to complete the same sort of process on MRLs.
Mr. Halstead: We have faith in Canada's scientific regulatory process, and farmers are very innovative people. It does become a little frustrating for farmers when we want to use new technologies but we are being held up by other countries' ability to accept what we feel is safe in Canada, what Canada has scientifically proven as safe, and we need to protect our markets as an industry. It does get frustrating at the farm level when there is technology you would like to use.
Senator Oh: In February 2016, last month, China's General Administration of Quality Supervision, Inspection and Quarantine, or AQSIQ, notified the Canadian Food Inspection Agency that the percentage of foreign material — seeds of other plants or straw — in authorized Canadian canola shipments would decrease from 2/2.5 per cent to 1 per cent. This new phytosanitary measure will be effective on April 1, in less than a month's time. What would be the consequences of this new standard on canola exports to China?
Mr. Innes: Thank you very much, senator, for your question.
As we mentioned in our remarks, China is a very important market for canola. Our relationship with China has grown significantly over the last number of years. I think we've shipped canola to China for over 20 years now.
The question you ask about the potential restrictions on dockage because of concerns around a disease called blackleg is a very pertinent one for our sector right now. The relationship has grown significantly between Canada and China on canola since 2009. In 2010 we had a memorandum of understanding between Canada and China to look at the potential risk for the disease blackleg and how it could affect China. We've done a significant amount of research around that memorandum of understanding that looks at the whole supply chain and at how blackleg is developed in the varieties that we now grow compared to varieties we used to grow. It has looked at a number of different things across the whole value chain.
As you referenced, there are now some concerns around dockage, which is bits of plant material in canola shipments. Brett can further describe it, but when you combine canola and take it off the field, you can't get 100 per cent pure canola because a few bits of leaves and stems are still in the canola that you harvest.
That's where the discussion is right now. As you highlight, there has been a difference of interpretation of the scientific research that we have done in Canada in collaboration with officials from AQSIQ that looks at whether dockage poses a risk to transmit blackleg.
I can say that both the government and the canola industry have invested a significant amount of time, money and effort over the last six years looking at the disease blackleg and how we can work together with our Chinese counterparts to mitigate potential risk that may exist. Those discussions are still ongoing between the Government of Canada and the Government of China around the announcement that has been made. As I say, we have done a significant amount of science and those discussions are ongoing.
Senator Oh: Any comment, Mr. Halstead?
Mr. Halstead: No, Brian covered it off pretty good. You can't get pure canola when you're harvesting. Whether plant parts or weed seeds escape, there is always a little bit left in it.
Senator Oh: This year, 2016, is the International Year of Pulses. As the global leader in pulse production, Canada is planning a series of events and initiatives to celebrate pulses and ensure that they have a bright future both in Canada and around the world. Is the government doing enough in this area?
Mr. Moats: That almost sounds like a loaded question. Every interest in pulses in Canada has engaged in promoting the year and participating in a whole array of activities. We look to government to support us on a variety of things. If you go on the Agriculture and Agri-food Canada website, you can see their video offering to celebrate the International Year of Pulses. We always ask government to do more, but I think we're all behind international year this year.
Senator Beyak: Canadian pulses and Canadian canola are worldwide success stories. I can answer a simple question that everyone in the room knows the answer to, but would you tell the viewers at home who read the Senate reports and watch on CPAC how beans, peas and legumes came to be known as pulses?
Mr. Moats: Good question. I wish I had my little dictionary of Latin translations. There is a word in Latin, puls, that is a kind of soup or potage; so it comes from that. It's been used to define the grain legume category of crops. There are many worldwide — 20-some, I think. We have four main ones in Canada. It is a crop category.
You know what cereal grains are. We want everyone to know what pulse crops are, too.
[Translation]
The Chair: Thank you very much. Your evidence has been very interesting for the committee, and we will undoubtedly have very specific recommendations to include in the report.
In the next part of our meeting, we will have the privilege of hearing from the Association des érablières- transformateurs des produits de l'érable du Québec, represented by Mr. Martin Malenfant, President, and Mr. Pierre St-Germain, Secretary.
Welcome, gentlemen. You have seen how we operate. We are going to give you a few minutes to make your presentation, and after that senators will ask questions. Thank you for appearing. The evidence you provide will be very important for the report we are presenting at the end of June. Without any further ado, I give you the floor.
Martin Malenfant, President, Association des érablières-transformateurs des produits de l'érable: Thank you very much for the invitation, we greatly appreciate it. The association of producers and processors is not a large organization in Quebec. We are, however, working very hard to grow it.
We have prepared a brief on how the Quebec industry works. I will let Mr. St-Germain read through it.
Pierre St-Germain, Secretary, Association des érablières-transformateurs des produits de l'érable: Good evening everyone. We thought we would start by telling you how the system works. To do that, we prepared a table that makes everything a little easier to understand.
The structure of the Quebec maple syrup industry is very specific. Everyone who sells maple syrup and who holds a quota is subject to Quebec's joint plan for maple syrup producers. This joint plan covers two types of products: maple syrup in containers of less than 5 litres and 5 kilograms, and maple syrup in containers of more than 5 litres and 5 kilograms, considered sold in barrels.
The Association des érablières-transformateurs represents maple syrup producers who bottle and market maple syrup in containers of less than 5 litres. The Federation of Quebec Maple Syrup Producers manages a joint plan and a sales agency responsible for marketing. It acts as intermediary for marketing products in barrels of over 5 litres.
You can see in the table we gave you that there are some 500 maple syrup producers in the 5 litres or less category, and 7,000 producers in the more than 5 litre category. A producer who sells less than 5 litres may sell to a distributor or directly to the consumer. Producers who put their syrup in barrels must go through the marketing agency, the Federation of Quebec Maple Syrup Producers, which sells to authorized buyers. The buyers then sell to distributors, who sell to consumers. You can see the distinction.
Producer processors represent the leading-edge maple syrup industry and work diligently on gaining recognition for their distinctiveness throughout the world, as is the case for many global agricultural commodities under different names — farm products, regional products, and reserved designation products.
The definition of a maple product processor is important, as it is entrenched in Quebec legislation. It is a corporate entity that owns or leases a maple stand on which a production quota has been authorized by the Federation of Quebec Maple Syrup Producers. It transforms and bottles its products in containers of less than 5 litres for sale directly to a distributor, food market, or directly to the consumer. That is who we represent.
The association's mission is to promote and advocate for maple product producers. In that capacity, since 2001, the association has intervened on several occasions before the Agricultural Marketing Board seeking recognition for the rights of maple product producers registered under the joint plan. It is also working to have the marketing of maple products in containers of 5 litres or less or 5 kg removed from the joint plan for maple products in Quebec.
In December 2015, a third report, the Gagné report, also recommended this removal from the joint plan. Recommendation 4 in the Gagné report aimed to remove from the plan all production and marketing of maple syrup produced by a producer and sold by this producer, to an intermediary, in containers of less than 5 litres.
It is important to understand that in 2000, the joint plan adopted in Quebec did not include containers or less than 5 litres. Those containers were included in the 2001 joint plan. There is confusion around the issue in Quebec.
The short-term objectives to promote maple product processors involve lobbying the government so that agricultural legislation respects free market enterprise. That is why we support recommendation 4 in the report produced by Mr. Florent Gagné. Another short-term objective is to certify Canada's maple product producers so that their maple products are recognized internationally as "produced and bottled at the maple farm.'' In this regard, the association has had an agreement with Canada Brand for almost six years. You can look at our certification logo.
Our short-term objectives also include promoting and helping our members to comply with food safety standards such as CFIA accreditation and GFSI certification, as well as promoting our members internationally to help them access different niche markets.
Now, here is what the association expects from marketing assistance programs. Since 2007, the association has participated in the Advance Payment Program at Agriculture Canada — or the APP. Thanks to that program, our producers who apply are able to receive cash advances equivalent to 50 per cent of the value of their annual production in stock. This program is highly appreciated and guarantees that our producers have the cash flow they need to promote their businesses.
For a small organization like ours with very limited means, time is precious, and submitting a request for assistance from a program is a complex process. Having communicated with the department to ask about the availability of funds in an announced program, and despite having been told that the funds were still available, no adviser was available to confirm that our application would fit well into the program's objectives.
We believe that small associations like ours would greatly benefit from the services of an adviser in order to better our understanding of certain programs' objectives. That is, generally speaking, our recommendation as it is in this case that we have had some difficulties. And so ends our short presentation.
[English]
Senator Mercer: Thank you very much for being here and for the presentation. It's very helpful, and the graphics make it simple.
I want to commend you for coming tonight. We have had some milder weather, and I thought you would have been off in the sugar bush tending the trees because I keep hearing the sap is running. I appreciate your sacrifice in doing that.
The purpose of our study is international market access priorities for the Canadian agricultural and agri-food sector. Where do you see the opportunities for new sales of Quebec maple syrup?
[Translation]
Mr. Malenfant: The European market is a very interesting one. The United States is still the biggest market for Quebec maple syrup. I believe that we will have to concentrate on promotion in order to make our product known in Europe. A major asset would be to train chefs so that they know how to use our products. The challenge is not exporting our products to Europe, but rather getting it onto the plates of the Europeans.
Mr. St-Germain: In actual fact, maple syrup is sold throughout the world and there are very few places where it is not. However, it is not well-known. Outside the United States and Canada, people do not know what to do with maple syrup. They do not have our knowledge of the product and do not use it regularly. Unfortunately, we're not currently trying to integrate this product into their eating habits.
One of my children is an accredited chef in Europe. He tells me, for example, that in Germany, we may indeed sell them maple syrup — it's the European country that imports the most maple syrup — but they do not know how to prepare it or what to do with it.
This is a problem for maple syrup producers and processors as these are niche markets that we are targeting. Maple producers and processors are not huge production units. They produce up to a 150,000 and some smaller units produce 10,000. These are all lovely niche markets, but we do not have the capacity to show people how to use maple syrup products.
[English]
Senator Mercer: If we create a larger market through the European Union, can we fulfill that demand from existing sugar bushes, or do we need to expand that? Obviously you're talking about Quebec, but maybe we need to expand the sugar bushes across the country to meet demand.
I do agree, Mr. St-Germain, that a lot of people don't know what to do with maple syrup other than put it on pancakes, but it's a much better product than that. I've used it a number of times in baking and preparation of other foods. It adds an awful lot.
If the market is there, can we fill the orders?
[Translation]
Mr. Malenfant: The potential of maple syrup production is significant and we would have no problem dealing with an expansion and meeting demand. Currently, there is still a good growth in maple syrup consumption as well as good growth in new facilities. Currently, one issue is that these facilities are outside of Quebec.
In addition, we are talking about a sugar and not all sugars are of the same quality. However, this is a good quality sugar and there are always markets interested in good quality sugar.
Senator McIntyre: Thank you, gentlemen, for your presentation. I must admit that I love pancakes, pancakes in the English sense of the term like Senator Mercer was saying. I often enjoy some for breakfast, with a splash of delicious Quebec maple syrup. That being said, I would have liked to ask you a question regarding new consumer markets, but Senator Mercer has already raised the issue.
The federal government often implements initiatives to facilitate the development of new markets in Canada and internationally. Have your members been able to benefit from these initiatives? If so, how effective would you say these initiatives are?
Mr. St-Germain: The maple syrup production house for which I am the sales manager sells its products in Australia and in Northern Europe. Distributors have greatly benefited from payment insurance in order to guarantee sales, and that is essential. You no doubt know that when one sells to Australia, the boat can take six weeks to get there. And so when the client is a large grocery chain, generally speaking, we have to wait between three and four months before getting paid. There is therefore a certain degree of uncertainty. Oftentimes, we take risks with niche markets. For exports, it is very important when EDC confirms to us that they will guarantee the sale. If EDC says no, we do not even think about it. It is therefore essential. That is how we secure our sales.
One must also not forget that maple products remain in our facility for one year. We therefore are not too concerned about whether we will be paid on day 90 or on day 100; what worries us is not getting paid at all.
We also mentioned the Advance Payments Program for producers. At the beginning of the joint plan, maple syrup producers and processors did not have this right, as it went through La Financière agricole, which would only fund production in barrels. This was an agreement with the federation. It was officials from Agriculture Canada who came to us to offer the program in Quebec so that our producers could benefit from it.
Before the joint plan, all producers benefited from 50 per cent of their inventory to fund themselves. After the creation of the joint plan, maple syrup producers and processors no longer had this right. This greatly helped our members. I think that members may not even have survived had they lost this option. This is very important as we are talking of sums of up to $400,000, I believe.
Senator McIntyre: I believe that maple syrup production in New Brunswick is in full growth.
Mr. Malenfant: Yes. Everywhere outside of Quebec, production is in full growth. The New Brunswick government unlocked a rather significant maple syrup production potential. There is a great appetite for the product and its consumption. Regarding the Advanced Payments Program, as producers, our production costs all generally occur at the same time. Our yearly expenditures occur for the most part during February, March, April, and May. The Advanced Payments Program is therefore very important to us. Our situation is different than when production occurs throughout the year. We produce, and then sell throughout the rest of the year.
Mr. St-Germain: I would like to add that the current problem is that Quebec has a fixed quota and that production is increasing significantly in the United States. Over the next few years, this will create a lot of competition in the maple syrup industry. Setting a quota is sometimes a good idea, but for us, in our association, we find it harder as the quota hinders our development. We are pleased that the industry in New Brunswick and in Ontario is growing, but growth in the United States is currently very rapid.
Mr. Malenfant: In fact, production in the United States is growing much more rapidly than in New Brunswick and Ontario.
Senator McIntyre: That was just a small comment, Mr. Chair.
It is true that maple syrup is traditionally associated with pancake and waffle consumption. I therefore imagine that your biggest challenge is to create new consumer markets?
Mr. Malenfant: Yes, exactly.
Mr. St-Germain: However, we need to be careful. Australia is a very important market and syrup is sent there in containers. In Quebec, as in the United States, we are used to maple syrup consumption being seasonal. We have realized, in the context of our sales in Australia, that there is no maple syrup season there. We sell maple syrup containers there regularly, all year long, whether it is hot or cold outside. This means that the markets outside of Quebec and the United States do not consume maple syrup in the same way as we do. It is more of a year-round market, which is very interesting.
[English]
Senator Unger: Do maple syrup producers need to buy quota when entering the market, or do you not have quotas in your business?
[Translation]
Mr. St-Germain: To give you an example, our company sells more than its production quota, which forces us to go back and purchase maple syrup from the federation in barrels. This creates a problem, because the syrup that we purchase is much more expensive than what we produce, which decreases our competitiveness on the foreign market with respect to the Americans. It's a bit complicated.
This is why we are advocating that containers of less than 5 litres not be subject to quotas. There is also the fact that several small sugar bushes did not receive a quota when the federation was handing them out. We believe that this would free people up and allow them to access other markets, when they are currently condemned to selling only to consumers. It is extremely difficult to sell syrup to one consumer at a time.
We have been advocating for a long time for containers of less than 5 litres and 5 kilos. When I say "less than 5 kilograms,'' this includes maple sugar, which is calculated by the kilogram. Therefore, in our case, in past years, it represented 50 per cent of our sales that we needed to purchase back in barrels. Frankly, this leads us to purchase outside of Quebec, because, when you buy syrup in barrels, Quebec has the most expensive syrup in the world. It is unfortunate, but that is the way it is.
[English]
Senator Unger: Are there any interprovincial trade issues? You mentioned Ontario. Do you sell to other provinces? Are there any interprovincial barriers?
[Translation]
Mr. St-Germain: There are no obstacles concerning containers of less than 5 L and 5 kilos. We can purchase syrup in the United States, we can purchase it wherever we want, but you will understand that we would prefer to purchase it from our region, because that supports our producers.
In my village, 700,000 maple trees are in production. Our local production is certainly a very significant economic factor in the village. Dairy producers transitioned from dairy to maple syrup production. There was therefore a capitalization that took place. This has a great deal of significance, but there are no restrictions.
The problem is rather the fact that Quebec producers who have barrels cannot avoid going through the federation. This problem does not concern us because we are maple producer-processors.
Mr. Malenfant: I would like to add that, between the provinces, there are no problems. Among producers in New Brunswick, Ontario or Quebec, there are no problems. It is the system that was established in Quebec that causes us problems.
Senator Tardif: Welcome to you both, and thank you for your presentation.
The Government of Quebec recently commissioned a report on the future of the maple syrup industry, the Gagné report, which was hotly contested. If I understand correctly, 1,000 individuals protested in front of the National Assembly of Quebec against the recommendations of this report. It would seem that the individuals who prepared this report stated that Quebec had lost its share of the international market. The statistics showed that the market share had decreased from 80 per cent to 70 per cent of the international market, I believe, and that you are also losing ground in the United States. The United States are the ones who are picking up most of the slack.
Do you agree with the statement that Quebec has lost part of its market share to the Americans? Is this reason for concern?
Mr. Malenfant: What is happening is that production is increasing, consumption is increasing, but we are stagnating in Quebec. There is no more growth, we are not tapping any new trees. The growth is therefore due to producers from Ontario, from New Brunswick and, mainly, from the United States.
Senator Tardif: Why is that?
Mr. Malenfant: It is due to the fact that we have production quotas to follow. We are not taking our share, currently, of consumption growth.
Senator Tardif: Is it only Quebec that imposes quotas? Do the other provinces have them as well?
Mr. Malenfant: No, only Quebec.
Mr. St-Germain: In fact, there have been several periods of stagnation in the maple syrup industry. At a given moment, the industry developed a joint plan. Then, because the federation was having problems, it wanted to create a syrup bank, and the syrup bank was quite imposing. Finally, quotas were set, which created stagnation in Quebec; it no longer taps new maple trees.
The joint plan was implemented in 2001. However, since 2001 the price of maple syrup has never been higher in the world. The price of a pound of syrup is currently at about $2.92. This generated interest among the Americans, who had had little interest in this product previously, because the price of maple syrup fluctuated a great deal previously. After 15 years of stable prices, the Americans finally became interested in the product and started building inventories.
Furthermore, the Ministry of Agriculture produced a study that shows the significance of opportunities offered by the American maple syrup industry with respect to ours. It is estimated that in Quebec, there are roughly 100 million additional maple trees that could be tapped, and the ministry estimates that in the United States, there may be as many as a billion maple trees that could be tapped. This growth has meant that Americans are now showing interest in maple syrup.
In his report, Mr. Gagné did an overview of the entire industry. I read the report in its entirety, and I did not detect any inaccuracies in it. It is an overview of the industry that is a bit worrisome. We need to recognize that the larger maple syrup industry is that of the United States. Traditionally, we sold 70 million pounds of syrup to the United States, and the Americans produced roughly 15 million pounds of maple syrup. Now, they have reached more than 45 million pounds of syrup. The Americans are producing and they have developed an interest in maple syrup, because they are in business, just like we are.
The fear is the loss of market share to the Americans. There are 300 million of them, and they consume a large part of our syrup. Just like us, they consume maple syrup on a regular basis. We have never successfully been able to transfer this habit of consuming maple syrup to other parts of the world. That is what is worrying us.
Senator Tardif: I went to the Calgary maple festival last week. Obviously, a meal was served with baked beans and pancakes with maple syrup. The maple syrup was distributed in small bottles to each person. The maple syrup came from Vermont and was bottled in Ontario. People were very disappointed to see that the maple syrup that was served was not Canadian. For them, it was a great disappointment.
Mr. St-Germain: One of the big dangers currently is the fake maple syrup that is being produced in the world. In Canada, when barrels of maple syrup are sold, there is no requirement for the traceability of the product that is rebottled elsewhere.
We are starting see prices that are so low that we tell ourselves that the syrup cannot be pure. The price is too low, and there is no will to regulate the market, because the only places in the world where maple syrup is bottled according to regulations and subject to inspection are Canada and the United States.
Therefore, if I bottle maple syrup in Australia, I can add rice syrup. No one will know the difference, and I can sell it as though it were real maple syrup. This represents a significant threat for the future. This product is starting to generate interest because of high prices currently.
[English]
Senator Moore: In terms of regulating the quota, it seems that it all ties into the size of the barrel. Does the province issue the five-litre barrels? Is that how you control it?
[Translation]
Mr. Malenfant: In the regulations, a product that is ready to be consumed is less than 5 litres. If it is more than 5 litres, it is considered a bulk product. As producers and processors, we cannot sell a greater volume per container.
[English]
Senator Moore: Does the provincial controlling authority issue the barrels? Are they certified to be a certain size and you can only use those barrels if you want to participate in this production marketing process?
[Translation]
Mr. St-Germain: No. The less than 5 litres and 5 kilos category stems from the fact that, before the joint plan was implemented, certain producers were already selling syrup. When the joint plan was implemented, producers sold to purchasers.
A barrel corresponds to the amount the purchasers purchased, but when the federation and the board developed the joint plan, they had to define what a barrel is, regardless of the quota. Given that this is a production quota, it can be sold either as a product of less than 5 litres, or by the barrel.
What does a barrel represent in terms of quantity? The board decided that the amount producers could traditionally sell to restaurant owners or distributors was 5 litres or less. So a less than 5 litres category was created and it was decided that anything over that would be purchased by syrup processors.
That is how the two categories were created, but the quota remained applicable to both. In Quebec, the quotas were allocated to each sugar bush according to their production statistics before the year 2000.
Senator Dagenais: What I found the most surprising is that Mr. Florent Gagné wrote the report, and I will tell you why. For 39 years, I was a police officer with the Sûreté du Québec, and Mr. Gagné was the director general of the Sûreté du Québec.
Mr. Gagné has produced a report on maple syrup, and I sit on the Standing Senate Committee on Agriculture and Forestry. All that to say that being a police officer can lead to all sorts of things, provided one survives. That is why I was so surprised. May I also say that Mr. Gagné is a former deputy minister, and I think that he has done an excellent job.
That being said, we know that currently there are a number of markets opening up, including those that come under the Trans-Pacific Partnership and the agreement with the European Union. Here is my question. Financially speaking, do maple syrup producers in other provinces do better than those in Quebec, who, relatively speaking, are subject to quotas? I have been listening to you, and it seems that all quotas seem to do is to make you poor.
Mr. Malenfant: What happens is that producers outside Quebec use the sale prices established in Quebec as a basis. They receive the same price and they do not have this entire structure to support and to finance. Personally, I have an additional quota that has not yet been paid to me. For my business alone, that is $450,000. That represents a significant amount of cash that I do not have for the time being.
The way the system works means that anything I produce above and beyond my quota can be sold, but I will not be paid immediately, because before selling these additional quotas, the in-quotas must be sold first.
Senator Dagenais: I am going to ask you a question, but you are not obliged to answer. In the area where I worked for over 24 years, many of my friends were maple syrup producers. One of them even began to produce maple cider or wine. The SAQ got involved. And this initiative did not last long, even though his wine was very good. He was not a former police officer, but I told him to stop. Did you get to the point where you are making maple wine too?
Mr. St-Germain: That is why we are defending maple syrup processing operations because today, they are extremely developed. They are factories, they are certified by the Canada Food Inspection Agency and they sell their products on international markets. They produce all kinds of maple syrup products, including vinegar and salad dressing.
The problem that maple product processors are currently experiencing is that they are included in a joint plan that stipulates that they must pay 12 cents to the federation for each pound sold at markets and they have no resources in order to promote themselves. That is the problem.
This joint plan applies to bulk producers who, it seems, are very happy with it, but maple product processors are penalized because they do not participate in this marketing. It is a bit complicated, but today, sugar bush products are extremely developed. Maple product processors manufacture very high-quality products. We are talking about extraordinarily profitable niche markets.
[English]
Senator Oh: Gentlemen, I heard that Canadian first grade maple syrup has been exported in a big way to Japan. The Japanese are buying the best maple syrup. Is that true?
[Translation]
Mr. St-Germain: I would say that you have to be careful. The Japanese like a very clear syrup, from the beginning of the season. But not all countries consider that the best syrup. It is a matter of culture.
In the United States, for example, the Americans prefer a darker syrup, because traditionally, when syrup is produced in the United States, the season is short and the syrup gets darker. So they prefer a syrup that has more taste. In Japan the culture is different and they like a paler syrup from the beginning of the season. That is perfect, because we need to find markets for each type of syrup and because the clear syrup is produced in smaller quantities than the dark syrup.
We are currently selling syrup in Northern Europe, and I would say that originally, they were used to a very full- bodied syrup. That, for them, is good syrup. So it depends on each region.
[English]
Senator Oh: I was also told that maple syrup is a substitute for people who have diabetes? Is that true? Has it been tested?
[Translation]
Mr. Malenfant: Maple syrup can be used as a substitute, but it is still very sugary. If a person with diabetes consumes maple syrup in large quantities that will cause problems. It may not be as hard on the system, but if you consume a lot of maple syrup and you have diabetes, you will have the same problem because it is still a sugar.
The Chair: To make you feel better, gentlemen, with regard to the opening of European markets, you will not be selling all of your surplus amounts anytime soon. From time to time, when I travel, I bring along a bottle of maple syrup, and last summer, the person whom I gave it to as a gift, a parliamentarian, told me that he found it excellent, but that he diluted it with water, because instead of putting it on pancakes, he drank it. So you have a long way to go.
[English]
Senator Mercer: I started the evening off by thanking you for being here and particularly with the news that the sap is running and there is a lot of work to be done. The question that escaped me at the time is the effect that global warming must be having on the industry. This is a fairly early time for the sap to be running. We have had some starts and finishes where the weather warmed up and then got cold. Is this having a detrimental effect on the industry?
[Translation]
Mr. Malenfant: In the medium term, I believe that there will definitely be an effect, because over the past two years, we have been tapping late in the season, because of climate change and the warming of the Pacific Ocean, where the current was further south early in the season. This year is an El Nino year, and we think it will be a good one. However, climate change is causing major and sudden temperature fluctuations.
The Chair: Gentlemen, the committee thanks you very sincerely for your testimony. We want to see and hear from people like you and producers. It is thanks to you that we will be producing a report for the future. Big business is necessary, but to have a big business, we need small producers. It was a great pleasure for us to hear your presentations this evening.
The committee will be travelling across Canada. Next week, we will be in New Brunswick, and then in Western Canada. The committee will then return to Ottawa to hear from witnesses from Quebec and Ontario, because it is more central and people do not have to travel as far. However we are very pleased to hear from people like you, because that is how we will draft a report that is valid for Canada for the coming years, jointly with farmers.
Thank you very much. I wish you the best production season ever.
(The committee adjourned.)