Proceedings of the Standing Senate Committee on
Agriculture and Forestry
Issue No. 4 - Evidence - Meeting of March 10, 2016
OTTAWA, Thursday, March 10, 2016
The Standing Senate Committee on Agriculture and Forestry met this day at 8:02 a.m. to continue its study on international market access priorities for the Canadian agricultural and agri-food sector.
Senator Ghislain Maltais (Chair) in the chair.
[Translation]
The Chair: The Standing Senate Committee on Agriculture and Forestry is continuing its hearings this morning. I am Senator Ghislain Maltais from Quebec, the chair of this committee. Now I will ask my fellow senators to introduce themselves, beginning with the deputy chair.
[English]
Senator Mercer: Senator Terry Mercer from Nova Scotia.
Senator Merchant: Good morning, Pana Merchant from Saskatchewan.
I apologize, Mr. Chair, but I have to leave very soon because I chair the Standing Joint Committee for the Scrutiny of Regulations. They start at 8:30 and they're across the way in Centre Block. I'll stay just for a little while. I'm sorry about that.
[Translation]
Senator Tardif: Good morning. I am Claudette Tardif from Alberta.
[English]
Senator Unger: Betty Unger from Alberta.
[Translation]
Senator McIntyre: Good morning. I am Paul McIntyre from New Brunswick.
Senator Dagenais: Good morning. I am Jean-Guy Dagenais from Quebec.
[English]
Senator Ogilvie: Kelvin Ogilvie, Nova Scotia.
[Translation]
The Chair: This morning, the committee will be hearing from the president of the Syndicat des producteurs de bleuets du Québec, Marc Larouche; the President of Fruit d'Or, Martin Lemoine, who will be speaking to us about cranberries; and, of course, the Executive Director of the Fédération des producteurs acéricoles du Québec, Simon Trépanier, representing one of Quebec's top industries.
Thank you, gentlemen, for agreeing to appear before the committee. Your input is vital to our study. I think all the committee members are very eager to speak with you this morning. Given that we have only an hour together, I would kindly ask you to show a bit of restraint by keeping your presentations and answers brief, so that we have enough time for everyone's questions. I would ask my fellow senators to do the same when addressing the witnesses. That way, everyone will have an opportunity to ask their questions, which will, no doubt, be very relevant to our study on the agricultural sector.
Mr. Trépanier, you may go ahead.
Simon Trépanier, Executive Director, Fédération des producteurs acéricoles du Québec: Good morning, honourable members of the Senate committee. It's a great honour to appear before you today to discuss the maple syrup industry in Canada and Quebec. I will do my best to keep my presentation as brief as possible. For your reference, I've included a document in French, which will be translated in the next few days, to allow for a more in-depth review of the subject.
I'd like to discuss three issues. First, I'll talk about who the Fédération des producteurs acéricoles du Québec represents and what it does. Second, I'll speak to the export environment for Canada's liquid gold. And, lastly, I will make four recommendations meant to help Canada increase its maple market share and export market all over the world.
Who does the Fédération des producteurs acéricoles du Québec represent? We are a provincial federation representing 12 local unions. Quebec is divided into 12 regional sectors, each made up of producers who appoint provincial representatives in Quebec. We have 7,300 member companies, representing 13,500 maple syrup producers across Quebec. Quebec produces about 90 per cent of Canada's maple syrup. The federation also serves as the coordinator for the Canadian Maple Industry Advisory Committee, which brings together four maple-producing provinces: Nova Scotia, New Brunswick, Quebec and Ontario. New Brunswick and Ontario produce a significant quantity of maple syrup for export, and Nova Scotia, less so. These four provinces make up the Canadian Maple Industry Advisory Committee, on whose behalf I am also appearing before the Senate committee to speak to the export issues facing the industry.
I'm delighted to tell you about 2015, a memorable year for the maple syrup industry, which shattered not just one, but two records. First, 2015 was a record year for Canadian maple product exports. According to Statistics Canada data released in January, in 2015, we broke the previous record, set in 2007. Exporting nearly 93 million pounds of maple products all over the world, our industry raised Canada's visibility on a number of continents.
When Canadians joke about what people in other countries know about Canada, they mention the RCMP and iconic symbols such as the beaver, but maple syrup isn't too far down that list. And that image of Canada really helps us grow our economy. Battered records aside, if you look at the chart on page 6 of our French document, you will see that Canada's annual volume of maple product exports was 93 million pounds last year. If you look at the next page, you will see that Quebec broke the record for bulk maple syrup sales in 2015.
The federation manages a strategic reserve of syrup. We have a warehouse where we store the syrup when Mother Nature is especially generous. In years when she is less so, we use the reserve syrup to supply the market and avoid a shortage, which could be devastating in a market where the supply has to be ideal for exports.
On page 7 of our French document, you will see that the marketing agency's annual sales hit 103 million pounds — another record for 2015, in terms of both Canadian exports and agency sales. As you can clearly see, the maple product industry is hitting its stride.
But Canadian maple has not always enjoyed a high profile. If you look at page 9 of our French document, you will see an interesting graph that shows maple syrup production in the United States versus Canada since 1840. Prior to 1930, the Americans produced significantly more maple syrup than the Canadians did. Since then, however, the opposite has been true, with Canada growing its maple industry.
Over the past 15 years, maple companies on this side of the border have enjoyed an interesting progression. Thanks to having access to trees on Crown land, New Brunswick increased its number of maple taps significantly. Quebec has added 11 million taps in the past 15 years, and Ontario has seen a tremendous increase in direct-to-consumer sales, with the local population representing an important customer base. Ottawa and Toronto are excellent markets for the sale of maple products.
What does the maple industry represent for Canada? Some 13,000 full-time equivalent jobs, as you can see from the table on page 9 of our French document. Clearly, the maple sector cannot employ people on a full-time basis, but, in terms of full-time equivalent employment, it generates 13,000 jobs nationwide, and that's nothing to sneeze at. One of the appendices we've attached is a 2013 study by an independent firm documenting the maple industry's contribution to Canada's economy.
On page 10 of our French document, you will see the industry's contribution to GDP — three quarters of a billion dollars. Even though dairy and pork production each account for a greater share of GDP, at three quarters of a billion dollars, maple has clearly shed the artisanal image it had in the 1960s and 1970s. We have grown into an industry that attracts tremendous capital investments nationwide.
I will wrap up with tax revenues. Economic activities necessarily generate tax revenue for the province, country and municipality. According to a 2013 study by an agro-economist firm, the industry generates a direct return for the government of $136 million in various taxes.
That said, in terms of the big picture, now is not the time to sell ourselves short. We must continue to expand. When it comes to exports, the industry is facing four major challenges. It is often said that a picture is worth a thousand words, and so, I invite you to look at the picture on page 12 of our French document. It's a product sold in France called Canadian Maple Hut Organic Canadian Syrup. On the label, we see an image of a sugar shack with two maple trees, the famous sap buckets and the maple leaf. This product has a maple syrup content of just 5 per cent. For better or for worse, we are competing with fraudulent products in the international marketplace, and that is causing a lot of trouble for the maple industry. Federal government programs such as AgriMarketing and AgriInnovation have gone a long way in supporting the export of Canadian maple products. Other countries are marketing products with little or no maple syrup content. We believe that, through the Senate committee, the federal government should report on the importance of having Canada's maple syrup internationally recognized.
Canada could obtain that recognition through a UN-based tool: the Codex Alimentarius, a collection of food and agriculture texts, produced by the UN, that help governments decide on product descriptions in the context of international agreements. For instance, what makes a cranberry a cranberry? A blueberry a blueberry? Honey honey? Or milk milk? Internationally, it is important for products to have the most exact definitions possible. Maple syrup is not currently one of the products described in the UN's Codex Alimentarius tool. One of our biggest priorities as Canadians should be promoting the addition of maple syrup to the Codex so that lawmakers in other countries can correctly recognize our maple products. It is our view that the Senate committee could help in this endeavour in order to prevent ridiculous product claims like the one we just saw.
Now I'd like to turn to market development. The U.S. is the biggest consumer of Canadian maple syrup, representing 60 per cent of our export market. The competition, however, reigns supreme. Like us, the Americans turn, first and foremost, to the domestic market, preferring to buy locally. So, rather than sit on its laurels, Canada must work to diversify its export markets because it can no longer rely solely on the U.S. We need to export our maple products to other countries. Through the AgriMarketing program, the federation has funded a number of projects around the world, including Japan, the United Kingdom and India. For the past year and a half, we have been marketing Canadian maple syrup in India, and we are setting our sights on countries such as Germany, France and Australia, all of which offer export opportunities. Given the value of the loonie, however, our influence in those markets has diminished. A low dollar helps us when it comes to pricing export products, but hurts us when it comes to buying foreign ad space, as it gives us less purchasing power than we had before. With that in mind, Agriculture and Agri-Food Canada should revisit its priorities to ensure our market diversification influence and government support are maintained. That is our second recommendation.
Now, I'd like to discuss the quality of maple syrup exports. As you know, maple syrup is not a high-risk product in terms of consumer health. It's not the same as meat or dairy products, which are very delicate and susceptible to contamination. Maple syrup is a stable product that is easily exportable. For the past 15 years, the Canadian Food Inspection Agency, or CFIA, has not been involved in the maple syrup verification process, leaving the responsibility of product inspection to the private sector. That is something that can hurt Canada's reputation. Keep in mind that, in 2012, Quebec provincial police discovered a massive maple syrup theft — more than 6 million pounds of maple syrup, worth $19 million, was stolen from the province's strategic reserve. Thirty people were arrested, with some admitting their guilt. The investigation is well under way, but Canada's reputation suffered. Why? Because the thieves used non- food grade containers to export the maple syrup. Fortunately, it never made its way to the public, but the fact remains that the thieves flouted food safety practices. The CFIA should therefore not wash its hands of the process but, instead, help repair maple syrup's reputation and ensure that the product is exported in the proper containers.
And, on page 16 of our French document, we talk about the marketing tools used by maple producers in Quebec. The province enacted legislation authorizing producers to establish the economic levers necessary to coordinate and ensure stable industry supply. Those levers were put in place — including the strategic reserve measure in 2000 — and have paid off. The stability of the market, of pricing and of processing industry supply, as well as increased exports, attests to the success of those levers. It is thanks to them that Quebec's and Canada's industries have flourished.
Without contributing directly to Quebec's tools, producers in other provinces also reap their benefits. It is our view that these tools strengthen the country's entire industry and give it needed structure. Prior to the 1990s and the year 2000, we were at Mother Nature's mercy. When production was good, prices dropped because of oversupply. And when production was low because Mother Nature wasn't so kind, prices tripled, and that had a destabilizing effect on the industry. Put yourself in the place of a maple company wanting to export its product. If it has no way to ensure a steady supply, how can it possibly develop a new market, such as in Sweden or Australia? How is that possible without a guaranteed supply? Thanks to the strategic reserve — one of Quebec's key economic levers — guaranteed supply is possible and both sides can agree on a stable price for two or three years at a time.
Quebec's agriculture minister, Pierre Paradis, commissioned sociologist Florent Gagné to conduct an external industry review. The report, submitted to the Quebec government in February, has caused some concern across Canada's and Quebec's maple industries. Why? Because it has called into question the sector's collective marketing tools. In his report, Mr. Gagné recommended easing and eliminating some of the industry's economic levers, which would take us back to the 1990s, an era when very few tools were available. Quebec's maple industry objects to the report's recommendations. I would urge the committee to spend a few minutes reviewing the analyses and recommendations in the report, not to debate their merits — since that isn't the Senate committee's mandate — but, rather, to give serious consideration to the issues raised. It is our view that, by following through on the report's recommendations, the Quebec government risks triggering instability in the Canadian maple market. Consumers and stakeholders, overall, would not benefit from the recommended approach; instead, those seeking less stringent rules and oversight would. I will end my remarks on that note. Thank you for listening.
The Chair: Thank you very much, Mr. Trépanier. We will now hear from Marc Larouche, President of the Syndicat des producteurs de bleuets du Québec.
Marc Larouche, President, Syndicat des producteurs de bleuets du Québec: Thank you. I would like to begin by thanking the committee for inviting us to talk to you about the wild blueberry industry in Quebec and its significance.
I won't be sticking word for word to the brief I submitted; instead, I will try to explain it in my own words. But the crux of my remarks today is there, in the brief.
First, I'd like to explain what makes a blueberry a wild blueberry, so that you understand the difference. Second, I'll share a bit of background on the Syndicat des producteurs de bleuets du Québec, an organization that represents producers in Quebec. And, finally, I'll provide an overview of the sector, the market, and the issues and needs of producers.
First of all, what are wild blueberries? I would like to make clear that they aren't the blueberries you see in the small see-through plastic containers in the produce section of your grocery store. Those are blueberries that come from the U.S., Chile or some other country. Wild blueberries are blueberries produced only in specific areas where the blueberry already grew naturally. Wild blueberries are not planted but, instead, are developed from native existing stands in the undergrowth. The forest is cleared and physically laid out in a way that allows the existing wild blueberry bushes to fully take over the growing area. The area is then set up so that the blueberries can be harvested using mechanized equipment. To make picking easier, it is necessary to remove stems, branches and bumps. A producer has to wait about 10 years for a blueberry field to really take hold. It takes about 10 years to turn a forest into a blueberry field producing a decent yield.
I would like to point out that only half of the blueberry field's total acreage is harvested. Each year, half of a producer's total acreage is managed to encourage vegetative growth, while the other half is prepared for harvest. The following year, the producer does the reverse. That means that, every year, 50 per cent of the blueberry field bears wild blueberries, while the other 50 per cent is in vegetative growth mode. Every two years, after harvesting, the field is mowed down to the ground, and the vegetation takes root beginning in the first summer. The second summer, it bears fruit. That method produces the best yield.
I should point out that we work very hard to make people aware of the difference between wild blueberries and highbush blueberries, because wild blueberries have distinct properties. Everyone is quite familiar with the health and nutraceutical benefits of wild blueberries, hence the importance of educating the public and, of course, growing wild blueberries. The demand for wild blueberries is on the rise worldwide.
Founded 30 years ago, the Syndicat des producteurs de bleuets du Québec, or SPBQ, is the organization that represents producers in Quebec. When the SPBQ was created, wild blueberry production was essentially confined to the Saguenay—Lac-Saint-Jean region, which is why our joint plan applies only to producers there and just slightly north of the Mauricie Region. Naturally, the objective is to bring all wild blueberry producers under the plan, including those on the North Shore, a producing region that is growing, as well as those in other regions such as Abitibi and Charlevoix.
We have a joint plan, a collective marketing strategy. The SPBQ represents some 300 producers in the Saguenay—Lac-Saint-Jean region, who account for about 85 per cent of Quebec's wild blueberry production.
Among the producers are nine blueberry-picking cooperatives. Each represents a large tract of developed land, between 1,000 and 2,000 acres, for which a cooperative was established, in every community. The Lac-Saint-Jean region is home to nine of them. It's a great system that allows many people to belong to a cooperative; each community has 30 to 40 members per cooperative. Members have to pick wild blueberries, the cooperative is managed in a specific manner, and the revenue benefits the people in the community. It's a wonderful principle that everyone can benefit from.
The SPBQ has been an affiliate of the Union des producteurs agricoles since 2012 and has a seat on its general council.
Now I will provide you with an overview of the wild blueberry sector in Quebec, since I was talking earlier about the SPBQ in the Saguenay—Lac-Saint-Jean region. Quebec has a total wild blueberry acreage of approximately 80,000 acres, or some 35,000 hectares, and 60 per cent of that acreage is on government land, with 40 per cent on privately owned land. Quebec's wild blueberry acreage is broken down as follows: 85 per cent in the Saguenay—Lac-Saint-Jean region; 12 per cent to 15 per cent on the North Shore; and 5 per cent throughout the rest of Quebec. That includes Abitibi, where wild blueberry production is beginning to grow.
Quebec is home to approximately 500 producers in all, with the Saguenay—Lac-Saint-Jean region responsible for the province's second-largest agricultural output. Clearly, then, we are no longer talking about artisanal harvesting. The sector's harvest is second only to the dairy industry in size. You have a handout that provides a cursory look at the sector's economic contribution. Farm production has reached nearly $50 million in value, and if we take processing into account, that's another $100 million. The sector contributes $90 million to GDP. What I find positive is that blueberry sales outside the country generate new money for the regions. Economically speaking, that's excellent news for the regions. The sector currently generates nearly 1,000 full-time jobs.
In terms of processing, Quebec has two main wild blueberry processing companies. I should point out that 98 per cent of processed wild blueberries are frozen. So that means that 98 per cent of the product handled by the two processing plants in the Saguenay—Lac-Saint-Jean region is frozen.
Keep in mind that, when fresh, wild blueberries last just two weeks, making it challenging to sell fresh product during a small window in the year. Since we are dealing with wild plants, they cannot be planted anywhere else in the world. Were it possible to plant them in the southern hemisphere, we could sell blueberries year-round. But that isn't possible. It's a native product that grows in nature, and that makes them rare. I can't stress that enough. Today, the blueberries you can buy at the grocery store look like wild blueberries and seem to have all the properties of wild blueberries. But the fruit develops entirely in its natural environment, without being modified whatsoever. What we are harvesting are wild varieties.
Now I'll talk briefly about the market. In the handout, you have a table that shows where our wild blueberries are sold: 15 per cent of frozen wild blueberries are sold in the Canadian market, while 85 per cent are exported to some 30 countries.
If you look at the chart there, you can see that, over the last 3 years, about 50 per cent of production was exported to the U.S., 35 per cent to Europe, 15 per cent to Asia, and the remainder to other countries. So demand for wild blueberries is on the rise, and that's mainly due to their health benefits. We have groups who come to visit us every year, from countries in Asia such as China and Japan, as well as from Germany. They come to see what wild blueberries are all about and they are always highly impressed. Japan, in particular, is very demanding when it comes to product quality, and is looking to buy the best quality fruit possible. Quality is very important to the Japanese.
Something else I should tell you is that Quebec still has more potential to develop blueberry fields, but a lot of effort is needed to get the word out and, especially, to make people aware of the difference between wild blueberries and highbush blueberries, which are produced all over the world and dominate the markets. We are competing with highbush blueberries.
Without wanting to take anything away from anyone else, we believe the government should support the Wild Blueberry Association of North America, or WBANA for short, as well as AgriMarketing Canada, both of which work to promote wild blueberries right around the world. They need ongoing support, because, otherwise, we will end up being steamrolled by the competition, highbush blueberries — a high-production crop worldwide.
Another point I would like to make concerns the issue facing the wild blueberry sector and producers' needs. I have eight recommendations that I'd like to summarize for you. First, I want to be clear that wild blueberry production in Quebec is not an easy endeavour. When you look at the graph lines in the chart in front of you, you will notice the fluctuations in the wild blueberry line. Some years were great and others, very bad, and that's what we need to avoid. We need to somehow minimize those peaks and valleys, which affect our ability to market our product. What often ends up happening is that we have a great yield one year, where people love the product and ask for more, and then, the next year, we have little or no yield. So that's a problem.
The Chair: I'm going to ask you to speed it up. Time is ticking.
Mr. Larouche: I was just explaining my last point. The biggest problem is freezing. On average, we lose about 50 per cent of our potential crop because the flowers freeze. On cold spring mornings, the flowers simply freeze, destroying the fruit. That's the biggest problem. It's the resulting fluctuations that make it hard for producers to keep production going and cover production costs.
The farm financing and support agency needs to offer more suitable assistance to protect against these fluctuations. It's a fact that the principle underlying evaluation is always based on historical performance, and that performance speaks to the problems we face. We are also in desperate need of research. Wild blueberry production is still a new field; we have been harvesting wild blueberries on a commercial scale for only 30 or 40 years, at most. The SPBQ has invested $1.25 million in research over the past decade. That underscores the need for more research support so that we can achieve better yields and performance.
Quebec's yields are at about 50 per cent of what New Brunswick's are, mostly because of freezing. We aren't competitive right now, so we really need to improve productivity and yields. In fact, in terms of yields, I would say that we produce about a third of what Maine's wild blueberry farms do.
Specifically, it would be advisable to establish a centre of expertise. The Saguenay—Lac-Saint-Jean region is home to the Normandin Research Farm, which conducts agricultural research. Only one researcher is currently working on blueberry production, and that's not enough, in my view. We need to leverage this mechanism by creating a research team dedicated to improving yields and wild blueberry production, overall.
There is no doubt that we need to do more to support the international marketing efforts of the WBANA, the association I mentioned earlier. We also need to do more to sustain family farms, which are vital to regional economies. You are familiar with the trend in agriculture: big business buying up all the farmland. Family farms are important to the wild blueberry sector because of the dynamic environment they give rise to. They also infuse the sector with passion, enthusiasm and pride. Without family farms, the vibrant community dynamic they create is at risk.
My sixth recommendation is, of course, that the government continue its efforts to ratify bilateral agreements with other countries. I mention China because our processors sometimes tell us that, if the tariff barriers with China were lifted, it would be a huge boon to the wild blueberry market. The elimination of tariff barriers, then, would be excellent news for our product, given that 85 per cent of our production is exported. The government should also do more to support advisory groups. Since wild blueberries represent such a new area of production and are a native product that grows in the wild, advisory groups would go a long way towards helping us improve farming practices.
The last point I'd like to make is the importance of promoting wild blueberry consumption, particularly, in public institutions such as schools, hospitals and community centres, as well as among young consumers. All of those measures would boost the wild blueberry industry while reducing health care costs — I can assure you. I will stop there.
The Chair: Thank you kindly, Mr. Larouche. We will now hear from Martin Lemoine from the Association des producteurs de canneberges du Québec.
Martin Lemoine, President, Fruit d'Or: Although I am here today representing Quebec's processing industry, I am the president of Fruit d'Or, a processing company that handles about a third of Quebec's cranberries.
Canada currently supplies about 30 per cent of the world's cranberries. Both coasts are home to cranberry production: British Columbia out west, and mainly Quebec and the maritime provinces out east. Quebec produces nearly two-thirds, or more than 60 per cent of Canada's cranberries. Cranberry farming has grown over the past decade, more than doubling.
I am very proud to say that our industry in Quebec is very competitive, with excellent yields thanks to a northern climate that affords very favourable growing conditions. Quebec has set itself apart by becoming the world's leading producer of organic cranberries. My company has experienced tremendous growth in organic production over the past few years, and that has opened up new opportunities for us in the international arena. This growth has a very positive impact on Canada's reputation, as well.
More than 95 per cent of cranberry yields must be frozen and processed before being sold to consumers. Fruit d'Or exports 80 per cent of its production. The U.S. is one of our biggest customers, accounting for 37 per cent of our export market, as is Europe, which represents a comparable export market. And the emerging Asian market holds tremendous potential for us.
Our top products are dried cranberries and juice concentrate. Our goal is the same as the whole industry's: to have those products processed here, in Canada, as much is possible, in order to generate added value and economic spinoff. With more than $80 million in business, Fruit d'Or, a company that is still growing, isn't doing too badly, production- wise.
On the topic of today's meeting, international markets, I'll keep my remarks fairly brief. I applaud the Canadian government for investing the time in negotiating economic agreements with parties such as Europe, an extremely important market for us. Europe currently has a 17.6-per-cent tariff on dried cranberry products, for example, whereas another cranberry-producing country, Chile, is not subject to any tariffs, thanks to the agreement it has had in place with Europe for more than a decade. And that hurts us. So we are very eager for the agreement with Europe to be approved.
The Canadian government is making tremendous strides when it comes to harmonizing the country's organic standards with those of Japan, the U.S. and Europe — and those efforts are much appreciated. On the Asia front, we believe that the Trans-Pacific Partnership will give us a major boost. Even though it will give us access to markets that are only emerging, the agreement promises to have long-term benefits, from a production standpoint. Last year's trade agreement with South Korea is welcome, but we need to catch up to the Americans, whose agreement was approved a bit sooner than ours. We are truly living in a globalized world with a global marketplace. China holds tremendous potential for us and is probably the market that will experience the most growth in the years ahead; we are already exporting between 4 per cent and 5 per cent of our cranberries to the Chinese.
Cranberry farming is unique to America, with some production in Chile. Production processes are automated and require little in the way of labour. I would say we are fairly well-equipped to stay competitive over the next few decades, here in Canada. There is still significant development potential in Eastern Canada, in terms of cranberry production.
Another consideration is the smooth flow of goods across the U.S. border. I think some work has already been done in that regard. In addition, market development initiatives need to be maintained and bolstered. Processors and those who work to market products outside Canada need support so they can give our cranberry products greater visibility, for instance, by exhibiting Canadian products at international trade shows, which offer us a gateway to other markets. Canada is fortunate because it has an excellent reputation in the international arena.
However, Canada's phytosanitary standards, which are among the strictest in the world, would be one thing that could be improved since they generate additional costs for processors and producers, whether we are talking about protecting the environment or other aspects that are not always applied to imported products.
I think there is work to be done by Canadian customs to monitor the quality of imported products with regard to controlling pesticides or respecting the environment, so as to ensure that the standards being applied are at least equivalent to Canadian standards.
We are no longer competitive if we apply very high standards to our products that are not applied to imported products. Regarding fresh fruit exports, when we export fresh cranberries, there are very strict customs standards involving, for instance, the size of the fruit. However, Americans often send their products to Canada, products that do not respect the American standards. Unfortunately, we really do not have standards at our borders, or very few, which creates unfair competition. This concludes my presentation. Thank you very much.
The Chair: Before we go on to questions, allow me to introduce two other members of the committee: Senator Beyak, from Ontario, and Senator Oh, also from Ontario. The first question will be put by the deputy chair of the committee, Senator Mercer.
[English]
Senator Mercer: Gentlemen, thank you very much for being here. Those were good presentations.
Mr. Trépanier, you very kindly put some recommendations in there that are good, and you might see some of them in our report when we get to write it. Thank you for that.
The question is always one of the availability of land for production of things like cranberries and blueberries, in particular. It takes a fair amount of land to do that. I know blueberries don't necessarily need high-quality land, and cranberries need wetland. It seems that there is an opportunity here for expansion because we do have a fair amount of land that is not as arable as perhaps it might be in Saskatchewan, particularly in the east. Also, we have a fair amount of wetland that would accommodate those crops.
Is there more land coming into production, and is there an impediment to that land coming into production, particularly for blueberries and cranberries?
[Translation]
Mr. Larouche: Wild blueberries are not produced on arable land in the same way as corn, hay or alfalfa. Commercial wild blueberry fields are developed most often in jack pine forests where blueberries were already present, and these are very acid lands that are not appropriate for agriculture. The development of commercial wild blueberry fields does not encroach on existing agricultural land but allows for the expansion of existing agricultural acreage.
Mr. Lemoine: Cranberries used to be produced in wetlands, particularly in the black soil of British Columbia. All of the new developments over the past 10 years have involved sandy soil that produces better yields, and acid soils, because cranberries are the cousins of the wild blueberry. And so cranberries are now produced in rather high level sandy soil, because the land has to be flooded for the harvest. I do not know the Prairies well; there is probably potential there and we would have to determine whether there are sandy soils that would be appropriate for that.
Mr. Larouche: Quebec recently decided to impose a sudden 400 per cent increase on lease tariffs. That is about four times the rate of leases in New Brunswick, which means that we are not competitive at this time. That is why we have asked the Government of Quebec to adjust the leases to make them comparable to those of other provinces, the Maritimes among others.
We also suggested a progressive rate to start up a blueberry farm, because as I was saying earlier, before a farm can be profitable, you have to put in 10 years of work. So if the land lease costs are too high from the outset, it is impossible to expand or to get going.
The Chair: We will have to talk to the Quebec Minister of Agriculture.
Senator McIntyre: Thank you for your presentations, gentlemen. So we have maple syrup and small fruits, especially cranberries and blueberries. All that is missing are pancakes for a good healthy breakfast.
That said, I have two questions. The first one concerns the Trans-Pacific Partnership Agreement, and the second will be about hiring workers.
From listening to Mr. Lemoine's presentation, I understand that Fruit d'Or is favourable to the signature of the Trans-Pacific Partnership Agreement. Very briefly, I would like you to tell me about the concerns of the Syndicat des producteurs de bleuets du Québec and the Fédération des produits acéricoles du Québec.
Regarding labour, at a previous meeting, the committee noted that certain production sectors were having trouble hiring people and were asking for greater flexibility in the hiring of temporary foreign workers. However, the federal government recently announced a complete review of the Temporary Foreign Worker Program. Do you share the concern of these sectors with regard to the hiring of workers? In the affirmative, what should the priorities be in the review of the Temporary Foreign Worker Program?
Mr. Trépanier: Regarding foreign workers, the Fédération des producteurs acéricoles du Québec has asked the Canadian government to recognize the production of maple syrup as a sector that would be entitled to hire foreign workers. Since the workers are often needed for the tapping of the trees, an activity that takes place in January and February, this could allow foreign workers to complete their stay here, which generally involves greenhouse vegetable production or other harvests that take place later in the year. We know the program is being reviewed currently, and we would like maple syrup production to be added to the list of sectors that can access the program.
As for the Trans-Pacific Partnership Agreement, Canada's maple syrup producers are pleased with the negotiations. As my colleagues mentioned, certain tariff barriers have been eliminated. This can only encourage production and export of the product. Will there be an impact on the price of the product for foreign consumers? Sometimes, other links in the chain will go and get the 10 to 15 per cent in tax that has been removed. However, in the final analysis, the fact of having lower taxes is a positive thing for production and exports, and so we are happy with this agreement.
Mr. Larouche: Of course we appreciate the elimination of tariff barriers, and we would like to see this continue. Wild blueberries are grown solely in northeastern North America, that is to say in Quebec, the Maritimes and Maine. They are not grown anywhere else. There is no reason to impose tariff barriers, since we are not creating competition with other outside wild blueberry producers. And so we are firmly behind this initiative, and we appreciate the improvements in this regard given that 80 per cent of our product is sold outside of Canada.
Regarding foreign workers, we are starting to need them. On family blueberry farms, by definition, the family does the harvesting. It is a nice family activity, a little bit like grape harvests in Europe.
Mr. Lemoine: As for foreign workers, we support the position of the Conseil de la transformation alimentaire du Québec. As producers, we have foreign workers in the summer as seasonal workers. These workers are very important. The delays caused trouble for us last year. Workers arrived late and we were unable to do the weeding as we would have liked. During the short harvest period, we must continue to be able to use foreign workers in our plants. It is impossible to find enough workers during that short two-month period. In our region, everyone harvests cranberries, and there are not enough workers. And so we must continue to be able to benefit from that advantage.
Senator Tardif: I thank all three of you for your excellent presentations. My questions will be for Mr. Trépanier.
Tuesday, we heard representatives from the Association des érablières-transformateurs des produits de l'érable. They told the committee that quotas should be eliminated in Quebec as it is the only province that has quotas on maple syrup. Eliminating these quotas would make the product more competitive. However, you seem to have a different point of view. Do you think that maintaining quotas makes your product more competitive on international markets?
Secondly, you put a great deal of emphasis on research. I believe you invested approximately $7 million in research projects since 2005. What has been the impact of these research projects on the competitiveness and the productivity of your industry?
Mr. Trépanier: You raise a very good question, in the context of the Gagné report which was released by the government a month ago. Broadly speaking, in Quebec, there are two main industry stakeholders. On the one hand you have the producers, who have 7,000 farms. On the other, there are approximately 50 authorized bulk maple syrup buyers. That is for all intents and purposes the maple syrup that is exported.
Between the two there is a group of approximately 10 businesses that are both producers and transformers. Those are the ones you heard from. Without wanting to denigrate their leadership or their sense of entrepreneurship, these businesses currently benefit from the stability of marketing tools that were created in Quebec. What this group is seeking currently is to be freed from constraints which producers adopted democratically, in order to increase their production and exports. If some stakeholders are allowed to benefit from a complete liberalization of the market, that will mean that other producers will lose those markets.
As an industry, do we want to go back to the 1990s when there were no limits on production? This meant that when the price of the product was high, people increased their production. When there was overproduction, the price dropped from $3 a pound to $1 a pound. This great fluctuation in the price of the product that existed before quotas meant that some enterprises were able to survive, but each year, we saw some of them go under. Imagine having a budget for a $3-a-pound product and having the price drop to $1 a pound. Some managed to get through the crisis, but the majority of them didn't.
Quotas limit the number of trees tapped, but do not constitute a limit on production, and it is important to point that out. However, the producer may improve his productivity and increase the number of pounds of syrup produced with the number of authorized taps. This group wants to profit from the opening of markets to find new ones. However, at this time, the processors, who buy product in bulk, are the ones who are opening up those markets.
Basically, the production quotas in place ensure the stability of prices and of development. If you look at the 2015 records, you can see that removing that tool will not allow the Canadian maple industry to develop. This group will develop, but it will do so to the detriment of the entire maple industry, and I think that would not be a good thing for the Canadian economy.
As for research —
The Chair: I apologize, but before we discuss research, Senator Unger would have an additional question.
[English]
Senator Unger: My question is for Mr. Trépanier. You used the word "tools.'' That means supply management, right?
Mr. Trépanier: It is not exactly the supply management that we know as it exists in milk and egg production. We are exporting the product, so they are not exactly the same tools, but they are tools that are feasible in Quebec, essentially.
Senator Unger: What percentage of producers support the current system, and what process is in place for producers who want to change the system if they are unhappy with it?
Mr. Trépanier: For four years now we have been doing a scientific survey every year to ask all of our members if they are happy with the way the federation is dealing with maple syrup in Quebec. For the last four years, the survey has said that 75 per cent of our members are happy or very happy about the way we are dealing with their product in Quebec.
Twenty-five per cent of the people are not happy, but one of the major things about those people who are not happy is the fact that they would like to receive money from the sale of their product more quickly.
What you have to understand is because we built up a 15-year strategic reserve of maple syrup back in 2000, it is helping to stabilize the needs of the packers. But when you put syrup in reserve, the producers are not paid, obviously. Some producers don't want to participate in that reserve, but the reserve brings to the industry a stable price and stable demand for the packers.
If those producers are not happy, you have to know that they don't want to contribute to the reserve. This is one of their major concerns. Do they want us to basically dismantle all those tools? Probably not, but the point is that with 75 per cent happiness, do we have to withdraw all the tools that have been developed?
Senator Unger: Still, if people are unhappy, smaller producers should be able to export their own products without having to join your system. Is that possible? Can they make a living?
Mr. Trépanier: Yes. There are two ways of exporting your product. You can sell directly to consumers in small bottles — for example, in jugs — or you can export elsewhere, to grocery stores or markets. It's not a problem. It's possible.
If you want to export in bulk, you have to buy back your product. We have to realize that in Quebec, there's the Association of Maple Syrup Packers. That industry is basically buying the product at the price we set with them. We have to realize that those people who are exporting 90 per cent of the product from Canada are buying it at a stable price. They don't want to have to compete with others who want to bypass the system and buy back the product at a lower price.
That's why the stabilization we brought in in Quebec is good for the producers, especially the smaller ones. When you're selling your product to Costco, are you able to negotiate with Costco when you are a small producer in a rural part of your province? Sometimes it's better to work together to make sure you are able to deal with Costco, Walmart, or Sobeys. Sobeys is looking for a large amount of syrup.
[Translation]
Senator Dagenais: My question is addressed to Mr. Trépanier. This evening our Prime Minister is at the White House and he may eat some maple cake made with Vermont maple syrup. It's too bad to ruin such a good cake. When the Queen came to Canada in June 2010, she had the opportunity of tasting a dessert made with real maple syrup. You referred to the Gagné report and to producers who are concerned about the market. Our American neighbors are now producing maple syrup, a little bit like oil. They produce it and keep it for themselves, which has an adverse effect on our U.S. export market. Have you thought of a strategy to avoid a drop in exports to the U.S., since that is our main market?
Mr. Trépanier: In fact, Canadian maple product exports to the U.S. have increased over the past five years, which is surprising. Why? Because the increase in American demand is such that Americans cannot meet it. Two of the big importers of Quebec maple syrup are maple syrup bottling enterprises in Vermont. If you purchase maple syrup in the United States, on the container it says that the product is bottled in Vermont. And yet, in 90 per cent of cases, it contains Canadian maple syrup. Reporters will not go so far as to ask where the maple syrup bottled in Vermont came from, but most of the time it is Canadian maple syrup.
[English]
Senator Oh: Thank you, gentlemen.
I have visited the British Columbia blueberry production area in the Lower Mainland. It claims to be the largest production area in the world for blueberries. I've never been to the Quebec area, but I'd love to have a chance to see it.
What about the prices? Can you compare British Columbia and Quebec on prices?
[Translation]
Mr. Larouche: According to data obtained from the Food Institute, or export derived prices, the cost of wild blueberries is generally higher than that of blueberries grown in British Columbia. It is more difficult to grow wild blueberries. The yields are smaller, it costs more, and it is not the same product. Since wild blueberries are what they are, we are talking about 20 cents, 25 cents, or 30 cents a pound more for wild blueberries, but the price can sometimes vary according to certain factors.
The Chair: Gentlemen, I thank you most sincerely for your testimony. I am convinced that you are going to find a good number of your recommendations in our final report. We wish you an excellent crop. Maple syrup production has begun, and then wild blueberries and cranberries will be harvested. We wish you a good trip back home.
Our next guests are Les Producteurs de lait du Québec, with Mr. Alain Bourbeau, Director General, and the Fédération des producteurs d'oeufs du Québec; Mr. Serge Lebeau is secretary and Mr. Emmanuel Destrijker is a member of the board of directors. Welcome, gentlemen. Thank you for having accepted the committee's invitation; your presence is very important to us. However, since our time is limited, I am going to ask you to make your presentations as quickly as possible so that senators may have more time to ask their questions. I know they have a lot of interest in this. However, the meeting must end at 10 o'clock.
Serge Lebeau, Secretary, Fédération des producteurs d'oeufs du Québec: With your permission, I will read my text, which will allow me to keep to the seven minutes we have been given. On behalf of all of our producer members, the Fédération des producteurs d'oeufs du Québec wishes to thank the Standing Senate Committee on Agriculture and Forestry for having allowed us to table this brief. It presents an overview of egg production in Quebec and sets out our sector's viewpoint with regard to international markets.
Before getting into the substance of the matter, allow me to say a few words about our organization. The Fédération des producteurs d'oeufs du Québec represents 111 egg producers in Quebec. Quebec is the second largest egg producing province in Canada. We have 4.5 million hens that lay 117 million dozen eggs per year. This volume for the most part meets Quebecers' need for shell eggs, that is to say the eggs you probably eat at home in the morning. The average Quebec farm has more than 39,000 laying hens. By comparison, the average American farm has 1.1 million.
Egg production in Quebec generates annual revenues of close to $300 million, and creates jobs for more than 3,000 people. There is a chart in the brief that presents the highlights of the table egg sector in Quebec.
I would now like to say a few words on the regulatory system which governs our production and supply management system. In 1972, the federal Parliament passed a federal law, the Farm Products Marketing Agencies Act. This law allows for the control of production by taking into account historical production by province. It also led to the signing of the federal-provincial agreement to put in place a comprehensive Canadian egg marketing and supply management system.
It also enabled the creation of the National Farm Products Council, today known as the Farm Products Council of Canada, and the Canadian Egg Marketing Agency, which has been renamed Egg Farmers of Canada. More specifically, supply management is a mechanism which allows dairy, poultry and egg producers in Quebec and Canada to adjust their production so as to meet the needs of our consumers.
These productions are mainly destined for the domestic market. This system causes no distortion on international markets since its main objective is to supply the domestic market. Supply managed productions represent 40 per cent of the income generated by Quebec agriculture. They represent close to 30 per cent of agricultural income in Ontario and 20 per cent of agricultural income in all of Canada. In the maritime provinces, they account for 33 per cent of income generated by all agricultural production.
Originally, almost 45 years ago, supply management was put in place in order to stabilize farmers' income and put an end to the massive injection of government funds to support producers. These systems still make complete sense today, and there is no doubt that they are beneficial for all of Quebec and Canadian society. Consumers have access to high quality products in sufficient quantities at reasonable prices.
Producers receive an income from the market that is based on their production costs, and processors benefit from great stability in their supply as well as enviable financial results. This mode of production promotes an agriculture that is respectful of resources and persons, effective agriculture on a human scale, throughout all of Quebec and Canada.
As for our sector's priorities regarding international markets, it is important that we mention that our objective since the adoption of the 1972 federal Farm Products Marketing Agencies Act is mainly to supply the domestic market and not to export. In fact, Canadian egg and egg product exports made up less than 1 per cent of total production in 2015.
Our work is thus focused on developing the domestic market and has been for 45 years. Our efforts have been successful, since consumption increased by 38 per cent from 2010 to 2015. It is also important to mention that the federation is not against exporting agricultural and agri-food products. Our production and marketing system, and the very nature of our product, which is fresh and undergoes little processing, distances us however from that objective. The high protein content of our product, together with its low cost, leads us to believe that our sector will continue to grow over the next few years, even if we focus our efforts on the domestic market.
Access to international markets has more to do for us with access Canada has granted in trade negotiations. There is the free trade agreement with the United States, the free trade agreement between Canada, the U.S. and Mexico, NAFTA, and the agreement with the World Trade Organization, without forgetting, more recently — although it is not finalized — the Trans-Pacific Partnership.
Through those agreements, Canada gives access to 21.4 million dozen eggs today. Those quantities will increase by 19 million dozen once the Trans-Pacific Partnership has been ratified. That 40 million dozen will represent 6 per cent of Canadian production. We believe that, to preserve our system, those imports must be limited, or we will reach an undesirable tipping point.
In closing, although the Fédération des producteurs d'œufs du Québec is not against the exporting of agricultural and food products, we will focus our efforts over the next few years, as we have done in the past, on developing the domestic market. The market access Canada has granted in trade agreements must be limited to its current levels.
Consequently, we are asking the federal government to maintain the conditions necessary for effective supply management by protecting the three pillars that ensure the system's sustainability — control of production and importing, and a price policy covering production costs.
As the famous author Eugène Ionesco said in a play written in 1954, "the future is in eggs,'' even though our efforts are basically focused on the Quebec and Canadian markets.
Alain Bourbeau, Director General, Les Producteurs de lait du Québec: Thank you for welcoming us this morning. I will not read the text I have submitted to you; I will summarize it. I invite you to consult the document, and I will refer to certain passages, just so I can move quickly.
Les Producteurs de lait du Québec is a democratic organization that represents the 5,600 dairy farms in Quebec. It is responsible for negotiating the terms of sale for milk on behalf of all of the province's producers. As you can see on page 4, the dairy sector is very important in our province. It contributes to nearly 80,000 direct and indirect jobs. We are talking about approximately $2.4 billion in terms of farm value and a contribution of about $6 billion to the GDP, not to mention the tax revenues at the municipal, provincial and federal levels, amounting to $1.3 billion. I would also like to point out that the nearly 6,000 farms are small businesses that invest a few tens or hundreds of thousands of dollars, and we estimate that their annual contribution to the investment is $300 million, which represents a major contribution to the Canadian economy.
My presentation will be divided into three segments. The first intends to highlight our expectations, especially regarding the government in two aspects. I will then briefly explain how our sector can distinguish itself in a trade context. I will then make some comments on competitiveness.
As for our expectations of the government, I will talk about two of them. The first has to do with trade agreements. We are very clearly in favour of trade agreements our country can conclude with other partners. We understand that Canada is a country whose prosperity is closely linked to international trade and, as a result, we support it.
However, we have a degree of sensitivity. We know that all countries have offensive targets and defensive targets in a negotiation, as well as sensitive sectors. In the last two significant negotiations Canada carried out, major concessions were made in terms of the dairy sector.
So what we are asking the government is to consider the possibility — if these agreements have been overall beneficial for our country and our sector had to make concessions for them to be concluded — that a matching compensation also be recognized for our sector. That is the essence of the requests set out on page 6 of our presentation. Basically, it's a matter of maintaining programs provided last October by the previous government that are currently under review.
The second issue that I would like to bring to your attention and that is covered on page 7 of our document is the importing of milk proteins. Of course, we are not against importing milk proteins, but that should be done in compliance with trade agreements that have been negotiated in good faith with our partners. Some administrative decisions have been made that we feel do not comply with the spirit and the letter of the agreements negotiated.
Diafiltered milk concentrates are currently considered to be simple concentrates, and they can enter the country duty free. However, when the issue is considered in light of the CFIAs' regulatory application, that agency is not being consistent with the other agency, and that creates a non-competitive situation for our producers and leads to significant costs, as described in our document.
Our requests are set out on page 8 of the document, and we have put forward a certain number of solutions. This issue was raised and recognized by all the parties during the election campaign, so there is a consensus on the nature of the problem and the solutions. The only thing missing is a political will to resolve the situation.
I would now like to very briefly explain how our sector can distinguish itself when it comes to pursuing markets. Canadian milk is produced in accordance with high quality standards. With today's consumers, we cannot settle for telling them that we are good; we have to prove it. We have undertaken the implementation of a certification system, with independent auditing, to cover six key modules concerning our production practices that will help confirm production standards in terms of quality, risk management, animal welfare, traceability, biosecurity and the environment.
The implementation of those modules is partially completed, and we have a timeframe that stretches over a few years. The first three modules are already covered. Animal welfare, biosecurity and the environment will be covered in the next few years. It is clear that government support to foster and encourage the implementation of those programs would certainly be appreciated, and perhaps the compensation programs that have been mentioned will be an opportunity to highlight that aspect.
Finally, let's talk about the competitiveness of our companies, covered on page 9. What may have been a failure in the latest negotiation is the fact that Canada did not adopt an approach that resulted in a level playing field with other countries, since our agricultural policy in the dairy sector is based on a tariff policy, while the agricultural policy of the countries we have negotiated with is based on internal support.
However, those internal support policies were excluded in the negotiation, and that put our sector and Canada at a disadvantage. In the future, we believe such negotiations should either exclude the agricultural sector or make sure that the other countries also take their agricultural policy into account in the negotiation.
I will now briefly discuss processing companies. The cheese processing sector will be affected by the arrival of fine cheeses over the next few years. Canada's fine cheese industry is primarily located in Quebec and is mainly supported by artisans, people with relatively small businesses. They have excellent products, but they unfortunately do not have the critical mass of expertise and the resources needed to participate in export markets. To do that, they would need support to acquire market intelligence, penetrate distribution networks, and pursue market opportunities based on the value added of their products.
In closing, I would say that certain administrative and commercial decisions have hurt dairy producers over the last few years. The government has the power to intervene and must do so to maintain a strong domestic dairy sector. Export potential is not mainly found in value-added markets or in commodity markets, which are served by countries that use grants to financially support their dairy production. We have to build on the distinctive quality of our production and support processors in the development of innovative products and in their marketing ability.
The Chair: Thank you. The deputy chair of the committee will ask the first question.
[English]
Senator Mercer: Mr. Lebeau, in your presentation you talked about a tipping point. Those were your words, a "tipping point'' that would cause some issues. Could you elaborate a little more on that for us, please?
[Translation]
Mr. Lebeau: Yes, of course. With the Trans-Pacific Partnership, we will increase access to our market by up to 6 per cent. Of course, the more that market access increases, the more the system, which is supply management, is put in jeopardy. A time will come when, if this keeps increasing and we are flooded by products from abroad, it will be extremely difficult to maintain the current system. That is what I wanted to say about the tipping point. Is the figure 6 per cent, 7 per cent or 8 per cent? It is hard to say; it may be 5 per cent. What I was basically saying is that the access should not be unduly increased, as we risk putting the supply management sector in jeopardy. That is what I wanted to say.
[English]
Senator Mercer: I've been on a number of farms of egg producers in Canada. Some have been large, but some have been very successful small family farms producing eggs. Our American friends, because of the size of their, would look at those farms with some surprise that they are there and that they are surviving and thriving.
I frequently refer to the dairy farmers of Quebec as the most powerful lobby group in the country, collectively. They are to be commended for that, because they work together and get their message across.
As we have discussed here, I have been a little surprised by supply management groups who have said that they are supportive of the TPP, but they always have a "but.'' What is the big "but'' for the dairy farmers here? Is it cheese?
[Translation]
Mr. Bourbeau: Here is what the problem is when it comes to trade agreements. When we say that everything is on the table, that is not quite the case for our partners. Canada's agricultural policy in terms of dairy products is based on tariff mechanisms. The U.S. agricultural policy is based on a budget policy.
In the negotiations of the Trans-Pacific Partnership, internal support policies were not placed on the table by the other countries. That is basically the "but'' you referred to earlier. So in this negotiation, Canada was asked to make concessions in terms of its agricultural policy, while other countries, whose agricultural policy is based on internal support, were not asked to do the same.
It is clear that, in this context, our sensitivity was very high and we did not want to allow our market to be more open than the markets of our competitors. For example, Canada currently imports about 8 per cent of its dairy product consumption. In the last two agreements we negotiated, that access will be 14 per cent, and it will be guaranteed. Europe and the United States import about 1 per cent to 3 per cent of their domestic consumption. Despite Canada's supply management, we could say that our markets are much more open than those of our competitors.
Senator McIntyre: My question is for Mr. Bourbeau. You mentioned the issue of milk proteins and piqued my interest a bit. I understand that there is diafiltered milk and there are milk proteins, and I also understand that diafiltered milk from the United States is duty-free, while milk proteins are subject to tariff quotas.
That said, are Quebec dairy producers still collectively against mass imports of diafiltered milk from the United States? I know that this was the case in the past, but is it still a major problem?
Mr. Bourbeau: Yes, it is. Thank you for raising this issue. I appeared yesterday before the House of Commons agriculture committee, and the topic of the public meeting was milk protein. We are still extremely concerned by that issue, and especially by the lack of consistency in the actions of the Canada Border Services Agency and the Canadian Food Inspection Agency.
As you understood and pointed out, when those products come into the country, if they are dry, their concentration is higher than 85 per cent. They are classified under chapter 35 of customs tariffs and are basically duty-free. They are considered an ingredient in cheese-making and their use is allowed within certain limits.
The issue with diafiltered milk is that it is the liquid form of the other product. Here is the protein content of that form: for 100 kilograms of the product, there are about 15 kilograms to 17 kilograms in solid form. Here is how we understand that. A proportion of 15 per cent is basically a concentrate and should be classified under chapter 4. Our interpretation differs when it comes to that.
We are also arguing that this is a concentrate for the Canada Border Services Agency. If diafiltered milk in its liquid form is considered a concentrate, the CFIA should also consider it an ingredient and manage the level of use based on its regulations. That is currently a source of inconsistency, and that is what we are asking the government to remedy.
Senator McIntyre: Do I have time for a second question?
The Chair: Yes, go ahead.
Senator McIntyre: Mr. Bourbeau, I also understand that last year — I think it was in the summer of 2015 — some dairy producers had to get rid of their skim milk, as they could not sell it on the Canadian market. I also understand that the situation is explained by a significant demand in terms of butter and cream, as well as an inadequate processing capacity and a low demand for liquid milk. Do you think that the Trans-Pacific Partnership would be a good opportunity for your sector to develop new markets and so avoid overproduction?
Mr. Bourbeau: Thank you again. I would like to start by specifying that no farm milk was thrown away in the summer of 2015. All milk in Quebec underwent primary processing. Skim milk is a by-product of butter-making; of course, that product can be enhanced, and significant production of or strong demand for cream and butter is good news for the industry. However, as a result, a certain amount of skim milk could unfortunately not be dried.
I do not believe that the Trans-Pacific Partnership per se is the best solution, although it certainly can open the door to some export markets. We already export as much skim milk powder as we can; the main problem is that the ingredients we import displace the potential uses of that skim milk, in a way, even though it is offered at a competitive price.
I would like to reassure you that milk was not discarded, it was skim milk. The cream was recovered but that by- product unfortunately could not be dried. If time allowed, I could explain it to you in much greater detail because a number of factors are involved. I could also explain to you some industrial choices that are made in order to make cheese as a priority, for example. It means that butter processing capacity has been used by some by-products.
Senator McIntyre: Thank you, you have reassured me and you have addressed my concerns.
Senator Dagenais: My thanks to our guests.
I would like to go back to the issue of supply management. I go to the United States regularly and I will give you a concrete example. I — well, my wife, because she does the groceries, but we were together — bought a dozen eggs at Maxis for $4.50 and curiously, three weeks later, we bought a dozen eggs at Winn-Dixie for $1.50. My wife pointed out that the eggs were the same. We also bought four litres of milk for $1.99. It is all very well to say that the quality is better here, but, to my knowledge, no Americans have died from eating eggs and drinking milk.
Supply management keeps prices higher in Canada. Do you not think that could harm us at some stage, because of the various agreements that have been signed? The Americans will be very aggressive of course. I am sure that you will have a good answer so I am going to listen to you and then I will call my wife to explain it to her.
Mr. Bourbeau: Thank you for raising that issue because, you are right, it is often brought up. It is true that, when you look at a basket of products, there are differences. If you take the lowest price in the United States and the highest price in Canada, of course the examples that you provide are real. However, when you take that basket of products and you look all around the United States, there is no American price, there are several prices as there are in Canada. If you look at the appendices of the document that I have given you, we deal with that question.
The difference is not substantial. If, for example, you compare a litre of milk in different countries, the United States, Canada or even in Europe, you are probably looking at about $1.50 or $1.80, depending on the format. Yes, some comparisons do us no favours, but overall, the difference is not significant. We also have to understand that the subsidy program in the United States means that, at first sight, the price may seem a little higher, but producers have received a subsidy for their production. There are also indirect subsidies: the drinking water access program in the United States is not considered an agricultural subsidy, but a number of irrigation canals in California are maintained with money from the American army. Subtle things like that make comparison difficult.
Before I let my colleagues speak, I will wrap up by saying that the final price of a lot of products has nothing to do with the milk they start with. Take cheese, for example. In all the varieties of cheese you eat, there is about seven dollars' worth of milk. That seven dollars' worth of milk is the same, whether you are eating Brie at $50 or Cheddar at $15. If you sold them at half price, there would not be a lot of difference in the end. You have to understand that many products in Canada that are not under supply management are still more expensive than products that are. Factors such as the size of our markets and the structure of the distribution networks can make products more expensive in Canada than in the United States, for a host of reasons other than supply management.
Senator Dagenais: Good answer.
Emmanuel Destrijker, Member of the Board of Directors, Fédération des Producteurs d'œufs du Québec: There is a point I would like to add, Senator. I was also in the United States two weeks ago — I am not as fortunate as you; I get the groceries when we go down there — and I paid $2.59 for a dozen eggs at Publix, in Florida. That is a long way from $1.50. The other point is that, in Quebec, our producer price dropped by nine cents about two weeks ago. We have not seen that drop passed on to the price consumers pay. Yes, sometimes our producer price goes down, but that drop is rarely passed on to the consumer price. But when the producer price goes up, it is often passed on. Little things like that mean that there can be considerable gaps between the price consumers pay and the price producers receive.
Senator Dagenais: Here's a tip for you: don't go to Publix, get the Winn-Dixie card instead. They have specials on Thursdays.
Senator Tardif: I read recently that the Producteurs de lait du Québec had changed their marketing strategy because of the new trade climate and agreements like the Trans-Pacific Partnership and the one with the European Union. Is that new marketing strategy only intended to defend market share in Canada or do you want to take advantage of those international agreements and find new markets?
Mr. Bourbeau: Yes, we did change our agency in order to support our marketing efforts and plans. We are going to try to develop ourselves in a different way along different lines, in order to establish a clearer link with our practices, the way we produce milk, the profession, so to speak. It will be all about showing Canadians where their product comes from, how it is made, and about putting them at ease about its quality. It is a little like what I was describing in the appendix, showing that Canadian milk has added value thanks to the values of those who produce it and to the discipline they impose on themselves in order to protect the environment, for bio-security reasons.
You have to understand that the export market for agricultural products is extremely volatile. Generally speaking, all countries produce for their own needs first. I mentioned that a little earlier: apart from New Zealand, which is a very particular agricultural model, the place of dairy production in international trade is relatively marginal. About eight to nine per cent of the world's dairy production is traded internationally. Yes, exports can be an interesting market, but, to feed the planet, we need all the kinds of agriculture on the planet, and they cannot all be similar. Canada is a northern country, for example. The capital with which we produce our goods is human capital, and producing food with human capital implies constraints. If we want Canadian agriculture to keep being prosperous, we must first of all make sure that Canadian agriculture is strong and that it will serve those of us who are already here in Canada. Basically, because our milk is of higher quality and our artisan cheesemakers have specific expertise, we can certainly bank on those value-added products to win markets. That we can do.
Senator Tardif: Is it the same thing for eggs?
Mr. Lebeau: Yes, it is. I would add something that I pointed out in my brief. Since we are talking about American producers, eggs are a product that does not travel over long distances very well. I mentioned that an average farm in the United States has 1.1 million chickens whereas in Canada, the average is about 22,000 chickens. Five American producers produce as much in a year as Canada does in its entirety. The production is extremely integrated.
So I feel that trying to compete with producers like that would be impossible. If we removed the tariffs tomorrow morning, we would be able to count the number of producers who could stay in Canada on the fingers of one hand. Our southern neighbour produces on a scale that is completely different from our own.
We have not changed our advertising agency, though.
[English]
Senator Oh: According to a Fraser Institute study, the potential benefit of the TPP agreement to Canada is estimated at 0.5 per cent of GDP, or $9.9 billion. Can you comment on this estimate? Have you done any assessment of the TPP's economic impact on your sector?
[Translation]
Mr. Bourbeau: Actually, our understanding of the Trans-Pacific Partnership trade agreement for Canada was first that it was all about a strategic objective to be an active partner in an agreement that represents a major potential over the long term. Canada could ill afford not to be aboard a train that could be taking our freight to new horizons. Canada already had a trade agreement with the four major member countries; we already had a free trade agreement with the United States; we have them with a number of TPP member countries. We already had that ability to trade. The new countries are not a major issue for Canada, at least in the short term, as the Fraser Institute confirms. Somewhat similar studies in the United States show that there will not be major benefits per se, in the short term at least. However, from a more strategic, long-term perspective, we understand that Canada's primary interest was in being part of that economic club.
Mr. Lebeau: From our point of view, the fact of focusing on more markets will certainly have an impact, in the dairy sector, the poultry sector, or in our sector. The previous government did not decide that they had to provide producers and processors with compensation for no reason. The government even agreed beforehand that there would be an impact on us. Yes, basically, the 2.5 per cent that we are going to give up represents production that producers will not be able to realize and there will certainly be a financial impact.
Mr. Bourbeau: I can add something to that. We have to understand that, if you want to have access to other people's markets, you have to have prices that are low enough to let you in. It is difficult to penetrate markets in other countries because their internal prices are lower. Take the European Union, for example. It is very difficult to penetrate their market and it not because of tariffs. They get subsidies on their prices so producers are able to handle much lower prices. The obstacle to getting in is not a tariff, but the effect of a subsidy that allows producers to handle lower prices. It is another way they have of protecting their market.
[English]
Senator Beyak: For the benefit of the people watching these telecasts, I am always amazed at how many Canadians do read our Senate reports and watch. Senator McIntyre referred to diafiltered milk and to liquid protein. Could you expand on the new products that are available to consumers so that they know what they are buying, whether it is Canadian or American?
[Translation]
Mr. Bourbeau: I can give you some indication of the nature of this product. When the cow produces milk, there are three main groups of nutrients: fat, protein and lactose. To make cheese, protein is the most important. When protein is in an acidic environment or with certain bacteria, it will clump together, much like the way milk coagulates in orange juice. That is how you make cheese. When you take that portion of the milk and remove the water, you obtain protein concentrate. Milk is composed of 85 per cent water and 15 per cent solids. In 100 litres of milk, there are approximately 4 kg of fat, 3.5 kg of protein, and 5 kg of lactose and other solids. We are interested in the portion of protein that will help make cheese more quickly.
In terms of quality, there are no real downsides. Consumers have no need for concern. However, the milk produced in the United States is not necessarily subject to the same environmental and health requirements regarding veterinary drugs. Social practices are not the same either. In Canada, our workers must meet standards. You are certainly aware that, throughout the American southwest, many workers have no clear status. Let us be clear: there is cheap labour working in conditions that we would not tolerate here in Canada. The origin of the ingredients is especially important. I want to reassure you that there is no need to worry about the products that contain these ingredients, but ethically and commercially, it is not in the best interests of our people to choose them.
[English]
Senator Moore: Thank you, gentlemen, for being here.
Mr. Bourbeau, I have a question for you with regard to your presentation. It follows Senator McIntyre's question with regard to the diafiltered milk. You talked about the lack of consistency between the Canada Border Services Agency and the Canadian Food Inspection Agency. The Canada Border Services Agency does not set tariffs. It is my understanding that they enforce. So why would a Canadian agency make rulings that would hurt, in this case, Canadian dairy farmers? Are American exporters arriving at the border and somehow pushing some trade regulation under the nose of the CBSA and saying, "You have to interpret it this way?'' I am sure that if the shoe were on the other foot and Canadians were trying to export into the U.S., they would not get a favourable interpretation. How is this happening?
[Translation]
Mr. Bourbeau: Yes, you are right. The Canada Border Services Agency does not set the tariffs. The trade agreements do. The agency plays an interpretive role and decides which product belongs in which category. The first decisions are made at the border. Canada Border Services Agency determines, for example, that product A is diafiltered milk, which must be entered under Chapter 35 as a dairy ingredient. When the CFIA comes across this product, it should label it as an ingredient and protein concentrate of more than 85 per cent. The problem right now is that, when the product passes by the Canada Border Services Agency, it is labelled as an ingredient of more than 85 per cent. When the same product comes to the CFIA, it is not an ingredient, it is milk. The oversight between the two agencies is not ongoing or constant. That's where I identify a lack of consistency.
[English]
Senator Moore: I understand that. Who has the final say here? Is it the Minister of Agriculture? This has been going on for a couple of years, and it cost our farmers $200 million last year; maybe the same again this year. I don't know, but this can't be good.
I read a comment in your brief where the minister said certain things about it. He is aware of it. He knows it is serious, blah, blah, blah, but who and what has to be done? Is it for him to tell them? He doesn't have any authority over CBSA; that is Public Safety. But someone has to tell CBSA to adhere to the CFIA interpretation and rules. Who does that?
[Translation]
Mr. Bourbeau: The answer to your question is on page 6 of our document. All this requires cooperation. This issue falls under several ministerial responsibilities. It's like watching a never-ending ping-pong match. Our first recommendation is to create an interdepartmental committee that would bring all the decision-makers together in one room. Canada Border Services Agency reports to the Department of Public Safety. The CFIA is under the responsibility of two ministers. All public health issues are the responsibility of the Minister of Health. The economic and administrative regulations are the responsibility of the Minister of Agriculture. Regulations on cheese manufacturing standards fall under the Department of Agriculture. Clearly, there is a lack of communication. When one department makes an interpretation, the other agency should make the same interpretation. The Minister of Agriculture is responsible for the CFIA implementing the regulations on cheese. Manufacturing standards do not prevent innovation. The standards are designed to reassure consumers that the product they buy is actually cheese. We must call a spade a spade. If you manufacture something else, don't call it cheese. All countries follow standards and Canada must not be an exception.
The Chair: You must know that Canada is recognized as one of the best milk producers in the world. The same is true about the quality of our eggs. However, I'm not impressed with your marketing. I'm a grandfather, and I buy milk on Saturdays, but I have to go around the entire store before I find the aisle with dairy products and eggs. The same goes for all supermarkets. Is there no way of ensuring that dairy products come after the vegetables when you enter the store? Maybe those in charge of your marketing might consider that idea.
Mr. Bourbeau: Let me give you a very quick answer. As an analogy, we sell trees, and the milk that you buy is the furniture. Our side deals more with the raw materials. Do you know why retailers do that? It's because dairy products and eggs are very much a part of the diets of most Canadians. Their goal is to make you go through the entire store and expose you to all the other products. I'm not making this up. That is why, in all grocery stores, the counter farthest from the door is dairy. This forces consumers to pass 50,000 other stimuli and to buy other products. I can assure you that we have pointed this out before, but we have not been successful. If you bring it up too, maybe we will correct the situation.
The Chair: So once you reach the dairy aisle, the cart is full of other things, and there is hardly any room for the milk and eggs.
Mr. Bourbeau: So their mission is accomplished.
The Chair: Thank you very much for coming. You will certainly find some of your recommendations in our report. Thank you for taking the time to come here, because it is very important to us. Thank you and have a safe trip home.
Mr. Bourbeau: Thank you for having us.
The Chair: I ask the senators to stay for a few minutes after our guests have left the room, because we have another point to discuss.
This morning, each of you has received a copy of our budget for 2016. This is a budget proposal. It is your responsibility to approve, question or change it. You are the authors. We will present it to the budget committee.
Senator Tardif: Do you have some dates in mind?
The Chair: For the trips, or the deadline for introducing the budget?
Senator Tardif: Both.
The Chair: The clerk of the committee will answer.
Kevin Pittman, Clerk of the Committee: In a few words, we will suggest the weeks in May. We will choose the weeks that generate the most interest. As for the trip, dates will be determined depending on the dates of the exhibition we want to attend.
Aïcha Coulibaly, Analyst, Library of Parliament: The exhibition will take place from November 7 to 9.
[English]
The Chair: Senator Moore, do you have a question?
Senator Moore: With regard to the submission of the budget, is that something we'll do today? It has to go to Internal. When will it go there?
Mr. Pittman: The particular date hasn't been determined, but the process, with the break week coming up, would be that we adopt it now in anticipation of.
Senator Moore: Would you like a motion, chair?
I move:
That the following budget application, as it pertains to our order of reference dealing with international market access, for $401,236 for the fiscal year ending March 31, 2017, be approved for submission to the Standing Committee on Internal Economy, Budgets and Administration following a final review by the Senate administration, that will be overseen by the Subcommittee on Agenda and Procedure.
[Translation]
The Chair: Does everyone agree?
Hon. Senators: Agreed.
The Chair: Carried. With that, we adjourn.
(The committee adjourned.)