Proceedings of the Standing Senate Committee on
Agriculture and Forestry
Issue No. 5 - Evidence - Meeting of March 14, 2016
MONCTON, Monday, March 14, 2016
The Standing Senate Committee on Agriculture and Forestry met this day at 9 a.m. to study international market access priorities for the Canadian agricultural and agri-food sector.
Senator Ghislain Maltais (Chair) in the chair.
[English]
The Chair: I welcome you to this meeting of the Standing Senate Committee on Agriculture and Forestry. I'm Senator Ghislain Maltais from Quebec, chair of this committee. I would like to start by asking the senators to introduce themselves, beginning with the deputy chair.
Senator Mercer: I'm Senator Mercer from Nova Scotia.
Senator McIntyre: Senator McIntyre, New Brunswick.
Senator Oh: Senator Oh, Ontario.
Senator Poirier: Senator Rose-May Poirier, New Brunswick. I'm not a regular member on the committee, but being from New Brunswick I thought I would come this morning.
Senator Hubley: Senator Hubley from Prince Edward Island. I'm also a visiting member of the committee, but it's a great committee and I'm glad to be here.
The Chair: Thank you very much. Today the committee is continuing its study from the last Parliament on international market access priorities for the Canadian agriculture and agri-food sector.
Today, we are very happy to be here in Moncton to hear from Atlantic Canadian government departments and stakeholders involved in the sectors of agriculture and agri-food. Thank you very much, gentlemen and ladies for attending this morning. It's a great pleasure for the committee to have you here.
Today we have the great pleasure to welcome, from the Government of Prince Edward Island, Mr. Alan McIsaac, Minister of Agriculture and Fisheries; and Mr. John Jamieson, Deputy Minister of the Department of Agriculture and Fisheries.
From the Government of New Brunswick, we have Ms. Cathy LaRochelle, Assistant Deputy Minister for Industry Programs and Policy, Department of Agriculture, Aquaculture and Fisheries; and Ms. Shirley Stuible, Director of Policy and Economic Analysis, Department of Agriculture, Aquaculture and Fisheries.
From the Government of Newfoundland and Labrador, we have Mr. Keith Deering, Assistant Deputy Minister, Agrifoods, Forestry and Agriculture Agency.
Mr. McIsaac, we'll hear from you first.
Alan McIsaac, Minister of Agriculture and Fisheries, Government of Prince Edward Island: Thank you very much. It is indeed a pleasure to be here. Thank you for the invitation to appear before your committee. It's great to see the Senate taking great interest in agriculture because on Prince Edward Island that is our number one industry. I know the Senate committee is responsible for agriculture and forestry. Forestry was under this department prior to the last election but has now been moved over to the communities, land and environment. However, our department looks after agriculture and fisheries, and we would like to make a small presentation with regard to our markets, our priorities and our concerns.
So, we have a fly sheet that we'll pass out and we'll just flip through that for a few moments, if that's okay.
We're going to begin with international markets. There's a graph there that shows the international exports and top categories equating to $1.29 billion for 2015. The farm and fisheries and food processing sectors of P.E.I. are the true economic generators. I was telling Senator Oh before that in our province we do not base our economy on oil like many of the other provinces do; it's agriculture, fisheries and tourism. We often say that our agriculture, the beautiful farms — and I invite each and every one of you to come and see how beautiful it really is on the Island, maybe in the middle of the summer — our fisheries, shorelines and fishing villages and things like that are what really drives our tourism. So it takes our fisheries and our agriculture to really drive our third largest industry and that is tourism, and I think you'll see that if you visit the Island in the middle of the summer when everything is really flying along really well.
Internationally, Prince Edward Island exported more than a billion dollars' worth of goods. The major categories are listed on the slide and you can see the importance of primary production, the food processing that is dependent upon that production. As important as international exports are, Prince Edward Island's trade in goods and services with the rest of Canada exceeds the values of our international exports, $1.4 billion in 2012, the last year for which the statistics are available. Nova Scotia, New Brunswick, Quebec, Ontario and Alberta represent 87 per cent of Prince Edward Island's interprovincial exports. The major interprovincial exports are very similar to the international exports with the addition of dairy products and 85 per cent of P.E.I.'s milk production, which is the highest percentage in Canada, is manufactured in European-style cheeses, evaporated milk and other products. Although our province has only 0.46 per cent of the population of Canada, we provide just under two per cent of the industrial milk, and a lot of our industrial product goes into havarti and feta; those are the major cheeses from our plant in Summerside. We also manufacture almost 50 per cent of the evaporated milk produced in Canada at our ADL plant.
On the international market, destinations, you can see from the graph there, the United States, of course, is our largest customer, taking up to 65 per cent of our exports. The top products to the U.S. include potatoes, both frozen and fresh, for a value of $245 million; lobsters, in the frozen category, $87 million, in the prepared or preserved category, $45 million; and mussels, live, fresh or chilled, $37 million.
It was interesting. Last weekend we were down at the Boston Seafood Show. A lot of times you go into the States and you mention you're from P.E.I. they'll ask "Where's that?'' We jumped into a cab. We were going out to an event and the cabby asked us, "Where are you from?'' I said Prince Edward Island, and he said, "Man, I love your Prince Edward Island mussels.'' We're really becoming famous in our province for mussels. We produce about 80 per cent of the mussels in Canada — our little province of P.E.I. — and they are a definite treat.
So, again, when you come to our province in the summer to visit, get a feed of those. You can get a feed of them all year around, so whenever or wherever you see them — you'll see them in menus right across Canada — take the opportunity to taste some of the product of P.E.I.
The U.S. market is critical to Prince Edward Island and will remain critical in the future. However, P.E.I.'s international export dependence on the U.S. has declined from 75 per cent in 2006 to the current 65 per cent, even though the value of all exports has increased by approximately $600 million, but they certainly are our largest trading partner.
Market access priorities: growing our exports for sure. P.E.I.'s seeking development of a comprehensive Canadian market strategy program with other provinces and the federal government to leverage value from new trade agreements. The other is promoting our food sector. There's a website there on our Food Island Partnership which we really put in gear in the last year or so to grow our economy by declaring ourselves as Canada's food island. That's exactly what we are all about in our economy.
My ministerial mandate from Premier MacLauchlan directs me to increase the GDP contribution generated through primary agriculture and fisheries and food processing. We've said many times at many meetings with groups that the Premier has challenged my deputy and me to grow the Island economy through our industries because they are our first and second largest industry and we are working very hard at that. He also wants to enhance earnings from international markets in agri-food, seafood and food processing.
This is the point here: Prince Edward Island is seeking development of a comprehensive Canadian market strategy program with the other provinces and the federal government to leverage value from new trade agreements. We need, as Canadians, to be complementing rather than competing with each other. For example, can we use P.E.I. mussels to help promote Ontario beef in Japan? Or can we use Manitoba pork and B.C. wines to promote P.E.I. turboprop service expertise in the EU, or P.E.I. cheese used to complement seafood from Newfoundland and Labrador in Singapore?
As an example, P.E.I. and Ontario just went on a trade mission to India, working together collaboratively and travelling together to promote what we have in our provinces. Even on the trade mission to India, we were developing trade between Ontario and P.E.I. My deputy is going up to a meeting in the middle of March to see a contact that our premier made while on that trade mission to India. It's through these trade missions that we can grow together, help sell our products internationally, and as well build trade interprovincially.
Another example of working together as Canadians is our lobster levy. I don't know if you've followed the matter — for sure, the Maritime senators likely have — but on P.E.I. now we've passed legislation and put regulations in place to collect two cents a pound basically, some from the harvester, some from the processor, for generic marketing. It's not for brand marketing; it's generic marketing for Canadian lobster.
In our meetings at the Boston Seafood Show with the ministers from New Brunswick, Nova Scotia and Newfoundland, and also with Minister Tootoo from Ottawa, we talked about how we're taking this money, but we are promoting the Canadian flag, you might as well say, because, internationally, when people look at our lobster they see Canadian lobster before they see Prince Edward Island lobster, or whatever that might be. We, as provinces, are working together to use that money to promote lobster overall at the Canadian level. We think that's really good. We're not competing against our partners from Nova Scotia or New Brunswick, we're working together to grow that market and by promoting Canadian lobster. We need to do that not only for lobsters but for other products as well.
Our Food Island Partnership — as mentioned above there and the website is there — will be a key P.E.I. initiative to support the growth and the success of the P.E.I. food businesses and to enhance international marketing. The division is to establish and promote Prince Edward Island as an internationally recognized place of origin for premium food product and destination for culinary excellence.
We need to continue to build in our own province so we can work with our neighbours and show them what we have. We are doing some promotion as well for the province We have some tractor trailers that, over the last year, we've wrapped with scenic pictures of P.E.I., our potatoes and our seafood They've travelled right across Canada and down through the States, even as far as California promoting the Prince Edward Island product.
Some concerns are market access, the importance of the U.S. market and sustainable production, and we're going to touch on climate change here as well.
With regard to market access, as tariffs on goods are lowered and eliminated, the need to prevent and resolve non- tariff trade issues quickly is enhanced, and we're really pleased with that. We see the benefit of the CETA and the TPP in many of our commodities. We also have concerns with regard to how those trade deals will be implicated in our supply-managed commodities.
The importance of the U.S. market highlights the need, from the P.E.I. perspective, for the federal government and its agencies, such as the CFIA, to maintain close relationships with our counterparts in the U.S. Department of Agriculture. For example, the benefits of maintaining relationships helps facilitate day-to-day business and becomes critical when issues with the potential to cause serious trade disruptions, such as the potato wart in 2014, come to the forefront. The potato wart issue is an example of what a good understanding of the science and established relations between CFIA and USDA can do. The issue was resolved with only minor disruptions to the trade of fresh potatoes. Back in the early 2000s, we had a real shutdown in our industry because of this very wart issue. We didn't have the connections there that have since been made. They actually had wart in the States, and although we hadn't found wart here our borders were closed; P.E.I. was zoned out. New Brunswick could still export potatoes, but P.E.I. was zoned out because of the wart. It devastated our potato industry there. Now, with the better relationship, we can get by little hurdles like that, or major hurdles in some ways.
Sustainable production: Increasing the products of the land and sea and the food products manufactured from them we have to demonstrate good environmental stewardship practices. We were just over here in Moncton last week talking about social license, and it's something that all our representatives for the various commodities are working on right now. They all have codes of practice in the dairy, hog and chicken industries. We have to have that because our consumers are key to our future; we know that. We have to prove to them, show them and grow that message that we are producing our food and our fish, whatever it may be, in a responsible manner. It's very, very important and it's becoming one of the largest topics in our industry these days.
Climate change is real and it's having an impact on P.E.I. For example, an assessment of the 1981 to 2010 weather, normal period, indicates a minor but consistent trend toward a decrease in rainfall during the growing season. There's a more consistent trend to change in rainfall distribution and less rainfall during the early part of the growing season, April, May and June. So, we're getting less rainfall in that time frame. There is an increasing pressure for the use of irrigation for certain crops to ensure production is there for the export markets. P.E.I. currently is considering the impacts of all water in use in the province. Through the development of a comprehensive water act and enhanced soil management it hopes to strike a balance which will enable agriculture and aquaculture production and, at the same time, protect the integrity of all of P.E.I.'s environment. It is a big issue on P.E.I., the lower rainfall and the demand for more water for our potatoes. About 65 per cent of our crop goes into the processing of french fries. Cavendish Farms, which buys the majority of that, is demanding a larger, longer potato for their french fries. That takes more water and there's a pressure on us to have more irrigation. We have a moratorium on drilling more deep water wells outside of the municipalities.
Senator Hubley, you well know, it's a big concern.
We haven't lifted the moratorium, but we are studying that, and we're coming in with a new water act. We are holding hearings right across the province to get input from our people with regard to this issue. We know agriculture is our number one industry, we have to grow our potatoes, it's our number one export for sure, but all our water on P.E.I. is taken from groundwater so it's a big concern. We have lots of science that tells a story, we're not all in agreement with what it might be saying, so it's a big issue and a tough issue to deal with at the present time but it's one our government is going to have to face fairly shortly.
In conclusion, as an exporting province, P.E.I. is determined to build on its success and grow both international and domestic markets. Market support by the federal government is essential. Market priorities should be cooperation oriented rather than competition oriented to ensure all Canadian exports grow, and we must strive to ensure our production systems and methods evolve to demonstrate long-term sustainability.
We have a great industry on P.E.I., we're doing relatively well at the present time. We're looking at new crops and we're definitely looking down the road to the future of where our potato industry may go. We're looking at our soil science, what the shape of our soil is and how we can maintain it. This is basic to our number one industry; it's of great concern to us and we need to grow our economy through this industry. We can't do it at the expense of our soils, that's for sure.
We're ready to entertain questions.
The Chair: Thank you, Mr. Minister.
Mr. Jamieson, do you have something to add?
John Jamieson, Deputy Minister, Department of Agriculture and Fisheries, Government of Prince Edward Island: I'll just support the minister. If there are any comments that I can add, I think the minister did a good job just giving an overview.
The Chair: We will hear from all the presenters, and then senators will ask questions.
It's a real pleasure for us to have Keith Deering with us from the Government of Newfoundland and Labrador. Welcome.
Keith Deering, Assistant Deputy Minister, Agrifoods, Forestry and Agrifoods Agency, Government of Newfoundland and Labrador: Thank you, senator, and good morning to the other senators.
Thank you for the opportunity to represent Newfoundland and Labrador at this important hearing. As we approach the middle of this century, many are predicting that we are approaching a global food crisis. The decisions that we make in 2016 could be critically important, not just for the future trade and market access abroad, but also for the security of food for our own people. While the next decade will present many opportunities for development, we will also face many challenges, and I am happy to provide you with Newfoundland and Labrador's perspective on this very important issue.
Prior to 1950, Newfoundlanders and Labradorians were self-sufficient in our food requirements. Our population at that time not only enjoyed an abundance of seafood, but we also had an abundance of agriculture products. At that time, we had about 20,000 people living and working on farms throughout the province. As transportation networks became more sophisticated, we became more comfortable with importing food from other parts of Canada and certainly the world. Today, while we are self-sufficient in dairy and eggs, and nearly self-sufficient in chicken, we are importing a vast majority of most other food products. Also, although we are more or less self-sufficient in the supply- managed commodities, we still find that we have to import almost all of the grains and feed requirements necessary for this production. We have been taking measured steps to correct this in recent years.
So, as you can see in slide number two, I regret that this one isn't in colour but you can see the distribution of where most agriculture production is taking place throughout the province. The other important point that I'd raise in this particular slide is that only about one per cent of the land base of insular Newfoundland is considered arable. While most of our farms are located in eastern Newfoundland, you can see the cluster on the Northeast Avalon — this is where our population is most concentrated — most of our best farmland is actually located in central and western Newfoundland. It is in these areas where most of our larger farms are located and where most of our new development is taking place. At about 25,000 acres, our current agriculture production footprint is relatively small. That said, we have some of the largest and most modern dairy and poultry farms in the country. Through our cost-shared programs, we've been able to build our industry using the latest innovations and technology. We have had the benefit of being able to use the most recent research to build our sector using best management practices throughout the value chain.
We are currently developing a strategy that will effectively quadruple our current agriculture production land base over the next 15 years. While our current production is valued at about $500 million, this could easily exceed $2 billion in the next decade. Although we are focused on our domestic requirements, we are also very interested in export opportunities.
Slide three talks a little bit about our farm cash receipts, and in this slide, you'll see that dairy represents about 36 per cent of the total agricultural output. Chicken represents about 23 per cent and a same consistent growth since 2006, probably very much aligned with the rest of Canada. Eggs represent our third highest valued commodity at about 14 per cent. As you can see, our supply-managed commodities figure very prominently in our agriculture industry, which is very much in contrast with what you'll find in much of the rest of Canada. It certainly does demonstrate the importance of supply management in Newfoundland and Labrador. Since future growth opportunities and primary production will be limited in these commodities, you should expect to see the most significant growth in our crops sector, as well as in greenhouse production.
On slide four are a few pictures of our grain production in Newfoundland. You'd be probably shocked to know that we import about 70,000 tonnes of grain annually to feed our livestock sector and this is valued at about $28 million a year. Through our own research and development efforts, we've been clearly able to demonstrate the viability of production of some of these commodities in Newfoundland and Labrador, and this segment is now poised for significant growth. Of course, as we become more self-sufficient in grains, we would also expect not only to improve the competitiveness of our current livestock producers, but we would also expect growth in many of the livestock commodities for which we are currently heavily reliant on imports.
Slide five: It is in black and white and probably looks like a dirt road to most of you, and I really wish it was in colour, particularly for my P.E.I. counterparts. What you'll find if this were in colour is bright red soils much like what you find in Prince Edward Island. Newfoundland's reputation as being a rock is a little bit of a myth, particularly out in western Newfoundland. In the near term, we will be very much focused on expanding our primary production land base. We will create opportunities for new entrants and we will reduce red tape for existing farmers to expand their potential. In spite of the fact that only a small fraction of our land base is arable, we do have expansive, contiguous areas that look like the area pictured here, which is in western Newfoundland. Our minister's recent mandate letter has given very specific direction to make more land available for agriculture use and to simplify the application process.
Slide six highlights the importance of young farmers to our province. As the median age of farmers in Newfoundland and Labrador is 58 years old, it's probably on track to be the highest demographic in the country. Statistically, this is among the highest in the country and causes us some significant concern. While past experience will be crucial in moving our sector forward, it could be argued that our most important agricultural import at the moment is young people coming home to our province to work in agriculture. We are very encouraged to see this trend unfold over the past few years and we look forward to changing our current demographic. We feel that the future of our industry depends on it. Similarly, we feel that we need to focus more attention on farm succession. Again, this slide provides a profile of a young family who have evolved to one of the most modern and progressive dairy operations in our province. They have also received national profile for their work and were recently named as Atlantic Canada's young farmers of the year.
On slide seven, I'll talk a little bit about our exports. Indeed, much work needs to be done on exports. We have recently had a new government elected in Newfoundland and Labrador, and we have been sent some very strong and positive signals that continued progress is expected on this important issue. Like many other provinces, we face a very difficult fiscal situation in the near term, and agriculture development is seen as a priority area for stimulation of growth in our economy.
All that said, we have been actively exporting a number of agricultural products for many years. From an environmental perspective, we have developed a leading edge fur sector. Our products have become very well received in international markets, mainly China, and it has been by far our biggest export. In 2012, fur exports were valued at over $20 million. As most of you are probably aware, this sector has seen a bit of a dip in recent years and lower prices have caused the overall value of this export to dip in 2014. Our final numbers are not yet available for 2015, but we are expecting the numbers to be down again. This industry does expect this trajectory to change over the next couple of years.
We have an abundance of land base to grow cranberries very well. We have been working in partnership with the federal government to develop a healthy and strong cranberry sector. While our goal is to achieve enough production to establish local processing capacity, up to this point, most all of our production has been exported to Europe. The product has been very well received in these markets, and we have also had strong interest recently from Caribbean countries. We expect to achieve sufficient production for processing within the next three years.
We have had some difficulty in Newfoundland and Labrador with processing industrial milk. While we have had investments in larger scale cheese and yogurt production, these plants have not survived and, today, we export all of our industrial milk quota. This makes us very vulnerable, and we have faced several circumstances whereby we have been asked to dump industrial milk because of interruptions in ferry schedules across the gulf or because of industrial production in Nova Scotia. While we have been able to avert crisis in most cases, we recognize that we must establish large scale industrial processing in Newfoundland in order to solve this problem. We do have one small artisan cheese producer currently, and we think this operation is poised for significant growth, not only in domestic markets but also in international markets. Our current exports in dairy are limited to small volumes of ice cream products to Europe, and these products are also very well received in these markets.
While we continue to make progress on our food security targets and objectives, we also recognize that this will eventually create opportunities for export growth.
We have a small but growing wine sector which has been doing a great job on marketing their products. We have also had very good success recently with growing grapes in western and central Newfoundland which could grow the wine sector as well over the next decade. The brand that you see on the wine bottle in this particular slide is called "Three Sheets to the Wind.'' Most folks have probably seen Newfoundland's tourism commercials. The laundry drying on clotheslines has become an iconic symbol of Newfoundland's tourism and, in fact, this particular variety has become one of the top sellers to alcohol stores and wineries.
We have a small sheep industry which not only apparently has a seemingly insatiable market domestically, it was recently featured on the front page of the Wall Street Journal as a very special product. American markets are calling it 'salt water lamb.'' I'm not sure that there's a big difference in Newfoundland sheep compared to sheep produced in other places, but the picture, again, if you were able to see it in colour, is a very striking example of how most sheep are produced on the east coast of the province.
While we continue to expand the volume of cranberries being exported, we very much hope to be exporting processed cranberry products very soon.
The issue of bee health has been a very high profile issue globally over the past few years. Newfoundland and Labrador has been profiled as one of only a few places left in the world with disease-free bees, and this is seen by many as a significant opportunity for growth and export. We have an apiculture industry which seems to be organizing around this potential, and is rapidly building momentum.
Here is my last slide. I took this picture this past weekend at the grocery store closest to my house. Unfortunately, I seem to be seeing it a lot more in recent years than I ever did before. I'm sure you would understand that in 2016, this is a topic of widespread discussion in our province. I would suggest that this is probably our biggest social license issue. While most folks have to deal with significant public pressure on a negative aspect of agriculture, our biggest complaint is that we're not producing enough. And quite frequently we see these signs in some of our biggest grocery store chains throughout Newfoundland. If the ferry schedules become interrupted for even a couple of days, we soon find store shelves bare quite quickly, and that's a huge issue for us.
In closing, we are quite proud of the leadership that our federal government has provided on the issues of international trade and market access. We figure we benefit today from the groundwork that is being laid on this, and we are quite confident that we will benefit from it even more as our industry continues to grow.
I thank you for the opportunity to be here today and I'm happy to take any questions.
The Chair: Thank you very much, Mr. Deering.
Ms. Cathy LaRochelle, from New Brunswick, now has the floor.
Cathy LaRochelle, Assistant Deputy Minister for Industry Programs and Policy, Department of Agriculture, Aquaculture and Fisheries, Government of New Brunswick: Good morning, senators. It's a pleasure to be here this morning. We sent our PowerPoint presentation in advance; it should be in your package. My intention isn't to go through the whole presentation, but I think I'll go through the first five or six slides.
As far as recent statistics, the New Brunswick agriculture and agri-food sector is a very important economic generator in the province of New Brunswick. The sector has over 2,600 farms and approximately 140 processing plants. In 2014, the sector generated farm cash receipts of close to $570 million, and processed agri-food products worth over $1 billion. Total exports were estimated at $400 million in 2014.
Moving to the next slide, called "Diversification of the Agriculture Sector in New Brunswick'', you can see that we do have a diversified industry. Potatoes are our largest crop for farm cash receipts, but like many of the other provinces we are heavily weighted on supply-managed industries, dairy, poultry and eggs. Supply management ranges anywhere between 35 and 45 per cent of our farm cash receipts in any one year, depending on how the other commodities are doing on farm cash receipts.
Turning to current export information, New Brunswick's main agriculture and agri-food exports are potatoes and potato products at $220 million, beer at $47 million, and maple products at $10 million. New Brunswick is actually one of the largest wild blueberry producers in the world, in fact. But, currently, our blueberries are mainly processed and exported through Nova Scotia so they don't appear within our statistics. However, that could change with a large new processing facility nearing completion in northeastern New Brunswick. It should be ready for this fall's harvest.
New Brunswick's key agri-food export markets are United States, Japan, Costa Rica, Venezuela and Mexico. According to 2014 statistics, United States purchased the largest share of our agri-food exports at more than 80 per cent. It should be noted that New Brunswick currently exports an average of only $5 million per year to the EU but, moving forward, we expect that to increase.
Turning to the slide called "Opportunities from Recent Agreements,'' New Brunswick is very supportive of trade agreements and the economic benefits that they bring to the province. Specifically under CETA, export gains might be expected when tariffs on frozen potato products up to 18 per cent move to zero upon implementation. However, at this point, we are unsure of the gains that might be expected in New Brunswick since our understanding is that McCain Foods Limited already fills their EU markets from their EU-based facilities. In addition, tariffs on frozen blueberries of up to 15 per cent and that of maple syrup of eight per cent will be zero-rated upon entry into force. There, of course, are other gains in CETA for meat and other exports, and while in New Brunswick, we do not claim the export data for these commodities, our primary sectors will definitely benefit from these Canadian exports. And, of course, New Brunswick expects significant gains in the seafood sector with tariffs eliminated progressively over seven years under CETA.
Moving to the Pacific region, our exporters should be very interested in new access as a result of the TPP agreement. New Brunswick exports an average of $350 million per year in agriculture and agri-food to the TPP countries, including the U.S.A. Furthermore, our $915 million in seafood exports to TPP countries provide an excellent opportunity to undertake joint marketing with our agriculture products. Specific openings of interest in TPP include access for prepared potato products as well as blueberries. And just like CETA, gains for other products will directly benefit primary producers.
As an aside, I will also mention that improved access to the South Korean market due to Canada's recent bilateral agreement should allow blueberry exporters to recapture some of the markets that were lost to the U.S. after the Korea-U.S. deal locked Canadian berries out of that market for several years.
However, moving to concerns with recent agreements, on the defensive side, both trade agreements, CETA and TPP, are expected to pose challenges to supply-managed industries. As I mentioned before, these are important industries for New Brunswick, contributing over $200 million annually to our farm cash receipts. Processing of supply- managed commodities also provides important economic benefits to the province. As you are aware, under the new CETA deal, Canada's dairy in-quota tariffs will be eliminated immediately and the TRQ volume of cheese that can be imported to Canada with no tariff will be increased. Also, under TPP, some import quotas will be increased in dairy, egg, chicken, turkey and broiler hatching eggs. Given these concessions, we are watching very carefully to ensure that commitments made to these sectors to tighten up the administration of border controls are kept by the federal government. Unfortunately, industry can show that the administration of border controls, for dairy and poultry in particular, is subject to abuse, and it can be expected that there will be more creative ways for these products to cross the border, so we must be vigilant.
We are also watching to ensure that appropriate levels and types of compensation are provided by the federal government, so that impacts throughout the country can be lessened. We are awaiting confirmation of how such compensation will be designed, so my comments are based on programs announced by the previous government. For New Brunswick though, it is important that any compensation or programming targeted at the processing sector be filtered down to the branch plant operations that are operating here in New Brunswick. Value added activities of supply-managed commodities are very important to the province. We are also watching closely the proposed compensation for quota value, and would advocate that any uncommitted funds for this program should be diverted to other sorts of compensation.
I do have other slides, but in the interest of time and hopefully to have some discussion, I will not comment on them.
I will, however, provide a conclusion that you can appreciate: In this current fiscal climate, New Brunswick is extremely interested in promoting and encouraging all sectors that can grow and diversify our economy. Our existing agricultural footprint is only 5 per cent of the province, and we do feel that we have barely scratched the surface given that a large portion of New Brunswick's land base is suited for some type of agriculture. We believe that New Brunswick is well positioned to achieve solid growth in agriculture and agri-food for decades to come. That said, unless our small population of 750,000 grows unexpectedly, the sector will need to develop strong export markets in order to sustain this proposed growth. We see that trade will become even more and more critical to our sector, even as we attempt to replace imports with a more sustainable local food system.
The Chair: Thank you very much.
The deputy chair of the committee, Senator Mercer, will begin the first round of questions.
Senator Mercer: Ladies and gentlemen, thank you very much for being here. We appreciate your very thorough presentations. You've generated a lot of questions, so I'll try to be quick and I'll go one by one, first to Prince Edward Island. On the subject of competition versus opportunity, you talked about there being some potential for growth. Where do you see the greatest opportunity for increasing exports from Prince Edward Island?
Mr. McIsaac: Well, we're looking at diversifying and, of course, right now we're massive in potatoes, of course that's the number one economy. I think where we likely will see the biggest growth overall has to do with our processing, and that's where we want to see the growth. We want to do more processing on P.E.I., not just in the potatoes but in different commodities. I think we have a lot of opportunity. One of the interesting things I guess is the future farmer program, where we see some people coming into our province and even new people coming into agriculture. Mr. Deering from Newfoundland talked in his presentation about the Future Farmer Program and the young couple in dairy there who were named outstanding young farmers for Canada. This year the outstanding young couple came from New Brunswick. It is fantastic when you look at the feeling and the mindset of the young people. In our new Future Farmer Program we have 55 future farmers this year, and they are involved in a program through which we give out dollars in five different areas to encourage them to grow and come up with new ideas. Fourteen of the 55 are in father/son or father/daughter relationships. The other 41 are actually new entrants into agriculture and they have small farms. They're growing berries or in box programs where they grow vegetables and sell them at the farmers' markets and things like that.
There was a lot of energy and excitement, I would say, in agriculture in our province. We have new farmers coming in which is terrific, and we need to work with them on marketing, exporting and that sort of thing. We see a lot of upside to agriculture. We have some concerns, of course, on our soil side and things like that but I think the future for agriculture is very bright on P.E.I.
Senator Mercer: You mentioned a new water act in Prince Edward Island, I'm not quite sure that I understood what the new water act accomplishes. Maybe it doesn't accomplish anything but what's the purpose of the new water act?
Mr. McIsaac: The new water act is not in place as yet, we're at the hearing level at the present time. On Prince Edward Island, we get all of our water from the soil. We don't take it from anywhere else, so all of our drinking water comes basically from home-drilled wells. We need more water for agriculture, and a lot of farmers are looking for deep water wells, which draw from our water table, to put on their crops. A lot of the general population is concerned that we will draw the water out and their wells will go dry.
Senator Mercer: Are there examples of that actually happening so far?
Mr. McIsaac: There are concerns about that happening, let me put it that way. We haven't drilled any new deep water wells since 2000 or something like that, but there is concern about that. Do you want to comment?
Mr. Jamieson: Currently, a number of high-capacity wells are in place in Prince Edward Island. Some of them are for municipal purposes and some of them are for food processing and some of them are for agriculture. Because our province is 100 per cent groundwater-fed, there are some concerns out there that that could impact on the water table. Essentially, what the water act does is it looks at what resources we have, and we do have roughly 1,100 millilitres of rain per year so we have a very good recharge, we have a good resource, but the act will talk about how that resource is allocated and how it's protected and how it's used. Some of it will be identified for drinking water, some of it will be for agricultural and food processing purposes, but it essentially lays out a plan to allocate and protect the resource we have, again, because we're a hundred per cent fed by groundwater.
Mr. McIsaac: We have had deep water wells drilled in the past but they are for the town of Stratford or Charlottetown, those areas. The agriculture sector is where the concern lies; can we allow more deep water wells to go to that area? You have to consider the fact, too, that Prince Edward Island is the most densely populated province. There are houses everywhere basically across the province, and agriculture is in the midst of that. So if you draw water from the reserve, does it cause other wells like personal wells to go dry? If you look at the science, there is plenty of recharge there, but the people actually are quite concerned and that's why we're going through the hearings at the present time.
Senator Mercer: Of course you're more densely populated in the summertime than you are in the wintertime.
Mr. McIsaac: Yes, quite a bit more.
Senator Mercer: Mr. Deering, I was impressed by your comments that you've have young people coming home to farm. Unfortunately all of us in Atlantic Canada have more young people coming home these days, from Alberta, in particular, because of the downturn in gas and oil, and they're coming home with two things, big debt and big appetite because they've been used to making the big money. You said you have young people coming home to farm, how are you getting people returning to Newfoundland and Labrador interested in farming?
Mr. Deering: We have a couple of examples that I know of, of people coming from out West. We actually have an example of a young farmer who recently came to Newfoundland from Prince Edward Island. Most of these folks don't require any encouragement; all they look for is an opportunity with land availability. From our perspective, as long as we can create opportunities for land availability, that will entice new entrants.
Senator Mercer: There is one product you have not mentioned. I just want to add it to your list, as it is one Newfoundland product that I buy. I don't buy it regularly but I do make sure I buy it at least once a year. It's summer savoury which is difficult to find other than in Newfoundland, which is a favourite around Christmastime of course.
Ms. LaRochelle, in your presentation you said there is a decrease in the value of potatoes exported in 2014. I'm curious as to why it's down by 7.1 per cent. Is that a monetary problem or an actual export problem?
Ms. LaRochelle: I will say for potatoes it's varied, I will say. We have one big processor you are probably aware, McCain Foods, and it often depends on from where they are exporting, which plants they're actually exporting from. It could be that New Brunswick potatoes are going to other places in Canada and they're actually exporting from some of their other plants. So it's difficult to compare from one to another because it depends on decisions that they make. I think the volume is similar overall.
Senator Mercer: You expressed some concern about the effect some of the new trade agreements might have on supply management. What do you see as the biggest risk in supply management if we ratify the TPP and open ourselves up to more competition, particularly on supply-managed products?
Ms. LaRochelle: I think they're best able to answer that certainly. I mean, reducing the production that they're able to produce and their ability to grow impacts the supply-managed industries. There might be increased demands overall in Canada that might be reduced. So it really looks to where they can't grow with the limited market they have that's getting a bit smaller.
Senator Mercer: Thank you very much. One of the concerns that I continue to have is that Canadians don't think in food terms about self-sufficiency even though supply-management gives us some self-sufficiency. People think of supply-management in other terms. Minister?
Mr. McIsaac: If I could touch on that, I'll give you an example from home. Amalgamated Dairies does the processing of their milk over there. Previous to the CETA agreement coming in, they worked with a Danish company, Arla Foods. ADL processed our milk to make their cheese products. Now that CETA has come in, Arla can process European milk and send their product into Canada and sell it here. So our plant now, which was processing for them, will not be doing that anymore, and the TRQs are the concern over there. What does our plant do now? They also, in their other plant, produced 50 per cent of the evaporated milk for Canada. Under the TPP, that may be displaced. So our concern is with regard to our processing of feta and havarti and also the evaporated milk. We are a trading nation and fully understand that and fully want to grow our exports. However, we have a concern on the supply-management commodity side, as has been expressed by some of the other provinces here as well. We are working on that problem and working with the federal government to get through that hurdle that is definitely a concern to our province.
Senator Mercer: Thank you.
The Chair: Before we continue, permit me to present the Honourable Senator Joe Day from New Brunswick.
Senator McIntyre?
Senator McIntyre: Thank you, Mr. Chair, and thank you all for your presentations. My question has to do with organic food products.
As we know, we have organic food consumption, organic food production and, of course, we have the global organic market. We all know that there is a growing trend in the Canadian health and wellness market for organic foods, and, that said, some of the witnesses that have appeared before this committee have informed us that organic production in the Atlantic provinces is at an early stage of development as compared with other Canadian provinces. Could you describe actions or measures that you are taking in your respective provinces to foster organic production and enable organic exports? What challenges are you facing in your attempt to diversify, because diversification, as we know, is all important; to diversify the type of exported agri-food products? Perhaps we can hear from Newfoundland to start with?
Mr. Deering: Thank you, senator.
In Newfoundland and Labrador, we do have several producers who qualify themselves as organic; their production practices are organic in nature. Unfortunately, they haven't achieved official certification. Again, I suggested in my presentation that we're far more concerned at this point about our domestic food requirements as opposed to export opportunities, and the organic piece is exactly the same thing. We have over demand in terms of the production capacity that we currently have available in organic, even non-certified organic products. So, I guess we have not really, at this point, been focused on export opportunities and diversifying those products to try to penetrate export markets, because we've been mostly focused on domestic markets.
Senator McIntyre: Thank you.
P.E.I.?
Mr. McIsaac: We do fund organic, that's for sure. We have farmers who are growing organic soybeans and things like that, and we are working with regard to that crop. We did have organic milk at one point. It took three years for some of our dairy farmers to become certified, organic milk. I guess the big problem in our area is we don't have that large centre to sell that product into. ADL, our processing plant, actually did do that for about three months. It did not prove to be successful and that whole trial period, I guess, went by the way, and the three-year certification for those farmers is now left behind. We, in our province, have a lot of push toward buying local, not necessarily organic although there is a lot of organic, but a lot of people now look to the natural and humane aspects. But if you go to our farmers' market, they want to buy food that is local first and foremost. We do have farmers, of course, doing the organic and we are working with them, but the trend lately is toward buying local. They want to know where their food comes from; they want to know the farmer it comes from. We are actually doing a lot of work as well with, and we need to do more of it, agriculture in the classroom, showing our people, and that gets back to the social license: Where does the food come from?
If you talk to the kids in the classroom, they think it comes from Sobeys or Superstore, that sort of thing. We're trying to connect with them to show them exactly where the food does come from, who the farmers really are and that sort of thing. On the organic side though, we still work with groups but, again, a lot of people are looking past organic to local, natural and humane. It is a piece that we are still working with and funding.
Senator McIntyre: And from my home province of New Brunswick?
Ms. LaRochelle: With respect to organic, we have support within our department. We have an organic specialist who will work with the producers, and we do also provide some funding. In the past, there has been specific funding for organic production. This year there has been help with greenhouses to extend the season for organic producers. The scale is still somewhat small. As the minister from P.E.I. said, a lot of the interest is from the local community. A couple of years ago, we did introduce legislation within New Brunswick to control the use of the term "organic.'' Organic is controlled by CFIA when it moves across provinces. We introduced some legislation to control the use of the word "organic'' within the province. So, those who really are organic can show that.
With respect to export of organic, we do have a few individuals, for example, in cranberries, who are doing some export, but the scale is very small at this point. So you start off with the industry that we have now and, as it matures, hopefully, there will be opportunities on the export side.
Senator McIntyre: Do you find that there is a greater demand for organic food not only in all of our Canadian provinces but internationally as well?
Mr. Jamieson: To just touch on that, I think the research has shown that the demand for organic has sort of levelled off a little bit, and I think local has picked up in North American markets.
What we have been doing, just to follow up on what the other provinces have identified, is providing a research coordinator to support the P.E.I. Certified Organic Association, which is a group that represents organic farmers on Prince Edward Island. That person has been working with that organization, looking at new ways, new crops that they can work on certifying and opening up new markets. I think what we're seeing is a certain sector of the organic production that wants to remain small and sell to locals through community-supported agriculture, and then you are seeing some of the larger organizations and farms that are see opportunity here. In particular, our largest potato farm on Prince Edward Island is also our largest organic farm because they've seen a business opportunity there. And we also have some large vegetable farms that have included an organic component to their production. Some of the smaller farms have identified organic as almost a lifestyle-type production where they want to remain small, and some of our larger organizations and farms have seen that there's a business opportunity here and have added an organic component to their production and in that way are able to provide product to a variety of markets.
Senator McIntyre: My next question has to do with labour and the low annual population growth that we have in the Atlantic Provinces. The reason I'm asking you this question is that stakeholders from the agriculture and aquafood sector that have appeared before us have identified, among other factors, labour as the potential issue in the improvement of their production capacity and their potential to meet the demand generated by the free trade agreements recently signed by Canada.
My question is this: Given the relatively low annual population growth in the Atlantic Provinces compared to the rest of Canada, what measures are taken by your provincial governments to overcome this issue?
On top of that I would add this other question: What recommendations would you make to the federal government to better support the provincial governments, in other words, to support your provincial governments in overcoming this issue of labour?
Mr. McIsaac: This is a large concern in our area. We have people who come in from Mexico. I think that's likely the largest group on the agricultural side of things. We have some people from Philippines come in to help with our fisheries side as well, but the Mexicans are a large part in our agriculture sector and they're very needed. We are working with our local people through trade shows and job fairs and that sort of thing to try to encourage labour to come home. We're working with high school students, university students by offering summer jobs and showing them what opportunities are there.
But the labour issue, especially in our processing plants, is of grave concern. If we're going to grow our economy and grow our exports, the processing side of it is really big. We really need the labour force in that area and the cutback with regard to the temporary foreign workers was a concern to us for sure, but we are working to try and get as many as our local people working as possible.
We have a little interesting project happening at home as well in that, for the first time, we're seeing the start of the Amish community moving from Ontario to our province which, I guess, in large part has to do with land prices and the fact that they can't expand in Ontario. I visited with them a couple of weeks back. They were up in the Millbank area. Groups from there are coming down as well as from a couple of other areas, and we feel possibly they will expand the workforce. They are large families. I've talked to people who are looking to the possibility of using them a workforce. We are trying in whatever way we can to grow the workforce through our local people but, at the present time, we do need the Mexicans as such.
Mr. Jamieson: If I could just add a couple of comments. One of the things that we've also looked at is nominating some of these foreign workers to become permanent residents of our province, and we've been working with some in the processing sector to do that. One of the challenges that we've identified is the language requirements that Canada puts on some immigrants. It's at a very high level and I think it's an impediment to a degree. I think that language requirement could be relaxed to a certain degree, as we have folks who are working in food processing or on farms or in fish plants, and they may not need the level of English at the outset that is required, and we do see that and we hear, actually, from the Newcomers Association who agree with us that language requirements could be relaxed somewhat.
Ms. LaRochelle: Just to add a similar comment, New Brunswick has the Department of Post-Secondary Education, Training and Labour, which is, of course, making concerted efforts to recruit and assist in recruiting for workers. We don't have a lot of foreign workers in agriculture in New Brunswick, although there are some. Certainly, as P.E.I. has indicated, it's in our seafood processing plants where they use the Foreign Worker's Program, and our minister has been very vocal on the requirements to change some of the rules. I know that there is a review of the program going on, but we will continue that program because it's necessary for those plants. Of course you want labour, but there's always mechanization.
Whether it be the seafood or the agriculture side, we would work to assist with mechanization and innovation so that they can deal with any shortages of labour. There is some cross-utilization of workers where perhaps workers in some areas of the seafood industry might be able to work in some areas of harvesting in agriculture. So, certainly, we're trying to promote the use of workers within the fisheries and the agriculture streams.
Senator Hubley: Welcome to each one of you. It has been a very informative morning for us, and it's always great to hear about what's happening in our home provinces.
My question is centred around research and development. I think each of you in your presentations touched on areas within your industries that could be maybe improved, developed to a greater extent with regard to research and development. I'm wondering if you would quickly share with us the facilities within your province that you use, and some of the issues that you feel they should be working on or are working on at the present time.
I might start with Minister McIsaac because he did speak about the soil condition on P.E.I., and I think one of the first major agricultural studies the Senate did was chaired by Senator Herb Sparrow from the West and it was entitled "Soil at Risk,'' I believe. At that time, many years ago, he saw what was happening to the condition of the soil in the Western provinces as a result of the challenges of producing, I guess, grains. I'm wondering if you might just give me an overview of what's happening in your province.
Mr. McIsaac: Well, that's a very timely question. In our province, as I stated earlier, a lot of our land, our largest export and largest crop that we grow is potatoes, but potato farming does take a toll on the soil. We are trying to encourage — it's not legislated — a three- or four-year rotation where you grow potatoes the first year, then it's grain, then it's hay, and possibly back into potatoes, stretch it out. We also grow a lot of soybeans, and if you are growing soybeans in that rotation, you pretty well need a five-year rotation with other crops before you can go back again. We actually have a presentation going to cabinet tomorrow morning from one of our soil engineers to talk about how the land has changed and the composition of the soil over the last 20 years or more. It is of grave concern to us.
As well, though, in order to get the rotation to work properly, in the off years or the rotational years, we need to grow a crop that is good to rotate with potatoes and also makes money for the farmer. If he makes money in potatoes one year but loses it in grain and then loses it in hay for the other two years of the rotation, he has to make it all up in that potato year. If the potato price is down, he may lose money all three years.
We've had a problem in the past up west. I don't know if I should put it on record, but there was kind of a laugh that the rotation used to be potatoes, snow, potatoes. We couldn't get a proper crop and the economy was so tight that we put potatoes in too often, and it really has hurt our soil. We need the research station of the province right now to work with our industry, help us grow crops that will rotate properly with potatoes. We also need to work with our trade sector when they're doing the trade missions to India, Singapore, where ever it may be, to find crops that will rotate with potatoes, that will make a dollar on for our farmers in the rotation years. If we could make money in the off years for potatoes, we might stretch that rotation out from three, maybe even to four or five years. That is a big concern to us.
I think the other issue that's of concern at the present time and, actually, it's ongoing while we are here is research on wireworm. We have had an infestation of the wireworm in our soil and it's a little pest that drills holes in potatoes, only in so far but if you have a hole in your french fry, it doesn't go over very well at Burger King and McDonalds as such. It also devastates care crops, a lot of root crops, even in my riding. The first time I heard about it was about nine, ten years ago. The farm was growing cabbage. The couple were actually one of the outstanding young farmers for Canada back in 2009. They had planted a crop of cabbage. They grew it in the greenhouse, transplanted it in their field. Overnight, the crows on the flight path between Charlottetown and the Stafford area pulled every plant out overnight. The little wireworm on the bottom of the plant is like a piece of candy to them and they just pluck it out. It was a $15,000 loss of their crop overnight just because of that worm.
There is no chemical that we can use to actually kill the wireworm and we're trying to find what we can do. There is research being done that shows if you use buckwheat and brown mustard, it kind of retards the wireworm, but they're on a seven-year life cycle and it's hard to get rid of them.
There was actually a chemical called Fipronil. We have several different strains of the wireworm. Fipronil actually would have killed this wireworm, but it's not approved by Health Canada to use in P.E.I. so we can't use it there. The interesting fact is that they use it in the States, and if we can't grow our cabbage on P.E.I., we take it in from the States. So what are we really saving? But we do not want to use any more chemicals which is always a concern on the Island.
With regard to the research going on right now, Dr. Christine Noronha has developed a trap that actually catches the click beetle which is the adult stage of the wireworm, and we're actually missing hearing some of her report on that but we will get it. That's the kind of research that we need to help in our crops because that wireworm is devastating more than just potatoes. So the two biggest issues are soil quality and these pests, and we are working on them.
Mr. Deering: Senator, I'm delighted you asked the question because I think research and development is key to the future development of these sectors across all our provinces. I'd first like to talk about our strong partnership that we have with our local Agriculture and Agri-food Canada research group in St. John's.
I will say that an announcement was made about 10 years ago that they were going to close the federal lab in Newfoundland. I guess that decision, at the eleventh hour, was reversed, but we have noted a fairly steady erosion in capacity at that federal lab since that time and that is concerning to us. That being said, the capacity that exists there today, we do have a strong working relationship with them.
For a number of years leading up to a couple of years ago, we had a research agreement with the federal government which was funded through AgriFlexibility. About two years ago that program had about $2.5 million in it. The province's share of that was $1 million and the federal share was $1.5 million. Of course, about two years ago the federal government terminated that agreement. I guess it was due to sunset anyway. The program continues to exist with just provincial dollars at this point, so we still deliver a condensed version of the agriculture research program with a $1 million dollar budget.
Something else that has been very significant for us is that our current President of Memorial University is a former dean of the agriculture school, from the University of Alberta. Dr. Gary Kachanoski came to Newfoundland several years back and brought with him a very strong interest in developing agriculture research in our province. He has established what we refer to as a BERI institute, in western Newfoundland, the Boreal Ecosystem Research Initiative. It was intended to work on research on agriculture and forestry, but what's happened is that the five clusters that have been established there have been focused mostly on agriculture-related things. We have a soil specialist, climate-change specialist. We have an agricultural economist which has recently moved into Newfoundland from a university in Colorado which is doing remarkable work, so there seems to be a lot of momentum on agriculture research, particularly in the western portion of the province.
And you are absolutely right: It's critically important to maintain this capacity in order to move our sector forward in 2016, particularly in Newfoundland where we're trying to build it from the ground up. We have an opportunity to utilize best management practices and leading edge technologies right from the start, so we feel it's critically important.
Ms. LaRochelle: In New Brunswick, we don't have an agriculture university per se. Nova Scotia Agricultural College is the closest or Quebec. That being said, there is significant research in Fredericton at the Potato Research Centre of Agriculture and Agri-Food Canada. So they're very important to New Brunswick as well as to all of Canada. In fact, we're working very closely with Agriculture Canada and the New Brunswick potato industry. We have a big project looking at competitiveness of the whole potato sector, and there's significant research that's going on right next door to our building in Fredericton at the Potato Research Centre. Research and development is important everywhere.
We're aggressively increasing our wild blueberry industry here in New Brunswick and released a strategy for 2013, I think, on wild blueberry development. One of the main streams within that strategy is to look at research and development. We've had significant productivity gains. We've more than doubled our yields in wild blueberries and a lot of that has to do with research. So we're definitely looking at some of the research requirements that are there.
I will mention as well that we are trying to work with our fellow Atlantic provinces. We have what we call a Pan- Atlantic program where we're trying to encourage research innovation of the industries across the provinces and we're trying to promote and help fund that, mainly through our Growing Forward 2 program which is with the federal government. We're too small to do the research on our own, so we're trying to work together. I know a really good example that involves not just the Pan-Atlantic but the Atlantic Grain Council, which has a significant program looking at grain research here in the Atlantic Provinces. They were successful in getting some federal funding, and each province also contributed. I think it's really important here in the Atlantic Provinces that we continue to promote that research.
The Chair: Mr. Jamieson?
Mr. Jamieson: Just as a follow-up to Cathy, another excellent example of cross-provincial research is a pollination plan that we're working on with bees, and that will have an impact on our fruit sector and blueberries. But, again, we're able to leverage a lot more research with our provincial dollars because we partner with the other provinces. We have at least four projects, one in dairy, the grains council that my New Brunswick counterpart mentioned, pollination with bees, and the fourth one just escapes me right now, but it's a wonderful way for us to collaborate on research and development.
Senator Hubley: I have a short question, but maybe I'll wait until the second round.
The Chair: Senator Oh.
Senator Oh: Thank you, panel, for the wonderful information. Your three provinces are truly beautiful. In 1987, I visited three of your provinces, New Brunswick, P.E.I. and Newfoundland. I discovered on a campsite wild blueberries. It was early in the morning, and they were everywhere on the campsite. Now that I think back, those were actually organic blueberries.
Today I want to talk a little bit about exports. You produce so much agricultural food. You mentioned earlier that the U.S. is the largest destination for exports, but you cannot just rely on the U.S. I think you need to export more to Asia. It is different now from 30 years ago. Now you have a lot of direct links with regard to transportation and airlines between Asia and Canada. There are direct links to any part of China from Toronto China. I have been told that a lot of lobster is exported from the East Coast by container trucks: 12 hours to Toronto and another 12 hours to Asia. Lobster survive without water for 72 hours, so when they arrive in Asia, they're still alive and healthy.
I have also travelled to Shanghai and Hong Kong to attend seafood shows, to help to promote our Canadian seafood and agri-food. Is there any strategy that you three provinces are working on, together with the federal government, to export to Asia, to develop the Asia Pacific Rim? That's a huge market.
Mr. McIsaac: I mentioned earlier that we are starting with that lobster levy this year, to look at promoting that. We have good export markets into Asia at the present time. We do want to grow those and we are working with the other Atlantic provinces on the Canadian brand. I think that's going to work out very, very well.
On our blueberries, as my deputy noted, we've had great growth because of the pollination program. We've developed our cranberry and blueberry markets in Taiwan. The product is dried and packaged and it's a real treat. They are picking up most of our cranberries. The Wyman's plant has doubled its capacity for blueberry processing over the last few years, and we're also sending dried blueberries into the Taiwan market as well. So we are working a lot on that.
Our premier just came back from the trade mission to India where he travelled with the Province of Ontario, as I noted before. He developed new markets there. I think there's talk of another trade mission to Europe coming up in the near future. So we are building on that initiative, but in many ways working with our counterparts in Atlantic Canada as well.
In addition, some of our departments work with the federal government, with Global Affairs Canada on export opportunities.
Senator Oh: Any comment?
Mr. Deering: Yes, thank you.
We export significant quantities of fur to Asian countries at the moment. Pretty much all of our fur production is exported to Asian countries. At the end of the day, we'd be delighted to engage in a conversation with our Atlantic counterparts on strategies to collaborate and access Asian markets for other products. But at this point, our main concern is on domestic requirements locally. If we can find ourselves in five or ten years at a point where we're exporting some of the food we produce, we'd be delighted, but certainly not before we find a way to feed our own people first.
Senator Oh: How are your seafood product exports to Asia?
Mr. Deering: That's a good question. I'm not really connected very well to the fisheries file. It would probably be reckless for me to attempt to answer that question, but I can certainly provide you with some numbers around that.
Senator Oh: Sure, thank you.
Cathy?
Ms. LaRochelle: With respect to seafood, I can't say that I'm the expert, but it is within our department and we are making concerted efforts in exporting specifically into Asia. We see with the recent trade agreements that there's going to be lots more opportunities with seafood.
We do attend the seafood shows and we do it along with our Atlantic counterparts., The Atlantic Canada Opportunities Agency, ACOA, of the federal government is a key partner as we go over to some of those shows. Whenever we're looking at seafood, we're trying to say, "Take some New Brunswick wild blueberries along with you.'' Certainly, we're working closely with the Wild Blueberry Association of North America, WBANA, which does the export marketing in blueberries, and we also see some huge opportunities for maple syrup as well. So as I mentioned, with the huge seafood opportunities, we're bringing along some of our agri-food commodities and promoting the Canadian exports from the eastern part of the country.
Senator Oh: Yes. Our Maple Leaf brand stands for safe, good quality foods in Asia. Thank you.
Senator Poirier: Thank you for being here this morning and for all the presentations and questions and answers. It has been very interesting.
I have a couple of questions. The first one has to do with the Canadian dairy sector and the TPP-granted partner countries, where there is incremental access to 3.25 per cent of the Canadian dairy industry. The federal government has proposed to implement two new compensation programs should the TPP agreement be ratified. The Income Guarantee Program will provide an income protection for the full 10 years following the implementation of the TPP, and the Quota Value Guarantee Program will protect producers against reduction in quota values when the quota is sold following the implementation of the TPP. I know, Ms. LaRochelle, you talked about it a little bit regarding New Brunswick, but could I have a little bit more information on how, in your opinion, these programs would benefit our dairy farmers in each of the respective provinces? Are these the types of programs Atlantic dairy farmers need to help with international programs, should the TPP be ratified? If so, why?
Ms. LaRochelle: Certainly compensation programs are necessary when there will be a loss of production. We have had some consultations with the federal government on the design of the programs. I can't say that I'm an expert, particularly on the income one. I know that the federal government is also doing some consultations with producers, and we are working closely with the producers to ensure that there are good compensation programs there.
We have heard of the quota value one, but we're not sure if that will do as is intended nor how the money allocated to quota value will be spent. I think that's the one where we have the most questions. In fact, if that quota value program is in, we would advocate that the dairy industry should be consulted on what's the best way to assist them in the loss of the production that they're going to experience.
I did also mention the processing. Obviously it's important on the primary side. We rely heavily on the processing that's here in New Brunswick. We have two fluid plants here in New Brunswick, as you are probably aware, and their head operations are outside of New Brunswick. They're branch plants. So we certainly want to ensure that the compensation on the processing side finds its way to the provincial processing plants as well.
Senator Poirier: Would you like to add to that, please?
Mr. Deering: Sure, I appreciate the question.
I know your question was specific to the dairy sector, but I also sit on the board of directors for the Chicken Farmers of Canada and we also talk about TPP and quota income guarantee and quota value guarantees. I think there's still some uncertainty about how well this is to be structured and what actual compensation will avail at the end.
I know, as Cathy mentioned, the AAFC is doing consultations across the country. They're actually out in Newfoundland on Thursday of this week to not only consult with us but also with the commodities that are implicated. So our hope is that there will be a little bit more clarity, but at this point I still think there's a lot of uncertainty and even from the industry's perspective on what it all really means at this point.
Senator Poirier: Did you want to add anything?
Mr. McIsaac: I think it's right; we're still waiting for some of the details with regards to that. My background is in dairy, so I'm going to give you my impression of the whole thing from my perspective.
The dairy industry in Canada and the supply managed commodities basically ran themselves with very little government input. We had milk boards, chicken boards, turkey boards that looked after their commodity themselves. They were elected by the producers themselves to run it and it worked very efficiently. We had a cost production formula that told us how much we should get for a litre of milk or for a chicken or a dozen eggs or whatever that might be. If you were to ask any of the agriculture ministers of the last 40 years how supply management worked, if they didn't come from that sector themselves, they might not even know how the system worked; it worked that well.
We understand as supply-managed commodities that we need trade between our countries. To lose 3.25 per cent of our quota in the milk sector or 2 per cent from the chicken sector, whatever that is, we need to know the details.
There is another interesting part when they talk about the quota values — we need to maintain the quota values — and compensation. The one thing we in supply managed commodities were so pleased about is that we did not get from the federal government bailout money, hurt money, subsidies, grants or whatever. We looked after our industry ourselves and a lot of credit goes to those producers in those commodities. But we had this cost of production formula that told us all the input costs and what they were to pay for a litre of milk, same thing with a dozen eggs, and it worked so well. Now to lose 3.25 per cent of that and say you're going to get a cheque from the government, it just kind of throws in the face of what we in our industry always were so proud of, that we didn't get dollars from the federal government or the provincial governments, we got it directly from the market place. That kind of hurts in a way, but at the same time we need a bit of an offset.
If only we had a time period. This is what we thought was going to happen with CETA, that we would have a seven- year implementation period where we could actually grow our domestic market enough to offset what trade we were going to lose because of the specialty cheeses coming in from Europe. If we had that time period and we knew more of the details, we could likely give you a better answer. But we need those details. I know the CETA document is still going through the translation process because I think there's about 20 different languages involved. So if we had a few more details on what this compensation package or the quota value package are supposed to look like, we could give you a much better answer. We have such a great industry there and great system in supply management.
We're very pleased that it's only 3.25 per cent. We had heard rumours it might be 10 per cent which would be devastating, so 3.25 doesn't look too bad. Had the federal government said, "Well, you may lose one or two per cent.'' and we learned that it would be 3.25 per cent, everybody would be up in arms right now. We're just waiting for a few more of the details and to see how that actually rolls out in the compensation.
Senator Poirier: Thank you for your answers.
I sit presently on the Standing Senate Committee on Foreign Affairs. We have been looking in the last few weeks at the different trade agreements, and CETA and TPP are a couple that we've had many witnesses give opinions on, for or against and their reasons. Also, the Foreign Affairs committee is also looking, and it kind of falls in with this, at the possibilities of doing more exportation to Argentina. I noticed in the list provided in New Brunswick's presentation and also in the Prince Edward Island one, I think it was, that Argentina was not listed. Do your governments, individually or collectively, in Atlantic Canada see a possibility of more exportation there, because of the change of government and things that seem to be changing in Argentina? Or have you even looked at that at all?
Mr. McIsaac: I would say that we're looking at all countries and possibilities. I would give you a different example. I don't know that much about Argentina, but I know we are looking at expanding our markets in Peru. Back when we had the foot and mouth outbreak in 2003, some of those countries closed their doors to us and we have not had them opened up since. For example, we cannot put live cattle into Peru, which is a concern. I have spoken to Mr. MacAulay from agriculture to look at that possibility. Some of those countries that had closed their doors to us weren't big trading partners at the time, so we didn't perhaps push the envelope to get those borders open; now we would like to. We have opportunity for markets there. We're putting embryos into Peru but we could put live cattle as well. Again, they're smaller countries, and perhaps we haven't taken a closer look to see what the impediments were. But there are possibilities and we are looking. Hopefully we're going to expand our look to many, many countries.
Senator Poirier: My next question is for Mr. Deering from Newfoundland. You mentioned supplying your own food for the demand of your population. In the 1950s, you said, you were actually at that level, but that it has seemed to have gone down over the years. You're aware of it and looking at how to maybe do more in the future, specifically regarding the demand for our local foods. I'm sure that same problem exists not just in Newfoundland. I'm sure we're singing that song in all the provinces in Atlantic Canada. Can you give us a short history of what were the main challenges and the reasons why you feel that happened? How are you dealing with those challenges and reasons to bring it back up, at least part way, to where it was before?
Mr. Deering: Excellent question, thank you.
In 1950, obviously our population was a lot smaller back then than it is today. As well, folks enjoyed a much more simplified diet than they do today. I think Newfoundland's joining Confederation in 1949 provided all kinds of very good benefits, including increased access and more sophisticated transportation networks, and that has resulted in our growing comfort with importing products, not just food, but all sorts of products from outside the province. So I guess our outlook would be that we understand and agree that we will never be able to grow some things in Newfoundland that Newfoundlanders and Labradorians like to eat. So there will always be a need to import certain things. But for the things that we can produce, we feel very strongly that we need to make significant progress over the next 10 years in order to achieve self-sufficiency in those products.
Our expectation as well is that the pressure coming from Asian countries by 2050, with the population boom that's expected over there, and the prices for these sorts of commodities by 2050, if we're still importing them from New Brunswick, P.E.I., Nova Scotia and Ontario, will be very expensive. So, we've been able to achieve a lot of growth over the last decade through our cash share programs and our provincial programs. We obviously expect that to quadruple in the next 10 years. We're very much focused on that.
Senator Poirier: Thank you.
My last question is just a follow-up from Senator McIntyre's line of questioning on organic food. A lot of the comments that we're hearing locally, specifically in the last couple of years, is that people find that the difference in price between buying organic and non-organic does not fit the budget of many households. They find that hard to understand, why such a difference in the price range. If you can elaborate a little bit on why such a difference, it would help.
Also we're seeing, because of the wide difference of prices, people are now, I find more than ever, going to farmers' markets to buy locally where they can get good quality food at a very decent price. So why such a difference?
Mr. McIsaac: Well, I think there is a significant cost to becoming certified organic. The land has to be clear of chemical fertilizer, chemicals of any kind, so there's a cost to preparing it. There's organic seed that you need that is going to cost more. When you grow a crop, organic soybeans or whatever it may be, you don't necessarily get the tonnage per acre, so the return per acre is not as high. There is a greater price for the product but you have to balance that off. If you've got two tonnes of wheat through normal practice and you've got one tonne of organic wheat, even if the price is doubled, you're pretty well breaking even on that.
On the farmers' markets side of things, I think people are looking not so much at the excess cost — they are willing to pay more — but more at "Do I know the farmer; do I know where this food comes from?'' and I think that trumps the organic side of it. A lot of our local farmers are producing organic food. They may not be certified but they're producing it in an organic fashion and that's what people are looking at, and they're looking at local and natural more so than the organic side. But there is still a strong organic presence there too though.
Senator Poirier: Thank you.
The Chair: Now, from New Brunswick, Senator Day.
Senator Day: Thank you, Mr. Chair. First of all, my apologies for being late. It's always the guy who lives the closest who is the last guy to get there.
Mr. McIsaac: They say the closer to the church, the further from God.
Senator Day: I think that applies in this instance.
I have had the opportunity to look at your presentations since I've arrived, and something that jumped out at me was the diversification of the agriculture sector in New Brunswick. The first question that jumped out at me relates to potatoes and the 7 per cent reduction between 2013 and 2014. Is that reflected in P.E.I. as well? That is, 7 per cent of the total dollar amount in the production of potatoes seems like a significant amount. Is that a trend or was there something that happened in 2014, and is it reflective of the other provinces?
Ms. LaRochelle: Seven per cent might seem large, but we would normally see that fluctuation within potatoes in particular. I think our 2015 numbers might be down a little bit more again. A lot of it depends on the price and what's out there, the contract that's negotiated, so we have seen some changes there. That being said, the acreage itself has gone down. I'm not sure if the potato people are coming again. They have actually been trying consciously to decrease the acreage but it is somewhat of a stable crop. I wouldn't say in any of these two years we had any production disasters; it was fairly steady in that way.
Senator Day: Mr. Minister?
Mr. McIsaac: Our farm cash receipts have stayed pretty even for all. We are down to about 85,000 acres of potatoes right now. I think we were as high as 110,000 or something like that years ago, but we found that we can only handle so much. Actually, though our acreage may be down, our farm cash receipts are staying pretty stable at the present time.
Senator Day: I don't know what your potato production is over in Newfoundland?
Mr. Deering: It's very low. In fact, I wouldn't be able to give you a specific number on decline, but one of our most significant potato producers over the last couple of years has stopped producing, and that probably would have resulted in a decline close to the numbers that you're talking about. That being said, we have a request for proposal that is being advertised as we speak to develop that former footprint as well as 1,600 acres all around it. So if we're successful in achieving that, our production could actually increase by next year by 50 per cent.
Senator Day: Just for my colleagues, can you compare New Brunswick production of potatoes in terms of total volume and dollar value to, for example, P.E.I.?
Mr. McIsaac: New Brunswick I think is roughly 50,000 acres, and we're somewhere between 85,000 and 90,000 in any given year.
One of the challenges I'll just speak to with capturing export numbers, is that it's often the port that the product leaves from that the numbers are attributed to. For example, we grow a lot of grain on Prince Edward Island that's shipped through Halifax Port, and it's captured in the Nova Scotia numbers. That may be the case with some of the New Brunswick data. If it went through a different venue, it may not necessarily be a change in production; it may be a change in where the product was sent from.
Senator Day: The other item I wanted to ask you about is maple products. Every time we go on a trip to another country, we take along a bottle of maple syrup or some maple candy. It's an extremely well-known international trademark of the Maritimes and, in particular, New Brunswick. Can you tell me what's happening with that industry, recognizing the tremendous pressure in New Brunswick from the softwood lumber and pulp and paper point of view and the consequent reforestation on the softwood side, which doesn't help with hardwood maple products? Can you help me with what's happening?
Ms. LaRochelle: I'm not sure I'll get into the whole forestry or the softwood lumber issue but with respect to maple products, New Brunswick I think is the second largest after Quebec. A lot of the maple production is actually on Crown land. There are opportunities for Crown land.
Recently, the Department of Natural Resources, not our department, but DNR did an RFP, a request for proposal, to lease some Crown land for maple production. We see the potential, particularly when we look at some of these trade agreements and the tariff reductions in maple products. We are making a concerted effort to expand our maple production much of which the province can control through the issuance of leased land. Certainly in working with the maple producers, some funding assistance is provided to those who are expanding. So we see some real opportunities, particularly with these trade agreements, in the maple sector.
Senator Day: Any maple industry in the other provinces?
Mr. McIsaac: We have very little on the Island but this is where we get into the maritime cooperation, we really enjoy tasting the New Brunswick maple syrup.
Mr. Deering: We wouldn't have any production, certainly no significant production in Newfoundland and Labrador.
Senator Day: With regard to the minister's comment about 3.2 per cent reduction or loss in relation to supply management, we hear, day after day, about the pressure on supply management and the whole concept of supply management. There is no better example than New Zealand which totally did away with its supply management. They're doing much better now than they were previously, and that keeps getting repeated and repeated. It's a concern when I look at the statistics for New Brunswick. Out of the top three products, numbers two and three are supply- management products. With the recognized pressure — maybe not this time with the European agreement, if it ever comes to fruition, or maybe not with the TPP — on the concept we've got to be ready. I just hope that we're not saying, "Well, we dodged the bullet this time.'' Maybe we did, but it's going to come again.
Mr. McIsaac: I think we need to ensure — and it's one of the reasons it's good to have these hearings — that every senator and every MP in Ottawa fully recognizes the benefits of supply management to our country. It has been stable for 40 years now, and it has been good for our farmers and for our governments. There are no subsidies or grants. It has run itself, and we have returned to the consumer a top quality product.
If you want to compare it to New Zealand, they produce milk in different conditions than we do. I visited the place several times. They put out a good product for sure, but when I was there, the cost of butter was five cents cheaper than the cost of margarine. They can export it all over the world and they do that, and they put out a good product.
If you compare it to the States, I think the federal government subsidization on an average-sized farm of about 115 head of Holsteins or dairy cattle works out to about $78,000 per farm. We do not get that nor do we want that here in our country. We want to return a price to our producer that comes from the consumer directly.
I don't think anybody in the federal government wants to get into subsidizing or granting or anything like that. We really like the way our system works here. As well, in the States, they use bovine somatotropin, or BST, which helps production, and we do not want that in our provinces either. We have a fantastic system here and we need the support of all senators, MPs and all Canadians to ensure that we maintain it. Three point two five per cent is significant in the farmers' eyes, but let's get the details and make sure there is no further slippage because we have the best system in the world by far. If you talk to American producers or New Zealand producers, they would love to have a system like we have here. In New Zealand as well, they buy shares in their processing plants, in their companies, which may be different than the quota system per se but it's somewhat similar.
Ms. LaRochelle: It's not just because our dairy producers are sitting here though I am conscious of them watching, but, certainly, you have identified the importance of supply-managed commodities in New Brunswick. They're certainly the backbone of much of the rural economy and backbone to the whole agricultural industry here in New Brunswick. As the minister has said, New Brunswick is very supportive of supply management.
I will add that our minister went down to Atlanta during the TPP negotiations. He saw the importance of supporting supply management. They don't receive other support. In all the business risk management programs that we have, there's no funding going to supply-management. They're very efficient, they're great farms and very important to New Brunswick. So as we say, it's important for everyone to understand supply management.
It's also important for the federal government to monitor the border, to watch that some of these products aren't coming into Canada when there should be tariffs, that they know what products can and cannot come in. It's very important that the federal government monitor that the products that come across are only those that are allowed to come across.
Mr. McIsaac: That is an excellent point. I talked to Minister MacAulay with regards to that, of supporting and ensuring our chief standards here. That is one of the hardest things on our system at the present time, the leakage across the border, and it has to be tightened up. Again, we have to maintain our supply-managed system for sure.
Senator Day: Good. Thank you.
Senator Mercer: Senator Day raised an important point. I don't have any hair on the top of my head but I do on the back of my neck and it goes up when I hear the discussion of supply management. It's unfortunate that a certain member of our committee is not here to hear this discussion because he has a hard time understanding how supply management works. Supply management in Canada and supply management in New Zealand are two different animals entirely. With the supply management system in New Zealand, to be clear, the money came out of the treasury of New Zealand and into the farmer's pocket. As I always say, the most important piece of equipment on an American farm is the mailbox because of the cheques that come in from the government. "Of course there are no subsidies,'' they'll tell you, but that's why the cheques keep coming to the mailbox.
Anyway, my question does deal with the supply management. We talked about the quota value and the 3.25 per cent that's been written into the TPP. How do we replace and find a new market for that competition that's going to come in? Is there an opportunity for us in supply management in exports? Can we now get into the business of exporting? There are all kinds of good things about supply management and I'm a huge supporter, but one of the down sides, when you get into international trade, is the fact that many of our supply-managed firms are small when we're talking about competing in a big market. What are the opportunities? What are the opportunities that we should be looking forward to exploiting if the TPP is signed?
Mr. McIsaac: I'm going to speak from the dairy side of things, given the period that we've had supply management and my experience on the board of the Dairy Farmers of Canada. We have had the opportunity because of a levy on our milk production to promote and grow our market within Canada, be it for butter, cheese or whatever the area. If in the implementation period for CETA or TPP, we are given a fair time period to grow that market, we could fill the gap that we are quite possibly going to lose if the implementation period is too short. The problem is that we don't know all the details. Personally, I don't think we want to get into the export market because that just opens things up even more, but some may disagree with that.
I was recently down in Denver, Colorado, with the agriculture ministers and the agriculture state chairs. I have a meeting once a year and it was in Denver this year, and I had a chance to tour one of the dairy plants down there which is the largest producer of mozzarella in the world. He was so excited about the TPP and the opportunity to move into Canada, but he was really disappointed that they only gained 3.25 per cent. I chatted with him about supply management and how our system worked here and the differential there. He is at the processing level; he does not get into the subsidization on the governmental side of things. However, he sees a market and is buying his milk at a certain price level. Actually the cost of the milk is here at this level, and he's buying it at this level, processing it and putting it into Canada. So actually his federal government is subsidizing Canadian consumers to buy American cheese, but he didn't see that. He looks at the processing side, that's all.
Again, the dollars going into the dairy industry down there are completely different than in the Canadian system. Our system is run by the producers on a cost production formula, and we get our dollars through the marketplace from the consumers directly. I think all levels of government really need to appreciate that. Getting into a wide-open export market, I don't think is the way to go. I think we need a little time to grow our domestic market here.
Senator Mercer: I think we need to continue to maximize our supply-managed products. I was disappointed that it was 3.25 per cent. I'd rather have zero, but 3.25 is better than 5 per cent but it's also more than 1per cent, and I hope that it doesn't do too much damage. I've got great faith in the farmers who are in the supply management industry and that they can survive this bump and outperform everybody else as they usually do.
Thank you, Chair.
The Chair: Thank you very much.
It's been a great pleasure to receive and hear the Atlantic witnesses. Mr. Deering, Mr. Jamieson, Mr. Minister, Madam Cathy LaRochelle, Madam Stuible, you have been great witnesses for our committee. Thank you very much.
Mr. McIsaac: If I could make one little comment. I guess you're familiar with Growing Forward 2. We are doing an assessment of Growing Forward 2 and will be working at renegotiating Growing Forward 3 coming into 2018. I certainly would hope that we would have the support of all the senators in putting together a terrific package in Growing Forward 2 so we can continue to grow our agriculture industry within this country. The programs under Growing Forward 3 are certainly beneficial and we hope that will continue in a strong way. Thank you.
The Chair: On our second panel of witnesses this morning, we have with us, from the Dairy Farmers of New Brunswick, Mr. Paul Gaunce, Chairman, and Mr. Richard vanOord, Vice-Chair; and from the Dairy Farmers of Nova Scotia, Mr. John Vissers, National Director, and Mr. Brian Cameron, Director General.
The Standing Senate Committee of Agriculture and Forestry welcomes you. It is a great pleasure for the committee to come to the Atlantic provinces.
Mr. Gaunce?
Paul Gaunce, Chairman, Dairy Farmers of New Brunswick: I certainly don't mind starting. Being the host province, I offered Nova Scotia the chance to go first, but that's fine. I know one senator who comes from close to where I live, so I hope I don't taint him.
Thanks for inviting us. We're always excited to put across the good news of agriculture, especially the dairy industry. I'll introduce myself. First and foremost, I'm a father. I'm also a dairy farmer, and my son and daughter work with me. I'm the Chairman for Dairy Farmers of New Brunswick and I live close to Hampton, New Brunswick, which is about 80 or 90 kilometres from here toward Saint John.
Mr. Richard vanOord, Vice-Chair, Dairy Farmers of New Brunswick: I'm Richard vanOord. My wife and I own a dairy farm together just outside of Fredericton. We recently, in the last six months, put in robotic milkers to milk the cows. So no, I did not have a chance to milk the cows this morning, but the robot was working fine when I arrived in the barn. The cows were laying down nicely, chewing their cuds, enjoying the nice sawdust mattress that they have and rubber foam mattresses, as well. Chewing away. So they looked happy and the robot was working fine so I thought it was safe to go. Anyway, I'd like to thank you for the opportunity to be here.
Mr. Gaunce: I'll start with our presentation. They said five to seven minutes, but Cathy told me you wouldn't cut me off if I took too long, and I've been noted for that.
New Brunswick's dairy sector represents 200 dairy farmers that ship around 400,000 litres of milk every single day of the year. Revenues from the sale of this milk are around $300,000 a day or $110 million annually. The following are a few indicators of what the dairy sector contributes to the New Brunswick economy: $330 million to the GDP. Ninety per cent of our milk is processed here and 60 per cent of our raw milk is consumed here. Forty per cent is sold mainly as butter and various types of skim milk powder to national and international markets, so we do export. We pay $63 million dollars annually in taxes to provincial and federal governments, 3,600 jobs. It also maintains the processing infrastructure, banking, feed mills, machinery, equipment service and sales; car dealers, grocery stores, etcetera.
We were provided with a copy of the Dairy Farmers of Canada report when they made their presentation to you guys almost a month ago now. We certainly agree with the things that they asked and reported on. We're not going to cover that report because you guys have it now, but consider us as fully supportive of the request from DFC. One of their big things was the fact that supply management works so well, and we certainly see it as farmers. I know you guys brought up the fact that the rest of the world seems like they're doing okay without supply management, but I'll tell you, every day we are probably the luckiest country in the world because we kept supply management.
Producers around the world are losing their shirts. The price of milk is at an all-time low on the world market just because it was all about growth, growth, growth, not about financial viability. Supply management is not export oriented and we never will be at that price. We just cannot compete at that price. It doesn't matter how efficient we become. When you as a government start subsidizing your producers, it just skews the world price and it does not make things work very well. So you get a glut on the world market, farmer's losing their shirts. It just does not work. Several people said that there were farmers around the world that wished that they had our system, and I don't blame them a bit.
Richard was just telling me that the suicide rate of the French producers is the highest in the world right now in agriculture because of the poor returns for farmers. You guys were talking about New Zealand. The price of milk to consumers in New Zealand is higher than ours, yet they'll export for next to nothing. Is that fair to their domestic market? No. I'm not against trade. I think a good trade deal works well for everybody. Yes, we allowed access for the CETA deal and the TPP deal. But if we have more economic growth in this country because of the trade deals, those people that live here will buy more milk and hopefully will offset those losses.
The next point is what do we do to compete on the levels? We are in supply management and it is closed. We are protected by the border and tariffs, but nonetheless we've got to be cognizant of the fact that in this world, we've got to keep being more and more efficient. So what can we do in New Brunswick to get more efficient as producers? The first big thing we need in this province and in all the Maritimes is infrastructure and processing. We've had pretty good growth in the dairy industry in the last 10 years, I think around 10 per cent growth. So in a domestic market that everybody says is stale, that's not true. Our processors are making really good products and consumers are buying more products. We make one of the best qualities of milk in the world. The reason we do is that we have farmers who have the technology and the return from the marketplace to keep up with the new technologies that come along.
That said, you've also got to be cognizant of what the consumers are asking for, and that puts hardship on the producer because consumers are very aware of where their food's coming from and they want to know everything about it. We've instituted several programs and one that covers them all called proAction. We certainly can use some help from federal funding to implement that on our farms. The five areas in proAction; CQM, which is Canadian Quality Milk. We have it installed on every farm in the country now. The next four steps will be animal care, traceability, biosecurity and environment, all things that consumers care about. The animal care pilot is being rolled out in New Brunswick this spring and it's going to show consumers and the animal welfare people that farmers do a great job looking after their cows.
If you listened to Richard talk about how happy his cows are in his barn, it's a place that I might want to go and sleep because it sounds like a pretty comfortable bed. Farmers realize full well, if a cow's not happy and healthy, she's not going to make any money. Every one of us does the best we can to make sure those cows are happy and well and eating.
Climate change has really made a difference in the crops we grow. We're far behind the rest of the country, because of our climate, in being as profitable and as equitable as some producers in good climate zones like southwestern Ontario or British Columbia, where they can start cutting grass I think in another two weeks. We need a lot more research into getting farmers more efficient at growing forages with better nutrition and better volume. We can grow grass in this climate for sure because we have a lot of moisture. But the key is to get enough grass, good grass, and a climate in which we can get it harvested properly.
I'll stop right there.
The Chair: Thank you very much, Mr. Gaunce.
Mr. Vissers?
John Vissers, National Director, Dairy Farmers of Nova Scotia: My name is John Vissers and I am a dairy farmer in Stewiacke, Nova Scotia. We built a new barn two years ago with robots and a lot of cow comfort involved. We wanted to have a farm that were people to visit they would see that we do look after our animals very well. If somebody ever wants to come our way, the door is always open.
I am John Vissers, a second generation dairy farmer from Nova Scotia, and also the National Director of Nova Scotia. There are 220 family dairy farms in our province, producing over 170 million litres of high quality milk each year, directly employing over 600 farm workers while contributing over $350 million to Canada's gross domestic product and $65 million to federal, provincial and municipal taxes. All of this is without a penny of taxpayers' dollars.
A little closer to home, our farm employs five family members milking 160 cows with a robotic milking system. The next generation has proudly taken on the challenge of modernizing our farm and farming practices. Our investment in this new technology is a direct result of the stability provided by our country's supply-managed marketing system.
As many of you know, supply management has been in place since the 1970s as a domestically focussed program relying on three pillars; production discipline, border controls and fair returns to efficient dairy farm families. Over the years, supply management has continued to evolve with many changes and alterations to adjust as milk production, processing and marketing dynamics have changed, but our focus remains on domestic markets. Since feeding Canadians is our primary job, we are not particularly interested in chasing international markets. In fact, we have concerns the reverse is happening.
Under both the CETA and the TPP trade deals, the Canadian Government has given heavily subsidized countries, like the Unites States and the European Union, more access to the Canadian dairy market. This hurts Canadian dairy farms and processors, leading to immediate and permanent cuts to our industry. This in turn undermines our prospects of growth. Worse still, we cannot increase our exports to foreign markets because of World Trade Organization restrictions and a 2002 ruling against Canadian dairy exports. Our border is becoming a one-way door. Supply management provides food security for Canadian families by ensuring adequate supplies of safe, affordable milk and that dairy products are available at all times. Our social license with the Canadian public is founded on responsible and humane production practices. The new proAction program of clearly demonstrates our commitment to food quality and safety, livestock traceability, animal care, biosecurity and environmental sustainability. Once fully implemented, all 11,000 dairy farms will be able to prove they follow these program elements to one of the highest international standards.
We collectively market our milk through Dairy Farmers of Nova Scotia to milk processors giving Nova Scotians a variety of dairy products while supporting our rural communities and businesses. Producing milk in a northern climate requires capital and labour investments. Still, the competitiveness and profitability on Canadian dairy farms is shown in our milk production efficiency increases, which match the most progressive countries around the world.
In closing, I would like to acknowledge the government's support for supply management and say that our industry remains strong from this and the next generation.
Thank you for listening this morning, and I am pleased to answer any questions you may have.
The Chair: Thank you very much, Mr. Vissers.
Mr. Cameron, have you something to add?
Brian Cameron, General Manager, Dairy Farmers of Nova Scotia: Thank you and good morning, everyone. As introduced, I'm the General Manager of Dairy Farmers of Nova Scotia. I work in Truro, Nova Scotia. I've been there for 13 years. It's been my pleasure to work not only with Mr. Vissers and our board, but with neighbouring provinces as well. My reason for saying that is that one of the collective strengths of supply management on the dairy farm side is not only the provincial authority that each of our boards has to operate supply management in our provinces, but our opportunities to work together, collectively as a sector, to increase the market strength of producers because there's consolidation at the processor level and consolidation at the retail level, and it's as important as it's ever been for producers to work together. I'll just make those comments at this point.
The Chair: For the first round of questions we will go to the deputy chair, who comes from Nova Scotia, Senator Terry Mercer.
Senator Mercer: Thank you, chair.
As you may have heard as I was asking questions of previous witnesses, I'm a big supporter of supply management. I understand why farmers around the world would be envious of our farmers.
Mr. Vissers used a term that we very seldom hear Canadian farmers talk about and I think you should talk about it more, particularly those of you in supply management. That's "food security.'' One of the reasons that you'll see subsidies for agriculture, particularly in Europe, is food security. They want to make sure that they can feed themselves. That's because they've been through times when they couldn't feed themselves. Canadians have been blessed or spoiled, however you want to look at it, by the fact that we've been able to feed ourselves. When we couldn't produce certain products at certain times of year, we were rich enough to be able to import it from people who could produce at that time of year. I wonder if you might talk about the issue of food security.
Also, I have a practical question because both of you had talked about robots and robotic milkers, etcetera. Could you perhaps talk about capital costs? Those of us who are not farmers might say about a given piece of equipment "That must cost a lot of money.'' How quickly can a robotic milker pay for itself?
Mr. vanOord: Because it's happened to me fairly recently, I don't mind sharing. We milk about 80 cows just outside of Fredericton, New Brunswick. It got to the point where we were spending about $70,000 on outside labour a year. I was still working every weekend. I was still working 60 hours a week. My wife was involved as well. She was getting a little frustrated with having to get up early in the morning at 5:00 and being responsible to be in the barn in the afternoon at 5:00, because they need to be milked at least twice a day, if not three times.
We hit a point where we said, "We're investing a fair bit of money on outside labour and we're still working 60 hours a week. Something's got to give.'' We went to a bunch of different companies and we came up with some scenarios and went through some budgets. Within an extremely short period of time, within a month, we had gone from the thinking process to actually installing one of these units in our farm.
The base unit for our machine was $300,000. It would milk about 100 cows. We are reducing labour costs by about $50,000 a year. The payback, as you can figure, is six to seven years on such a machine, just on labour payback. One thing that we haven't noticed or didn't really expect is that the quality of life has changed dramatically for us. There's no more 5:00 in the mornings unless alarms go off saying there's something wrong with the robot.
My wife has rekindled her love for being in the barn. My wife is a very social person. She was in the car industry. She sold cars for many years. She didn't like to be stuck in the barn in a specific area milking the cows for a long period of time, but she likes to be in the barn with the animals. This robot is actually her baby. She's pretty much taken this on. The reason why she likes it so much is that she can walk around with the cows because the robot does the milking. If a cow needs to be milked and hasn't been milked, she'll go up and give it a tap and say "Hey, it's your turn.'' She can do that while she's on social media with her phone. She loves to be on there. We put a nice comfy chair in there. We put one of those splitless duct air conditioner units in there so in the summer she will be cool and in the winter, she'll be warm. She's taken this on.
Not only have we reduced labour, my wife, who is a 50 per cent partner with me, and has now had a rekindled, for the last six or seven months, interest in the farm. It's really her baby. On top of that, because our cows are being milked in a more comfortable manner, they're producing 15 to 20 per cent more milk. Not only am I receiving labour savings, I'm receiving an extra I'm going to say 400 or 500 litres a day off of 80 cows, at 75 cents. An extra $200 or $300 we're making because the cows are being milked when they want to be milked versus when we think they should be milked.
Cow comfort plays a huge role. When we're in the barn plays an important role. We can organize our social events not around our milking times and milking schedules, but around when people want us to come for supper or a birthday party. We can go in the barn around those times. It's dramatically changed.
In New Brunswick, I think there's over 10 per cent of farms are robotically milked. That will rise to 20 per cent within the next year, and I suspect to 30 or 40 per cent within the next five years. It's really changing the dynamic of the family farm. I hope that answers your question.
Senator Mercer: Yes.
The Chair: Mr. Vissers?
Mr. Vissers: From our aspect it's somewhat the same. The next generation to be interested in farming didn't want to continue what we're doing. When my brother-in-law and I farmed, there were lots of weeks that if we had a half a day off every two weeks we were doing good. We basically lived in the barn from 5:00 in the morning until 7:00 at night. Then if you got calls through the night for cows calving or whatever, you were there doing that too. They didn't want that. They wanted to farm, but the technology is there today with the robots. Robots have been out for probably 22, 23 years now, some of the first ones. The technology has improved so much over the last 10 years or more that they are reliable. That was probably part of the motivation.
When the boys were designing the barn, we actually sent them around to different parts of Canada; Ontario and Quebec, out West, even down in the States, to look at robot barns. They wanted to see the top 10 per cent. They wanted to know about the ones that made it work, how they made it work. My son would ask them why they went there. There was a couple who had labour issues, but the majority said that it was lifestyle. If their son or daughter was playing hockey at 4:00 in the afternoon, they didn't have to be milking. They could go to the hockey game first and go to the barn afterwards. Robots allow for that lifestyle. For ourselves, as we get a little older, rather than hiring more people we're still able to help, though not as much, and we're still there to fill in when it's needed. The payback is there at the end of the day, if you've got to build a new barn and put in a parlour and everything. If you look in the States at the bigger barns there, they build the big parlours because they're working 20 hours a day, with three shifts milking. Over here, you build your big barn, you put your parlour in and you try to get all the cows milked in two hours. You already milked them two or three times a day, so it's sitting idle a lot of times. The robots at that point are efficient because they are milking 24 hours a day and the cows adjust to their time. You go in there at midnight and there's cows still lined up, a couple cows waiting to get milk. So for the cows it's more relaxing. It's just a more relaxed atmosphere.
A lot of it is lifestyle. Cost wise, there may be a little higher investment but the tradeoff is lifestyle.
The Chair: Mr. Cameron?
Mr. Cameron: Those were two great responses.
To give you some insight into robotic milking, you had also asked about food security that Mr. Vissers mentioned. I think there's quite a pool of evidence and current information about food security, food sovereignty, even buying local. They all sort of fit the same theme. If you think of going into your grocery store, what draws a lot of attention is whether it is Atlantic produced or for us Nova Scotia produced. We feel that dairy has a really good story to tell there.
You mentioned the percentages of the milk produced in New Brunswick that stay in New Brunswick. It's similar in Nova Scotia, very high percentages. Our fluid markets are effectively served from within the provinces. That's really important, that Nova Scotia or New Brunswick consumers know that the fluid milk that they're purchasing in creams is actually produced locally. Again, with the makeup of the country and the processing sector, a lot of the industrial products; the cheese, butter, yogurt, ice cream, comes in from outside our region. The Dairy Farmers of Canada have branded our products to encourage consumers to look for the 100 per cent Canadian milk through a logo. It's on the bottom of the handout there, and that's a branding program that the Dairy Farmers of Canada has developed on behalf of all producers, to drive consumers to look for that product.
As an example, if you're in the dairy case of the freezer section and you want ice cream, the package that has that logo is100 per cent Canadian and the dairy ingredients have come from Canadian cows. Right beside that, there might be a product that doesn't have that label on it. I'm not going to use company names. They call it frozen dessert. Not only is there very little, if any, butter fat in there, it is palm oil. It's a very different product. Again, that quick example of driving Canadians toward looking for the 100 per cent Canadian milk logo is a way of supporting what Canadians want, and a means to having food security, food sovereignty or buying local.
Senator Mercer: I appreciate your answers. I would encourage the dairy farmers of Canada, egg farmers, chicken farmers and turkey farmers to focus on the fact that food security is an issue. You may have noticed that one famous fast food restaurant in Canada has switched to talking about food security and how the beef is produced for their Teen Burgers. I find it interesting that it has come of age to talk about these things. I don't want to be criticized for being a hypocrite because we opposed the country-of-origin labelling issue in the United States. But when I shop, and I do most of the grocery shopping in my house, I do look for Canadian products. But I also look for Nova Scotia products if I have a choice, or Atlantic Canadian products if I don't have a choice for Nova Scotia products.
I think Canadians are sophisticated enough now to know that, but perhaps in the advertising of the dairy farmers, the egg producers and the chicken farmers, they could start reminding them of food security and that homegrown is a good thing.
Thank you, Chair.
The Chair: Thank you.
Mr. Gaunce?
Mr. Gaunce: Just on that, the buy local or the carbon footprint sustainability advertising of dairy farmers is probably one of the best programs of any industry in this whole country. My milk travels 30 kilometres. One way it goes to the industrial plant or the other way it goes to the fluid plant. You can't get a product on the shelf any closer than that.
Senator McIntyre: Thank you, gentlemen, for your presentations. My question has to do with diafiltered milk and milk protein substances.
As I understand, diafiltered milk is exempt from duties when it enters Canada from the Unites States, while the milk protein substances are subject to tariff quotas. I understand and I'm sure you're aware that both Ontario and Quebec have both voiced concerns about the large scale importing of diafiltered milk from the United States. So my question is this; have the imports of diafiltered milk from the United States affected the dairy industry in Atlantic Canada? If so, how? Are the Atlantic provinces also looking to establish a new class of milk that includes diafiltered milk? How will this affect the milk industry in Atlantic Canada?
Mr. Gaunce: I'll try and give that a go.
Diafiltered milk is a big problem for the dairy industry, not only in Atlantic Canada but all the way across the country. The imports of MPI, which is milk protein isolates or milk protein concentrates, have gone up from around 5 million kilos in 2005 to around 40 million kilos this year. I don't blame the processors because obviously it works better in their cheese plants. The issue is that we don't have the technology in our plants. We have aging infrastructure in our industrial plants all across this country and we need to get that technology in new plants, number one, just to make it so those processors can use it, but also so they use our product. It's probably the cause of half of our skim milk surplus right now. It comes in as an ingredient, but in our definition when it goes in the cheese vat it becomes a milk. So we think they're circumventing the tariff lines. If we had better border controls, that wouldn't be an issue. That being said, if we had the technology in the plants here, they wouldn't have to bring it in. They would use ours. And yes, we are working on an ingredient strategy to try and get pricing and technology in new plants built. I haven't reached a deal. We have sort of a deal in principle.
Senator McIntyre: Does anyone else wish to comment?
Mr. Cameron: It's an excellent question. It probably comes from previous testimony you heard from the dairy folks in the other provinces. To build on Mr. Gaunce's comments, the biggest impact in both Nova Scotia and New Brunswick, or the Atlantic region, is a financial one, a reduction in the price paid to producers. So what happens is again, instead of processors using domestically produced protein that's in the cow's milk from our herds, they're importing the protein in various forms and therefore purchasing less of our protein. You can actually take milk and separate it so the cream goes one way and the skim milk goes the other way. You may be familiar years ago with the separators. That still happens today. There's a large demand for butter fat in Canada, so the cream is all required. However, there's a surplus of skim that Mr. Gaunce mentioned. As the outlets and the markets for those become fewer and fewer, the price goes down. As the price goes down, that impacts the price producers receive from the marketplace.
Certainly, there is quite a bit of work going on in the industry now to try to modernize supply management, which is a phrase that has been used, whereby more of the protein from our cows' milk will be used in order to make Canadian dairy products. Again, it goes back to my 100 per cent Canadian logo comment.
The Chair: Mr. vanOord?
Mr. vanOord: Further on that, I don't know all the details, but what I do know is diafiltered is milk that's been filtered twice. One load of diafiltered milk takes four loads of regular milk to make. It's a four to one ratio. If one load of diafiltered milk comes across the border and CFIA says "It equals one load of milk,'' it actually equals four times that amount. How the CFIA accounts for this is where our concern lies. We think that the CDC, the Canadian Dairy Commission, which is a sub-arm of you guys, has the ability to audit this stuff and the knowledge to assess what the product actually is. One load of diafiltered milk is actually equal to four loads of milk, but is it being counted as four loads of milk coming across the border or is it being accounted for one? That's our big concern.
Like Paul said, we don't blame the processors for it. A litre of diafiltered milk can actually put out, I don't know, 25 per cent more cheese than a litre of regular milk. They're doing it for a cost reason. They're doing it because it makes their plants more efficient. They're able to make the product easier. Our concern is that we want to be able to produce that milk and we want to make sure the government, CFIA, is accounting for what's actually coming across the border. That's where my concern is.
Senator McIntyre: I just want to talk about two free trade agreements that were signed by Canada with the European Union, namely CETA, and the TPP. Obviously with the coming of those free trade agreements, there will be huge economic impacts and challenges and so on. What can the Government of Canada and your provincial governments do to help mitigate these challenges? The agreements have been signed and not yet ratified, but should they be ratified?
Mr. Gaunce: The first thing I'll say is yes, it's going to hurt us. The cost that we figured out is around $30,000 to $40,000 a year per farm when the full impact of both CETA and TPP take place. There was a fund promised by the federal government with the TPP deal for processing, infrastructure and farm rebate to help offset this cost. If I look at big picture on both of these trade deals, if it's a good trade deal for our country and we get economic growth, then the people that get the economic growth will buy more dairy products, so we'll be able to hopefully hold our own on what we're losing to those two trade deals.
On the other hand, if we have the marketing expertise and the world price is right, we can export into probably niche markets. It used to be, back when WTO was signed, we had an agreement then to sell 3,000 tonnes of cheese to Europe. The price just kept whittling down lower and lower. It was no longer lucrative enough for us to bother, so we hardly export any cheese to Europe anymore. We are exporting cheese to some other countries. If we find our processors or retailers can get the expertise to get into niche markets that are lucrative enough for our producers, then we'll be exporting to those countries because now we have the ability with these trade agreement. But they aren't going to be just any market. They've got to be a lucrative one.
Senator Poirier: Thank you for appearing today. Actually, Senator McIntyre touched on the line of questioning that I wanted to follow; the TPP agreement and the Income Guarantee Program and the Quota Value Guarantee Program. If I understand what you're saying in your presentation, you feel that you are going to be losing $30,000 to $40,000 per year if this is ratified, because of the 3.25 per cent. Is there anything that you see in these agreements if the Income Guarantee Program is provided, and if the Quota Value Guarantee Program is there to protect you, that could help Atlantic dairy farmers? Are you in need of any type of help at this time? If they can help you, in which way do you think they can help?
Mr. Gaunce: I think we definitely need research for crops to make us more efficient and technology to make our farms more efficient. Robots are a fairly new technology in Canada. They've been in Europe for quite a while. They're working well. It's a lifestyle thing because producers work 24 hours and drive themselves crazy. It's a lot nicer when you can have a lifestyle. I'm so thankful that I have my kids at home to help me work so I can get some time off.
The quota value fund, I doubt that we'll ever use. Supply management will have to disintegrate before we'd even have any chance of getting any money out of that. Rather than put it money there, I think they'd be better off to put it into research and technology to make farmers and processors more efficient.
Senator Poirier: If I understood both provinces correctly, a good percentage of the milk you are producing stays within your provinces. There is a small percentage that is leaving. The percentage that is leaving is going where? Is there a potential to produce more, to have more going elsewhere? Is there an opportunity for more exportation of value added products or anything like that out there?
Mr. Vissers: Just to touch on that, we're in a pool within the P5 provinces; Ontario, Quebec, Nova Scotia, P.E.I. and New Brunswick. One of the things we share is market growth and price. If, for example, the products are in demand in Ontario, part of our milk production in Nova Scotia will actually move up to New Brunswick, which gets moved up to Quebec, which gets moved to Ontario to fill that market. Part of the production we do produce is for Ontario or wherever the growth is within the pool.
There are products that are consumed in our own province. For example, Scotsburn is a big ice cream maker that processes ice cream for across the country. We could never consume that much ice cream or we'd all be really big. We do share within the country. There is still opportunity for more. Part of it is we need to have more investment for processors to do more. Our old plant in Salmon River was a cheese plant. It only produces powder now. The butter and that is made in New Brunswick. So there is opportunity for processing investment. That's part of what they're talking about, coming up with a new ingredient class to help accommodate that. That will come. That will allow the opportunity of more production to come.
We've seen growth over the years. We're fewer farmers, but we're getting more efficient. We haven't cut back on production, we've actually increased. I think in that area there is really opportunity.
Mr. vanOord: Just to touch a bit on export, we've heard quite a bit about export. The Canadian Dairy Commission continues to tell us that there are opportunities and there will be opportunities with CETA. We don't completely see what they are yet. They have some ideas and I hope they're going to share them with us on exactly what they are. The Canadian Dairy Commission is working on that. Because these deals haven't been signed yet, we can't investigate too far. We can shoot down the rabbit hole, come back and see what we're going to come up with. It's hard to give you a firm answer on export.
I know every country likes the idea of exports because it brings foreign money in. We realize, as a dairy community, that's important. It's important for the Canadian economy. We haven't traditionally filled that role. Is there potential there? There may be some potential there. The Canadian Dairy Commission has told us, over and over again, at our individual provincial meetings that there will be opportunity. What that looks like, we don't know. What we do know is that farmers across the world are struggling.
We heard about New Zealand. Well, I got a Twitter feed yesterday on an article that New Zealand processors aren't paying their producers up to date. Not only are there farmers having a hard time right now in New Zealand because the world price is so low, they're holding back milk cheques. There was an article written, and I re-Tweeted it, in New Zealand, about how they're struggling down there. You see that all through Europe. My family is from Holland. I was born here in New Brunswick but I travel back quite often. They have nothing to do with agriculture over there, but they've told me, over and over again, "Don't get rid of your system. The farmers here are miserable.'' And we see that. You guys can see that on the news or whatever. You can see that all through Europe, it's a problem. Ireland, England and France are all having problems.
We know what our system does right now. It works. It works very well. Let's continue with it. If there's opportunity to bring some foreign money in, let's explore it. Let's see what the opportunities are.
Senator Hubley: Welcome and thank you so much for your presentations this morning. My question goes to Mr. Vissers. In your presentation, you mentioned the new proAction program. You highlighted food quality and safety, livestock traceability, animal care, biosecurity and environmental sustainability. I'd like you to comment on livestock traceability. I guess we all assume that the Holstein is the king of producing milk. Is there an industry around the Holstein as the animal? Do you export it? What exactly would the livestock traceability include?
Mr. Vissers: On our farm now we have the IDF tags, or those reader tags, through Holstein Canada. With this proAction program, the idea is that we'll be using the tags across the country to monitor cattle as they move. If a cattle dealer comes and buys a couple bull calves, we'll actually have to record that information in the computer to let them know that those cattle have left our farm. When they're born, they have to be recorded. The tracing follows right through to wherever the cow ends up. They know where the cow came from.
I think part of it goes back to the BSE problem originally. The beef industry has a little more work to do. The dairy is further ahead with it. ProAction is part of that. We're unrolling different parts or segments. We had the Canadian Quality Milk program, which we're all on board now. The next aspect is the livestock traceability, then biosecurity and the environmental one afterwards.
Brian, do you have any more to add to that?
Mr. Cameron: I understood part of your question to be around the Holstein breed. John mentioned Holstein Canada, which is a breed association. All the other dairy breeds have national associations as well. If we think Holstein, the black and white cows, one of the great things — and it's not directly involved in the work we do with the marketing boards — is the export of Canadian genetics. Again, our high quality genetics on the male side, as well as genetics from embryos, is world renowned. I can't quote the numbers, but it's a big business in Canada, very export oriented. As well, it helps to have Canadian genetics go around the world and help other countries improve their production. That's certainly one aspect of our industry that we don't often talk about in milk marketing boards. It certainly is an important part of our industry and it means millions of dollars a year in exports.
Senator Hubley: Thank you very much.
Mr. vanOord, you mentioned that the milking now is either twice a day or maybe three times a day. So I think with the new system, you can almost program your herd to have different milking times. I have to smile because I think they're probably very happy. I don't know what kind of music you use to entertain them, but that's alright. We won't get into that today.
The other thing that intrigued me was the fact that we have family farms here before us today. Generally, within the dairy industry, is this happening? I suppose it depends on being able to acquire quota, but are there a lot of family farms within the dairy industry?
Mr. Gaunce: I think you'll find that every farm in the dairy industry's a family farm. And it doesn't matter how many cows they milk; whether they milk 1,000 or 50, you just cannot replace family labour. Their heart's there. They work for next to nothing sometimes, but that's how they run. It's family. I suppose I'm biased, but I think it's a hell of a place to raise kids. Your kids learn how to work hard, what life is, what death is and rewards. It's just amazing. I get so many compliments from people: "Man, your kids are great and nice.'' A lot of people laughed at me, but when my kids were going through school; they're both out now, and brought friends home, I made them come to the barn. Not that it was a big deal to force them, but they came and they shovelled manure and they saw what we had to do. They learned what farm life really was.
I talked to a guy in Saskatchewan who is the association vice-chair. He and his three brothers milked 700 cows, but it's a family farm.
Senator Mockler: Do they have robots?
Mr. Gaunce: No, they don't have robots. They have hired help. The three brothers run it. They each have their area of expertise and that's how they split up the workload.
Mr. Vissers: Yes. For ours, too, they're all family farms. Of the 220, I don't know any of them that aren't a family farm. One of the challenges for the next generation is being able to keep the kids interested in continuing farming. A lot of things have changed from the practices of 20, 30, 40 years ago. We moved to Nova Scotia in '67. I think it was just a year or so before that that the bulk tanks had come in; it was all milk cans. We've gone, you know, from tie stalls right up through to putting in milk parlours and now we have robots. You have to be willing to invest in a new technology moving forward, because if you don't you're going to lose the next generation's interest.
Like I said, my son is home on the farm and my nephew. My brother-in-law and I are partnersand his son is home on the farm. They both very much have an interest in it. It's the new technology that keeps them interested, too.
Senator Hubley: Thank you very much.
Senator Oh: Thank you, gentlemen.
You mentioned earlier that we have a very strong, good system, better than the ones in England and Europe. This committee has heard from the Canadian Dairy Farmers that they are very nervous about the impact of the influx of dairy products from other milk markets and milk prices. Small farmers are very concerned about the trade agreements. Can you comment on it?
Mr. Cameron: That's a good question. The 3.25 per cent has been mentioned a few times here this morning. That is Agriculture and Agri-food Canada's and the previous Conservative government's estimate of the impact of the trade deal, 3.25 per cent of the 2016 milk production. That's the number. We're three months into 2016 so it's pretty difficult to predict, even with our statistics and so forth, what the production is going to be, let alone 3.25 per cent of that. The reason I say it that way is that — and I'm sure Dairy Farmers of Canada relayed this in their presentation as well — it is based on the preliminary schedules of the imports of all the different dairy products coming into Canada under the TPP, if it's ratified the way it's set out now. The impact is considered to be closer to 3.4 to 4 per cent. So 3.25 per cent sounds low to us. Dairy farmers have calculated it to be between 3.4 and 4 per cent.
Nonetheless, in some ways they may seem like relatively small numbers, but certainly for our industry it would be a big change. It's been mentioned already that it's planned to come in over a five year transition period. If you throw CETA in on top of it, the cheese deal with the Europeans, that's 17,700 tonnes of cheese increasing the imports into Canada from 5 per cent of Canadian consumption to 9 per cent. It's almost doubling the imports of cheese. Add those two together, and you're well over 4 per cent, closer to or approaching maybe a 5 per cent impact on Canadian producers.
Supply management as a national system that includes all producers in Canada. There are a little over 11,000 producers now including the ones in our provinces, and all producers in Canada will be equally impacted by those agreements. Why? Because we measure the market and we try to have milk production meet but not exceed the market. When the market shrinks over time, that reduces the amount of milk and the number of cows on Canadian dairy farms. Yes, the impact will be across the country. Yes, it will be proportional for all producers because it will be both an impact on quantity, which is their quota; the amount of milk that we need in the system, and on the price that they receive for their milk as well.
To speak to a little bit more, there's a wider range of dairy products. They're not all coming from the United States, from what we understand. The industry will be open to all the TPP countries. As has been mentioned, neither of these deals has been ratified yet. It was a more transparent and open process relative to the TPP, to understand those numbers and what the exact impact will be as opposed to the CETA one, where it was sort of at the last minute that the agreement in principle was released to the industry. All that means is that it's very much a work in progress. It will have a big impact. It will have an impact on all dairy herds; small, medium and big herds. All herds will be proportionally impacted.
It was mentioned earlier, as well, about the compensation package that was announced by the Conservative Government. That's important relative to replacing the impact of the lost income because of the increased exports.
Senator Oh: Just now you mentioned milk powder. Does anyone produce infant formula milk product in this part of the country?
The Chair: Excuse me, Senator Oh. Before your second question, Mr. vanOord would like to comment.
Senator Oh: Sorry.
Mr. vanOord: I think I can answer the infant formula question, but I'll leave that.
To further what Brian said, this CETA and TPP is on top of existing trade deals that we've made in the past through WTO or through other things. What would the total number be, Brian, if we added them all up? Would it be closer to 15 per cent of the Canadian market if you add up all previous trade agreements, as well?
Mr. Cameron: Yes, I think it would easily double to more than 10 per cent of consumption because under WTO we currently import 3,200 tonnes of butter a year — 3,200 tonnes of butter every year. That's 5 per cent of Canadian consumption. Currently, we also import 20,400 tonnes of cheese. That's a lot of cheese, but it's 5 per cent of Canadian's consumption. So those 5 per cent numbers are there on the major industrial products. The increase in the access would at least be 9 to 10 per cent I think, is the numbers I've seen. If we take a 10 per cent number, Unites States wouldn't allow 10 per cent import into their country. Europe wouldn't allow 10 per cent imports of their production into their country. So we've already allowed more than what basically all these trading partners have allowed into their country. We think we've done our fair share.
I don't know about the infant formula.
Mr. Gaunce: Maybe just to bring it into respect of if you took all the dairy farms out of New Brunswick and Nova Scotia so we weren't producing any more milk, that wouldn't cover all the imports that that's going to create. From our perspective, that means there would be no dairy farmers left in Atlantic Canada and that milk would be imported.
Mr. Vissers: Just to comment on the infant formula, I don't know if there's any infant formula made here at this point that's for export. We keep hearing about it. I know the CDC's talked about that there's opportunities there, but it's really special equipment that processors would have to invest into that. As dairy producers, we produce the raw product and it's really for the processors to look at that opportunity to see what market's out there. While we'd like to try to find some markets, that's something that processors would have to be willing to invest to go into that market. There may be opportunity there. We keep hearing about opportunities, but at this part, so far processors haven't really invested into that part to go there.
Senator Oh: We will try to invest it.
The Chair: Thank you, Senator Oh.
Mr. Gaunce?
Mr. Gaunce: Just a comment. Actually, when Richard mentioned that the CDC is looking for ways for us to find out, one of the ideas they have is an infant formula plant.
The Chair: Now Senator Day.
Senator Day: Good to see you again. Let me say first of all how important I believe it is that you come to Ottawa on a regular basis annually to lobby, to inform. There are a lot of members of Parliament that don't have any appreciation of the complexity of your industry. Also, have no appreciation of the value of supply management. It's important to keep talking about that, and you're doing that.
I'd like to talk very briefly about two items you've already talked about just to make it clear. If I wanted to open up a cheese factory in New Brunswick, is that a role for the Canadian Dairy Commission then to determine where the supply would come from of the raw product, and dividing it amongst the various provinces in the pool? Is that how that would happen?
Mr. Cameron: I think the answer would be the same for Nova Scotia or New Brunswick. As was mentioned I think earlier, I've referred to the fact that we work as milk marketing boards. One of the roles that we have, and it's a delegated provincial authority; so it's from the Nova Scotia Government to our board, from the New Brunswick Government to Dairy Farmers of New Brunswick, is to buy and sell all raw milk. So we would purchase the milk from the dairy farms that are in each of the provinces, and then to sell that milk to processors. Using your example, a new cheese plant I guess would be established —
Senator Day: That's just an example.
Mr. Cameron: Yes, that's fine. We'll use that as an example. If a new cheese plant were to set up business in New Brunswick, several things would need to happen. First of all, the plant would need to be licensed by a provincial authority. All the processing plants are licensed. Second, Canadian Food Inspection Agency would be involved in making sure the plant was set up properly and that the standards that were needed under their regulations for the production of cheese.
On the question of milk supply, that would be a question I believe to the New Brunswick board, our board. If they needed — and I'll just pick a number — 20 million litres of milk a year, they would be asking the New Brunswick board to commit to selling them 20 million litres of milk a year. That would be part of their business plan. They would need to have that supply of milk. The New Brunswick board would look at okay, all of the other purchasers of milk, each province has its own what we call an allocation system. How do you take the milk that you buy from the farms and allocate it to the processors? Those rules are different across the various provinces. In Nova Scotia, we would have that 20 million litres of milk and potentially the same in New Brunswick, could be allocated to that cheese plant. It would mean that some other processor in New Brunswick, because milk production really doesn't change with that, doesn't — it receives 20 million less. So that's part of the decision that the board would be making relative to supplying that milk to a new entrant or a new processor. We have a couple of programs where extra milk can be made available above and beyond the provincial allocation of provincial supply to a new processor coming in, if they're doing an innovative product or if there's an opportunity that a portion of that milk could be supplied for more than New Brunswick to that plant.
Senator Day: But is the total supply determined by the Province or by a national authority? That's the point I'm trying to get to.
Mr. Cameron: In Nova Scotia, we're 2.2 per cent of the national pie. It would be a little under 2 per cent I think in New Brunswick; 1.7 and 2.2 per cent of the national pie. To follow that through to help you understand, if that cheese maker is making a type of cheese that grows the cheese market, they're not just stealing markets from other processors, they're actually growing the cheese market. That would be measured by the Canadian Dairy Commission as growth in the market. There will be more over time, of course. Then there will be more quota in the system. That quota is allocated nationally so all 10 provinces will receive a portion of that growth, for isolating the production from that cheese plant. Within the P-5 pool that Mr. Vissers mentioned that's been in place for 20 years, there would be some adjustments within the five provinces to make sure that that processor has the milk that they need to make their product.
Senator Day: Mr. Gaunce, did you have anything to add to that?
Mr. Gaunce: Just a comment. John mentioned that because we're in a P-5 pool, we move milk to where the growth is and we share in all the market revenues. The last 20 years since we've been in the P-5, most of the growth has been in Quebec and Ontario. We move milk on a regular basis to Quebec and Ontario. If that happened, that scenario you just mentioned; a cheese plant was built in New Brunswick and grew the market, then milk would move back the other way from Quebec and Ontario to New Brunswick to help fill that market, because we're sharing in it.
Senator Day: That's helpful.
The other area I just wanted to clarify is robotics. There are a couple of questions that come to mind. Both of you talked about family farms and that was brought up. There is a concentration of quota happening. I hear about it on a regular basis, that one farmer will buy the quota of his neighbour and expand. Is there a trend towards corporate dairy farming as a result of robotics?
Secondly, would you talk about is robotics just one way of doing it or are there various stages of robotics? I hear the stories of a round table, the cattle come in and go around on a roundabout. Rotary parlour, that's the terminology. There's also the sanitary aspect that I think is very important. In all robotics, do we see all of those things or are there various stages?
Mr. vanOord: That's a fun question to answer, as well. There are many different ways to milk a cow. For us, the robotics that we've changed has been in the milking aspect of the cow. There are many different brands out there that do it. They all meet the quality standards. Each teat has a cup and has a sanitizer that goes through and cleans each teat before the milkers are put on. It puts a post of nice film underneath the udder to make sure everything's sealed up afterwards. There's technology in many different ways. There are farmers in New Brunswick and across Canada that have feeding systems that are either partially robotics or full robotics, where they turn the silos on and the feed comes down and fills a cart. You can get it so it will actually feed the cow at 2:00 in the morning. You don't even have to be there, or any time of the day.
There's robotics in many different ways. There are technologies in those carousel parlours you're talking about and the rotary parlours. They're making those that are robotic now, actually the robot arm. Just picture the same thing you picture in a car factory. The arm comes down and does whatever it does. Well, robotics can do the same thing. If there's a cow coming onto a turntable or a rotary table, it can clean and put things on, as well. Technology is in all aspects; whether you're driving a tractor, you can have automatic steering now. You can have it set up that everything in the field is pinpoint accuracy on sprays, on fertilizers, on you name it. Planting a crop so it's a beautiful straight line when people drive by and you say "How can that farmer be so accurate with that steering wheel?'' Well, it's because a little wheel on there that's actually turning the steering wheel for them. Technology is in all aspects. For us, the ones we like to concentrate on are the ones that take away our daily routine; frees up our time to do other things. What are they? Milking is a big one and feeding is the other one.
Senator Day: Interesting. Thank you.
Mr. Vissers: Just a couple comments. You talk about corporations, but even our farm is considered a limited company. You do that for tax purposes to set that up. One of the things though with the robots, most of the robots that are out there today will milk 50 to 60 cows per robot. If you're going to milk 500 cows, you need almost 10 units. You've got to decide what kind of investment you want to make in that. Where you start getting a bigger size, then bigger rotary parlours sometimes is more economical. Again, it goes to lifestyle which you're looking for.
The other thing is you talk about quotas, about somebody buying your neighbour's quota and expanding. We've had a policy in our province for years now that basically if the quota's sold, it's sold on the exchange. Everybody, every producer has access to that unless it's somebody buying that farm to continue farming it. Otherwise, everybody has access to it. Things evolve as you get efficiencies. That's part of the way you do the expansion. If you did an expansion or you did some things in your farm to get more cropping and that, part of the income is you have to get more quota in order to generate that income. At the end of the day, that's your livelihood. Economically, you'd like to have it all in growth but if not, part of it is if somebody is selling, everybody has the opportunity to buy a little bit of that, too.
Mr. Gaunce: Further to John's comments, I've been milking cows for 36 years. When I started, there were 650 dairy producers in New Brunswick and some of them were shipping cream at the time. Now there are 201. That's been going on for the last 40 years. As farmers get older, nobody wants to take them over so they go out of business and somebody buys their quota. Like John says, we get more efficient. We need more quotas so we get a little bigger. The farm size is probably about 80 cows on average now in New Brunswick. Back then it was probably around 40. You've got fewer farms, but the farms are bigger and they're more efficient.
Senator Day: People saying the optimum size farm is 50. Now the average is 80?
Mr. Gaunce: Well, the optimum size for me is 40. I milk 40.
The Chair: Mr. Vissers, Mr. Cameron, Mr. Gaunce and Mr. vanOord, thank you very much for your participation. Your testimony is very important for our committee. It's necessary for parliamentarians to come and see you here. That's the first time I think. We hope that other Senate committees will come to this region as well.
Mr. Gaunce: Thanks very much for having us. We're glad to be here to give out the great details of supply management. I hope we'll see you all at our Dairy Farms of Canada conference next February. We invite everybody to come to our wine and cheese reception on Tuesday evening. Joe will tell you that it's very well attended and very well appreciated.
Mr. Vissers: I'd like to thank everybody for the opportunity to present here today. I always say whenever we have an opportunity to present, we will. Again, I say the same thing as our farm. We built the farm and we want to have people come to see the farms. If anybody ever has an opportunity to come down our way, feel free to stop in because it's really amazing. You start talking about robots and you tell people, and they try to imagine how a robot works. Once you see it, you're wowed about how technology can do it. The door is always open.
The Chair: Thank you very much.
We now have the pleasure to welcome the former chair of this Agriculture and Forestry committee, the great senator from New Brunswick, Percy Mockler. Welcome, Senator Mockler.
We continue our work this afternoon with Mr. Greg Fash, Executive Director of the Atlantic Food & Beverage Processors Association.
Mr. Greg Fash, Executive Director Atlantic Food & Beverage Processors Association: I'd like to thank you for having us here to discuss growing exports in our food, in our case the food and beverage business in Atlantic Canada. That's who we represent: four provinces, food and beverage processors, aquaculture and seafood. We have a diverse membership. Even if you're not a member, we still represent the interests of many who choose not to join our association but are involved in training programs and other work we do in the industry.
I'd like to start with a few quick facts regarding the structure of the food and beverage processing sector in Atlantic Canada. This is based on an asset map study completed some 18 months ago. We had some cooperation from ACOA, and a company by the name of Gardner Pinfold Consulting completed the work.
The most current data in the study is 2012. Based on 2012 data, there were 892 food processing establishments. When I say "food,'' I mean food, beverage, aquaculture and seafood. It employed 37,591 employees, $6.6 billion in annual gross revenue, generated $2.2 billion in GDP and Atlantic farmers and harvesters supplied 50 per cent of the raw material inputs into the industry.
On the investment and R&D piece, from 2009 to 2012, 23 per cent of Atlantic Canadian firms spent more on marketing, while 46 per cent reduced spending on product innovation and 28 per cent reduced spending on process innovation. Now, that's not necessarily a bad thing. Marketing helps build businesses. However, by reducing innovation investment long-term health of the industry will deteriorate.
Further, while we talk about marketing in broad strokes, you're not always able to separate what was a price promotion or a price and rebate related incentive to meet retailer and distributor demands for programs, which does nothing really but meet short-term business needs.
In the last few months we've had a couple of round tables, town halls, with some of our processors and other people in the industry and we asked them what's keeping them up at night. They gave us a little list. On top was the rising cost of goods that could be from labour changes, labour issues, raw material costs, et cetera — raw material availability, skilled and unskilled labour availability, high turnover in skilled food safety staff due to workload pressures, tougher business conditions. It's harder and harder to build a profitable domestic-based business, which impacts the company's scale and global competitiveness. Imported products that do not meet Canadian standards are showing up on Canadian store shelves. There's been a huge, and as everyone knows, radical currency shift for exporters to try and manage, and there's been that lack of innovation and productivity to add wealth to the industry over time.
I've tried to take those issues, put them into some buckets and talk in a little more detail about them. Again, this is from the input from our food and beverage processors.
On the cost side, 50 per cent of the raw material inputs are sourced from outside the Atlantic region. Processors are, therefore, subject to an ongoing natural currency hedge with risk and opportunity dependent on U.S. dollar-based raw material. So the amount or the degree to which you're exposed to U.S. dollar cost input, you're either opportunity or a challenge.
When the Canadian dollar is low imported cost inputs rise and some of our companies have to import their raw material. Chocolate would be one. When the dollar is strong domestic inputs are more expensive, and that's a challenge because you're labour advantage on whatever you're growing, like a potato, becomes more expensive on a global basis.
Managing effectively in both those cycles is critical to sustaining a viable processing business. In addition, increases in minimum wage, competition for a shrinking workforce and high turnover are all helping to drive costs higher.
Specifically on labour, the labour issues and particularly seasonal labour has long been an issue in Atlantic Canadian food processing and is a particularly acute problem today in times of rapid growth fueled by a low dollar. Temporary foreign workers and other mechanisms have provided the industry life support in the past and are a critical component in enhancing current food industry competitiveness.
An aging workforce, young people leaving, accessing motivated and properly trained people, along with fewer head offices in the region all conspire to create ongoing challenges. Careers working in our most valuable and sustainable natural resource are not seen as attractive by our young people and the detrimental changes that were made in the past couple of years to the Temporary Foreign Worker Program must be reviewed and fixed quickly. The current program criteria are inflicting great harm on our processors in their ability to be competitive in a global environment.
The criteria were modified for the primary agriculture sector and this should be applied to processors as well. What's the point of growing, fishing and harvesting if the product can't then be processed and value added? There was a recent example in Nova Scotia of lobsters being dumped because of a lack of access to sufficient quantities of quality workers to get it done.
There's also something I call the "capital investment paradox.'' Processors often struggle to access the capital required to improve their businesses. When the Canadian dollar is strong the food business struggles to make money which makes it difficult to financially justify the investment in capital equipment. There's just not the cash. On the other hand, with processing equipment most often sold in U.S. dollars, capital investments will be more expensive and hard to justify when the Canadian dollar is weak, as it is today. In addition, when the Canadian dollar is weak, food plants tend to run at higher and higher levels of capacity utilization. Business is good. This means that installing new equipment requires shutting down production capacity during a time of high demand, and typically in this region that means we will fill in with more labour to bridge that gap instead of investing in capital.
On the innovation side, the biggest roadblock to innovation is bridging the gap from idea to market. Ideas often stay only ideas for too long. Innovation is critical to developing realizable, tangible benefits and developing long-term marketable value. There does need to be a continuing public-private partnership and mechanism supporting innovation investment within our sector, but at current rates of successful implementation the how of what we do needs to be rethought. For example, there are really good programs which help with innovation and product development. There don't appear to be as many that support the go-to-market cost, an important component of getting success on shelf. With commercial success rates of new products in grocery and food service at less than 10 per cent trying to generate new product wins is a challenging endeavour.
Profitable growth: Now, this isn't about export, but companies are doing business in Canada and growing within Canada to try and export to build their businesses forward. Accessing Canadian food distribution channels is challenging for Atlantic food and beverage small- and medium-size enterprises, SMEs and our association primarily represent the SME processor.
Canada has one of the most highly consolidated food distribution systems in the G20, a necessity given our small population and geography.
Processed food buying decisions by Canadian retailers and food service distributors for the most part are made in Toronto and processors have to be globally competitive in the battle for domestic shelf space. Once you secure the shelf space it then becomes a one-sided relationship with all the negotiating power in the hands of five or six grocery chains and even fewer food service chains that control 90 per cent of distribution. Typically, a new product launch must consist of at least two items at the same time to have a reasonable chance at on-shelf visibility, and it's not unusual for processors to be forced to spend $200,000 or more to get one product, a single product listed on grocery shelves coast to coast and that listing may only last a year. It's very difficult to develop enough critical mass and margin to make money in our domestic market. Canada is a small market with a high cost of access in both retail and food service sectors, and in some cases buy local programs in other Canadian provinces can also create an additional barrier to entry for Atlantic Canadian products.
Conversely, the U.S. market has much more competition in regional retail and food service distribution but is still extremely tough to crack for most Atlantic Canadian food and beverage SMEs. As an example, and this is just for illustration, if a company was successful in securing a national listing with Walmart U.S.A. the required production volume could exceed that of the entire Canadian market for that product. Again, this constitutes simultaneously a huge opportunity as well as a huge risk. Manufacturing scale becomes an immediate challenge as well as, and a lot of people don't think about this, the financial risk of potential markdowns on unsold inventory that could cripple many companies. How can we offset and mitigate those risks?
Border control for imported foods, the question is from our processors, is it a level playing field? Atlantic Canadian food processors are investing significant dollars in food safety and security certification training. Some retailers demand that their suppliers have it, but some imported products are not being adequately scrutinized for safety standards and labelling compliance. At the same time, the U.S. border crossings are very effective at scrutinizing imports.
A few examples, and these examples have been given to me. We're a member of the Canadian Council of Food Processors and I didn't have any specific examples. I asked them to provide from across the country and this is a few of their examples. Duck imports from Europe that are not in compliance with Canadian requirements, they still have feathers sticking out. A significant percentage of imported bottled water does not comply with our labelling requirements. Some imported muffins from a California firm have 100 per cent more of a preservative than authorized by the CFIA. Another is an organic quinoa from South America that was rejected by the U.S. because of high pesticide levels. This product was then dumped in the Canadian market.
On the regulatory side, about a decade ago product of Canada labelling legislation was put in place bypassing the established process for implementing changes to package labelling. This forced food and beverage exporters to assume higher costs to maintain separate inventories for domestic and export markets. Further, all processors were forced to spend many thousands of dollars in packaging design and printing plate development to comply with the new labelling requirement under threat of recall by CFIA if they failed to do so. Even while it was burdening Canadian processors it provided no real benefit to Canadian consumers who do want to know where products are made so they can figure out how to make decisions on food safety and security.
A good example from my experience is frozen potato products. French fries made from potatoes grown on Canadian farms, processed in Canadian plants by Canadian workers in Canadian made packaging don't qualify to be labelled as product of Canada which has to be 98 per cent Canadian content. The problem is that the product contains 5 per cent canola oil. Now, this canola oil is often grown in Canada but processed by necessity in the U.S. because of limited oil seed crushing capacity in Canada. So Canadian labels have to read "Made in Canada with domestic and imported ingredients,'' while to export to the United States the label must read "Product of Canada.''
So this summarizes some of the challenges facing food and beverage processors. We can discuss and argue about the individual problems and irritants but I think it's time for a broader discussion about the strategic direction to develop our industry for export and that's why I titled it "Getting Export Ready.''
So on meeting the challenges, I have a list of eight points.
One, the government spends a lot of money and significant dollars to support market development initiatives around the world and supporting market access is critically important. It has to continue. Unfortunately, there's no requirement for companies taking advantage of the funding to assess whether they can sustain a competitive position in the target market over time.
Two, raw material, raw cost will always vary. Sustainability is based on maintaining profitable growth in all cost cycles. To grow the value added versus the commodity sector in improved GDP development we need to focus support on processed development as well as market access. Competitive, profitable processors will always find markets.
Three, cost containment through efficient manufacturing is a key part of generating value. New processing technology can be a critical game changer but only if the process improvements are in place first.
Four, our diverse cold water seafood resource is a worldwide best in class. This renewable source of great tasting clean protein is a culinary and health superstar. Are we making the right mix of investments to maximize profitability so we can build a truly global brand?
Five, climate and geography will always to some extent naturally limit the quantity of volume growth available. Sustaining high paying jobs and careers can only be accomplished by generating more value for what we create, harvest and process in the region.
Six, without an effective new product development and implementation process good ideas will die before ever getting to a customer. Investment in the whole innovation to market cycle and process needs to be a priority to successfully commercialized new products.
Seven, are we educated but under skilled? Processors have commented they need more than two feet and a heartbeat. We need investments in targeted education that could develop workers with the right skills, attitudes and be part of developing career opportunities for the future. We are blessed with an outstanding network of universities and community colleges in Atlantic Canada. What might be possible if we aligned a strategic education plan to develop our food and beverage processing sector?
And, finally, regulators in industry should cooperate in transparent, constructive processes.
To sum up, my thrust is based on our conversations with processors and others that work in the industry. Successfully developing a sustainable export business requires controlling the controllable and investing in processes that continuously improve productivity.
Thank you.
The Chair: Thank you very much, Mr. Fash.
The deputy chair of the committee, Senator Mercer, will start the first round of questioning.
Senator Mercer: Thank you, chair.
Mr. Fash, thank you for being here. I agree with some of the things you said and other things I'm thinking about. The one thing I wanted to talk about was one of the last points you made in point number 7. You talked about education and skill. We need investments in targeted education that could develop workers in the right skills, attitudes and be part of developing career opportunities, and you talked about the network of universities and community colleges in Atlantic Canada. I think this is one of the under-utilized assets that we have. The intellectual infrastructure that we have in Atlantic Canada is second to none in the country. We're not under one global university, which I think is a good thing. I'm a graduate of a smaller institution, and maybe that's what prejudices me, but I also watched a smaller institution respond differently.
When Irving was granted the shipbuilding contract in Halifax one of the first things that happened after the announcement was made was the Nova Scotia Community College said, "Okay, how do we respond to this?'' They immediately retooled a couple of programs, particularly their welding program because they had allowed welding to sort of take a backseat because there was not a great demand, so they responded and are now providing welding programs. I think that's a good example. But can you give me some bad examples? There has got to be dozens of bad examples, not just community colleges. I've used community colleges, but I think universities are too slow to respond to foresee change. Other people are making the changes, perhaps just not around us, but above us somewhere, and are cutting our grass, actually.
Mr. Fash: I'm not sure I could say where there are bad examples. I think to me you've identified that it's slow to change. What used to work and has always worked should continue to work. I'm just getting familiar with some of this. I've been in this role a fairly limited time and it's just been the exposure to some people like the Springboad Network, for example, that's working through the university system in Atlantic Canada. We're going to have a meeting with them and see how we can work together going forward. But for example a fundamental core training program to work in the food processing sector, there's nothing specific for that. Everything is kind of general. We're running training programs. We're facilitating training programs in food safety and dealing with the turnover and finding qualified people is a constant, ongoing challenge because the certification has to be in place. So to have programs, and I'm not going to say exactly what they have to be, we have to start talking about it. We need people coming out of either a community college, or maybe a part of it through the university system, particularly for the middle management, who really understand the seafood and food processing opportunities ahead, a program customized for the industry because you need customization today. We'd have employees hitting the ground with enough knowledge, and companies would be spending less on interim training than they are today, which is a tough go for a small entrepreneurial organizations. So that's not a great answer. I just think we've just got to start talking about it and figuring it out.
Senator Mercer: I agree. We can't make big decisions and not make the associated decisions that need to go with them. You make a big decision that makes some sense and might work. We don't want to bring the workers from elsewhere especially when people here are going undertrained or untrained to do the job.
I did underline something you said because it surprised me. There was a recent example of lobsters being dumped because of the lack of access to sufficient quantities and quality of workers. I don't doubt that that happened because you've said it. I'm kind of curious as to why anybody would dump lobsters when you can keep lobsters and process them in time.
Mr. Fash: It was a Chronicle Herald article from a couple of weeks ago when I was going through Halifax. They just couldn't put it through their system. So in that case they have no commercial value if they can't manage it.
Senator Mercer: It must've been a small processor because the larger processors like Clearwater, et cetera, can house quite a significant number of lobsters.
Mr. Fash: That's correct.
Senator Mercer: One other question I had was on the issue of border control. We have an example I'm trying to recall — perhaps Senator Mockler might remember this — of a dairy product that came across the border and was approved by uneducated, unsophisticated Canadian border inspectors. They said, "Well, this is not a dairy product,'' and so now it's here. Percy, perhaps you can help here.
Senator Mockler: A percentage similar to what —
Senator Mercer: I didn't hear you say that we need to continue to education CFIA and border control services on what the agriculture sector in this country is about. It's a product that goes into ice cream. I can't recall the exact product, but it's affected tremendously the industry that was exclusively being serviced by, in this case Canadian dairy farmers. It seems to me that that's one thing you need to add to your comments.
Mr. Fash: Yes, and I don't know what the solution would be. The United States had different motivation. Through my career it was never particularly onerous to get products exported into the United States, but following 9/11 a lot of things changed. They have increased their scrutiny of imports significantly over the past 15, 20 years and they don't miss much. You know, they have the USDA there and as well as the Border Security and they're staffing it and they're funding it. It's probably not anyone not doing their job or being trained, it's probably just it's a lot of work and I don't know if we're focused on border control of food the way they are.
Senator Mercer: It's awfully inept. However, I think the Government of the United States is taking some advantage of that mindset that Americans have around protection that they didn't have before 9/11, and it allows them to get away with perhaps some things under the guise of protection that they wanted to do but couldn't do before 9/11.
Anyway, thank you very much, Mr. Fash.
Senator Mockler: Mr. Fash, when you talk about raw material availability, I presume we're talking here about Atlantic Canada?
Mr. Fash: Yes.
Senator Mockler: Could you expand and give us some precise examples, please?
Mr. Fash: I probably can't give you the precise examples. I would go to the seafood people that could do that, but it's available seasonally. They can sell more than they can access and that may be by regulation. In other words, controls on how much they're able to harvest in a particular season.
Senator Mockler: This committee did address in the past the country-of-origin labelling. Could you expand on that in view of what you just mentioned, that imported products are not meeting Canadian standards? What would you recommend to us in light of the TPP or the EU agreements?
Mr. Fash: I think within those agreements you're going to have, and I don't know the details of TPP except in broad strokes, for example, the country-of-origin labelling would be one of the things discussed. As I understand it, and I'm not close to current labelling changes, but country-of-origin labelling is not specified as to product of. It could be imported but still allowed for Canadian food products and that tells the consumer not much other than, yes, there is accountability on the importer, if there is a recall they're on the hook. They've got to make something happen. But it doesn't necessarily have to say product of China or Vietnam or United States. It may say that but I do not believe that is enforced today.
Senator Mockler: Basically that's where you have a concern. It's not being enforced.
Mr. Fash: I think it's got to be in an international agreement. I don't want Canada doing something that the rest of the country or the rest of our trading partners aren't. I think this has to be an agreement among trading partners. I think we have to determine what's right for our country. What I am saying is what we shouldn't is have arbitrary labelling laws domestically that would force a company to create a brand-new inventory. It would be for our smaller market, which is Canada. When I was in the potato business, 10 to 20 per cent of the business is Canada. You have to maintain all this new inventory now just for the Canadian market. The problem to me was the arbitrary setting of 98 per cent. Where did that come from and what does it mean? That's just one case. I'm sure there are others. There was a very good process, and I think the fundamental process is still in place, that industry and government work together to create good labelling laws for the country and that respect our obligations internationally. I believe in country-of- origin legislation because I think consumers want that and we've got to clean it up and clear it up and not disadvantage Canadian manufacturers.
Senator Mercer: On that same subject, the issue that gets confusing when we talk about agriculture, of course, is when we go into the beef industry, for example. A prime example in the beef industry is that many cattle born either in Canada or in the United States cross the border three or four times by the time they're slaughtered and off to market. They may be slaughtered on one side and processed on the other side depending on where they are, depending on the market. So the country-of-origin labelling has had a tremendous effect on the beef industry. Animals slaughtered in Canada, get labelled Canadian as the country of origin when it may have indeed spent the majority of its life in the United States. When it goes on the grocery store shelf in Charlotte, North Carolina, they say, "Oh, this steak is from Canada.'' Well, the steak may have been from Canada but the animal may have lived in Montana for 75 or 80 per cent of its life. So we have to be careful because country-of-origin labelling can have some unintended consequences. That's where I think Senator Mockler was going.
Mr. Fash: I've looked at it in the somewhat narrower scope of the process side. You're importing some ingredients, you're growing domestically some ingredients. The whole point is that we didn't like the process that came out of the PMO's office. Instead of going through the normal CFIA process of working with industry, it was arbitrary and we weren't able to have a real discussion about those impacts that were fairly significant for some companies.
Mr. Mockler: You talked about competitiveness and profitability, as this is our order of reference: competitiveness and profitability of Canada's agriculture and agri-food sector, including producers and processors. You said — and I'd like to have more information than just the comment you've made, Mr. Fash — that it should be transparent and a constructive process. In the same light as what Senator Mercer said, we have CFIA and then we have Border Services and sometimes the left hand doesn't know what the right hand is doing. Could you expand on that without necessarily pointing which sector of your industry is being more challenged?
Mr. Fash: In fairness, the scope of that comment goes to that particular product of Canada decision. I can't comment more directly on the CFIA piece. It was just that we've had an industry/government process in place for a long, long time. It had worked fairly well. Our industry associations work well with the CFIA. There's a gazetting process. Everybody knows what's coming down the pipe. They have a chance for input and you get what you get, but it's a result of consultative work. This one wasn't, or at least it wasn't to our industry. Maybe in the beef sector or another sector of the industry there was consultation but not in our case.
As I tried to point out in linking these things together, it's a tough business to make money in especially when you're dealing domestically. Right now in export you can make money, but you can get costs thrown at you from which you're not gaining anything. You're not adding value to the product. In fact, in some ways you're taking away value when you have a confusing statement that Canadians aren't familiar with and you're growing more inventory. You have to have more warehouses to store the inventory. You're going to run into more dating concerns because you've had to produce more products in smaller volumes.
So all that complexity comes out of what seems to be a fairly logical decision. Well, let's redefine what product of Canada is. The impacts, the unforeseen impacts, can be pretty substantial on some companies.
Mr. Mockler: Thank you.
Senator McIntyre: Thank you, Mr. Fash, for your presentation.
In your brief you raised labour issues, and in particular, seasonal labour, which has long been an issue in Atlantic Canadian food processing. You are on point and the reason I say you're on point is because over and over again this committee has heard that the agri-food processing sector is having difficulty recruiting labour and is calling for greater flexibility in hiring temporary foreign workers. Now, that said, the federal government recently announced the allowance of a full scale review of the Temporary Foreign Worker Program. In your opinion, how should the Temporary Foreign Worker Program be improved in order to better address and meet your needs?
Mr. Fash: Without trying to be intimate with all the details about how the program works, I think we just have to find ways. I experienced it with one of the companies I worked with. There was unemployment in the area where we were doing business. We were trying to expand. We were trying to hire a 100 workers and we hired 300 of which we were able to keep about I think 60 or 70 and we couldn't fill those remaining positions to complete the expansion. We ended up hiring foreign workers and they were a terrific asset to not only the community but to the company.
I'm not going to sit here and tell you how the program should run, just that restricting access to temporary foreign workers is damaging to the seasonal industries, in particular, particularly so now in a time of a low dollar. There are more opportunities than a lot of companies can take advantage of and anything that stands in the way of that prevents them from taking advantage of this dollar and hopefully investing in becoming more efficient going forward.
I believe personally, and I'm not sure how many others agree with this, that temporary foreign workers serve a very important purpose, but it can't always be the solution either. At the same time that we're looking at temporary foreign workers, fixing that problem for processors, we should also be looking at how we make their businesses more efficient. How do we improve their businesses so it's not always the only answer in the future. It shouldn't always be the only answer. We should be helping companies become efficient enough that they don't face radical shifts in what they're requirements are based on market shifts. That comes through sensible business improvement practices, operating efficiencies and capital equipment over time. That's where we need to provide help to the industry, in my opinion, and that ties into the education piece as well.
Senator McIntyre: My understanding is that the federal government plans to compensate the supply management sector through various programs and initiatives, and I don't intend to go through all those programs; I'm sure you're aware of them. But given the federal proposal to assist the supply and management sector, what types of programs would you like to see be developed?
Mr. Fash: I gather we're talking beyond temporary foreign workers, yes. The type of programs I've tried to outline in the eight points are to the effect, "Let's get serious about developing skill sets.'' They're out there. They're in private industry. They're available. Let's broaden the access to business improvement education, business improvement specialists. There are some brilliant people and there are some companies using this all the time.
Somebody mentioned Irving. The reason Irving is so successful is that they're relentlessly driving process improvement through their facilities and their assets. That's tough for an SME to do. They're just trying to get stuff out the door a lot of the time. The small- and medium-sized companies are running on fumes some days, like right now when they're so busy. When times are tougher and they're not making as much money with a strong dollar so it's hard to deal with it then. How can we step in and help industry smooth out that process, give them ways to acquire and process — education, implementation, capital equipment — make their businesses stronger and more insulated from the dramatic cycles that we seem to go through every eight to 12 years that are driven largely by currency?
Senator Hubley: Thank you for your presentation, Mr. Fash.
According to the 2015 report from the Atlantic Provinces Economic Council, Atlantic manufacturing firms are smaller than the national average with exports per plant, about 30 per cent lower. Atlantic plants also tend to have lower productivity and are less likely to innovate by adopting advance technology. Would you like to comment on that statement.
Mr. Fash: Other than that I agree with it without having read that study, the asset map study also reinforced some of those points, and I'd be happy to share, by the way, our asset map study with the committee. I'll certainly make that available if you're interested. It is true. We're small companies. The productivity is lower and that's exactly what I'm trying to suggest, that we've got to coalesce around longer term solutions than what we're doing today.
We have companies that go out to business trade shows, trade missions, and aren't able to execute. If they are successful at some of these trade shows and missions, they aren't able to execute and shouldn't have gone there in the first place without, call it a "stress test,'' if you will, for a processor. Then they might see the light and say, "You mean I have to know how to do this before I can grow my export business?'' "Yes, you do. And here, we can provide that for you.'' And whether you call it centres of excellence we have to build around food processing, I'm not sure. but we've got to bring resources, intellectual and expert resources in engineering and process development and all those things. We have them here, we've just got to develop the curricula and the momentum to help these processors get beyond where they've always been, which is exactly what that 2015 study says, and take advantage of our natural advantages in climate and geography, and we do have some. We have a lot.
Senator Hubley: So the solution you feel is having more information sessions for our processors and, as such, to bring them up. It seems like 30 per cent lower is a fairly large percentage and we wouldn't want to just be known for operating at a 30 per cent deficit all the time.
Mr. Fash: No.
Senator Hubley: But you've made some suggestions as how to improve and change that. Are there other things that we can be doing?
Mr. Fash: Again, I think government is trying to do a lot. And I'm new. I just started at this in September, so this is a new sector for me being on the association side of things. I sense a very strong desire on behalf of the government people I'm working with to make things better.
What we need to do is find that critical mass of things that are actually going to make them better, not sell more, let's get better. We can figure that out. If you're efficient, if you're competitive, if you're creative and innovative, you will be successful regardless. So we have to get people there and that's where the money should be spent, in my opinion. You can call it a business improvement institute. There are experts in this part of the world who are doing this work privately and being very successful at it. How do we make that more broadly available through these great educational institutions we have in Atlantic Canada? I think there's an interest there.
Senator Hubley: Thank you very much.
Senator Oh: Some of the witnesses who appeared before the committee stated that it is important for Canada's trading partners to recognize the Canadian meat inspection system and meat processing technologies in order to facilitate trade in agri-food products. Do you think the TPP agreement provides a proper framework to facilitate the removal of barriers between Canada and countries like Vietnam and Malaysia? Do you have any comments on that?
Mr. Fash: It's a great question but one I don't feel qualified to answer. It does bring up a concern a couple of processors have brought to me. I didn't make it a central point of this presentation, but they'd like to see more integration between our federal meat inspection system and the provincial ones. So having the two levels, why can't we get to one? Why can't we get to one standard that's managed by one agency Again, for some small processors it's very difficult from time to time. I'm not immersed in meat; I've never worked in the meat processing side of industry, so I'm not the best person to talk to. But certainly wherever we can take duplication out of the inspection and regulation process would be helpful to smaller processors.
Senator Oh: Any concerns from your members?
Mr. Fash: There are lots of concerns about TPP, but I have to say that most of the concerns would be uninformed. They'd be more based on fear than on fear of the facts. I think the concern they would have is more competition coming into the market, more competition coming in from companies that may not have the same certification, food safety and other standards being enforced, that they have to subject themselves to in order to compete.
Senator Oh: The low Canadian dollar at the moment is good for exports, isn't it?
Mr. Fash: I'll give you the story of two companies. If you're growing potatoes and manufacturing something grown in the ground here, it's a very advantageous time. If you're in the chocolate business, it's a different hedge because you're importing the chocolate from the United States and then exporting to the United States, so you don't have that natural benefit.
Senator Oh: No, if you are importing, it becomes too costly.
Mr. Fash: Your cost of goods has gone up.
Senator Oh: Export is good for you?
Mr. Fash: Except that your labour inputs now are less expensive, and that's a good part. But your cost of ingredients is higher, because you're buying in U.S. dollars from the U.S. We have a few chocolate manufacturers, and chocolate is purchased in U.S. dollars so it can work against you. So if you're in the food business bringing nuts in, for example, they are typically going to be brought in based on a U.S. dollar purchase. So, again, you're always going to have some of that, always.
You can have bad crop years. Forget about currency.
If you're running your factories well, if you're processes are strong you can ride those tough times out and live to fight another day. But if we're doing things the way we've always done them we're going to see continued consolidation, which is natural but it may not be Canadian's consolidating the small enterprises. It may be from outside the country. That may not bother people. I'd like to see our industry continue to grow. I've been fortunate enough, very fortunate, to build my whole career, a very exciting career, in the food business in Atlantic Canada and live here and bring my family up here. I'd like to see others have the same opportunity.
Senator Day: Mr. Fash, the way you caused me some concern when you said that Canadian firms spend more on marketing but reduced product innovation spending by 46 per cent and reduced process innovation spending by28 per cent. Now that's huge. So product and process innovation, major reductions.
At the end of your presentation you talk about the eight points and again about innovation. The federal government has a number of programs now like Growing Forward 2 and then there's a market access secretariat working in the federal government, supposedly to help with gaining access to markets, and part of that is innovation of new products and innovation in processing. Where's the disconnect here?
Mr. Fash: There are programs like Growing Forward 2. Our association accesses funds from that program to help provide food safety and security training so that people are certified in HACCP and BRC, food defence, all those types of important programs that they need to be certified in. So there is government money available and there is money for innovation. There's SR&ED, all good stuff to help you defer the cost of developing something. Not as much is available for taking it from there to the consumer and that's where a lot of the money is.
I'm not saying it's all broken; I'm just saying it's incomplete. Again, where do you want to spend your innovation dollars? If you're working with a company that has a good idea have you done an audit on that company to see that they actually have strong operational processes in place so they can execute? That's where I think the discipline has to be.
Whether you're going to a trade mission to a big trade show in the United States or you're working on a new product that may revolutionize a particular industry, let's help those companies be successful. Let's figure out what the best way to help them be successful is and taking orders in a United States trade show that you can't fulfill isn't one of them. Developing a product that tastes great, looks like it could be a world beater but if you can't sell it nobody benefits. There are processes and there are people who can train,educate and transform business operations to be able to do those things and I think, to me, that's where the focus should be.
Don't stop doing innovation support because we are doing it and I'm not saying we're doing a terrible job. Let's just look at it more holistically. How many of those projects actually got to market, were commercially successful, and that means that they're generating a net profit after two years, they're sustaining their sales, they're growing, they're in the product life cycle, how are we tracking them? Are we tracking them? Are we tracking the success record of all the money we spend in innovation development? I don't know. I'm not that close to it. But let's keep doing it, let's just do it better.
Senator Day: Whose role is this? Is this a federal government role, a provincial government role or an association role?
Mr. Fash: I think it's all three working together. Sometimes we've got to put our own provincial self-interests aside and our own association self-interests aside and work toward the kind of plan that we can all sign off on and say this is the plan. How we administrate that I think needs some discussion. There are some great people within Atlantic Canada who are working in this field and I'd be happy to refer you to some of them afterwards. The ideas are there. The people are there and you probably know some of them and you've probably talked to them anyway. But there are a lot of good people, government and private sector that want us as a region to succeed as an industry to succeed. We just need to think about how we make that happen.
Senator Day: One of the areas you talked about temporary foreign workers. I emphasize the temporary aspect of that. That's a short-term solution, bringing in temporary workers to fill a gap that we perceive. Longer term, in Atlantic Canada we have a very high unemployment rate and some very capable people who aren't working. There has to be a gap there between those individuals who I know could do a good job for us in industry if we could work them into the system, but they're not being worked in and the community colleges, universities and high schools are letting us down.
From your association's point of view, is there anything that the federal government could do to help with an apprenticeship program that would get these young people in at an early age to learn the business, and then the business would be able to handle the innovation and the marketing and all those things where we see some gaps now?
Mr. Fash: Yes, I think that's along the roads that I believe to be necessary. We have the levers that can make that happen. We have the education facilities that can make that happen, and we've got people coming back from Western Canada that would love to find a good paying job here. It's a bit of chicken and the egg, and I don't know where to start first.
I think the discussion has to start first and get the priorities in place, but unless you're generating really good added value out of your resources, you can't afford to pay good salaries and good wages. You just can't. You're in the commodities cycle and you're always going to be in the commodities cycle. That's why I talk about the capital investment paradox. It's never a good time to invest in efficiency and capital but you should be and that's how I would feel if I was a small entrepreneurial organization, 10 or 12, 15 people in my company. I add more through a temporary foreign worker program when I'm really, really pounding it out the door. I haven't got time to worry about that. I don't know how to do it, first of all. I don't have time for it and I'm not making enough cash when the dollar's too high and right now I can't afford to stop and get it done. How do we fix that paradox? I don't have the answer today but we're not even asking the question.
Again, there's talent available in our region that can help us think differently but it's got to start with an objective. That objective is not to help sell more stuff out in the export markets. That's going to happen anyway. With a low dollar it's going to happen. Our objective is to make our companies competitive at a world level, globally competitive to the extent that that's possible. That, to me, is as far as I've gotten, but these are some of thoughts around it that I have, and that's what I believe.
Senator Day: Well, I appreciate you giving us the list. That's a helpful place to start.
Senator Mockler: There's a program in Quebec called La question qui tue, and I'll translate it: "The question that kills.'' With all due respect, Mr. Fash, and to follow up on what Senator Day was asking, it's about competitiveness and innovation and then looking at the labour force. Has it ever come to your attention with your industry or have you discussed another hindrance and it's EI, when it comes to our workers, versus the TFW?
Mr. Fash: In what context?
Senator Mockler: The Employment Insurance program that we have now keeps some of our supposed labour that perhaps we could extract from the EI list to work in our industries. There's a big debate on that. Politically to some extent it has been costly. We talk about TFW and I know how important it is in northwestern New Brunswick when you look at the challenges we have there. That said, we're also facing people telling us that we need more temporary foreign workers, it has to be increased, and we have another group saying to us "Senators, you have to do something with EI.'' I support EI to the extent of when it's needed. Some are saying that too often the program does not encourage going back to work or at least as fast as the industry would like to have them come back to work.
Mr. Fash: I think anything I might comment on it would be more from the realm of opinion than research that I've done or had access to.
Senator Mockler: I would accept your opinion.
Mr. Fash: Look, I'm probably going to repeat what you said. I think EI exists for an important reason. It's needed at times. Like any program people take advantage of it in ways they probably shouldn't. I think we can all cite stories of companies that are in high employment insurance areas that have trouble getting employees when they need them, and for whatever reason, whether the individual is not motivated, they're not qualified for a particular role, they're not interested in that particular role, I think those stories have all been told.
Temporary foreign workers are a stopgap, absolutely. Until we can solve the problem of ironing out these cycles from a productivity point of view and efficiency point of view — and there's no perfect answer — I think it's always going to be there.
I think you're always going to have good employees and not so good employees and you're always going to have people who desperately need EI for all the right reasons and you're going to have other people that maybe shouldn't be on it as much as they are but they are and that's just the way it is. The other thing is if you're an employer you want motivated workers. You want people who come to work prepared to make a contribution to the organization, work well with others and contribute to the work environment. There's all that mixed up in there too. So I don't have an answer.
Senator Mockler: Mr. Fash, you said that you have an asset map study you could share with the committee.
Mr. Fash: Yes, absolutely.
Mr. Mockler: I wonder if you could bring it to the attention of the chair.
Mr. Fash: Sure. I will send it to Mr. Pittman. I can email it to him.
The Chair: Thank you.
Senator Day: I think it would be good for the record, Mr. Fash, if you could indicate to us if all of the 892 food processors in Atlantic Canada are members of your association. Could you describe your association and how it's made up?
Mr. Fash: They aren't. I'm not sure what that number would be today if we re-surveyed them in 2016. We have on average over the years had between a 125 and a 140 processors in the association itself. They range from companies like the Ganong brothers making candy to Fancy Pokket making baked goods to Bonté Foods making processed meat products, so the full gamut, and a number of large seafood processors and small seafood processors, and consultants to the industry as well. So we're a non-profit association with a board of directors and I report to that board of directors.
Senator Day: Based where?
Mr. Fash: Based in Moncton.
We started out originally as the NB Food Processors Association and about 11 years ago, I believe, became the Atlantic Food and Beverage Association.
So our core mandate is to support the food and beverage processing industry. We have found, I guess, call it a niche or a benefit that we can provide our membership in providing this very necessary food safety and security training among other types of training, labelling, keeping them up to date on new legislation, and we offer that at a very affordable price. We give discounts to our members. We work hard in partnership with the province's, and Growing Forward 2 is one source of funding that we've been able to take advantage of, and we believe we have to grow that mandate beyond just food safety training to operational excellence, commercial excellence and innovation.
We've recently added a new slate of directors on the board who have experience in those areas, and we're working through how we can do that and best provide the industry and our members access to these kinds of learning experience and opportunities.
Senator Day: Do you receive any money from the Atlantic Canada Opportunities Agency?
Mr. Fash: Only on a project basis if we're able to justify a project to them that makes sense; for example, leading trade missions. Our association is leading three trade missions this year. One to ECRM. It's a pilot program working with ACOA. We're leading a mission to the National Restaurant Association show in Chicago. It's a large food service trade show. And we're leading a mission to the New York Fancy Food Show in the summer, which is primarily a retail initiative for value-added products. So that's working in association with ACOA and the provinces who also support us on that front. So yes, good partnership and I think there's more room to work together. They've been very supportive. All five of us in the group, the provinces and ACOA we all want to see things improve and are working hard at that.
Senator Day: I understand that the Prime Minister is likely to lead a trade mission to China in the not too distant future recognizing the success of fish products sales to China from Atlantic Canada. That may be an area worth looking into.
Mr. Fash: Absolutely. I had the good fortune of taking our first french fry order for McCain Foods in China about 20 years ago and to watch that market grow, and companies are being very successful over there. I think we should continue to support those initiatives because we're up against some tough competition. The United States has been very aggressive in supporting their exporting, and they're very good at it and we have to continue to support our exporters in that market. I haven't been over in a while, but Canada was always very well thought of in the Chinese market.
Senator Day: Absolutely. Thank you.
The Chair: Thank you again, Mr. Fash, good luck in the future.
For our next panel, we have witnesses from the Agricultural Alliance of New Brunswick, Mr. Mike Slocum, Director and Treasurer; and from the Nova Scotia Federation of Agriculture, Mr. Victor Oulton, Director.
Welcome gentlemen.
Mike Slocum, Director and Treasurer, Agricultural Alliance of New Brunswick: Thank you very much for the invitation to come here and speak today, senators. That was very cordial of you guys.
My name is Mike Slocum. I am part of the Agricultural Alliance of New Brunswick. I have sat on that board for a few years. This brief that we are about to present today was put together by all of the four federations in Atlantic Canada, and I'll be presenting one half and my colleague will do the other half at the end.
Atlantic Canada has a strong and diverse agricultural industry. Not only is the industry diverse but many of the individual farms are diverse as well. The agriculture industry in Atlantic Canada is made up of farms that supply the domestic market such as dairy, poultry and horticulture crops and those who rely on export markets like blueberries, mink, beef, potatoes and Christmas trees. Atlantic Canada also has many commodities such as apples that supply both domestic and export markets.
The Agricultural Federations of Atlantic Canada commends the federal government for doing their best to maintain a balanced position across the various agricultural sectors in the CETA and TPP trade agreements. However, in order for farmers to fully access the open markets support programs need to be put into place so our farmers can meet the market demands. Also, on the contrary, commodities that are facing more access to the Canadian markets, especially the supply management commodities, need to be compensated for future losses. I will go into this further in our presentation.
The main priority of the Atlantic federations is to ensure that there are support systems in place for farmers and commodities that are facing changes to market access. One area of change is the supply management commodities. The TPP has allowed market access for supply management commodities between 2 and 3.25 percent. When speaking to each of the commodities' associations they can each print a picture of what their respective reductions in quotas will look like. Turkey farmers of Canada have said that if the turkeys entered Canada in an all breast meat which is an expectation, the impact is equal to the entire yearly production of Nova Scotia and New Brunswick combined.
Supply management industries need to be compensated for losses that it will face when the trade agreements are ratified. Farmers in these commodities have invested in quotas in order to be able to produce their respective commodities. These farm businesses rely on the security of supply management and base their business plans on such. Farmers producing under the supply management system must be compensated for not only their losses in quota which they purchased but also the future losses as a result of imports. Once the maximum import percentages are known, it will take time for these commodities to adjust to a difference in production levels. The federal government must come through to fully mitigate hurt to those sectors negatively impacted by the trade deals.
Collaboration is important when it comes to determining what programs will be effective and how to implement. We recommend that any mitigation programs put into place be done in consultation with the commodities organizations that will be affected by the programs and their trade negotiations.
Aside from supply managed commodities, other domestic commodities face inadequate treatment in comparison to similar products being imported. Horticulture products that are produced in Canada for domestic market are subject to CFIA testing to ensure that chemicals not approved by PMRA are not present in the product. However, it is our understanding from horticulture producers that the produce imported does not face the same testing through many of the countries that Canada imports produce from. Having access to pesticides that PMRA doesn't allow in Canada creates a competitive advantage for imported goods over the domestic products.
Let me be clear. I am not saying that Canada should allow access of these other pesticides. There are good scientific justification reasons why we do not use these pesticides. However, a minimum standard for import goods that is at least as high as the standards for domestic product needs to be in place to protect and support horticulture producers in this country.
Now I'll hand it over to my colleague.
Victor Oulton, Director, Nova Scotia Federation of Agriculture: The Atlantic Federations of Agriculture also have priorities as related to the export market. The TPP and CETA trade agreements open doors in the export market for many commodities produced in Atlantic Canada. While access to these markets will benefit the rural economy in Atlantic Canada, farmers will only benefit if the appropriate programs are in place. The AgriMarketing Program is an example of a current program that will benefit these commodities interested in the export market. The program is designed to build and promote Canada's ability to expand domestic and export markets. Considering the significant export potential of the trade agreements that have come into place since this fund was established, the AgriMarketing Program needs to be renewed and ideally increased to access these markets to the full potential.
An example of how this program has worked, even prior to the trade agreements, can be found in the wild blueberry sector. The AgriMarketing Program and its predecessor programs helped the commodity grow and expand into other programs. Without this program the industry would not have had access to the markets that they do today. Also, the wild blueberry farmers and processors can see a return on investment on the levy since AgriMarketing requires matching funds. The program has allowed for promotional campaigns in various export markets including Korea, China, Japan, Germany and France. These campaigns focus on the safety of Canadian produce and the great taste of wild blueberries in such a way that appeals to a specific market. AgriMarketing like programs need to be broad enough to allow the commodities to determine their markets and best opportunities for their product. For example, it is best for the wild blueberries to be able to access markets that have appropriate infrastructure to support cooling systems for frozen blueberries.
Every commodity is different and markets need to be assessed appropriately. More federal dollars in this program in the coming Agriculture Policy Framework will definitely be a step in the right direction to support farmers and commodities that have access to these new markets associated with TPP and CETA.
Infrastructure plays an important role when accessing markets. Farmers in Atlantic Canada face many transportation and rural infrastructure challenges. Over time the current commercial transportation system which includes road, rail, water and air have developed inefficiencies that are causing a competitive disadvantage for Atlantic Canadian farmers. A pan-Atlantic agriculture transportation study needs to be done to review issues and concerns impacting agriculture. Also, in order to access many of the new markets that are open as a result of the trade agreements, appropriate systems need to be put in place. These systems include but are not limited to certification programs and market exploration programs. These systems will require the entire supply chain to work together and in order to do that, financial support is needed to put these systems into place.
Also, as a result of increased market access, more skilled employees will be needed to meet the demands for these markets. The agriculture industry is already facing a skilled labour shortage that can be expected to increase as farms expand operations to meet new market demands. Training in the form of an apprenticeship program and future support for temporary foreign worker programs will be needed to address this shortage.
In summary, the programs to support farmers facing market access need to be in place. Any programs put into place should not cancel out other programs. For example, if a farm produces both supply managed commodity and an export commodity, they should be compensated for losses for one commodity and be able to access any available funding for market development in the other. The worst thing that can be done is to essentially punish your farmer because they mitigate risk by diversifying their farm business.
Thanks for the opportunity to bring these remarks to you today and we will be happy to entertain any questions you have.
The Chair: Thank you very much, gentlemen.
Senator Mercer, our deputy chair, will begin the first round of questioning.
Senator Mercer: Thank you, gentlemen, for being here.
I am going to bore my colleagues again with my discussion of supply management. I am a huge supporter of supply management but you've confused me here. One of the primary basic fundamentals of Canadian supply management is that it is industry run. It's run by chicken farmers, egg producers, dairy farmers and turkey farmers. That is the fundamental basis of it. There is no government money in it, and the one big mistake that supply management has made over the years is not explaining that to the Canadian public, and to some politicians, not necessarily those at this table today, but some who have sat at this table in the past. However, that being said, you are now telling me because of the TPP and because of the CETA that there should be some government money involved in supply management to offset some perceived losses. We have no idea what the losses might be from these two trade agreements. You're going to have to help me with this.
As I say, my colleagues know that I'm one of the staunchest supporters of supply management and I continue to try to educate people in the Senate and in the House of Commons when I get a chance about the fact that supply management works because it's industry run, it works because government doesn't have any money in it, it works because government has little to do with the management of supply management other than the fact that government has managed to keep its hand off of supply management for as long as it has. So help me with this. Now you are asking for government to put some money into those parts of supply management that might be affected by either one of these trade agreements?
Mr. Oulton: In my opinion, I don't think we're asking you to put money directly into supply management. We're asking you to supplement producers who are potentially losing money or losing market access. They're going to have less production on their farm because of some of these trade agreements. Supply management farmers have bought quota to be able to produce so much product. So if they cannot produce as much product as they are supposed to in their quota, then the quota is going to be taken back presumably by 2 to 3.25 per cent or little more. It depends on how the formula works out.
Senator Mercer: How do we measure that though? I go down the road to Masstown, Nova Scotia. There's a farmer there who is an egg producer. You probably know who he is. He is involved in the Egg Farmers Association. We visited his farm, a number of us who were on the committee at the time, and it's a smooth operation, but it's a small operation. It's got two barns. He's maximizing his return. He's got a windmill on his farm that's generating electricity. A windmill on your farm operation goes directly to your bottom line once you realize your capital costs. However, how would he know that his eggs are being affected? How does he know, in comparison to some other operator with a much larger operation? I don't understand that.
Mr. Oulton: I'm sure you fellows have talked to the egg producers or poultry producers. You'll probably be talking to all the different supply managed commodities and they can probably answer those questions. Personally, on our farm, we don't have any created supply managed commodities so it's hard for me to get right into the nuts and bolts of that. But I am sure those questions probably are better asked to say the milk producers.
Senator Mercer: Philosophically though, being one of the biggest supporters of supply management I have a difficult time seeing how you are going to figure things out for my friend who has this small egg production in Masstown or Mr. King down in Bridgewater who has one barn. He has other farm interests but one barn in egg production. How can anybody figure out that the eggs that he is producing have been affected by either one of these agreements, and then figure out if there is an amount of money to be allocated, how much he gets, how much some guy with five or 10 barns, gets?
Mr. Oulton: Well, all of them would have a certain amount of quota, so theoretically I suppose it would be based on how much quota you had.
Senator Mercer: It would be based on quota. I would suggest the accountants being paid to do this would probably eat up a fair amount of money allocated for it.
Mr. Oulton: I agree, probably, that's true.
Senator Mercer: Anyway, you also say more federal dollars for this program are coming through the Agriculture Policy Framework. This is when you were talking about blueberries, et cetera. I assume that it is the opinion of the agricultural alliance. Have you spoken to Mr. MacAulay, the Minister of Agriculture?
Mr. Oulton: I can only speak for Nova Scotia. We have not had a chance to speak to him, but we will.
Senator Mercer: Senator Hubley is here from P.E.I. so maybe she can take the message back to Mr. MacAulay. If I see him, I'll certainly pass on the message.
I have one other question here.
Mr. Oulton: Actually, I am wrong on that. We did meet with Mr. MacAulay when we were in Ottawa a few weeks ago and talked to him about some of that stuff.
Senator Mercer: You gave him this information?
Mr. Oulton: Some of the same stuff, yes.
Senator Mercer: Well, that's good. Then when I approach it with Minister MacAulay, he won't look at me like it's new information. Well, that's good because I will see him and I will bring it up with him.
I was curious, in your opening comments, you talked about chemicals, et cetera, and the testing. You mentioned that on the second page, I guess. I wasn't aware that this was not addressed in either of the trade agreements. One would've thought that in writing the trade agreements this would be one of the things you would address. But to your knowledge, it hasn't been addressed in either agreement, right?
Mr. Slocum: To my knowledge it hasn't been, no. That's an issue that the horticulture side kind of brings up all the time that the chemicals that have been discontinued in this country sometimes are still allowed to be used in some other countries. They bring that up quite a bit to our federation.
Senator Mercer: And we know that that happens —
Mr. Slocum: Yes.
Senator Mercer: — and is wrong. Where it really gets wrong is when it's allowed to come back in the country. We've seen it happen with other products. You guys are right on.
The Temporary Foreign Worker Program and the Apprenticeship Program, you talked about that. The Apprenticeship Program, are you talking about existing apprenticeship programs or are you talking about a new apprenticeship program?
Mr. Slocum: I believe we're talking about the one that's in Prince Edward Island. They have an apprenticeship program started. I believe it's the only province that has one. It sounds like a very interesting.
Senator Mercer: It's apprenticeship as a farm worker?
Mr. Slocum: Yes, that's what it's designed for, yes.
Senator Mercer: It's about time.
Mr. Slocum: Yes. It's designed to bring skilled farm workers back to the farm.
Senator Mercer: It is about time. It makes a lot of sense. I think that's certainly something worth pursuing.
Thank you, gentlemen.
Senator Hubley: Thank you very much. That's quite true. Also one of the mussel plants has had a program, and I believe it's continuing, where they approached the school system. Grade 12 students could receive credits as workers. Now, those workers from the school had to apply. They had to go through a training program and then they had to put in so many hours at the plant. It was not 100 per cent successful but it was certainly encouraging. Those young people who did take part in the program became very experienced workers and will probably stay within the industry. That is an interesting avenue that some parts of the industry are taking to try to meet this need for skilled workers, and that would have been a credited course for those students.
Mr. Slocum: If I can comment a little bit on that, our farm uses temporary farm workers and have been for about six years. We only use about five. We hire about 20 workers seasonally. Six of those fellows are local fellows that are like I call seasonal full-time. They have been coming back every year. I like the idea of an apprenticeship program. It's a nice idea to bring those fellows back. It's a hard job to get seasonal pickers and that's where the Seasonal Agriculture Workers Program falls in very nicely with the horticulture industry, coming from our side of the operation. I like to say that we very much depend on the seasonal agricultural workers and the apprenticeship workers coming back because those fellows do a lot of the harvest work. The other fellows do a lot of the planting and the maintaining afterwards, but we need that core workforce for eight weeks or 10 weeks or 12 weeks. It fits very well.
Senator Mercer: It sounds to me like it's going to be a little more expensive. Somebody's got to pay more for the apprentice than they do for the temporary foreign worker because you become an apprentice so that you can become a farmer or a plumber, whatever you have apprenticed in. So somewhere along the line, it's going to cost more money.
Mr. Slocum: I agree with that. I think our industry looks for that because we want to train those people to take over our farms. We don't want our seasonal agricultural workers taking over our farms but we need those seasonal agricultural workers. That apprentice has to have a job. He can't do all the work. We only need those extra hands when the crop is exactly on. There is a lot of interest in that program, and that makes good sense to hand farms over because a lot of farms don't have the next generation coming along. So we're looking for somebody who is interested in farming and doesn't own the farm but trains into it and could take it over.
Senator McIntyre: Thank you, gentlemen, for your presentations which I found rather interesting.
My question has to do with the transportation of agri-food products in our markets, and as you have indicated we have both domestic and export markets. Infrastructure — and you also mentioned this in your brief — plays an important role in accessing those markets. Now, bearing that in mind, several witnesses who have appeared before us highlighted the importance of accessing adequate infrastructure in order to efficiently transport agri-food products into foreign markets. About five years ago, the federal government introduced the Atlantic Gateway and Trade Corridor Strategy. Have those strategies contributed to the increase of export sales? Do you have any recommendations to improve this strategy?
Mr. Slocum: Do you want to handle that one?
Mr. Oulton: I can't comment specifically on whether those have helped a lot or not. I know in this brief here, most of this is coming from the island provinces, P.E.I. and Newfoundland, about transportation problems and stuff like that. Just an example, one of the potato producers that I talked to in P.E.I. said that it was costing them $1,250 to get a container shipped to Halifax to put on a boat. After it reached Halifax, it would cost them $250 to go anywhere else in the world. This transportation thing is affecting P.E.I. and Newfoundland more than anybody else.
Senator McIntyre: So, as I understand, the strategies need to be developed both from a provincial and a federal point of view, but perhaps more so domestically for your purposes, for Atlantic farmers.
Mr. Oulton: Yes, and whether or not that includes somehow having a way to load container boats in Prince Edward Island somewhere for the potatoes or what not.
Senator McIntyre: In Atlantic Canada, as we all know, farmers are older than in the rest of Canada and statistics are there to prove this point. Does the aging farm population question your capacity to produce and meet the demand for agri-food produce, and what recommendations can you suggest to overcome this challenge? We need more young farmers, of course.
Mr. Oulton: Yes, and I don't know. I'm torn both ways a little bit on this one because ever since I was in college, I've heard that the average age of farmers in Nova Scotia was between 55 and 60. That was 30 years ago and I hear the same thing today.
Senator McIntyre: According to Statistics Canada, about 53 per cent of Atlantic Canada farmers are 55 years or older while in the rest of Canada this percentage is about 48 per cent.
Mr. Oulton: Yes, and I don't that's changed over the last number of years. I don't think that's growing in number. In my opinion, it's taken that long for the next generation to take over the farm. In my case, my father is in his seventies. He is still very active in the farm, still a shareholder in the business and very active in the management part of it. It just seems to take a while for the turnover to happen.
Senator McIntyre: It takes years, yes.
Mr. Oulton: For so many farms, too, there hasn't been enough money in agriculture in the Maritimes to keep the young people here. They are always going out West, looking for the bigger money and jobs so it's hard to keep them on the farm. It's not until they go out and maybe work for a while and then come back that they are taking over the farm.
Senator McIntyre: The way I understand the situation is either our young farmers will take over or we'll have to bring in the foreign workers.
Mr. Oulton: Yes.
Senator McIntyre: That's about the size of it. Thank you.
Senator Oh: Thank you, gentlemen. My question is on organic food.
Canada now is catching onto organic foods. In the Atlantic Provinces, organic food is still in the early stages and in the rest of Canada now the consumption is faster than we can produce organic food. So have your members started to share this technique or to grow for exports, and how are they coming along?
Mr. Slocum: In Atlantic Canada, I think it's kind of related to the older farmer possibly too, like the succession plan. We're a little behind in succession so it's the younger generation. We see a lot of it in the horticulture industry. We see a lot of small upstart organic operations coming along. If you are in a generational farm, you don't see it as much now because the older generation I think doesn't see the advantage to that organic side of the produce, and that's an opinion from what we see in New Brunswick anyway. That next generation, they just doesn't want to let go. They don't see that change over as much, but as generations succeed each other, I think we'll see that. We see it now coming in our horticulture industry. Our growth is in that small organic type of production. It would be like five hectares, four hectares farm sizes coming along in New Brunswick.
Senator Oh: So what about local consumption? Do you see a change in the shopping patterns?
Mr. Slocum: Yes, not so much in the stores, but we see it at farm markets, direct sales, roadside stands. Those fellows are seeing that the people are asking for organic pesticide-free, free range, that kind of stuff. I don't see it promoted and we don't get asked for it on the wholesale side going into the Sobeys and the nationals as much here in Atlantic Canada, I would say, or in New Brunswick anyway. But definitely at the roadside stands, there's that movement on direct sales right to the customer. I think that's what they are looking for.
Mr. Oulton: I would reiterate those comments. I think the consumer is more interested in where their food is coming from and how it is grown than ever before. We have an abattoir where we have a farm store right on the property and sell meat and stuff, and every day we are getting more questions on how this product is raised and what is put into it. Consumers have become more aware of what they want to eat.
Senator Oh: Thank you.
Senator Hubley: Thank you both for being with us this afternoon.
Access to agricultural land is a challenge in modern agriculture given the importance of agricultural production and the pressure of city growth on rural land. In 2014, in the Atlantic Provinces, farm land values increased by 7 per cent. How is that affecting your farm community, including young farmers? I also note that the Government of New Brunswick has launched consultations on agricultural land policy and I am wondering how that has been received by the membership?
Mr. Slocum: The Agricultural Alliance of New Brunswick has put a lot of pressure the last couple of years on the government to come up with a land policy for New Brunswick. We've been adamant in that because we are seeing a lot of our land in New Brunswick sitting idle or growing up, not being used. Some of it is being built on by encroachment from towns and cities, but a lot of it is just being left because there doesn't seem to be interest there. There are farmers who want to use it but some of it is not being made available, it's being stripped for top soil or growing sod. It's used for growing crops that are not necessarily to do with the food industry, like cosmetic crops. I don't know if you can call it cosmetic crops, but it would be things like sod and stuff that we wouldn't use for food. Farms in our rural area that have not been growing any produce or hay or raising animals now seems to be going to sod or it's just been going back to nature.
I know we've put a lot of pressure. We're seeing a lot of good results from our local government in New Brunswick that is interested in pushing that land policy to be able to keep that land at a reasonable price and taxable at a reasonable price. The flip is an issue in there with some farms and that type of deal and that's where a lot of that has come from in terms of our membership in the alliance.
Senator Hubley: Do you know of any other provinces that are looking at that sort of land use or project?
Mr. Slocum: I think B.C. has one. I know we've done some work on that. I think there are three provinces in Canada that have land policies already in place and there are two or three more working on them, on some kind of stage like what New Brunswick has I believe. That's where it sits.
Mr. Oulton: In Nova Scotia, we're trying to develop a bit of land policy also. Agricultural land is increasing in price there and it's more of encroachment. A lot of our farm land is being put into development for housing and whatnot. So we are trying to come up with a policy with the provincial government to have possibly a land bank system or something like that where the farmer can be paid what his land is worth for development or whatever. It's then put into a trust more or less, and then if a young farmer comes along, he can buy it for what farm land is worth, which is not what development land is worth. Also, we're trying to come up with a policy to get more access to Crown land for agricultural work, whether it's blueberries, maple syrup or whatnot.
Senator Hubley: Farmers in the Atlantic Provinces, as in the rest of Canada, have been advocating for a national food policy. Is that something that your membership has suggested, that Canada is at a stage where we do need a food policy, or do you feel that the present regulations and legislation is adequate?
Mr. Slocum: I know the New Brunswick government is doing something with a food and beverage strategy right now. The alliance has worked with them quite a little bit on feedback for that. Our membership from New Brunswick has been asked to promote that, try to bring in a local food strategy so that people will support and buy as much local as they can in the area. So I think it's coming from our membership for sure.
Mr. Oulton: Again, the same thing. I think the food policy where consumers are becoming more aware of what they want to eat and whatnot, I think it's a good thing to keep. The policies have to be updated all the time. What might have been good 10 years ago may not be good in five years' time.
Senator Hubley: Thank you.
Senator Mercer: I want to go back to something you said a moment ago. You talked about access to Crown land. If you have access to Crown land and you export the products that you produce on that land to the United States, which is a very practical thing that probably could happen in many cases, what does that do to our NAFTA agreement? The Americans claim that the softwood lumber industry is subsidized because it's on Crown land, et cetera, et cetera. We know that's all bull. I just raise the issue because the Americans are sitting down there with over $1 billion sitting in a bank account.
Do you know whose billion dollars it is? It's ours because when we signed the last softwood lumber deal we left $1 billion dollars behind. And of course, they immediately put it in the bank and said that's for the next challenge. So if you thought there wouldn't be a challenge coming, they're already well funded.
My question is do you think that the access to Crown land needs to be carefully managed so that the products that are produced on Crown land don't end up in the export market with our American friends. Actually they would challenge if you exported the products to wherever because they'd see it as a challenge to their own potential markets?
Mr. Oulton: I believe how this program will work, it's not free access to that land. It's going to be leased for 20 years or so.
Senator Mercer: Leased at market value?
Mr. Oulton: I don't know the answer to that question.
Senator Mercer: Okay. Don't answer it, but take it with you.
Mr. Oulton: Yes.
Senator Day: The answer to that last one is yes, of course. We are paying more than we should.
Gentlemen, I've followed your presentation and you touch on a number of points that are clear and obvious, but one of them isn't clear to me. I'll just read this. "Also the wild blueberry farmers and processors can see a return on investment on their levy since agri-marketing requires matching funds.'' What does that mean?
Mr. Oulton: The agri-marketing program is federally funded, that is matching dollars from feds and the commodities. In the case of wild blueberries each producer pays a levy into their association. Those levies are then matched by federal dollars to try to access some of these other markets.
Senator Day: You said they see a return on their investment.
Mr. Oulton: Well, they can see that it's working for them.
Senator Day: Because their levy is going up?
Mr. Oulton: No. They can see, because they are paying this levy, an increase in demand for their product.
Senator Day: Oh, they are seeing an effect to the levy.
Mr. Oulton: Yes.
Senator Day: And the matching funds from the federal government?
Mr. Oulton: Yes.
Senator Day: Okay, I understand that now. So the Atlantic federation of agriculture comprises four provincial federations. Are the four provincial federation producers required to be members of the provincial federations or is it optional?
Mr. Slocum: In New Brunswick it's still optional. There are two federations you can belong to. We have the National Farmers' Union or the Agricultural Alliance or you can opt not to belong to either of them.
Senator Day: If you belong, do you then receive something for your membership? Do you have to pay some money to the federation and then you receive something in return?
Mr. Slocum: Yes, you will get the benefits of the organization speaking for you if you belong to it. In New Brunswick, it's tied to the farm fuel tax rebate, like the discounted fuel rate if you belong to the association. There are a number of different benefits to belonging to the alliance, and the same applies to the National Farmers' Union because we are an accredited association, and I believe the other ones are too. You don't pay the association anymore. We pay it directly to the government and the government pays money to our association which allows it to operate.
Before we became an accredited association with the government, we paid it to the associations and they struggled a lot for the reason that a lot of people wouldn't join, would be in one year and out another year. Since it's tied to some benefits like the farm tax card and there's a few other major things that really brings in the membership. If they don't belong to the membership, they can't receive any benefits.
Senator Day: Maybe it's an incentive.
Mr. Slocum: Yes.
Senator Day: A similar type situation exists in each of the other Atlantic Provinces to the best of your knowledge?
Mr. Slocum: To the best of my knowledge.
Mr. Oulton: In Nova Scotia, if you're not a member of our federation, you're not eligible for any provincial funding.
Mr. Slocum: Yes.
Mr. Oulton: If you want to apply for any provincial funding, you have to be a member of our organization. Plus there are other member benefits also.
Senator Day: Do any of the provincial federations or the Atlantic federations of agriculture provide any certification of good farming practices, any of that type of activity?
Mr. Slocum: Well, I know in New Brunswick federations look after the environmental farm plan and a lot of that stuff. That's our best management practices and they give the accreditation back to the farmer through that.
Senator Day: And then the farmer can use that as part of his or her marketing?
Mr. Slocum: We use it for that. We use it to access funding. A lot of funding from the provincial side is not obtainable unless you have that accreditation like the environmental farm plan and stuff in place. That's all run through our association. That's what looks after that kind of stuff.
Senator Day: Thank you. That's helpful to know.
Senator Oh was asking questions with respect to organic farming, and we heard earlier today that maybe demand or desire to get involved in that area might have plateaued. Is that your experience as well or is there still a growing demand for this particular type of farming?
Mr. Slocum: In New Brunswick, we're still seeing a lot of growth. I call it the CSA, that community service agriculture. Our growth that we see on the horticulture side is coming from that small market. The people are going to direct markets, they're having little stands or selling directly to the consumers through those food baskets. I think it's still growing in New Brunswick.
Senator Day: But that surely isn't a big part of production, selling at your local stand that you have on your farm.
Mr. Slocum: No, it's not the biggest production but we're seeing new entrants on the horticulture side, because they can get in at the small level and build themselves up. In New Brunswick, the potato industry is very big and it's very much located in the northern part of the province.
Senator Day: In New Brunswick?
Mr. Slocum: Yes, and that's where the majority of our agriculture would be on that horticulture side and the potatoes fall under that. We're not as big a vegetable industry in New Brunswick as what Nova Scotia would be.
Senator Day: In Nova Scotia, organic farming?
Mr. Oulton: Again, I'm not sure. You keep seeing a lot of smaller operations growing organic. It's hard to really put a handle on it because even a lot of those small organic producers aren't becoming members of the federation. We're trying to get more involved with them, and I don't know how much farther it will go.
Senator Day: We're interested in particular in looking at international markets and how our production here can grow to supply international markets. I am hearing from you that you're not seeing a lot of that from your federation's point of view.
Mr. Slocum: No, we wouldn't see that. The organic side wouldn't be big enough to export.
Senator Day: What about some of those other terms that we see sometimes like Canada Grade A, grain-fed beef? They're really marketing approaches. Are you seeing locally grown. I can think of a lot of them that I see. Are you seeing a lot of that or is that again the small local market approach?
Mr. Oulton: No, I think you're seeing more of that. Even some of the bigger operators are taking that approach whether it be Grade A or whatever. It's a brand, more branding.
Senator Day: Yes.
Mr. Oulton: So you're seeing more branding. Even if you go into the big chain grocery stores you see more branding type stuff all the time.
Senator Day: The little sticker on the apple or the orange.
Mr. Oulton: That's right, yes.
Senator Day: I guess not too many oranges are grown in Canada.
Mr. Oulton: No, not in the Maritimes.
Senator Day: The same for New Brunswick, you're seeing that kind of marketing activity going on?
Mr. Slocum: Yes, we see that at in New Brunswick too.
Senator Day: And who certifies that? Does your federation get involved in that?
Mr. Slocum: No, the federations don't certify that. I don't think it's really certified.
Mr. Oulton: No, some might be certified through their commodity groups.
Senator Day: Thank you.
Senator Mockler: I have a few questions in light of touching on bullet B of our order of reference, sustainable improvements in the production capabilities of the supply chain. According to Statistics Canada, between 2010 and 2014 net farm income was positive in the Atlantic Provinces with the exception of Newfoundland and Labrador. Could you explain the reason why, if you have that information, net farm income was negative in Newfoundland and Labrador and positive in the other provinces of Atlantic Canada?
Mr. Oulton: In the three provinces anyway, I'm not sure why specifically in Newfoundland it would less.
Mr. Slocum: Less processing maybe?
Mr. Oulton: Yes, less maybe. I'm not exactly sure. Maybe there's fewer farmers there or something. In the other provinces it's going up because more consumers are buying local. That's been a big benefit to Maritime production.
Mr. Slocum: I would add that it's probably to do with the processing capabilities of Prince Edward Island, Nova Scotia and New Brunswick compared to Newfoundland probably in the potato processing sector and the wild blueberry processing. I don't believe Newfoundland would have that capacity that the three provinces have.
Senator Mockler: Okay, so we don't know.
Have your farmers been able to invest in the development of new technologies in order to improve their productivity and competitiveness since we all know that in 2050 we will have over 9 billion people to feed?
Mr. Slocum: I believe that the growing forward programs and policy frameworks, a lot of farms in New Brunswick and probably most of the other provinces are taking advantage of a lot of those programs, which are 40 to 50 per cent dollars if you invest in the new technology. There's a lot of uptake on that. I believe a lot of the big farms are expanding into that new technology.
Senator Mockler: Technology innovation?
Mr. Slocum: Yes, technology innovation.
Senator Mockler: Do you want to add something from Nova Scotia?
Mr. Oulton: I was just going to say that I think all these farmers want to become more efficient, and this new technology is making them more efficient, whether in the dairy industry putting in robots for milking or whatever it might be.
Senator Mockler: The 2010 report that has been shared with the committee entitled Opportunities and Challenges in Atlantic Agriculture, says that the importation of food is among the factors that could be detrimental to the profitability of Atlantic Canada farms. Just to touch a bit on what Senator Oh acknowledged, do you think that grocery retailers in Atlantic Canada should be supplied as much as possible by Atlantic Canada farmers and processors. I'd like to know why you would think that would be an appropriate angle when we look at production and chain supply for our consumers?
Mr. Slocum: It would be awful nice to be able to force that onto the grocery or chain stores. I believe the issue is when you look at Atlantic Canada, there are only a couple of commodities that we could probably step up to the plate and supply, and the other stuff we can't. That's what the chain stores hold over our heads, and if you can't supply, you don't really get into that market to give them a fair place. That's what they hold over you, I believe. It would be nice if they had to buy Atlantic Canada first and then fill in with what we can't, but it's told to us that way.
Mr. Oulton: I would agree with that.
Senator Mockler: When I go to, and I just share this with you, Costco, Walmart or even Atlantic Superstore or Sobeys or IGA, I try to look for local products. Some areas of Atlantic Canada are doing a great job or a reasonable job I would say, other areas to a lesser degree. If we go see our friends south of the border, and I was in Presque Isle, Maine about a month ago, and I was looking at their style of commercialization. It was basically evident that they were putting onus on local farming products. Do you feel we're not pushing that enough?
Mr. Slocum: Oh, yes, vegetable producers complain about that all the time. They won't put our products in the store because we don't have enough volume to supply. They'll always use that excuse and to use Costco as an example, we spoke to the produce manager there at one store. We produce some tomatoes. So we said, "Why don't you carry our tomatoes during the month of September?'' He said "Well we would sell a thousand cases a week.'' He said "If we were out of them in three days, you wouldn't have them.'' I said that I come in to buy those lights, for example, or something at Costco. You have them today, tomorrow you don't have them when I come back.'' He says, "Well, we aren't getting any more of them.'' I said "It's the same scenario. You would have it this week, you're out next week, and the next week you could have it again. You could carry it and that would build up the consumer base.'' But they throw in that comment that you can't and we can't back it up because we don't have the supply. That's their mentality. But if we go to buy something at Costco and they have it for two days, and if you went to buy it today it's not there. They don't bring it back in.
He couldn't answer that question for me but he wouldn't buy the product because we couldn't supply it.
Senator Mockler: Then we should encourage the associations to join together and send a letter to Costco Canada or the other big chain stores.
Mr. Slocum: Yes.
Senator Mockler: When we look at the preference for diversified foods, knowing that our communities are changing because of more immigrants coming to Canada, is it tough for Atlantic Canada to compete and/or adapt to the foreign competition or even to encourage our farmers to produce certain products that would complement our local produce?
Mr. Slocum: I would say that there is potential for growth and increase our productivity for that ethnic immigration that's moving in. I believe it would be with the younger generations coming along. They'll see that advantage. It's a hard job to change a farmer that's 55 years old. I do see some hope there for the next generation. There will be that niche market and it will increase movement for all the operations.
Mr. Oulton: From our experience in the ethnic market, we supply a fair amount of red meat into the Halifax market for the Muslim community and whatnot. We actually see with the next generation that is coming along, they want their product more Canadianized, more so than what they were used to where they came from. I think it's going both ways a little bit there.
Senator Day: As I understand it, the Muslim religion calls for a particular way to slaughter the animal?
Mr. Oulton: Yes.
Senator Day: Are you supplying that service?
Mr. Oulton: Yes, in our place we have a Muslim gentleman that comes two days a week to work there.
Senator Day: I'm interested in that because that's a niche market. How did you happen to get into that particular market?
Mr. Oulton: That happened probably 30 years ago when my father was getting into this area. It would have been longer than that now. It would have been the early 1970s. We were just getting into the slaughter business at the time and developed a relationship with some of the Muslim people in Halifax and started catering to them a little bit, and as it happened, more and more have come our way.
Senator Day: There's a growing Muslim community in Montreal and Toronto, and have you looked into supplying for that community in particular?
Mr. Oulton: We haven't because we're only provincially inspected so we're not allowed to export out of the province. We have a hard job right now supplying enough product for the Halifax market or the Nova Scotia market.
Senator Day: The Muslim market just increased significantly.
Mr. Oulton: Yes, it did.
The Chairman: With the influx of refugees.
Mr. Oulton: But also, there's talk of more regulations coming that will possibly making it tougher for us to do that for the Muslim community.
Senator Day: Isn't that interesting.
[Translation]
The Chair: I have a quick question for you. In Nova Scotia, there is one interesting thing about apples. The Honeycrisp, which is known internationally, is particularly expensive when it's sold in Quebec and elsewhere in Canada. Will the new agricultural technologies enable apple producers to expand so they can put larger quantities of apples on the Canadian market?
[English]
Mr. Oulton: Yes, we produce some honey crisp ourselves also. There's a lot more cost in producing honey crisp than other apples because you have to go through some other work. When you pick a honey crisp, you have to also clip the stem off it so you can't harvest the apples mechanically, so there's more production costs in processing honey crisp. There are new technologies coming along, different ways of planting your trees and whatnot, whether they are small or root stocks, to make smaller trees, easier to prune, easier to pick. I know one producer who just last year got one of these carts that drives through the orchard. He has five guys picking and it just moves real slow. It increased production by about three-fold in just that one thing.
The Chair: Thank you very much, gentlemen, for this information and for accepting our invitation to appear. Good luck in the future.
(The committee adjourned.)