I call this meeting to order.
Welcome to meeting number 10 of the House of Commons Standing Committee on Agriculture and Agri-Food.
I'd like to outline a few rules to follow. Most of our MPs are now familiar with them, but I will go through some of them for our witnesses.
Interpretation in this video conference will work very much like it does in a regular committee meeting. You have the choice at the bottom of your screen of floor, English or French. When you intervene, please make sure that the language channel is set to the language you intend to speak, not the floor channel. This is very important. It will reduce the number of times we need to stop because the interpretation is inaudible for our participants. It will maximize the time we spend exchanging with each other.
Witnesses, could I get a nod from you that you understand how to change the channel if you want to change your language. Mr. VanderHout, Mr. Keenan, Mr. Lemaire and Mr. Gilroy, are you good with that? Okay.
Also, before speaking, please wait until I recognize you by name. When you are ready to speak, you can click on the microphone icon to activate your mike.
Make sure your microphone is off when you are not speaking.
We're ready to begin now.
I'd like to welcome our witnesses to today's hearing.
Today, for our first hour, we have, from the Canadian Horticultural Council, Mr. Brian Gilroy, president, and Mr. Jan VanderHout, vice-president. Welcome to both of you. From the Canadian Produce Marketing Association, we have Mr. Ron Lemaire, president. Welcome, Ron. From the United Potato Growers of Canada, we have Mr. Ray Keenan, chairman, and Mr. Kevin MacIsaac, general manager.
I know we're working to reduce statements from 10 minutes to seven minutes, but because we did not have time to do that before the meeting, we will have a 10-minute opening statement from each organization.
Let's start with the Canadian Horticultural Council, with up to 10 minutes between Brian Gilroy and Jan VanderHout. Go ahead.
Thank you, Mr. Chair, for the opportunity to be here.
Thank you to the committee members for working under these extraordinary circumstances on behalf of Canadians.
My name is Brian Gilroy. I am the president of the Canadian Horticultural Council. I am also an apple grower from Meaford, Ontario.
The Canadian Horticultural Council is an Ottawa-based voluntary, not-for-profit, national association that represents fruit and vegetable growers across Canada. They are involved in the production of over 120 different crops on over 14,237 farms with farm cash receipts of $5.7 billion in 2018.
As you can appreciate, with 120 different types of crops, our industry is very diverse; so too are the challenges we are facing in light of the COVID-19 pandemic. Certain subsectors in the fresh fruit and vegetable industry, such as potatoes and greenhouse vegetables, are facing very acute and immediate challenges while others are making decisions on the future of their business. What is common among all commodities is that the impacts felt this year as a result of COVID-19 will have a lasting impact on their operations
I want to start off by saying that CHC recognizes that the safety of Canadians and the integrity of our health care system remain the government’s number one priority. We're fully supportive of that. We appreciate the great efforts that the government has made to keep us all safe, as well as the measures to keep our country and economy afloat during this crisis.
However, we are here today to point out that, like most countries, Canada faces serious challenges on an issue that is essential to a strong health care system and a healthy population. It's our national food security. We think this is an opportunity for the Government of Canada to continue to demonstrate how critically important our food security and supply is to Canada and to underline that governments have farmers' backs, to paraphrase the .
Early in the pandemic, access to temporary foreign workers was the single most significant threat to our sector. We are grateful to the federal government for its actions exempting international farm workers from travel restrictions and for providing some financial support to employers of foreign workers to help cover the extraordinary costs of the two-week isolation protocol; however, a number of obstacles have made the flow of critical workers untenable. Many farms will receive merely a portion of the workers they generally rely on.
Again, we do recognize the work that ESDC and IRCC, along with Agriculture and Agri-Food Canada, have put in to getting workers into Canada. We appreciate that, but the government has been using statistics in their briefings that do not reflect the situation on the ground. For example, the government has pointed out that in the month of April, Canada received 10,066 workers compared to 13,000 in April 2019; however, that 10,066 includes workers who were supposed to arrive in March but were delayed when the travel restrictions were put in place.
Based on the numbers we have found internally, the data that we have compiled show that, so far, Ontario, which also coordinates arrivals for the Atlantic provinces, has received 78% of the requested workers; Quebec has received just 50%, and B.C. has received 54%.
May and June are busy months for our growers. That's when they would typically be expecting a lot of their workers to arrive. We are very concerned with the small numbers of workers we are seeing who are fully processed to arrive. Without the guarantee of a reliable workforce, many growers are making decisions as to whether it’s practical, let alone possible, to tend crops, prune trees, harvest greenhouse vegetables, etc.
Compounding these difficult decisions is the knowledge that they do not have a sufficient safety net behind them. Growing fruit and vegetables has significant input and overhead costs. It is not for the faint of heart. Many growers just can’t take on those extra costs without a guarantee that the risk will not push them into bankruptcy.
COVID-19 has also had a significant impact on potato growers in Canada. The closure of food services triggered the collapse in the demand for frozen processed potato products, resulting in a huge on-farm surplus of processing potatoes from the 2019 crop that will no longer be utilized. In addition, the 2020 processing-potato contract volumes have been reduced by 15% to 25%, and unsold seed potato inventories remain on farms as a result of the significant reduction in 2020 plantings. Over 700 million pounds of surplus processing and seed potatoes remain in storage on Canadian potato farms, valued at around $110 million.
The United Potato Growers of Canada will be speaking a little later. They've asked the for immediate action to compensate for losses from the surplus perishable potatoes that cannot be sold due to COVID-19.
Growers are not immune to risk and uncertainty. Year after year, they take on risks associated with Mother Nature, pests, infestations and market volatility to make sure that Canadians have an abundance of healthy fruits and vegetables. With the record cold temperatures over the past fortnight, Mother Nature has been especially—I wrote “difficult”—cruel so far this season. In these extraordinary times more than ever, growers need concrete assurances that the government will have their backs.
The government has announced several measures, such as the emergency wage subsidy and the emergency business account. Unfortunately, many family farms will not meet the eligibility criteria. The $5 billion going to Farm Credit Canada is not beneficial, as taking on additional debt will not help our growers recover our backstop losses.
We understand that business risk management programs are there with the intention of protecting farmers from disastrous losses, but cuts to program funding and changes to the eligibility criteria have rendered the programs, namely AgriStability, ineffective for most farmers. The changes made in 2013 to the reference margin limits and the limitations of what expenses can be deemed eligible make it very difficult for even very devastating scenarios to trigger a payment.
CHC—together with AGgrowth Coalition members which represent various sectors across the agriculture industry—has outlined its recommendations to the and the for immediate changes to these business risk management programs. These are needed to help see farmers through this crisis so that they know that Canada supports those who grow Canada's food.
We have requested that the AgriStability trigger be increased to 90%, beginning for the 2020 program year or, more generally, the program year that covers the 2020 crop year for edible horticultural farms, and that the program cover 85% of losses below this trigger. To cover any immediate extraordinary costs for growers, we have also requested an immediate injection of a minimum of 5% of a producer's 2018 allowable net sales into their AgriInvest account, and waiving the requirement for the grower to match the contribution. This would help give confidence to growers in the short term.
We have recommended that these emergency coverage measures be coupled with the review of the reference margin limit. It's outdated. If a farm is forced to reduce farmed acreage and/or reduce output per acre as a result of delayed or insufficient labour or value chain supply disruptions, CHC has stated that particular consideration should be given to waiving structural change provisions for edible horticultural farms.
The Canadian Horticultural Council is prepared to work with Agriculture and Agri-Food Canada to refine any of these recommendations and minimize the risk of any unintended consequences or moral hazard. What is important to note is that we are not asking the government for a blank cheque. Making improvements to a program like AgriStability will allow for a mechanism for farmers to recoup at least some of what has been lost.
Again, I'd like to thank you for the opportunity to speak to all of you today. I look forward to any questions you may have.
I will now turn it over to my colleague Jan VanderHout.
Thank you, Mr. Chair and honourable members of the committee. On behalf of the Canadian fresh fruit and vegetable sector, I welcome the opportunity to share our comments regarding the financial repercussions that the COVID-19 pandemic poses for the fresh produce industry and its supply chain.
The CPMA represents the entire fresh fruit and vegetable industry, from farm gate to dinner plate. Our comments are reflective of a wide array of members who work daily to provide Canadians with the fresh and healthy fruit and vegetable options they demand and who have continued to do so during these extremely challenging and stressful times.
To begin, the CPMA would like to recognize and express our industry’s appreciation for the high level of engagement and collaboration the federal government has shown in working with industry during these challenging times. In particular, I would like to thank the government for their flexibility and collaboration with industry in granting exemptions to international travel restrictions for temporary foreign workers and in providing some financial support to employers of foreign workers to help recover costs for the two-week isolation protocol.
We look forward to an ongoing working relationship to find solutions to mitigate the impact of the outbreak on Canadian families and to ensure they will be able to continue to put our safe, healthy and nutritious fruit and vegetable products on their tables throughout this crisis and afterwards.
With Canadians staying home and buying patterns shifting during the pandemic, we have seen retail sales up 8% for vegetables and 5% for fruit, but at the same time, consumers are spending less time browsing grocery stores for unique items, and sales for shorter shelf-life products and specialty items are lower.
While the CPMA members within our national retail category have navigated COVID effectively to meet consumer demand for produce items, there are many other companies within the supply chain that are not so fortunate. Food service represents 30% of our value chain, and the catastrophic impact to this sector and those who supply it will be felt for years to come.
While meal delivery and curbside pickup have lifted food service produce sales from zero to 20% and sometimes 30% of traditional volume, it will be a long recovery, as physical distancing and consumer fear will play a role in how restaurants reopen. For many, the physical space available, which cannot be changed to accommodate new social distancing requirements while also allowing sufficient customer capacity, will be a major factor in the economic decision on whether to reopen.
Those operators who still owe distributors for product ordered when they closed their doors will not be serviced when they try to reopen until they pay these bills. Many of our members are also being dramatically impacted due to the rising costs of inputs, access to labour and operational changes. For a sector that works with a very small margin and limited available capital, we are at a point where more effective programs to access operating capital without going into unmanageable debt are paramount. I will touch on this more later in my comments.
In a post-COVID world, business continuity will be challenging as we transition. It is crucial that the government ensure the supply chain is supported from farm gate to dinner plate. Government programs created or adjusted to support the produce industry must provide the necessary flexibility, adaptability and longevity to minimize losses to the industry. The impact to businesses in our sector is happening not only today but will continue for the next 12 to 24 months. The complexity and seasonality of our industry mean that both large- and small-scale operators must have access to programs and tools developed by government for both the short term and the long term.
The CPMA recognizes and commends the speed at which the Government of Canada operated to create macro level programs to support industry at the outset of the pandemic in Canada. Many of the programs created have provided support to segments of our supply chain. Yesterday's announcements are a good example, but moving forward it will be important to provide a more focused approach to reduce the unintended consequences and impacts to some businesses, which include increased debt, challenges in accessing domestic labour, and more.
In addition to foreign workers, the produce supply chain relies on a steady supply of domestic labour. The CERB has created unintended consequences in the short term for many packers, distributors, wholesalers and small retailers, which are facing greater challenges to hire at a time when Canadians are relying on them to provide the food they need. The Canada emergency response benefit must be adjusted to support unemployed Canadians without creating a disincentive for Canadians to work, as the $1,000 allowable monthly income amount is not enough encouragement during these unique times.
Additionally, the Canada emergency student benefit has the potential to impact seasonal and summer employment opportunities within our sector. I would encourage greater flexibility for students to collect the benefit and work for essential service providers like agriculture and agri-food.
On a positive note, programs like the Canada emergency wage subsidy have been key for those of our members who qualify. They were able to maintain staffing during the initial food service market shift, but now we must review this tool and potentially extend it beyond September for targeted essential services like the produce supply chain. This will help alleviate the economic stress companies are forecasting under the new normal.
Early in the pandemic, access to temporary foreign workers was the single greatest threat to our production, food security and integrity of the food supply chain in Canada. While some of the industry's key labour concerns have been addressed to a point, logistical and financial challenges remain. CPMA would like to echo the concerns of our partners at the Canadian Horticultural Council about the significantly reduced number of workers who have been able to come to Canada, particularly looking ahead to harvest.
CPMA also supports the recommendations made by the Canadian Horticultural Council in relation to the government's business risk management programs, including additional support for farmers through AgriStability and AgriInvest. We all know there will be winners and losers during this pandemic. As members of the committee are fully aware, the Canadian produce industry has been requesting for many years that a financial protection tool for produce sellers be implemented.
Unfortunately, over the next two years, the COVID business environment has driven and will drive businesses into bankruptcy, and our sector has no effective protection. Canadian produce sellers now more than ever are at risk in the event of a bankruptcy. Without a limited statutory deemed trust, we will potentially see more companies dragged into economic hardship. At a time when food security is second only to health care in terms of priorities for all Canadians, it is crucial that the government provide all possible safeguards for the Canadian food supply chain, including a deemed trust mechanism for produce sellers and farmers.
From growers to packers, shippers, processors, wholesalers and retailers, our industry has incurred unprecedented costs to develop COVID-related business plans and new procedures to ensure business continuity and to prepare for the eventual return to work. Many CPMA members are addressing, and will need to address, employee concerns by implementing physical and social distancing measures and ensure access to PPE.
Why is this important? In B.C., one greenhouse packing operation had 30% of their workforce not show up to work one day following the announcement of a suspected COVID case. The need for PPE is recognized as necessary to ensure business continuity and staff morale while working to keep absenteeism low.
In a survey completed last week, 87% of our members reported they are actively purchasing PPE and other health screening tools. However, challenges pertaining to the access of these essential supplies have been noted by many CPMA members. A shortage of supplies and long lead times to order products like hand sanitizer, gloves and N95 masks have only added to the complexity.
I must note that the added costs of purchasing this equipment cannot sustainably be absorbed by the industry. While the announcement by the yesterday was encouraging, CPMA recommends that the government implement a PPE tax credit to support industry in securing the equipment needed to keep workers and the public safe.
Additionally, the inconsistency of a harmonized delivery of isolation protocols and measures at a local level is also causing frustration across the industry. The need to have common risk-based models is vital to provide and enable competitiveness and public safety.
Finally, we must also recognize trade and regulatory flexibility. This pandemic has clearly demonstrated the need to bolster our food security to ensure the ongoing viability of our food system and strong domestic global strategy. The supply chain linked to transportation, border access, ports of entry and exit must all be maintained. The regulations such as hourly service for truck drivers should be harmonized wherever possible, specifically with the U.S.
The produce supply chain is a globally integrated model that relies on both domestic and international networks. Recognizing the government's efforts to provide some flexibility in the enforcement of non-food safety labelling requirements to ensure that the smooth flow of essential products continues is needed more than ever.
Further flexibility to allow nutrition facts from other countries, especially the U.S., and to allow English-only mandatory labelling information in provinces other than Quebec would help to ensure that grocery stores can continue to provide food.
I apologize for being long.
Good afternoon, honourable members of the Standing Committee on Agriculture. I am speaking today with Mr. Ray Keenan from United Potato Growers of Canada.
Our organization has been in existence since 2006 and was created to help growers improve profitability by sharing data based on the economic principles of supply and demand. We are funded by a per-acre levy from growers across the country, from Prince Edward Island to British Columbia. We would like to thank you for inviting our organization to share our thoughts on how this pandemic has affected the Canadian potato industry.
First of all, we must look to see how the potato industry was doing before this pandemic began in the second week of March. Simply put, it was doing very well. We did have some harvest issues last fall, particularly in the provinces of Alberta and Manitoba, but overall our supply was fairly well matched with demand. If anything, it was a bit short, creating a need to import potatoes from our neighbours in the United States.
Our fresh sector saw strong demand and resulting good prices. Our processing sector, based largely on pre-season determined contracts, was in an enviable position, responding to increased demand for the insatiable taste for french fries. Export markets were growing and domestically, plant expansions in the province of Alberta by Cavendish Farms, in Manitoba by the J.R. Simplot Company, in Quebec by Saint-Arneault, and in New Brunswick by McCain Foods all required additional supplies of potatoes for 2020. The seed potato sector was increasing as well largely to service the needs of the expanding processing sector.
However, on Monday, March 16, after our country began to self-isolate, we saw immediate changes in our potato markets, beginning first of all with table potatoes. Demand for fresh potatoes increased substantially and packers were challenged to keep shelves stocked, as consumers, now staying home, stocked up on staple nutritional foods like potatoes. It was commonplace to see produce managers in grocery stores moving empty pallets as they waited for new skids to come into the store. Demand for table potatoes is still strong and has become more stable in recent weeks as consumers have learned to cook again and enjoy the experience. Potato chip producers also saw increased sales, as consumers selected their favourite comfort food for the pandemic.
It did take more time for the processing sector to react, but eventually, with the sit-down portions of restaurants closed and only the drive-throughs open, the large volume of processed potatoes that enter the food service side of the industry was affected. French fry companies quickly realized that their freezers were becoming full from the factories that are designed to run 24 hours a day, seven days a week. Fryers began by taking downtime and shift layoffs to mitigate the effects but had to eventually close plants at various times.
The excruciating pain for growers then began as french fry companies began calling and advising that they would not be buying all of the potatoes that they had earlier contracted from them. Growers were advised to sell those potatoes to another market. In the following weeks, the situation became even worse with fry companies advising growers that they would be cutting volume for next year's crop. Cuts are dependent on what market each one of these factories supplies but range anywhere from 10% to 35%. The COVID-19 pandemic has had similar effects on french fry sales in the United States and in European countries like Belgium and the Netherlands.
Seed potato growers in Canada became the final victim of this COVID-19 pandemic as they began to receive calls from growers cancelling their seed orders due to 2020 crop volume cuts from the processors. It is difficult for any segment of the supply chain to react to market adversity, but it's definitely hardest for seed growers as they are at the bottom of the supply chain. In addition, many of these growers had started multiplying varieties three years ago that are only now reaching the commercial stage.
Our organization has the difficult task of trying to determine what supply of potatoes is needed to feed our country and export to others in the coming year. We can run several models, but we need to know two important input factors that are right now unknown: When do we start and how long will it take us to get back to pre-COVID-19 consumption levels? It will perhaps not return to what we know as historical consumption.
In the meantime, our growers need assistance. Planting time is now here for the 2020 crops, so there is a real sense of urgency.
The United Potato Growers of Canada supported the Canadian Potato Council in a letter of April 23 to the requesting assistance to deal with the effects of COVID-19 and preserve food security in Canada.
On May 5, the Government of Canada announced an industry support program, of which an initial $50-million fund would be used to purchase unsold inventories, such as potatoes, poultry and other agricultural products. There are no details yet as to how this program will work. However, our organization thanks and for acknowledging in that announcement that our sector needs help. At this time, it is clear that it falls short of our urgent needs, unfortunately.
Specific to our industry, the Canadian Potato Council has contacted each province in Canada and identified the surplus potatoes on Canadian farms to be valued collectively at $105 million. The components of this big pile of potatoes include processing potatoes valued at $92 million and seed potatoes valued at $13 million. Converted to pounds, this pile is about 760 million pounds. This is a massive quantity of potatoes to move in a short time.
These surplus potatoes have a shelf life, so action must be taken now.
UPGC has looked specifically into the option of running more of these potatoes into the fresh market, but unfortunately, that market is now approaching saturation levels, in addition to our difficulty in locating sheds with additional run times.
Dehydration would also be an option, but our three plants in Canada are currently running at full capacity and their markets have been hit by food service restrictions as well. Cattle feeders are another possibility, but basically they only return trucking costs to the potato growers.
Food banks are an attractive option to avoid food waste, but logistically require extensive time to organize transportation, delivery and receiving. We simply do not have the infrastructure to handle the volume that must move. Many of our growers do support food banks now and are familiar with some of these difficulties.
The final option for these surplus potatoes would be composting or burial, both of which need to meet environmental and plant health guidelines.
All of these scenarios point to a series of options that growers cannot handle at their own risk and expense. Outside help is needed to begin removing this product now, with completion over the next three months to avoid environmental and plant health risks to the 2020 crop. We need help now, not in three months' time.
Your input and assistance as the Standing Committee on Agriculture and Agri-Food is critical to the future food security of Canada. Given all of the negative situations created by the COVID-19 pandemic, one positive has been a greater appreciation of the food produced in Canada and an increasing desire of consumers to support the producers who put it on their tables.
Thank you for the invitation and the opportunity to address you today.
Mr. Chairman, thank you for the opportunity to speak with you here today.
I am the chairman of the United Potato Growers of Canada. Our farm operates a growing and fresh pack operation delivering potatoes on a daily basis to chain stores and, in the past, to food service, when it existed.
I echo the comments that have been made today. Although we are grateful for the dollars that the has allocated to the potato and poultry industries, unfortunately the potato industry has less than half of what it needs to facilitate moving to market the flood of potatoes that we now have available.
As the government searches for methods of doing things, there was an announcement to put these potatoes through food banks or in cattle feed, but I'm not certain that the logistics on that have been worked out very well. Certainly, as Kevin mentioned, potatoes have a shelf life and have to be.... If we bring processing potatoes into our packaging plant, about 50% to 70% of the yield will be packaged. In other words, there's a huge shrink to them, so we have a lot of potatoes that don't have a home in a fresh pack that make it into processing, because they have more uses at the processing level.
Having said that, with the problems they have had in western Canada with the feedlots or the meat packing plants, there's a backup of cattle on the farms, so I think we need to be careful about making assumptions that these potatoes can go to cattle. Some of them can, but some must be disposed of.
The more important thing is that the money gets distributed fairly among the provinces. I would like to make a recommendation that the fastest and most effective way to do this is through the provincial governments, in turn through the potato boards in the various provinces. We should take their advice on how to use the money, because each province has a different situation. Certainly, one size does not fit all clear across the country, especially today in the heavy processing sectors in, for example, New Brunswick, Manitoba and Alberta. They have been especially hit hard with processing extra potatoes.
Welcome back, everyone.
I'd just like to make a few comments for the benefit of the new witnesses.
Before speaking, please wait until I recognize you by name. When you are ready to speak, you can click on the microphone icon to activate it.
Also, interpretation in this video conference will work very much as it does in a regular committee meeting. You have the choice at the bottom of your screen of either floor, English or French. When you intervene, please make sure your language channel is set to the language you intend to speak, and not the floor. This is very important. It will reduce the number of times we need to stop because the interpretation is inaudible for the participants, and it will maximize the time we spend exchanging with each other.
When you're not speaking, please put your microphone on mute.
I would now like to welcome our witnesses for this second hour.
We have from Bio-En Power Inc., Mr. Earl Brubacher, manager.
From Food & Consumer Products of Canada, we have Carla Ventin, senior vice-president, government relations.
From Whyte's Foods Inc., we have Elisabeth Kawaja, president; and Philippe Blondin, vice-president.
Welcome to you all. We will start with up to 10 minutes for opening statements, beginning with Food & Consumer Products of Canada.
Ms. Ventin, go ahead, please.
Thank you, Mr. Chair and members of the committee for the opportunity to present to you today to provide insights into the study on the Canadian response to the COVID-19 pandemic. My name is Carla Ventin, and I am the senior vice-president of government relations for Food & Consumer Products of Canada, based here in Ottawa.
For nearly 60 years, our national industry association has been representing the companies that manufacture and distribute the majority of the food, beverage and consumer goods found on store shelves, in restaurants and in people’s homes.
Our member companies range from small, independently and privately owned companies to large global multinationals, together making about 85% of the products available on grocery and drugstore shelves. FCPC’s membership is truly national, providing value-added jobs to urban and rural Canadians in almost every federal riding of the country.
The food and beverage manufacturing sector is the largest manufacturing employer in Canada. The industry employs more than 300,000 Canadians in high-quality middle-class jobs from coast to coast.
We commend the government on its openness and timeliness in its response to the exceptional circumstances presented by COVID-19. Throughout the pandemic, we have appreciated working collaboratively with the government, and we look forward to playing a central role in Canada’s economic recovery.
We appreciate the government’s public recognition at the highest levels of the importance of the 300,000 workers in the food manufacturing industry across Canada and its formal recognition of grocery, pharmacies, convenience and pet food stores as critical infrastructure. This helps to motivate workers in our industry, and it provides the necessary reassurances to our members to allow them to plan and operate during this unpredictable period.
With our highly integrated North American industry, we are pleased with the government’s commitment to keeping the border open to allow for the free flow of ingredients, products and essential workers. Our members also welcome the government’s efforts to allow for the entry of temporary foreign workers and equipment technicians.
In response to COVID-19, our member companies have pivoted and stepped up to the plate to provide essential products on Canadian grocery and drugstore shelves. However, since March, our members have faced immediate and unprecedented challenges, costs and uncertainties that jeopardize the industry’s long-term viability.
Costs associated with the compliance of new health and safety measures for workers, the purchasing of personal protective equipment, the closure of restaurants, and training of new employees have all risen significantly. As well, the growing uncertainty in securing access to ingredients, packaging, people and PPE has revealed significant and deep-rooted vulnerabilities in the supply chain. These mounting costs and growing uncertainties are not sustainable.
We recently conducted a survey with our members that captures these concerns, costs and impacts. Let's consider a few. Over 50% experience up to a 25% reduction in productivity due to COVID-19 mitigation measures. Seventy-five per cent experienced moderate to significant input cost increases. Twenty-five per cent to 30% anticipate raw material shortages. Thirty-five per cent reported experiencing PPE shortages. Seventy-five per cent are experiencing increased absenteeism in plants, and 40% expect significant training costs as a result.
We are pleased that some of these concerns have been addressed by the government’s $77.5 million announcement on May 5. We believe that this a positive step forward.
We are also pleased that the acknowledged that this represents an initial announcement and that more remains to be done. However, we are really concerned that the $77.5 million won't even cover the costs already incurred by the primary meat processors, leaving nothing else for the rest of the industry that relies on these very ingredients.
We need to work urgently with the government to secure additional and immediate funds to cover mounting pandemic-related costs, which are needed now for our members to keep the doors open and provide food for Canadians.
The challenges that existed before COVID-19 have only gotten worse. Access to labour is the prime example. Before the pandemic, there were approximately 10,000 vacancies in the food and beverage manufacturing sector, and this has only gotten worse. While we appreciate the efforts of the government to introduce relief for affected Canadians, the Canada emergency relief benefit, or CERB, has had an adverse impact on members' ability to fill positions. We wish to partner with the government on a program to help incentivize Canadians to work in our industry.
We'd also like to see additional financial incentives, like a wage top-up or hero's pay for workers in our sector, as well as a retroactive removal of income tax for wage top-ups provided by the private sector. While we appreciate the government's financial commitment of $3 billion on May 7 to provide a wage top-up to essential workers, we also urge the federal government to encourage the provinces to include our industry.
In order to improve our industry's productivity levels, we not only require readily available labour, but we also need to ensure that the workforce we recruit is properly trained. We require support to offset these training costs, which can vary from $2,000 for a production line worker to $5,000 for a highly skilled specialized worker. We therefore suggest an employer training tax credit worth $29 million.
In order to ensure that Canadians continue to have access to essential products on store shelves, we need to work together on a whole-of-government economic recovery plan. With such a significant economic footprint in Canada, it will be critical for our industry to play a central role in rebuilding Canada's economy. The government will need to focus on investments that help build a robust and competitive food and consumer product manufacturing sector, in addition to creating domestic capacity to supply the ongoing increased need for PPE and hand sanitizer.
Part of this will need to involve a serious conversation about the significant government-imposed regulatory costs. We are specifically referring to proposed labelling costs, including front-of-package labelling and potential service fees.
Prior to COVID-19, Health Canada was proposing unprecedented changes to the way our industry makes, packages and sells products. While we support regulations that improve public health and product safety, we are concerned about the host of costly regulatory proposals that do not contribute to these objectives. A comprehensive re-evaluation or rethink of the regulatory agenda in Canada, in collaboration with industry, will be needed.
It's important to note that in the weeks ahead it will be harder than ever to attract and keep investment here in Canada, as other countries are looking to repatriate manufacturing and become more self-reliant. We are already seeing growing pressure for companies in Canada to leave and take their jobs with them. We can't let this happen. Canada needs to step up and build a robust manufacturing sector that provides incentives for companies to stay and create jobs for Canadians.
In summary, our recommendations include the following:
Number one is for emergency funds to help offset COVID-related costs incurred by our industry, the food manufacturers.
Number two is to develop a program to incentivize unemployed Canadians to fill the existing 10,000 vacancies in the food manufacturing industry.
Number three is to work together to upskill and transition unemployed Canadians with the creation of a $29-million employer training tax credit.
Number four is to ensure that international trade, especially with our southern partner, is rules-based and science-based, and allows for the predictable flow of ingredients, products and people.
Number five is to develop a domestic manufacturing strategy in collaboration with industry and provincial governments that builds a robust consumer products and PPE manufacturing sector in Canada.
First, I would like to thank the members of the committee for inviting Whyte's Foods here today. It's an honour for Philippe Blondin and me to be able to share this information with you and hopefully represent the voice of our industry.
We are the largest pickle and pepper manufacturer in Canada, and are also sadly one of the last. Our company began just outside Montreal in 1892. Since that time, we have not only been manufacturing and selling food to the Canadian market, but we have been employers, buyers and charitable givers to our community.
Since our company was founded, we've purchased the Mrs. Whyte's brand, the Coronation brand from Kraft Foods, and finally the Strub's brand in 2012 out of bankruptcy. Each of these pickle and pepper manufacturers struggled to remain alive in Canada for decades prior to our acquisition of them. In 2011, the Bick's brand left Canada and moved to the United States. We are, in effect, the last one standing in our industry.
Two years ago we decided to open a new facility. We saw many advantages to operating south of the border, including lower minimum wages and often less restrictive business environments; however, we chose to stay in Canada. We have always chosen Canada. We are now, as I said, more or less the only ones left in Canada in our industry, and we are so proud to still be here.
Our relationship to the communities in which we work runs deep. In Saint-Louis, we are the town's largest employer. In Wallaceburg, we're providing jobs in a previously extremely underemployed region of Chatham-Kent. We buy from local farmers and view ourselves as members of the community. We have always taken our role as corporate citizen extremely seriously. We support local charities both financially and with our human resources. Without us, jobs in the cities in which we operate would be lost. Many Quebec and Ontario farmers would be unable to sell their crops, and the communities we call our own would suffer significantly.
The agriculture and agri-food sectors are Canada's largest employers. It's easy to forget this from our urban centres, but we are the engine of our national economy and we are rooted in our national identity. Imagine the Canadian landscape without our farmers and without our rural communities. We're here today to make clear that an omission to help us during this challenging time will make that sad vision a reality: a Canada with far fewer farmers, with significant unemployment, with rural decay, and with an entirely imported food supply.
Starting a business like ours takes significant investment and, for those who are not as committed to Canada and to our farmers as we are, there is little reason to be here. Operating out of Ohio or Michigan is cheaper and provides easy access to our markets. Without the support of our government, losses that result from the pandemic to the agri-food sector will not likely be gained back in years to come. As we at Whyte's are pivoting to be retail packers, Canada will be forced to pivot into being exclusively an importer of agricultural goods. I hope you agree with us that this is not the Canada any of us recognizes or desires.
As a company that views itself as a community member, we prioritize the safety of our team above all else. We have slowed production in order to maintain social distance, bought as much PPE as we could and engaged in training and safety precautions everywhere possible. This is costly and time-consuming. We, like all of you, are aware not only of the closure of meat-packing plants in Canada, but also of many non-meat food manufacturers in the United States that have closed due to COVID but have received less press.
The risks of the virus hitting our plant, and us having to shut our doors during crop, are very real. We are doing all we can to avoid this, and to make our team feel safe coming to work each day. We would have it no other way, but we need help to continue to do this. We have invested $52 million in our facilities in Canada in the last few years, including $23 million in our new facility in Chatham-Kent.
recently said that more needs to be done, when he referred to the programs being offered to sustain the agricultural industry in Canada. We are here to echo very clearly that yes, indeed, more needs to be done. We have lost our food-service sector, which has left companies like ours to fight in a crazy game of survival in which we are forced to become almost entirely retail providers.
As anyone who understands food manufacturing knows, this is neither easy nor cheap. We are facing staggering wage increases to combat current unemployment subsidies, and receiving notifications from retailers about their commitment to maintaining current prices. We have inventory that was planned for restaurants but that will go to waste. We are awaiting a rapidly approaching single annual crop in Canada and have neither the manpower nor the resources to equip ourselves to process it in time. This likely means that the shelves of our grocery stores will see shortages as we move into the fall. I would encourage you to look through the middle aisles of your grocery store and note how many items require product from local farmers and food processors like us. Any company like ours that produces both retail and food service, which is most of us, is very likely to be unable to transition quickly enough to fill those shelves and replace the food service business we have lost. Add to this that profits from food service sales are gone and you can begin to imagine our reality: lost margins, massive operational expenses as we transition, increased wage costs and wage shortages, inventory going into the garbage and little room to increase prices.
The natural conclusion to this is empty shelves, the destruction of our agri-food industry, significant damage to growers and eventually the loss of rural life. I don't mean to sound bleak, but hungry Canadians and deserted rural towns are the inevitable final chapter of this story if we are not afforded assistance. This assistance needs to be both generous and swift. Our crop is around the corner, and it doesn't come back for another year.
As a result of our large investment in a new plant in southwestern Ontario, we were proudly able to bring a great deal of business back to Canada that was lost to the United States many years ago. Due to this recent growth, and the metric currently used to assess wage subsidies, we cannot qualify for programs like the 75% wage subsidy. We have lost over 40% of our sales compared with last year, but this truth is hidden by the growth brought from our new facility; in other words, what appears to be sales growth is in fact not growth at all when one considers the expenses incurred in the last few months to accommodate much greater growth. Our costs continue to be in line with this anticipated growth from our new facility. We have lost almost all food service sales and are therefore left at a very significant loss, with no government help.
We ask that the parameters around certain programs be more flexible so they can be fair to everyone. Companies like ours that have invested in growth in Canada and are providing more jobs and supporting more growers in Canada than last year cannot be measured against last year’s pre-expansion sales. We need to be measured against what the reasonable growth expectations were when we built a new facility and invested so heavily in Canada. The current metric effectively penalizes us for providing additional jobs and buying more from our farmers. Companies with no planned growth are rewarded for cutting jobs and losing sales. This was not the intent of the wage subsidy, but it is certainly the result of the current system.
In conclusion, we are asking our government for help to cover the costs of wage increases, the changes we made to our operations to accommodate more retail production, the crop we paid for and cannot use, the lost food service inventory and for keeping our team safe. I am asking for help not because this is all about money, but because this business is full of people that my family have worked with for 20, 30, and even 40 years in some cases. These are people I consider friends and care about deeply. This is not just a numbers game: These are human beings who have worked hard their whole lives, who love their work and the community of growers and customers we have all known for a lifetime.
I received an email recently from a colleague who has worked in our plant in Laval for over 30 years. She asked us not to give up on them, because they need us right now, so today I pass along her message: We need you, the Canadian government, on behalf of the Canadian people, to decide that agri-producers, growers, rural communities and the Canadian food supply chain matter enough to keep us alive, and that we, as a company full of loyal, hard-working, smart people, deserve to survive this pandemic.
Thank you for your time.
Thank you, Mr. Chair, and also to the witnesses for their presentations today.
Ms. Kawaja and Mr. Blondin, I just want to say, coming from Lambton-Kent-Middlesex, where you've opened your new plant, your new facility, in Wallaceburg in my riding, that I know it's been a great addition to the economy there. Wallaceburg has been hurting for many years. It was great to see that kind of investment. I believe you said that $23 million was invested in that processing plant.
The community was excited about these direct new jobs that would come from this processing plant. Also, it was not just about jobs in the processing plant. The farmers were then able to supply you with the produce—like you said, the cucumbers for pickling, the peppers—and they were so excited. I've heard from some of the farmers in my riding who have said that it's great because they can cut down on their costs and they don't have to freight their products to the United States any longer.
As you said, most of the pickling cucumbers go to the U.S. to be processed, so to be able to ship them in Canada and keep our crops here in Canada has been great. We've seen huge reductions on freight from this. It's great to see it freshly harvested from the field and going straight from the field to the factory, whether it's in Wallaceburg or Quebec. Thank you for that investment in our community.
I just wanted to touch on what you said, which was that you've had a hard time with labour, and that's also been a bit of a factor. I'm wondering, with the new programs that have been announced.... I'm not sure how much you rely on students for your labour, but we as a party proposed a plan to try to get students involved in agriculture or agri-processing, because we obviously want to secure our food supply and keep businesses such as yours here in Canada. Would that program be helpful for you if we could match students with jobs in the industry? What is it looking like as far as getting the labour force out there goes?
Also, for the farmers who you deal with on a yearly basis, obviously with production going to be down.... You've alluded to a lot of health and safety processes that have to happen, which slow down production and mean that you can't produce as much through the facility. Also, you rely heavily on food service distribution products versus retail products. How is that going to affect the farmers and their supply chain, knowing that they planned their crop months ago and that at this point they're getting stuff in the ground right now?
With regard to the supply from growers in Ontario, so far the only thing we've changed is that we've had to buy smaller-sized cucumbers. We've cancelled some contracts with pepper growers, because we're carrying some excess inventory that we cannot afford to replace right now.
In general, the requirement is more for retail. With what we've lost on food service, we've gained some on the retail side. We're still going to buy quite a bit of stock from Ontario.
Labour has been a big issue, and it's still a big issue, not only because of the government program for people who don't have jobs, but also from the fact that day care centres and schools are closed. Some of the employees need to stay home to take care of their families. That's been one of the biggest challenges we've had.
We haven't have any cases of COVID-19 in the Wallaceburg plant, but if we get people who have symptoms of the flu, we usually send them home. We don't want to take any chances that they could be contaminating anybody else. We want to keep the business going.
We've had issues with supply from Mexico. They have closed some regions, where workers cannot go to the fields to harvest, which is reducing our supply right now.
This is pretty much where we stand.
That is a very good suggestion, Mr. Perron. I will ask Mr. Brubacher to send us a summary.
Again, Mr. Brubacher, we apologize for that. If you want to submit a brief, we will certainly take it into consideration in our whole study. Perhaps another time we can have you in as a witness again.
This completes our time for this panel.
I want to thank our witnesses today: Mr. Brubacher from Bio-En Power, Carla Ventin from Food & Consumer Products of Canada, and Elisabeth Kawaja and Philippe Blondin from Whyte's Foods Inc. Thank you very much for appearing. You're free to go.
I just have some very short business to cover. I want to make sure this time around, as we agreed, that we will reduce our witnesses' time for testimony from 10 minutes to seven minutes. Because they had already submitted, we could not do it today, but the next meeting.... It will not be Tuesday, but next Friday, May 22, with present. I think, if that's all correct with you and there aren't any issues.... I think we had all agreed, but I don't know if there are any issues or questions on that.