I call this meeting to order.
Welcome, everyone, to meeting number 12 of the House of Commons Standing Committee on Agriculture and Agri-Food. It is a beautiful day here, and it looks like it's a beautiful day across the country.
I'd like to outline a few rules to follow.
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 your language channel is set to the language that 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.
With a nod, could our witnesses let us know that they understand how this works? I think we have everyone. Thank you so much.
Also, before speaking, wait until I recognize you by name. When you're ready to speak, you can click on the microphone icon to activate your mike.
As I just did, you have to press on the language channel button to switch to French. Make sure your microphone is off when you aren't speaking.
We are now ready to begin; I want to welcome our witnesses to today's hearing.
From the Canadian Mushroom Growers' Association, we have Ryan Koeslag, executive vice-president and chief executive officer, and Ms. Janet Krayden, workforce expert. Welcome to both of you.
From the Canadian Agricultural Human Resource Council, we have Cyr Couturier, chair, and Portia MacDonald-Dewhirst, executive director. Welcome to both of you. It's nice to see you again.
From F.A.R.M.S., the Foreign Agricultural Resource Management Service, we have Ken Forth, president. His sound is working. We also have Ms. Sue Williams, general manager of CanAg Travel Services, but I think there's a problem with her sound. Unless they can correct it, we won't be able to hear from her.
With that, we will start with the Canadian Mushroom Growers' Association.
You have seven minutes for an opening statement. You can split it, or one of you can do the seven minutes. Go ahead.
I'll start off and then pass it over to Janet.
Thank you for the opportunity to speak on behalf of the Canadian mushroom industry.
Members of the committee, we come before you today with some grave concerns. It's now the end of May. The pandemic started in March, and we're still fighting for our mushroom farms to get access to a single program. We're very concerned about the lack of funding for farmers to fight COVID-19.
Emergency funding is needed quickly. Since the beginning of March, our farms have incurred major expenses for COVID, in addition to losing major market share, all while being told they are an essential industry. To date, not a penny has been received by our farms.
For the record, our mushroom farms have not benefited from the $50 million for the temporary foreign worker quarantine, because our workers are not seasonal and are already here. When farms expand their housing for social distancing for temporary foreign workers who are already present, these costs are not covered.
There is also the $40 million for food surplus. This does not work, because our production dropped significantly after week four to eliminate throwaways. Also, this program has only been working for oversupply since the end of April.
For food processing, COVID cost relief is prioritizing the meat industry, and the program has not yet rolled out.
We don't care where our funds come from, but as of now, nothing has been received, and we are going to enter into the territory of too little, too late.
Since the start of the pandemic, mushroom farms have implemented costly measures out of their own pockets. Personal protection equipment, Plexiglas dividers, increased housing, increased transportation, staggered isolating shifts and hygiene management supervision are some of the responses that mushroom farms have made. These measures have been estimated to collectively cost over $250,000 a week for the mushroom industry. One mushroom farm spent close to $100,000 in one month, in March, to protect and prevent the spread of COVID-19. This is in addition to the lost production that has been and still is being experienced. More details on these costs are in our full report.
The Canadian Federation of Agriculture's request for over $2.6 billion included Mushrooms Canada's estimates and was far larger than the government's $252 million.
The AAFC programs do not work for our mushroom farms. They're broken for industries like mushroom farms and greenhouses. An example is AgriStability. The AAFC has made AgriStability irrelevant for our industries because of their intensified operations and expanded production, with major exports to the United States. The government must examine the scale of operations with regard to their $3-million cap. If mushroom farms must experience losses of 30% in order to trigger a payment and the payment is capped at $3 million, the program will not stop farms from going bankrupt.
Additionally, when an operation has experienced a major expansion in its previous year and the calculation for the payment removes the highest year and the lowest, the difference between the new expansion and the payment calculation from the average is too great to help with anything. The government calls this the weighted average. This, too, should be examined and removed.
At the end of the day, when it comes to agriculture during the COVID pandemic, the government has implemented every measure imaginable to reduce the payments to farmers. Caps, weighted averages and margin references are all things to stop or reduce payments. It's not a helping hand; it's a costly hesitation and a disservice to our farmers.
We ask the committee this: What does “essential” mean? It's unfair that this essential industry that Canada cannot live without is dying and struggling and being asked to carry the full burden for three months, while payments have been flowing with record speed to so many others. Although we are also called “essential” by provinces, very few have included agriculture as part of their strategy for essential services; hence, none of the supports are for farm businesses or farm workers.
These are difficult times, and beyond lip service, the government's treatment of essential work leaves one to question if the government thinks that farms and food supply are actually essential.
Our second request is for support from the immigration department for improvements to help skilled and trained agricultural temporary foreign workers who are in Canada, including changes to the agri-food pilot, which was recently announced, that adjust the program to remove the cost for verifying high school diplomas. We aren't saying to remove the requirement for a high school diploma, but rather to remove the payment that needs to be made to a consultant to verify a high school diploma during the COVID pandemic.
Before I pass the microphone to Janet, I should mention that there has been one area where the government has been very responsive: Service Canada's surprise inspections. Although we, too, support the inspections and want all workers to be treated fairly, farmers have reported that documents are being required over long weekends, so farm staff who are under extreme stress every day to keep their farm operational also have to work overtime to comply with the temporary foreign worker requests, again adding costs, adding burden and receiving no help from government to date.
With that, I'll pass it over to Janet.
We're here to report to you today that our supplies of the N95 face masks on many of our farms will be gone in two weeks. The N95 face masks are now selling for up to $10 per mask. These masks used to sell for well under $1. Committee members, that is 1,000% inflation.
The N95s are being confiscated at the border. India is no longer shipping, and the face masks from China are defective. If the N95s do not work for health care, they also do not work for the mushroom farms. We need them for worker safety purposes beyond COVID-19 for some varieties of mushrooms, to protect our workers from the spores.
We ask the Government of Canada to make agriculture its number two priority and please include us in the procurement process. All the PPE support for the farmers has been late. A few provincial programs are only now rolling out, three months into the pandemic. In Ontario, the new $2.25-million joint federal-provincial program for producers, called the agri-food workplace protection program, is capped at $7,500 per incorporated farm, so with the costs of the face masks inflated 1,000%, you can see that the funding is not going to go very far.
The research is clear: The industry cannot continue to produce healthy, safe and affordable food for Canadians and for global consumers without ensuring that workers are secured and in place to do their jobs.
The COVID pandemic has put a greater spotlight on this, and it has confirmed that there's no more time to waste. We must work toward longer-term and systemic solutions to the persistent labour shortages that the agricultural industry is facing. CAHRC's labour market research has clarified that job vacancy rates in the industry are as high as 10%, which is exceptionally high compared to other industries, and those vacancies are impactful and result in close to $3 billion in lost sales revenue annually for food businesses alone.
Beyond financial losses, farmers' inability to fill all of their vacant positions with either Canadian or foreign workers makes the business of food production in Canada very stressful and difficult.
International workers, as you know, come to Canada to work on farms and fill positions when Canadians can't be found. Although approximately 60,000 foreign workers are brought in each year, tens of thousands of positions still remain vacant. The latest assessments indicate an expectation that the labour gap will grow to 123,000 positions by 2029.
Businesses that aren't able to fill vacancies face production losses and excessive stress. Owners cancel expansion plans, and many report leaving the food business altogether. Securing a full team of workers is challenging for farm businesses at any time. It's especially challenging during a pandemic. However, the pandemic has highlighted that food production is part of Canada's critical infrastructure, and maintaining the ability of food producers to operate effectively, even during a global health crisis, is critically important to every one of us.
Food businesses are expected to continue to operate through the pandemic and, thankfully, have been designated as essential workplaces so that Canadians can enjoy homegrown fruit, vegetables, meat, dairy and grains. However, keeping agricultural businesses operational has not been easy for either industry or government due to the already extensive labour shortages the industry faces and the unique workforce management challenges that exist.
COVID has highlighted not only how complex it is to maintain public health during a pandemic, but also just how important and complex it is to manage workforce issues in this industry. COVID has certainly put a spotlight on the need for focused attention to address the persistent and pervasive issues of workforce shortages that continue to undermine this industry's ability to operate at full capacity. There's a clear need for a national labour strategy to stabilize worker availability and food production through the pandemic and beyond.
Now I'll pass the floor to Cyr.
Thank you for the invitation to participate.
During COVID, obviously, employers have been struggling with extensive uncertainty about meeting their staffing needs. They have been uncertain about operating realities during the pandemic and about getting their foreign workers into Canada on time. A lot of these decisions about planting and proceeding with production have been filled with an exhaustive list of unknowns. Farmers continue to lack clarity about what their staffing levels will be this year because they don't know if or when their international workers will arrive. They also don't know if workers' absenteeism will increase for Canadian and international workers due to wage benefits like the CERB, public health directives encouraging people to stay home, and limited PPE—you just heard about that. They don't know if new entrants, like students, can be enticed to join the industry during a global health pandemic and be convinced to stay for the whole season. They also don't know the extent to which disruptions across the value chain will impact their operations.
In addition, employers have also been struggling with keeping up to date on new and evolving workplace protocols. An extensive list of government agencies at the federal, provincial and local levels all set expectations for employers. While learning the rules and recommended practices, employers are also working to secure their staff, and they are responding directly to the health and safety concerns of their employees, clarifying rules around new work arrangements, physical distancing, PPE, housing, commuting, outings, etc.
There's a clear need to support the industry employers with their complex HR management activities. CAHRC has been doing this throughout the pandemic, providing access to all farm operations across the country. It's very complicated. Farmers in all of their businesses are still struggling for all of this.
The Government of Canada has demonstrated a commitment during COVID to meaningful consultation, coordination and action to address pressing workforce needs. Better mechanisms have been implemented to connect industry, government, and so on. What we need now is to expand upon this good work and develop a national labour strategy with longer-term activities to refine consultations and improve labour supply and skills.
Now is the time to ensure that the food production system stays operational through COVID and beyond, and is well positioned to overcome the persistent labour shortages that have been limiting growth. What is needed is the proper time, resources and attention put forward to develop and enact a national labour strategy. It's time to listen to the various recommendations of so many reports and committees that have reviewed this serious issue about labour.
The agri-food economic strategy table outlines key recommendations for addressing labour shortfalls in the long term that are aligned with those proposed by RBC, the Conference Board of Canada, CAHRC, HUMA, AAFC's national labour task force, and the Barton report. What all these reports stress is that there needs to be strategic, coordinated action to do three things: continue to monitor the numbers with quality labour market intelligence and research, increase the supply of labour by improving access to temporary foreign workers and generating Canadians' interest in agricultural jobs, and improve the knowledge and skills within the industry by upskilling workers and supporting the HR management skills of employers.
CAHRC has been supporting provincial efforts in these areas, but a national approach is still missing.
No doubt the farming community in Ontario and Canada will never forget 12:01 on Wednesday, March 18, as it marked the closure of non-residents, and in particular farm workers under the seasonal agricultural worker program, from entering Canada. This was devastating news to stakeholders involved in agriculture and the agri-food business, and this started the massive stress that still remains within agriculture.
The start of the week of March 16, right through to the third week of May, is noted as the peak time frame for seasonal agricultural workers to arrive in Ontario. In excess of 8,700 workers were already scheduled to arrive, with flights arranged, airlines positioned, source countries busy documenting seasonal workers, farm operators preparing for the arrivals and the workers themselves preparing to leave their families for another season.
Overnight, everything came to a standstill. The phone lines were jammed with the first farm operators questioning where the workers were and whether they would arrive in time for spring vegetable planting, fruit tree pruning, asparagus harvesting and ginseng shading, as well as nursery production and flower production, which are always in high demand. In the following days, borders closed to almost all source countries providing farm workers to Canada. The media quickly became the focal point of everyone’s day.
Fortunately for all stakeholders, the announcement came quickly that an exemption under the special exemption was approved for non-resident temporary farm workers to enter Canada. However, farm operators had to act quickly to fulfill the obligations that were now imposed on both farm operators and the arriving temporary workers.
Farm operators' obligations are as follows: one, monitor all persons for the virus; two, facilitate self-isolation according to public health requirements; three, meet minimum standards where housing is provided, to provide social distancing of two meters and to ensure that individuals in self-isolation are separated from those who are not; four, maintain zero contact with older adults; five, provide personal protective equipment, masks, gloves and thermometers, as well as any necessary material to practise adequate sanitation such that surfaces are cleaned and disinfected regularly and there is access to soap and water to regularly wash hands or the use of sanitizer; and six, support efforts to minimize the spread of the virus during and following the 14-day isolation period.
In terms of the health ministry, Public Health Ontario offices play a huge role in the seasonal agricultural worker program by providing seasonal housing inspections every eight months, thereby adding to the integrity and success of the seasonal agricultural worker program. Farm operators relied on the Public Health offices to make sure they were adhering to the virus guidelines, as well as the guidelines set forth by the federal and the .
Partial solutions were implemented, with a focus on making sure everyone maintained the following guidance.
Farm operators needed to plan for a 14-day isolation period for all newly arrived farm workers. This includes closely looking at the housing plans to reorganize, if needed, to meet the guidelines. For social distancing, beds were moved further apart. In some cases, partitions were put up. Hotel rooms were rented.
As I’ve already said, they needed to purchase sanitary cleansers and masks.
There was agreement with the farm operators for food provision beyond the 14-day self-isolation period. A number of farm employers have arranged for food pickup or delivery on an ongoing basis to eliminate the farm workers’ need to go to the local grocery stores. The farm workers are made aware that the agreement is voluntary and they have the option to change the process. It has been found that farm workers are generally in agreement with the pros and cons of leaving the farm on a frequent basis. It should also be noted that the general public in Ontario does not like to see foreign workers going into grocery stores anymore. Actually, it’s pretty pathetic how Canadians are acting in some cases in some food stores, but that’s the reality of what’s happening today.
Added thought was put into farm equipment and how best to keep distancing in play. Farm operators have installed Plexiglas and other dividers for the workers on planting machines and when they are sitting closer. This small measure is huge when you consider that it provides a barrier against a potential cough or sneeze.
Farm operators are to monitor the farm workers on a daily basis and to document a plan to remove and quarantine any worker who shows signs of the virus, which would include notifying the Public Health office.
They are to maintain distancing to the extent possible during work hours and supply masks, glasses and face shields. They are to receive and take action on communication updates periodically sent by our office in relation to the virus updates.
Simply, these measures cost the growers a ton of money, and nobody has been there with us on this basis.
The health and safety of Canadians and seasonal and temporary workers in Canada remains paramount. Farm operators and farm workers acknowledge that they have an obligation to remain under strict guidance for the duration of the term of employment.
While the virus continues to present itself, the food supply chain remains viable through the long-standing relationship between Canada and the source countries.
The bottom line is that we need the government to have our backs in this thing if it wants a stable food supply. The farmers of this country have basically been left on their own. Support for agriculture has fallen drastically short. “AgriStability” is a phrase that urban Canada likes to talk about. AgriStability simply does not work, and has never worked. We just need our backs covered, if we want Canada to have a food supply.
Thank you very much for your time.
I've heard that some people have some problems accessing it, but I haven't heard of anybody's getting it yet. However, it's early in the game. We still expect it to happen. The called me personally before the announcement. She told me that it was $1,500 and that's the way it was, and I thanked her very much. Then Agriculture Canada got involved, and there are a whole bunch of stipulations, t's to cross and i's to dot.
That's not what we were told, and some people from Agriculture Canada reiterated to us on a phone call the other day that this is a windfall. Well, of the $1,500, at least $1,000 is the wages that we have to pay for the worker to sit in the bunkhouse. If you add all the other things that happen with that, there isn't much of a windfall there. If you're into hotel rooms and that kind of stuff, you're into a couple of thousand dollars more. Most of us have either rented more bunkhouse space or put trailers in or whatever so that we can isolate different groups.
It's gratefully received, but don't give me any hassle about 1,500 bucks, because it doesn't cover it all. It does help, though.
I would like to thank my colleague Yves Perron for giving me the floor during the first round of questions.
I also thank the witnesses for their very interesting presentations.
I'm from Charlevoix. I have visited with the farmers in my riding in order to get a feel for real life. I have talked to people about the company Champignons Charlevoix, a great company that is expanding. Champignons Charlevoix supplies mushrooms to hotels, restaurants and inns. As you probably know, Charlevoix is a choice destination.
Since people can no longer make orders or purchases, Champignons Charlevoix has revised its way of doing things. Indeed, the company has gone into retail. The company now produces pickled and dried mushrooms. These products are sold in the boutique, but since that is closed, online commerce has served as a lifeline. Online trade was already possible, and it was effective. However, the company now realizes that it could further develop e-commerce internationally. Of course, the complexity of international relations, international trade and privacy protection when shopping online means that the company is limited in this respect.
Ms. Robitaille's question was whether there was a possibility that the government would invest in the future. Mr. Koeslag or Ms. Krayden, what do you think?
We in the Bloc Québécois are thinking about the future, the post-COVID-19 period. Is there a way to invest in order to save certain businesses, such as Champignons Charlevoix, in terms of e-commerce, for example?
There is also a demand for a more developed postal service. A delivery used to take three or four days; today, it takes more than two weeks, or even three weeks, with Canada Post. There would surely be investments to be made in that area as well.
I'm going to talk to you a little bit about labour.
As far as seasonal workers are concerned, we in the Bloc Québécois still think the same thing, that the federal government should have been responsible for quarantining seasonal workers arriving in Quebec. That would obviously have saved a lot of energy for the farm owner-operators.
Farmers like those on Île d'Orléans should have been in the fields working to save the day by planting as much as possible with the help of their families, cousins or neighbours while waiting for foreign workers to arrive. Instead, they spent all their energy trying to house the workers, enforce physical distancing, and get equipment.
Do you think the $1,500 per worker could be made more accessible now? The application process is complex, and farmers are in the fields right now. So they don't have time to send out invoices, receipts. They are being asked to do a lot of things so that they can benefit from the $1,500, which is not enough anyway.
What do you think? I'd like your comments on that.
Thank you very much, Chair.
Thank you to our witnesses for helping us understand how this crisis is affecting yet more of our agri-food and agricultural sectors.
Maybe I will start with the mushroom growers. First I have a comment for Ms. Krayden.
Ms. Krayden, your comment about the two weeks' supply of face masks is very concerning, but it echoes concerns we've heard in other committees. At the government operations committee, we have had troubling questions about the status of our national stockpile. It's certainly something that we, as a country, really need to take note of.
Mr. Koeslag, I want to go back to your comments, because you were the one who said that mushroom growers are still fighting for access to major programs and that it's going to be too little, too late.
Before COVID-19, our committee was engaged in a study on the business risk management programs and a litany of complaints that exist.
Our federal said earlier this week that farmers, growers and producers need to access already announced support programs in order for her to make the case in cabinet that more money is warranted. You're saying those programs are hard to access, but she's saying you need to access them before she makes the case for more money.
I would like to get your reaction to that, please.
Yes. We spoke to the minister directly about this as well, identifying the issues with accessing these programs. There are really two major issues for us. One is that there is a cap, and these farm operations are running into the cap for the $3 million. If you think of the scale of operation, when you're capped at a certain amount and you have losses greater than that, this isn't going to be enough to sustain that farming operation.
In addition, there is a situation where we are having expansions, and investments in capital in order to expand the operations. When there's a weighted average elimination of your highest sale year and elimination of your lowest sale year, if your timing is correct, you eliminate a substantial amount of revenue from that calculation, which would again put you in dire straits for any kind of payment that you'd receive from that.
Those are the two major issues we have with it, in addition to even, say, the premium costs that would be incurred for some of these farm operations for potential payout, which would be maxed at the $3 million. Those are the things these farms are weighing. They have accountants and they have people who are examining this all the time. We hear from them that this isn't something they want to be participating in. At this point, they need some assistance and this is not the program to do that.
I certainly appreciate the testimony that was given.
Mr. Koeslag, you said at one point that there have been no programs available, but I want to note the fact that there's the emergency business account that was available to many farmers, and I assume that includes the mushroom industry. There's also the wage subsidy, Farm Credit Canada, the BCAP and AgriInvest, which I know is available. I know there are challenges, but I took a bit of exception to the fact that none of our programs have been able to be offered.
I want to take my comments over to Mr. Forth, if I could.
Ken, Charlie Keddy is in my riding. He's someone who speaks highly about your leadership. I know this was a challenging time, so first of all, thank you to farms for their continued work to get workers into the country. You mentioned the 86.5%, and that's a number that correlates with what the told our committee the last time she was here.
Is it fair to say that most of the challenges you face in terms of bringing workers in are actually in the countries of origin, in terms of their countries opening airspace or perhaps even having their own processing? Can you explain that?
Thank you very much, Mr. Forth and Mr. Blois.
Unfortunately, that is all the time we have for this first panel. I certainly want to thank, from the Canadian Mushroom Growers Association, Ryan Koeslag and Janet Krayden; from the Canadian Agricultural Human Resource Council, Cyr Couturier and Portia MacDonald-Dewhirst; and from Foreign Agricultural Resource Management Services, Ken Forth.
Ms. Williams, our apologies that we could not get you on, but perhaps the next time.
Thank you, all.
We shall suspend for five minutes and have the sound tests for the next panel.
I shall call the meeting to order again. Welcome to our second panel.
For the second hour, we have the Dairy Farmers of Canada.
We have with us Mr. Pierre Lampron, president of Dairy Farmers of Canada.
We also have Mr. David Wiens, vice-president; and Mr. Bobby Matheson, vice-president of advocacy.
As well, we have witnesses from the Dairy Processors Association of Canada.
We have with us Mr. Mathieu Frigon, president and chief executive officer of the Dairy Processors Association of Canada.
We also have Mr. Michael Barrett, chair.
Welcome to all of you. We'll start with a seven-minute opening statement.
Dairy Farmers of Canada, go ahead. You're on.
I’m Pierre Lampron, president of the Dairy Farmers of Canada.
I’m here today with David Wiens, vice-president of the board and also chair of Dairy Farmers of Manitoba, as well as with Bobby Matheson, our vice-president, advocacy. On behalf of all Canadian dairy farmers, Dairy Farmers of Canada welcomes the opportunity to offer its perspective on the Canadian response to the COVID-19 pandemic.
Like for many other sectors of the Canadian economy, the COVID-19 pandemic has had negative repercussions on dairy farming. Preliminary estimates indicate that the total monetary impacts of the pandemic on the dairy sector, including farm revenue losses and extraordinary costs, could reach up to $347 million in 2020. Given the unpredictability of the pandemic, DFC continues to monitor these costs closely, and will provide revised estimates if necessary.
The pandemic caused sudden and rapid fluctuations in the demand for milk and dairy products, ranging from an initial period of rushed purchases to a significant drop in demand as consumers adopted new consumption patterns. These unprecedented peaks and troughs were largely due to widespread closures of hotels, restaurants and institutions, which we call the HRI sector.
The exercise of rebalancing production in line with demand has proven to be more complex, since a cow is not like a faucet, we can't just turn it off. In addition, raw milk is highly perishable and cannot be stored.
The financial impact of COVID-19 includes lost revenue and milk disposal costs as well as costs to producers under the Canadian Dairy Commission's (CDC) storage programs, as producers will cover some of the carrying costs under these programs. Dairy Farmers of Canada estimates that disposal costs have already reached $40 million and could reach up to $50 million by the end of the pandemic, when combined with storage costs. Adjustments to the sector have stopped the need to dispose of milk for the time being.
How have dairy farmers adapted to this changing landscape? Marketing boards quickly took action to reduce milk production. They worked with industry players to put in place measures to balance production with the rapidly changing market. This was no small task, as we also had to ensure a continuous supply of safe and nutritious Canadian milk, with a return to normal in a few months.
We also worked with the Canadian Dairy Commission to position its butter and cheese storage programs to help address the problem of milk surpluses. To this end, we would like to take this opportunity to thank the government and the opposition parties for the recent amendments to the Canadian Dairy Commission Act.
While we also welcomed recent announcements that will benefit the entire agricultural sector, some industries have been harder hit than others and require additional government support.
I'm now going to turn the floor over to Mr. David Wiens.
The question is this: What role does supply management play during the pandemic?
The timelines of the dairy sector's response to the challenges caused by COVID-19 are a testament to the agility and the efficiency of Canada's system of supply management, which has enabled a coordinated response to the impacts of the pandemic throughout the dairy supply chain, while limiting impacts on Canadian consumers.
Let's take a look at what is happening in the dairy sectors in the U.S. and the EU, which, in the absence of supply management, were not well positioned to act quickly or collectively in response to the crisis. As an example, according to Dairy Farmers of America, dairy farmers in the U.S. were forced to dispose of 14 million litres of milk per day at the peak of the crisis. Without any measures on production controls, the European Milk Board, which represents dairy farmers in the EU, asked for funding to help reduce production, while the U.S. government recently announced a $2.9-billion bailout for dairy farmers in that country.
What support does the dairy sector then need from government?
Despite the losses, at this time dairy farmers are not seeking financial support from government to address the impacts of COVID-19. Why? Well, it's because supply management has proven its ability to limit the impacts on our industry compared to other industries and countries. Unfortunately, supply management is not designed to offset the loss of dairy production transferred to dairy farmers in other countries. This is a net loss of market. To be clear, this means that a greater number of dairy products on our shelves will be made from foreign milk. In fact, by 2026, 18% of our Canadian dairy production will have been transferred to imports from abroad.
If you want to support your domestic dairy industry, if you support a safe and secure Canadian dairy supply chain, we ask that you formalize the commitments to mitigate the impacts of trade agreements and announce a schedule for the compensation.
In closing, dairy farmers want to do their share to feed the nation. This is why beyond the existing programs, dairy farmers across the country have donated over $10 million in products to Canadian food banks to support Canadians in need. It's also why we remain hard at work on farms across this great nation producing high-quality, domestic agricultural products that will help cement our food security.
On behalf of the Dairy Processors Association of Canada, I would like to thank you for the invitation to appear today to discuss the impact of COVID-19 on Canada's dairy processing industry.
I am the chair of the DPAC board, plus I am also the president and CEO of Gay Lea Foods Co-operative, with small and medium-sized enterprise facilities across Canada. Joining me today is Mathieu Frigon, the president and CEO of DPAC.
In these difficult times, DPAC is certainly grateful to those who continue to be able to work diligently to provide Canadians with essential goods and services. Like all Canadians, we are especially thankful for the hard work and dedication of our health workers.
I want to obviously highlight the work done by the dairy sector to ensure continuity of dairy product supply in Canada. These are unprecedented times and dairy producers and processors working together are doing their part. Since the beginning of the COVID-19 crisis, the dairy industry has donated almost five million litres, which has been processed into nutritious dairy products and distributed to food banks across Canada. This speaks to the strong commitment of dairy producers and processors towards their communities.
COVID-19 has put a lot of pressure on all aspects of the country's economic and social infrastructure. Canada's food manufacturers are no exception and diary processors are under tremendous strain today as they adapt to the challenges brought on by COVID-19. Providing Canadians with a continuous and ample supply of nutritious dairy products while protecting employees' health remains a top priority of dairy processors.
On one hand, depending on their product line and the markets they serve, most dairy processors saw their revenues drop between 0% and 50% due to the decline in the food and hospitality market.
On the other hand, dairy processors saw an increase in their costs related to COVID-19, such as increased absenteeism, the cost of personal protective equipment and health screening tools, and increased worker distancing that reduced production capacity.
The combination of declining sales and rising costs means that many dairy processors are under significant financial pressure due to much lower or even negative bottom line results.
We thank the government for agreeing to the industry's request to increase the Canadian Dairy Commission's line of credit to $500 million. We also recognize the emergency support programs announced by the federal government to mitigate the impact of the COVID-19 pandemic.
However, these programs are often insufficient to meet the needs of food processors. Therefore, we recommend the current support programs be expanded in two ways.
First, the $77.5-million emergency processing fund must be increased significantly. It is also important that all food processing sectors be treated equitably when the program funding is allocated.
Second, as it is currently structured, the Canada emergency wage subsidy will leave some food manufacturers without support because revenue declines will not meet the 30% threshold in April and May. We propose that the government make changes to the program by providing a sliding scale of support for income reduction between 10% and 30%.
Now Mr. Barrett will take over.
We cannot come here today without putting into a broader context the impact of COVID-19 in the dairy sector. At full implementation, when considering the latest three agreements, Canadian dairy processors will lose $320 million per year on their net margin. On top of the market access concessions, CUSMA has a clause that imposes caps on worldwide exports of Canadian milk powder, which will make it increasingly difficult to balance the supply-managed system.
We appreciate the opportunity the government gave to the dairy industry to voice their concerns and work towards a compensation scheme to mitigate the impact of trade agreements through the mitigation working group; however, while dairy processors worked diligently and submitted their mitigation plan in 2019, we haven't yet heard back from the government. This is extremely disappointing.
We trust the government will keep its promises to fully and fairly compensate dairy processors for their losses. As such, we would like to remind the committee of our twofold approach to mitigate the negative impact of trade agreements.
The first is a dairy processor compensation program, which would aim at supporting investment in dairy processing capacity, competitiveness and modernization. That program would include tools such as non-repayable contributions for investments, refundable tax credits, etc.
The second is the allocation of dairy import licences, known as tariff rate quotas, or TRQs for short, to Canadian dairy processors.
I'd like to quickly go back to the point Mr. Barrett just made about the allocation of TRQs. We want to reiterate the importance of allocating dairy TRQs to dairy processors.
Last week, we sent a memo on this subject to several government representatives, pointing out that allocating the vast majority of dairy TRQs to dairy processors would minimize the impact on the Canadian dairy market. Let's be clear: it is the viability of the dairy sector that is at stake when it comes to allocating TRQs.
Dairy processors possess the expertise and the distribution network to import a wide variety of dairy products in a way that will be the least disruptive to Canada's domestic dairy market.
The government must refrain from repeating the mistake it made with the Canada–European Union Comprehensive Economic and Trade Agreement, or CETA, under which, it allocated more than half of the CETA cheese TRQs to non-dairy stakeholders. They do not have a vested interest, like dairy processors do, in importing dairy that would minimize the impact on existing production lines and manufacturing platforms in Canada. In addition, dairy processors continue to innovate, invest, and maintain and generate well-paying jobs across the country. Additional imports that are poorly planned or poorly targeted would undermine the survival of many businesses.
Finally, I would like to remind you that the Canada–United States–Mexico Agreement, or CUSMA, will be implemented on July 1, which leaves very little time for our members—dairy processors—to adjust and plan. It is therefore imperative that both TRQs and export allocations be announced by Global Affairs Canada as soon as possible.
I'd like to thank the witnesses for being with us this afternoon.
My first question is for Mr. Lampron, from the Dairy Farmers of Canada.
Mr. Lampron, you explained that producers experienced serious losses because of the pandemic, but that the industry was able to limit the impacts thanks to the flexibility of supply management. Millions of litres of milk had to be discarded at the beginning of the pandemic, but the situation was quickly brought under control.
I'd like to hear your views on the post-COVID-19 landscape. We are in the midst of the pandemic right now, but it's drawing to a close. Several major trade agreements have been signed, including CETA and the Comprehensive and Progressive Agreement for Trans-Pacific Partnership, or CPTPP.
What are you looking for from the government?
In the last year, the government has promised that it would be putting forward a plan, and right now, we are nowhere near the compensation pledged to farmers for the losses stemming from the market concessions granted to Europe and the countries in the Asia–Pacific region.
Thank you very much, Mr. Lehoux, for your question.
COVID-19 is indeed a spontaneous event, and we don't know how long it's going to last. We leveraged supply management tools and we will continue to do so.
We've lowered milk production, and the Canadian Dairy Commission is going to help with storage. However, the market concessions granted under the trade deals mean that imports will make up roughly 18% of Canada's market in 2026, once all the agreements are in effect.
That is a direct attack on the underpinnings of supply management. Products on store shelves will have been produced by farmers in other countries. The supply management system isn't equipped to offset those losses. We did not support the concessions, but they were made, and we were promised compensation.
We received compensation for the first year, but compensation for the following years is outstanding. Not to mention, CUSMA is coming into force soon.
You stand shoulder to shoulder with your fellow farmers in other supply-managed sectors. The government hasn't signalled anything to them either about possible compensation for the cracks in supply management caused by the agreement.
In your opening statement, you said millions of litres had been sent to the United States, which doesn't have supply management, and Europe. That clearly illustrates how important supply management is to Canada's agricultural system.
Thank you, Mr. Lampron.
Now I'd like to turn to the representatives from the Dairy Processors Association of Canada.
Mr. Frigon, at the end of your opening remarks, you said that the allocation of TRQs would have repercussions. In response to the current COVID-19 crisis, the government announced $77 million in compensation for the processing sector, but that doesn't come close to meeting the need. What's more, the program isn't quite tailored to Canada's dairy processing sector.
Did I get that right?
Thank you very much, Mr. Chair.
I'd like to thank all the witnesses here today. We've had an opportunity to speak with them before.
Mr. Lampron, kudos to you and your organization. Two months ago, I didn't think it was necessary to explain that a cow isn't directly tapped to obtain a quart of milk, but there you go—it had to be explained. Your organization has done some great work.
You're absolutely right when you say that supply management did what it was supposed to, even at a time of crisis.
I'd like to commend all the farmers in my region. The Dairy Farmers of Canada has been very generous, even locally, donating hand sanitizer, milk, cheese and so on. My hats off to all dairy farmers.
What do you think the challenges will be in the next few months? I know it's hard to say, since you can't predict demand. Nevertheless, for the farmers you represent, what challenges will July and August bring?
No one knows what's going to happen. It's hard to predict anything.
I drew an analogy with a tap earlier. If hotels, restaurants and institutions—in other words, the HRI sector—resume operations, if consumers fall back into their old habits and if local buying remains strong, that's good for us. The demand will have to be met, however. There was a drastic break in the supply chain, and our production dropped. If demand rises, that demand will have to be met. That's why the Canadian Dairy Commission's storage capacity was so important. The government raised its line of credit to ensure it had sufficient storage capacity to meet the demand that lies ahead.
The future is very unpredictable. Today, for instance, it's quite hot. We have good facilities, but production could drop. Weather is one of the unpredictable variables we have to deal with.
Thank you very much, Chair, and good afternoon to all of our witnesses. It's good to see you on my Zoom panel.
I'll start with the Dairy Farmers of Canada. I was one of the members of Parliament who received a technical briefing on the to give the commission increased borrowing authority.
During that technical briefing, the officials let us know that dairy farmers had been forced to dump 30 million litres of milk. I know that must have pained your members greatly because of the pride you have in our supply-managed system. When I heard that figure, and when we see all the foreign dairy products on our shelves, I kept on wondering about that. Would that have ever been necessary if we hadn't given away so much of our domestic market share?
I really appreciate your comments on how supply management, because of our ability to manage production, has allowed us to weather this storm we're in. Going forward, what kind of a commitment do you want to see so that we can build resiliency into our supply management system so it's there for future generations and we can withstand further shocks like this in the future?
First of all, for the Canadian Dairy Commission, the ability to increase the storage is important for us, because it does help us. When we had surplus in the beginning, they could put it in storage for a time, as we now have reduced production.
Certainly the trade agreements in the past have exacerbated the situation, because we have already lost production from where we would have otherwise been.
Another important factor is that as we go through this pandemic and come out the other end, we are not going to get to the same place anymore, because by then CUSMA will have taken effect and we will have lost further market share.
Part of what we're trying to emphasize here is that with supply management, we can handle things like downturns, although this one was extreme. We have never experienced something like this. That has tested us to our limits. What supply management cannot handle is the continuous undermining of our foundation. Whenever we allow further access to the Canadian dairy market, that is in fact what is happening. Every time there is more access given, it weakens us, and then it makes it more difficult for us to withstand the kinds of challenges we've seen with this pandemic. It is a real concern that in the future it will make us a little bit weaker. That foundation we have, which supply management rests on, makes everything else happen.
As we move toward that 18% foreign access to our Canadian dairy market, that access overall undermines our ability to weather the kind of storm we have faced with this pandemic.
Thank you very much for that answer.
In my remaining time, I'll turn to the dairy processors.
I think all of us on this committee agree that agriculture and agri-food are going to be a central part of Canada's recovery to this crisis.
Regarding the TRQ, the tariff rate quota allocation, I understand the arguments for why our processors need to have more TRQs to give in-depth understanding of the local markets and make sure our domestic supply of dairy products is not interrupted by foreign imports.
However, can you give me a sense, if we do get that increased TRQ allocation secured for you, what that's going to mean in terms of an economic shot in the arm that will help your processors lead in your regions, as part of our economic recovery to this crisis?
I appreciate the question. Certainly it is fundamental to ensure the TRQ allocations to those who have bricks and mortar within the country. There have been billions of dollars spent in investing in Canadian processing capacity and capabilities, and when you talk about the shot in the arm, what it's going to do is reaffirm that continued investment. Certainly the CETA allocation of TRQs was not a shot in the arm for Canadian dairy processors being able to invest in cheese manufacturing in Canada.
Looking at that investment or that TRQ that is allocated—and we're asking for north of 90%—the shot in the arm gives us the ability to understand the stability of the marketplace, to build on what Dave Wiens was talking about, because you have to have stability on the supply side, but you also have to have stability on the capacity side.
It's not surprising that we're both sitting here together, because there's no sense in producing if you have no processing. What we need as a shot in the arm is stability in return. Our members are seeing a 30% to 50% decline in sales and a 80% decline in EBITDA. That type of COVID impact is going to have a considerable impact.
It may not be the shot in the arm, in the sense of a punch in the shoulder, but maybe an adrenaline shot that allows us to see stability in the market.
Mr. Lehoux, thank you for your comments.
On June 1, we'll raise our glasses of milk, take a picture and post it on social media.
Thank you for reminding us of this date.
Just as a last note to members before we leave, as you know, Motion No. 7 has been passed, and we have permission to continue to sit beyond Friday. I will reach out to the vice-chairs and we can start a discussion about how we want to proceed, what kind of themes to have and so on. I will reach out before the end of the week, if that's okay with you. You can start to talk among yourselves, and we will find a way for how we are going to move forward.
If there's nothing else, I again want to thank everyone. We shall see you on Friday.
The committee is adjourned.