Good afternoon everyone.
I hope you're all doing well.
I call this meeting to order.
Welcome to meeting number 13 of the House of Commons Standing Committee on Agriculture and Agri-Food. Pursuant to the motion adopted by the House on May 26, 2020, the committee may continue to sit virtually until Monday, September 21, to consider matters related to the COVID-19 pandemic and other matters.
Certain limitations on the virtual committee meetings held until now are removed. As just mentioned, the committee is now able to consider other matters. In addition to receiving evidence, the committee may also consider motions as we normally do. As stipulated in the latest order of reference from the House, all motions shall be decided by way of a recorded vote.
Finally, the House has also authorized our committee to conduct some of our proceedings in camera, specifically for the purpose of considering draft reports or the selection of witnesses.
Now I would 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 your 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.
I'll ask all of our witnesses to let us know with a nod that they have understood this, just to make sure everything will go right. It looks like everybody understood. If there's an issue, we will help you out.
Also, before speaking, please wait until I recognize you by name. When you're ready to speak, you can click on the microphone icon to activate your mike.
Please make sure your mic is on mute when you're not speaking.
We are now ready to begin.
I'd like to start by welcoming the witnesses. For the first half of the meeting, we have joining us, from the Chicken Farmers of Canada, Benoît Fontaine, chair, and Michael Laliberté, executive director.
Next, from the Grain Growers of Canada, we have Jeff Nielsen, chair of the board of directors, and Erin Gowriluk, executive director.
Lastly, from the Canadian Canola Growers Association, we have Dave Carey, vice-president of government and industry relations.
We'll begin with everyone's opening statements. Each group will have seven minutes for their presentation. The Chicken Farmers of Canada representatives can start things off. You can split your time as you see fit.
Please go ahead.
I'm a chicken farmer from Stanbridge Station, Quebec, in the Brome—Missisquoi riding, and I'm the chair of the Chicken Farmers of Canada.
Our industry contributes $8 billion to Canada's GDP, supports more than 101,900 jobs and generates $1.9 billion in tax revenue for the government. Canada's 2,877 chicken farmers are proud to raise birds that represent Canada's number one meat protein, in the good times and the more challenging ones—as is currently the case. As is seen across the country, and even across the world, the COVID-19 crisis has left no sector untouched, especially not ours.
Chicken Farmers of Canada was pleased to see the government's announcement on May 5, 2020 in support of the agriculture and agri-food sector, but we need to highlight that these measures do not go far enough in supporting Canadian agriculture and, in particular, Canadian chicken farmers. In order to continue to ensure food security for Canadians, further support for Canadian chicken farmers and processors is needed as we navigate the unprecedented stress and pressures of the pandemic.
Currently, the Canadian chicken sector is seeing unprecedented market conditions as a result of the infamous COVID-19 virus. Food service, which usually represents approximately 40% of the market—so a huge share—has experienced a rapid decline in sales, almost overnight. In retail, there was an initial surge in sales caused by consumer stockpiling, but that demand has now stabilized, resulting in a total demand that is below usual volumes.
What does this mean for farmers? The rapid decrease in food service meant that farmers and processors were left with surplus production for a short period of time. Thankfully, the flexibility provided by supply management allowed our board of directors to quickly react and adjust production for the coming months, hoping to avoid a worst-case scenario of depopulation. On April 14, the board of directors reduced allocation for May 10 to July 4 by 12.6%, and recently adjusted the national allocation for July 5 to August 29 by 9.75%. Those decisions were made to deal with the situation in a responsible way and to make sure the chicken supply was sufficient to meet demand in Canada.
While we have been able to adjust production, that does not entirely alleviate the stresses on farmers and processors during this time. Some processing plants may have to reduce their slaughter and processing volumes of chicken owing to physical distancing requirements, employee absenteeism and complete shutdown to isolate workers and deep clean facilities for longer periods of time.
Processors are working closely with one another and with farmers to redirect birds if and when needed, as was the case in early April in Ontario and in early May in British Columbia. However, there are limits to the number of birds that can be processed by other plants if a plant significantly reduces its activity or is completely shut down. This reduced throughput and risk of plant shutdowns significantly increases the risk of farmers having to depopulate flocks.
Farmers do not take depopulation lightly. In addition to impacting the food supply of Canadians, depopulation means a loss of the flocks farmers have spent time, money and energy raising. It also means a financial loss.
In the event that processors do not have the capacity to process chickens, farmers will have to work quickly with their processors to determine next steps, and at this point in time, they do not have government assurance that the live price of the birds will be covered.
Based on the government's announcement, our understanding is that AgriRecovery will cover up to 90% of the costs of depopulation. This does not address the value of the flocks being depopulated, the administrative burden on the farmer or the lobbying of provincial governments to provide their portion of business risk management funding.
Throughout numerous conversations with government officials, we have reminded them that, under the Health of Animals Act, depopulation is supported in instances of disease. We are well aware that the act was specifically designed to cope with animal disease, but we believe what the sector is experiencing now—with processing capacity, depopulation and the overall impact on operations—follows the intent of the act and has the same consequences for farmers.
We are disappointed that the government has not looked to this well-functioning model to support the chicken sector in the event that depopulation is necessary.
While the business risk management suite of programs is designed to address fluctuations in income to support farmers in times of need, it does not work for chicken farmers in cases—
Thank you, Mr. Chair. Erin Gowriluk and I will split our time, and I'll quickly make my opening remarks.
Once again, thank you for this opportunity to speak in front of your committee today. I am Jeff Nielsen, and I farm in central Alberta near Olds. I am chair of the Grain Growers of Canada, which is a national voice for grain, oilseed and pulse producers through our 15 regional and national grower associations.
To put it simply, we are extremely disappointed in the support offered to farmers to date. The recent $252-million announcement directed limited funding to select sectors while leaving others feeling totally ignored. Let me be clear: We do not expect to be your main or sole focus right now, but we also do not want to feel like an afterthought.
We do not have to look far to see a different level of support for agriculture in the face of COVID-19. Our direct competitor to the south has offered agriculture a support package that is well into the billions, with $6 billion recently going directly to crop producers.
For the benefit of the committee, let me give you some background on the state of the grain industry. Certain grain commodities, such as corn, have been significantly and directly impacted by COVID. With a decrease in demand for fuel, ethanol plants are running at a very diminished capacity. We do not expect a return to normal anytime soon. Soybean cash receipts have fallen nearly 40% over the last two years.
I am a malt barley producer. Malt barley demand is down significantly due to to the fact that the restaurants and hospitality industry have been affected by COVID, which has naturally decreased the demand for beer. Barley cash receipts are down 21% in 2020 from the same time last year. Malt contracts are being pushed well into the fall for the current crop year, and new crop contracts have been asked to be reduced due to the fact that we currently have an oversupply of malt barley.
Feed prices are very volatile. It's a reflection of what may happen to the U.S. crops and will definitely affect their feed prices. Flaxseed cash receipts have dropped 33% in the last year. Demand for pulses has remained stable, but there is the concern with the lack of container shipping, a problem complicated by the rail blockades this past year, port quarantines and decreased cargo ship movement at this time.
A regular amount of uncertainty is typical for us farmers—we plan for this—but these are not normal times. Recent years have been disastrous for many of us, in terms of weather, rising costs and growing market access challenges. In fact, Canadian farmers were not well positioned going into this pandemic. According to StatsCan, in 2018, farm incomes fell by nearly 21% while realized net farm income fell by 45%.
While StatsCan data from this week shows a rise in income for 2019 for the first time in three years, that does not give an accurate picture of agriculture. Excluding cannabis, which seems to be a new agricultural crop, crop revenues on the national level have decreased by over 1%.
Talking about StatsCan information, this only heightens the concern about our ability to service farm debt loads, which are now at a record high of $115 billion—an increase of nearly $30 billion in the past four years. I do not want to overstate this, but in reality our industry is hurting, and while it's not easy for older guys like me to admit, we need support.
I'll turn it over to Erin.
Now, for the good news. We believe there are easily achievable solutions to help farmers and to protect the Canadian economy. We have very specific, very actionable requests for you today.
First, as a sector, we are asking for two critical changes to the AgriStability program. The changes are as follows: Coverage must immediately be adjusted to cover losses, starting at 85% retroactive to 2019 and for the remainder of the Canadian agricultural partnership; and the reference margin limits must be removed. These two simple changes will give farmers the confidence to keep operating.
As members of the committee know, we are not alone in seeking changes to AgriStability. The fact is that this change is the one that unites essentially all agricultural sectors.
While it is a positive signal that the application deadline for this program was extended, we do not see it inspiring more farmers to apply. Farmers simply don’t see enough value in the program to put in the time and effort required to enrol, and unfortunately, an online calculator isn't going to change their minds.
However, we commend the federal government on some of the other business risk management programs for farmers that work well, including AgriInvest and crop insurance. These are success stories and valuable tools for farmers, ones that cannot afford to have funds diverted away to bolster or address the concerns we have cited here today. These programs need to continue to be complementary in nature.
Finally, we understand that the cost of the current program is shared sixty-forty between federal and provincial governments, and that provincial governments are currently facing their own financial challenges. This is why we are seeking leadership from the federal government on this. We need our federal leaders to renegotiate the cost load.
As we look toward recovery, this is definitely not the time for government to abandon its vision for agriculture as a high potential sector for economic growth in Canada. As stated in the report of Canada’s economic strategy tables, Canada has the potential to be one of the top five competitors on the international stage, increasing agriculture, agri-food and seafood exports by 32% to $85 billion by 2025. This is a laudable goal, and it is one that the entire sector supports. However, it can only come to fruition if Canadian farms remain solvent and are able to succeed.
We are at a crossroads. We can choose to support Canadian farmers now and allow for that potential to be realized, or we can choose to abandon Canadian farmers and lose the vision for a real economic recovery and future prosperity for our farms.
Thank you, Mr. Chair, for the invitation to appear before your committee today on your study on the Canadian response to the COVID-19 pandemic. It's a pleasure to be here on behalf of Canada's 43,000 canola farmers.
CCGA represents canola farmers from Ontario to British Columbia on national and international issues, policies and programs that impact their farms' success. CCGA is also an official administrator of the federal government's advance payments program. For the last 35 years we have been providing cash advances to help farmers better market their crops and finance their operations.
Developed in Canada, canola is a staple of Canadian agriculture as well as of Canadian science and innovation. Today it is Canada's most widely seeded crop, and has the largest farm cash receipt of any agriculture commodity, earning Canadian farmers over $8.6 billion in 2019, which is a decline of $700 million in 2018. Annually, the canola sector provides $26.7 billion to the Canadian economy, and provides for 250,000 jobs.
Exports drive canola's success. More than 90% of all canola grown in Canada is exported as seed, oil or meal. There continues to be global demand for canola, but blocked market access coupled with the economic downturn from COVID-19 is putting considerable pressure on farmers. Canola prices in 2019-20 lag the previous year's, and farmers face significant market uncertainty. Continuation of this trend could significantly reduce the canola sector's contribution to Canada's economy, impacting employment and wages. Urgent efforts are needed to restore stability and position canola as a dependable economic contributor to Canada's post COVID-19 economy.
To unleash the full potential of Canada's canola farmers, the following actions are requested from the federal government: opening and diversifying markets, ensuring that farmers have access to risk management tools that are effective, and facilitating global competitiveness through access to innovation.
On the trade side, farmers are well positioned to provide safe, reliable canola supplies, both domestically and to the world, but require a rules-based, predictable framework to grow our exports. Promoting this framework will be even more important to counter protectionist policies post-COVID-19 as countries turn inward and look to shore up their domestic economies. Trade is key to the world's economic recovery, and modernization of the World Trade Organization is essential to ensure that borders and supply chains remain open.
For the canola sector to achieve its full potential, reopening the China market must remain a priority. For canola farmers, China was their largest market, representing 40% of canola exports. It has been over a year since market restrictions were imposed, and farmers continue to struggle with market uncertainty and reduced prices. In 2019, canola seed exports to China were a third of those in 2018, leading to a 26% decrease in export value. The impact of such a large trade disruption has highlighted the need to diversity our markets, and to do so, additional resources are required, particularly in the Asia-Pacific, to help understand evolving regulatory requirements and to address market access issues.
In addition, launching FTA negotiations with the Association of Southeast Asian Nations and the expansion of the CPTPP could generate new market opportunities and create a more predictable trading environment.
Canada's domestic biofuel market also presents an important opportunity to diversify the canola market, and the upcoming clean fuel standard, or CFS, provides an opportunity to realize this potential.
Canadian canola is a high-quality biodiesel feedstock currently used in Canada, the U.S. and the EU. It has the potential to not only spur economic investment but to lower greenhouse gas emissions. The CFS, which is currently under development, could triple the domestic demand for canola-based biofuels, providing much needed market stability for farmers, increasing value-added investments and making real and quantifiable contributions to GHG reductions.
To leverage this potential opportunity, the government must consider immediate improvements to the regulatory design of the CFS, including providing the necessary demand signal for biofuels by requiring all diesel fuel to contain the minimum 5% renewable content. The current standard mandates 2%. If this requirement is instated in the CFS, increasing renewable content to 5% of the diesel pool would conservatively use 1.3 million metric tons of Canadian canola and reduce GHG emissions by 3.5 million tonnes of CO2 equivalent per year.
This would represent new domestic demand for Canadian canola that is not subject to trade disruptions, and is roughly the size of the Japanese export market in value. A clear and strong demand signal is critical. The time is now to leverage this opportunity for biofuels to spur economic investment in Canada, with no cost to the government.
Canola farmers need urgent action to improve business risk management programming. Family farms are facing unprecedented challenges and uncertainty due not only to the current pandemic but also to ongoing trade restrictions. Net farm incomes fell 45% in 2018. In Manitoba and Saskatchewan, net farm incomes again saw significant declines in 2019. In addition, farm debt levels continue to increase.
Farmers rely on BRM programs to help manage the risks that are beyond their control. Immediate solutions and focused investment are required to improve programming and provide farmers with effective tools to manage increased volatility and uncertainty that, in turn, will support their ability to contribute to rural communities and economic growth.
The following BRM change is needed immediately: AgriStability coverage adjusted to cover losses starting at 85% of historical reference margins with no reference margin limits.
As we prepare for the next policy framework, CCGA looks forward to working with the government to ensure that risk management tools available to farmers are effective and reflect the risks of modern farming. CCGA requests the establishment of an industry-government technical working group that will allow farm groups to actively participate in BRM data and impact analysis.
It's worth noting that in the last three years, the U.S. government has announced $47 billion in agriculture support in addition to its regular farm bill and crop insurance programs. To realize our full economic potential, we have to remain competitive in the global market.
On innovation, a science-based regulatory process is the foundation upon which the Canadian canola industry was built. It's critical that the PMRA continue to take science-based regulatory approaches that assess risk on crop protection products, including the final decision on the proposed ban of neonicotinoid seed treatments that would cost the Canadian canola industry between $700 million and $1 billion annually.
As part of our stewardship, CCGA collected water monitoring data in collaboration with industry partners, weekly over the spring and summer of 2019, that demonstrates canola farmers are effective at preventing these products from moving into wetlands. The PMRA needs to continue making science-based decisions on crop protection products by incorporating the best available information.
Another important innovation is the advances in new plant breeding techniques, as was identified by the 2018 report from the economic strategy table, the 2018 fall economic update and the 2019 Treasury Board agri-food and aquaculture regulatory road map. These new tools have the potential to create new and better varieties for farmers, consumers and the environment alike. To ensure research and development continues in Canada and to maintain farmers' competitiveness, an enabling regulatory system is required.
In conclusion, we appreciate the opportunity to speak with this committee today. CCGA would urge this committee and all parliamentarians from both Houses to reflect not only on the current challenges that agriculture is facing but also on the support our sector needs to drive the Canadian economy post-COVID.
Supply management encompasses five types of products: dairy, chicken and turkey, boiler hatching eggs and table eggs.
In the dairy sector, I think farmers received direct payments. As for the poultry sector, we've always asked for funding to encourage people to buy Canadian chicken or tax credits to help poultry farmers upgrade and expand their facilities.
Out of fairness, we don't think that funding should be limited to the first year. When it comes to tax credits, our preference has always been that farmers have access to them for a decade or so. A young poultry farmer who starts farming this month, or who started a year ago, won't have the money to make investments at the beginning of their career. This would enable them to start investing in the seventh, eighth or ninth year. We aren't in favour of direct payments to farmers. We want a tax credit or funding to promote chicken products, which all 10 provinces are doing.
Without supply management, Newfoundland and Labrador and Prince Edward Island might have no chicken farmers. Without supply management, the market would not be controlled as strictly. Let's be clear, supply management is an economic solution in rural Canada.
We are one of 36 administrators of the federal government's advance payments program. CCGA is by far the largest, doing over 60% of the dollar value.
There have been delays. We weren't prepared for the new creditworthiness measures that Agriculture and Agri-Food Canada put in place for April 1, 2020. We were not in a place to deal with those new creditworthiness measures as well as relocating our 65 staff to work remotely. We've heard in other conversations the fact that some of our staff live in rural Canada, based outside Winnipeg. Dealing with one or the other would have been certainly manageable. Dealing with both was very difficult.
We are now in a position that by next week we will be able to return to our normal business turnaround times, which is between three to five business days.
To date, we've issued over 3,000 advances, for $400 million.
We're not the only advance administrator, but as the largest one, we take that responsibility very seriously. We've been in constant communication with our farmer customers and have successfully renegotiated with AAFC twice, as far as loosening some of that red tape is concerned to allow our front-line staff to get the advance payments to farmers in a timely manner.
We now resume the meeting.
During the second hour, we are hearing from Joël Cormier, chair of the board, as well as Jean-Michel Laurin, president and chief executive officer, both from the Canadian Poultry and Egg Processors Council.
We will also hear testimony from Rory McAlpine, second vice-president, government and industry relations, Maple Leaf Foods, as well as from Paulin Bouchard, president and chief executive officer, and Denis Frenette, assistant director general, both from the Fédération des producteurs d'oeufs du Québec.
We will begin with opening remarks. Speaking time for each group is seven minutes.
Mr. Cormier or Mr. Laurin, go ahead. You can share your speaking time if you like.
Good afternoon, Mr. Chair and members of the committee.
My name is Jean-Michel Laurin, and I'm president and CEO of the Canadian Poultry and Egg Processors Council, CPEPC, or CCTOV in French. I'm joined today by our board chair, Mr. Joël Cormier, who is also senior vice-president, chicken division, at Exceldor co-operative.
Thank you for inviting us to appear before the committee to brief you on our industry's response to COVID-19 and the challenges we need to overcome. Before I turn it over to our chair, Mr. Cormier, I'd like to say a few words about our association.
CPEPC represents Canadian hatcheries, egg graders and processors, chicken and turkey processors, and further processors. Collectively, our membership represents 179 establishments, both small and large businesses, and covers every province.
Two things our members have in common are that they compete against one another in an open market, and they also purchase their primary inputs—chicken, turkey, eggs and hatching eggs—from supply-managed producers. Our members fall outside supply management. Overall they process over 90% of the poultry and egg products raised by Canadian farmers. The large majority of our members' production goes to feed Canadians through the retail food service and restaurant sectors.
I'd now like now to invite our chair, Mr. Cormier, to make introductory remarks on behalf of our association.
Mr. Chair and honourable members, thank you for giving us the opportunity to appear before you today to brief you on our industry's response to the COVID-19 crisis and on what we are doing to meet the expectations of the government and Canadians.
I want to begin by saying, on behalf of all of our members, that we are taking very seriously our role of industry designated as an essential service, immediately following health and safety services.
Since the beginning of the crisis, two primary objectives have guided our actions as industry. The first is ensuring the health and safety of people who work in our facilities. That includes not only our employees, but also all Canadian Food Inspection Agency inspection staff who must be on site at all times in our slaughterhouses.
Our second major objective is to keep our factories operating, so that Canadians can continue to purchase eggs, chicken and turkey, despite all the market disturbances. Canadians are counting on us to provide them with food to eat and feed their families, and egg and poultry producers are also counting on us to process their products. We take those responsibilities very seriously. We play a key dual role of ensuring constant food delivery to consumers and, at the same time, avoiding a break in the supply chain, which consists of living animals.
Responding to the COVID-19 pandemic and making sure we meet the two objectives I just outlined has not been without its challenges for us. I would like to focus your attention on three of those challenges.
The first one is the significant costs our members have incurred to keep operating during this crisis. The second is the rapid deterioration of market conditions as demand and prices fall, especially from the food service sector. The third is that the combination of these two elements puts our sectors in an unsustainable and vulnerable position. This is why we have asked the government to adapt their measures to help us overcome these challenges.
To expand a little bit more on the first point, keeping our workers safe so we can continue to operate our plants is having a significant financial impact on our sector. For all CPEPC members just in March and April, we're talking about more than $87 million in unbudgeted costs, or a little over $3,000 per worker. Despite taking these measures, some plants have had to shut down production shifts and sometimes their entire plants for several days to ensure workplace safety.
On the second point, we had to rapidly adapt to an unprecedented level of market disruption. We've seen an overall decrease in market demand, in large part due to a massive drop in demand from our food service sector and the institutional segment. Over one-third of our production was going to that sector. Even if this market collapsed, we still had to process those poultry and egg products as if the market were still there, because we are dealing with a live product. Because of the severe market correction in the poultry sector especially, wholesale prices have also dropped significantly since the beginning of the crisis.
On the third and final point, what we want to stress is that this perfect storm creates vulnerabilities within our supply chain. Under normal circumstances in a business, cash flow drives business investment. Right now that is not the case. We have to make significant investments to keep our plants running despite COVID, but the reduction in demand and the deterioration of market conditions are putting strong pressure on our financial sustainability. For this reason, and because most of our members don't qualify under existing programs, we have been reaching out to governments to adapt and target their support measures to the unique reality we are facing.
We hear that there is $1.6 billion available to producers through business risk management programs. In our sector the impact of COVID is largely being felt by our members—hatcheries, graders and processors—but those programs are made available only to producers. We have been asking both levels of government, provincial and federal, to expand one of those programs, the AgriRecovery segment, so that the extraordinary costs incurred by processors can be eligible.
Another idea we share is to expand the Canada emergency wage subsidy using a sliding scale approach so that processors with a 15% to 30% reduction in net income could qualify.
We also welcomed the emergency processing fund and the surplus food purchase program announced a few weeks ago, and we have made recommendations on how these measures should be applied to help our industry.
I should also mention that poultry and egg processors were promised financial support to mitigate the impact of CUSMA and CPTPP. More specifically, we ask that this support focus on capital investments and on allocating the majority of import quotas to processors and further processors. Having the government follow through on its commitments is more critical than ever.
In closing, we hope we can work with you to overcome the challenges we described today—additional costs, lost revenues and an unsustainable financial situation that is resulting from this. By working together we want to ensure that we get back to a sustainable position as an industry, and that we can ensure a long-time presence for the benefit of customers and consumers.
Thank you very much, Mr. Chair and committee members.
It is a great pleasure to represent Maple Leaf Foods and to provide our point of view on the impact of COVID-19 and on the future.
You've heard from many witnesses, and I could of course give you a great deal of information about how the crisis has impacted our business and the sector broadly, and about our direct experience in the crisis management response of our industry and government partners collectively. I'll be happy to answer any questions on those issues, and I've shared a longer document that gives a bit of context for what I wanted to say, but I really wanted to focus more on the future, on what needs to happen for our sector to recover and on what are some of the processes and understandings we should have to make the most use of that, because, as we all know—I think it was Winston Churchill who once said it—you should never waste a crisis.
In the months to come, we owe it to Canadians to take a careful forensic look at our food system and reflect critically on what needs to change operationally and strategically to make sure that we are better prepared in the future. I have some immediate thoughts.
First, there needs to be at least one inclusive evidence-based post-mortem or lessons learned exercise on the agri sector crisis response as a subset of the national inquiry that will presumably be led by Public Safety Canada. The federal government must be willing to put the review in the hands of one or more independent bodies, such as the Canadian Agri-Food Policy Institute or the Arrell Food Institute, both of which in fact have been thinking about this and have already announced a joint process to undertake such an inquiry. Leaders from government, agriculture, the CFIA, Health Canada and the Public Health Agency and so on, along with their provincial counterparts, should be directed to participate fully and transparently in such a process.
Second, it needs to be asked why Canada did not have a cross-agency business continuity plan for the agri-food sector similar to the U.S. food and agriculture sector-specific plan, which was last updated in 2015, and also, if we build one, what will be done to actually exercise one.
Coupled with this should be a serious examination of integrating federal, provincial and industry interests into a more cohesive crisis governance model that's capable of making informed, timely decisions. We could look at models in other countries. We need to ask whether plans and structures to deal with agri sector specific crisis events, such as African swine fever, are up to the task, and whether in that case a group like animal health Canada could be launched in 2020.
Third, there needs to be careful consideration of what COVID-19 has fundamentally taught us about the resilience of the Canadian agri-food system and what we need to change, both to better manage the forward risks and to seize the commercial opportunities in a time when other Canadian industries may be permanently damaged. The areas of specific focus, in our view, need to be the following.
The first is the economic health of subsectors of Canadian agri-food going forward, at least until there is a COVID-19 vaccine. This is important, since some farms and businesses will be bankrupt, food service sales may remain impaired for a very long time, workplaces will operate with higher absenteeism, operating costs will be higher with some production lines running more slowly and food prices will have to rise, etc. Some useful literature has already been published by the academic community on this.
The second area is the future state of global agri-food policy and trade and the implications for Canada’s agri-food trade and investment strategy. We are a trade-dependent sector, so this matters a lot. The OECD has already begun to examine this and, given our export dependence, Canada should participate fully in that work. Canada must align with like-minded countries to beat back protectionism and highlight Canada’s export capacity as a key contributor to sustainable food production and global food security. To do this, we also need to fix our relations with China.
The third issue, while taking full account of the difficult fiscal circumstances facing all Canadian governments, is the design and scope of programming under the federal-provincial Canadian agricultural partnership, which expires in 2023.
In our view, there needs to be a top-to-bottom review to ensure that it is appropriately mitigating business risks for the agri-food supply chains, not just the farm sector, while making the right investments in research, sustainability, animal and plant health, export market development and so on. Commitments on regulatory modernization and solutions to the labour crisis should be brought within the CAP framework.
Next, we need to look at the appropriate design, funding and governance of the food policy for Canada that was announced last year. The need for a joined up whole-of-government food policy has been made very evident throughout the pandemic, but many priorities will likely have to be rethought, not least because of the new fiscal circumstances. Health Canada’s regulatory agenda for the food sector also needs to be brought into the food policy framework and, in our view, be less activist-driven.
Finally, there's the issue of food insecurity in Canada and what needs to be done to prevent it from getting worse. This is something that Maple Leaf Foods cares deeply about, and our Maple Leaf Centre for Action on Food Security could help in this area of investigation.
In conclusion, the Canadian agri-food sector has a huge contribution to make to Canada’s post-COVID-19 recovery, perhaps more than any other sector of the economy. The pandemic has demonstrated that for many social, environmental and economic reasons, the sector matters more than ever, and Canadians see that. Under the right set of conditions, the sector has the ability to attract investment and create employment at a faster pace. It has immediate employment opportunities for thousands of unemployed Canadians. It is also experiencing an IT-enabled technology revolution that plays to another major area of strength for Canada. In the aftermath of COVID-19, there's an opportunity to pivot business models and government thinking towards the priorities of resilience, risk prevention, sustainability and innovation-driven growth. Where the crisis demonstrated that certain legacy structures and decision-making processes—whether within government or between government and the agri-food sector stakeholders—got in the way of better, quicker decisions—
I would also like to thank you for extending the invitation to the Fédération des producteurs d'oeufs du Québec. This is the first time I have had an opportunity to participate in this committee, and I am happy about that.
This afternoon, I will talk to you about how our sector has had to adapt since the beginning of COVID-19. Those adaptations have been possible essentially thanks to our supply management system. Fortunately, despite the pandemic's numerous impacts, our system has helped us a great deal, at the end of the day, to mitigate the repercussions and circumvent the challenges we have had to address over the past few weeks.
I will briefly introduce our federation. In Quebec, we produce 1.9 billion eggs annually, and 160 producers that account for approximately 6 million laying hens. Our industry is split into two markets: the market referred to as “table eggs”, which is related to grocery stores and restaurants; and the processing market, which accounts for about 25% of our markets.
The stakeholders are, of course, the farmers who produce those eggs, the graders who wash them and package them for sale, and our processors, represented this afternoon by Mr. Laurin and Mr. Cormier, who handle product processing.
In the first two or three weeks of the crisis—and you have probably heard about this—we had to quickly make a transformational shift concerning our markets. The closing of restaurants has resulted in our graders having to redirect a major portion of the production toward grocery stores. You will understand that packaging is not really the same in that case. We have also had to adapt our marketing. You have heard about empty shelves in grocery stores. We were something of a victim of what is called the “toilet paper syndrome”, where people would grab products in large quantities in fear of running out. When the shelves were emptied, vendors quintupled their orders. They were ordering five times more eggs than the previous week, which posed a major challenge for our graders. We worked together, we communicated and we overcame that stage.
The second event that followed soon after is the aftermath for meat processors. Plants and slaughterhouses also had to adapt. We were told that our spent fowl, our spent chicken at the end of their life, could no longer go through traditional slaughterhouses, as the staff could no longer meet the demand. We had to provide our producers with guidance on slaughtering or euthanasia on the farm. Supply management enabled us to to spread the cost out across industry and avoid causing disproportional impacts on some of our producers.
The good news is that we are now experiencing something of a return to normalcy. We can reassert the value of those carcasses through existing slaughterhouses and turn them into chicken broth. So the situation seems to be relatively resolved.
Finally, let's talk about the third adaptation. In the beginning, the restaurant market experienced a huge drop, while the table egg market was growing. The processing sector was relatively stable. However, after a month, we saw nearly 70% of the processing market collapse. There was no longer any place for eggs. We could no longer send them to processing because they were not needed on the table egg market. To avoid waste, we had to make donations to the tune of 84,000 dozen eggs. We had to spread out those costs to be able to donate the eggs.
We are now at the stage where we have to decrease production by prematurely slaughtering flocks that should have been slaughtered two weeks later in order to prevent us from throwing away our products or producing needlessly. That leads to costs, but the entire sector can share those costs to avoid any bankruptcies or disappearances of small farms in our regions to the benefit of other larger players.
Supply management, combined with programs that were already somewhat planned or are already set up, enables us to stabilize the sector and take care of supply. Our next challenges mainly have to do with U.S. imports. In Canada, we are prematurely slaughtering about 2 million laying hens. In Quebec, we are preparing to send 400,000 laying hens to valorization and processing earlier. We would not want to see U.S. products arriving on our market at the same time, as that would exacerbate the issue right now.
Fortunately, we have solid communications with our importers, graders and so on. However, we also need government assistance to make import rules more flexible. Some flexibility has been added by the Canadian Food Inspection Agency in terms of identification on packaging, which is appropriate. That has been well received. It's a good thing. We would have liked the agency to take things a bit further to give us more flexibility in terms of grades. We wanted Global Affairs Canada to cooperate with producers, importers, graders and processors when it comes to import management.
Currently, we are being told that trade rules require imports. We would like there to be better cooperation and better round tables to minimize the impact. We are not against trade. We don't want to create a war between the United States and Canada. We just want industry, producers and the government to implement the best possible procedures to minimize the impact.
Thank you to the witnesses.
Mr. McAlpine, some of my questions involve sharing practices exactly as you talked about, and some involved measures you took to protect your employees. You have already touched on that. I appreciate all the ideas you have as well, looking forward.
Right now we're planning next steps as we come through this. As you said, the opportunities are fantastic, but we are also in stabilization mode right now.
This morning I saw a video on social media—and I wouldn't mind having that discussion—in which your company, Maple Leaf, talked about diversity and inclusion and mental health. I know that touches home here, because we've got a hatchery plant in my riding of Kitchener-Conestoga, so that's a concern. I'm glad to see you're taking some positive steps.
If you could elaborate on diversity and inclusion and the mental health aspect of keeping workers safe, that would be helpful.
That's an excellent question.
As we said, the first thing we want to ensure as an organization is worker safety, and that's all of our members. As Mr. McAlpine mentioned, there will be a lot of sharing of information among all members about the stuff they did to improve.
At the beginning, our employees were anxious. They were nervous and scared. We saw a lot of absenteeism also. With some of the programs that have been created, some of that absenteeism in our plants happened when people thought they could stay home and get paid, so some of them decided to quit. However, then they realized it wasn't the thing to do.
I will say right now that because the screening being done before they get into the plants and all the measures that have been put in place, most of the time people feel that they are safe. When you look at the number of people across Canada in our processing plants on the poultry side, you see that all of our members did very well in ensuring security, and the employees feel it.
On the issue of the processing plant environment, the challenges of operating and the impacts to production, as Joël said, have been very challenging. For us, we have had some particular plant issues. In the case of our poultry business, we had challenges, particularly at our poultry plant in Brampton, Ontario, that resulted in the closure of the plant for a few days. We have been extremely vigilant and have so far kept it out of our big plants in western Canada, which is so critical. Our brand and slaughter plant has had none of the experience that has occurred south of the border, or, frankly, at the beef plants in Alberta.
I guess the biggest concern is absenteeism. I think we can manage with all the new physical issues and the layout changes, but we are experiencing higher absenteeism. That could become a concern, but so far I think it's stabilized. We're achieving a new normal. We're relatively optimistic.
On the issue of food security, absolutely, this has been a devastating impact. I don't think there's yet really credible third party data, but there have been some suggestions that already in the last three months food insecurity in Canada has doubled. The number of individuals who need help to feed the family has doubled, and it was a crisis before.
In our case, our Centre for Action on Food Security has been operating for three years. Just in the crisis, we've added a $500,000 donation. We've now begun a campaign to raise a further $2-million contribution for food insecurity in Canada. That's on top of a $2.5-million donation to front-line health care workers. Yes, it needs work.
Thank you, Mr. McAlpine. Thank you, Mr. MacGregor. Unfortunately, that's all the time we have for today.
I would like to thank the Canadian Poultry and Egg Processors Council, represented by Mr. Joël Cormier, chairman of the board of directors, and Mr. Jean-Michel Laurin, president and chief executive officer.
I would also like to thank Mr. Rory McAlpine, senior vice president of Maple Leaf Foods, as well as Mr. Paulin Bouchard, president and CEO, and Mr. Denis Frenette, assistant general manager, both of the Fédération des producteurs d'œufs du Québec.
Thank you all for coming to talk to us about your experiences in our new collective reality.
Now, for our members, our next meeting will be a business meeting next Wednesday. We need that to give the clerk direction as to where we want to go with the new mandate we have to continue until the end of the Parliament and beyond, if we decide that. The next meeting, again, will be about that.
I would encourage everyone to start thinking about their witness lists—