I call this meeting to order. Welcome to meeting number 18 of the House of Commons Standing Committee on Agriculture and Agri-Food. Pursuant to Standing Order 108(2) and the motion adopted by the committee on October 24, 2020, the committee is resuming its study on processing capacity.
Today’s meeting is taking place in a hybrid format pursuant to the House order of January 25, 2021. Therefore, members are attending in person in the room and remotely using the Zoom application. The proceedings will be made available via the House of Commons website. So you are aware, the webcast will always show the person speaking, rather than the entirety of the committee.
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As you may have noticed, today's meeting will consist of one panel of three witnesses, as we had a last-minute rescheduling of witnesses. The meeting will end at five o'clock, or might extend now that we've had a little problem.
I will start by welcoming our witnesses here.
I know Ron Lemaire, from the Canadian Produce Marketing Association, very well. He has been on our committee many times. Welcome, Mr. Lemaire.
We also have MNP LLP Kelleen Tait, partner; and Glenn Fraser, national leader, food and beverage processing practice. Welcome, Ms. Tait and Mr. Fraser.
I would assume that the third witness is not with us yet. When Derek Johnstone, special assistant to the national president of the United Food and Commercial Workers Union Canada, joins us, we'll make sure that he has his chance to make his opening statement.
Mr. Lemaire, do you want to start with your opening statement, for seven and a half minutes?
On behalf of the Canadian Produce Marketing Association, representing over 800 companies growing, packing, shipping and selling fresh fruit and vegetables in Canada and supporting roughly 249,000 jobs across the country, I want to thank the chair and members of the committee for the opportunity to share our comments on increasing capacity for processing in Canada.
My comments today are reflective of a complex supply chain that works tirelessly to provide fresh fruit and vegetables across Canada, and to develop opportunities and solutions to increase processing capacity and competitiveness in Canada.
Our recommendations support the government's export objective of $75 billion by 2025, as referenced by the Barton report, and support the goal of increasing local capacity to protect food security and strengthen Canada's food sovereignty while providing safe food for all Canadians.
Canada's fresh fruit and vegetable industry contributes significant benefits to our economy, to our communities and to the government. In 2018 alone, the total value of the fresh fruit and vegetable sector was $17.7 billion. Development in the fruit and vegetable sector, including processing, directly leads to jobs for many Canadians and Canadian workers. At the same time, the government collects over $2.6 billion in revenues through taxes on production each year.
The fresh fruit and vegetable industry has significant potential to transition more products towards processing and value-added items such as frozen fruit and vegetables, baby food, juices, shredded lettuce, minimally processed salad kits, mini carrots, purées and others. In fact, in 2020, in a survey conducted by Caddle, 24% of Canadians indicated that they were planning to spend more on frozen produce in the next year, 2021.
Unfortunately, the current market conditions encourage more number 2 grade Canadian produce items to be sold in the open market in the United States for processing or for juicing than in Canada, as there are self-imposed barriers to domestic processing sectors. The pathway for fresh number 2 grade produce items to be processed needs to be modernized to encourage greater investment in the sector at the provincial level, specifically in Ontario. The regulated commodity model in Ontario is an example that has created a disincentive to drive innovation and investment.
Currently, we are not aware of new processors entering the Canadian markets, for reasons that include labour challenges, corporate tax structures and the regulated market conditions in our largest province. The regulated market conditions in Ontario restrict some movement of open-market fresh produce into processing channels. As an example, Ontario fresh producers are now shipping product to North Carolina for carrot purée and to New York, New Jersey and Pennsylvania for diced carrots for soups.
However, by selling into the U.S., a Canadian company receives only about 35% of the gross revenues back, due to the logistics and transportation costs. While these exports may seem on paper to look positive toward our Barton goal, they are not providing the best return for our growers.
To provide better support for increasing processing capacity here at home, there are three key areas of focus and review needed by the federal government: our domestic labour model in plants, the high cost of product and inputs, and competition from frozen products coming from overseas, which are significantly more cost-effective due to low input and labour costs.
This committee has heard previous testimony related to the gaps in labour; I will reiterate the estimated shortfall of 30,000 workers within the processing sector, with projections doubling by 2025. Without the necessary skilled workforce, the sector is already facing an uphill battle. CPMA supports a labour strategy that focuses on addressing the shortages in skilled trades, ensuring we have access to qualified foreign workers and supporting automation and innovation.
We all recognize that the produce sector functions in an extremely competitive market. As commodity prices and volumes drive the success or failure of our sector, the Government of Canada should examine short-term and direct supply chain opportunities to support and create market opportunities both domestically and internationally.
At the same time, federal and provincial regulatory models must also be reviewed to determine opportunities and gaps being created by the unintended consequences of regulated commodity models and production volumes. The COVID-19 pandemic has imposed significant new challenges for businesses throughout our supply chain, including the added costs of purchasing personal protective equipment and other health screening tools and equipment, the implementation of safety protocols to allow for social distancing and so on.
All of these impacts are difficult to pass on to Canadians without increasing the cost of fresh produce, thereby creating food security concerns.
While the government funding available through the agri-food workplace protection program and the emergency processing fund is welcome, these measures will not be able to address the full scope of the economic challenges facing our sector, especially as COVID protocols will be with us for the foreseeable future.
The Government of Canada should implement a series of tax-incentive programs that will encourage industry to invest in Canada. This can include PPE tax credits to support those companies protecting their workers on packing lines and processing lines or investment tax credits that can spur GDP growth.
As I noted at the outset of my comments, there is significant potential for the fresh fruit and vegetable industry in Canada to transition more products towards processing and value-added items. The Government of Canada can foster growth in our sector by working with industry to address the challenges I've described here today.
CPMA is greatly appreciative of the opportunity to share these comments, and I'm happy to answer any questions the committee members may have.
It is an honour to be invited today to discuss building back better with a more robust and competitive agri-food sector. Enhancing our domestic and global competitiveness with respect to food and beverage manufacturing capacity has never been more critical. A global race is on and Canada cannot afford to fall behind.
My name is Glenn Fraser and I'm the national leader of food and beverage processing at MNP. I am joined today by colleague, Kelleen Tait, national lead of livestock and poultry.
As a leading accounting, consulting and tax advisory firm headquartered in Canada, MNP is in the unique position to be the voice of over 20,000 agri-food clients, including 1,000 food and beverage manufacturing companies from coast to coast to coast. One thing is for sure, the post-COVID-19 business environment will look much different than it did pre-pandemic. More virtual activity is forecast as food and beverage manufacturers look to technological solutions to increase their efficiencies and effectiveness by adopting automation, mechanization, digitization, e-commerce and AI.
MNP believes Canadians will witness a significant increase in the applicability and investment in these areas within the industry supply chain. It's already happening as we speak. To enhance domestic and global competitiveness, we believe the federal government can help resolve ongoing issues and impediments to growth and profitability. We have three specific building back better recovery recommendations.
Our first recommendation is that the federal government take a leadership role in establishing new policies and programs to ensure the consistent availability of high-skilled labour. Labour supply is critical for an industry that is the backbone of Canada's food supply. In today's food and beverage manufacturing industry there is a labour shortage of 10%, which is expected to widen in the next five years. To address this the federal government needs to explore policy options that would invest in automation, training and career awareness.
Automation can bring in efficiencies and cost savings for businesses, and it also has the potential to help address labour shortages, which are particularly sensitive to disruption. Automation will equally create demand for skilled workers and draw more youth to well-paying jobs in their communities that they can be proud of.
To fully capitalize on this opportunity, the federal government will need to create programs and provide incentives geared toward training and skills development for the modern workforce. It is also critical to create specific policy geared toward developing awareness among youth of the variety of rewarding and skilled career and employment options within this industry.
Our second recommendation is for the government to foster innovation in the food and beverage manufacturing sector. The food and beverage manufacturing industry is currently experiencing decreased investment caused by declining margins, difficulties in accessing capital for investment, and ongoing barriers to accessing tax credits toward scientific research and experimental development.
Working in partnership with provincial governments and industry, the government should broaden existing funding programs while also developing industry-specific policy that can be used to promote innovation in food and beverage manufacturing. Innovation doesn't need to be leading edge or new technologies. Innovation can also be achieved by adopting proven strategies and technologies that may already exist inside or outside of Canada.
Programs such as Agriculture Canada's agri-innovate program and ISED's strategic innovation fund have the potential to be expanded to include incentives for food and beverage manufacturers to invest. We would like to emphasize the importance of innovation, automation, mechanization, digitization, e-commerce and AI in this sector. These funding programs need to be specifically tailored to the food and beverage manufacturing industry so there is a more streamlined and simplified method of accessing these funds.
Our third recommendation is for the FPT agriculture ministers to ensure there is a grocery code of conduct that establishes a fair, transparent and efficient relationship between grocery retailers and food and beverage manufacturers. In Canada, five major grocery retailers control 80% of the grocery market. This has caused an unbalanced relationship in the business landscape between retailers and the food and beverage manufacturers where arbitrary transaction costs, fees and penalties are levied, at times retroactively.
In addition, the COVID-19 pandemic has exposed additional challenges and costs at all levels of the supply chain.
Retailers have taken some of these financial costs associated with COVID-19 and passed them down to the manufacturers. This adds additional strain on already escalating costs for most if not all food and beverage manufacturers.
A grocery code of conduct would enable the food and beverage manufacturing industry and retailers to engage in a constructive and transparent manner that ultimately provides positive outcomes for all Canadians.
In conclusion, we want to thank this committee for its important work in building a more competitive food and beverage manufacturing industry. Automation, skilled labour, training and awareness, enhanced innovation programs and a grocery code of conduct would ensure this critical industry is equipped to grow and prosper at home, reach attainable export targets and compete abroad.
These recommendations are vital to our future food security and an affordable supply of quality food for all Canadians.
On behalf of the United Food and Commercial Workers, I would like to thank the standing committee for the opportunity to share our perspective today and also for the work of the committee on this important subject.
Before I put forward some of our thoughts, it might be good to say a few words about who we are.
The UFCW is the voice of Canada's food workers. We are one of the country's largest unions and are very proud and privileged to represent more than a quarter of a million hard-working people across Canada. About 80% of our membership work in food-related sectors. As we like to say, you can find UFCW members everywhere in the food chain, from field to fork.
Throughout the pandemic our members have played a central role in holding the front line and providing the food and other crucial products and services that Canadians need for their day-to-day lives.
I can tell you that the last 12 months have not been easy for food workers in Canada. For good reason, many of our members have been afraid to go to work. They are afraid to get sick; they are afraid to bring the virus home to their families. Thousands of our members have tested positive, a number have been hospitalized, and some have died.
As a food workers union, we've been calling for a number of measures and responses to the pandemic, many of which have been implemented in varying degrees by industry and by major employers in particular. However, consistency and enforcement remain a problem.
The CFIA, of course, watches over production, but they have made clear to us that their job is to ensure the safety of the food in the plant, not the people in the plant. That responsibility, as you know, falls to the provinces, with whom we have had, to say the least, mixed experiences throughout the pandemic.
The elephant in the room throughout the pandemic and long before COVID is line speed. The speed of the production line has made physical distancing practically impossible. For many years it has been the leading cause of repetitive strain injuries and mental health issues for many UFCW members.
The truth and the bottom line is that to protect Canada's food supply we must protect Canada's food workers. There remain some major structural issues that stand in the way of fully achieving that.
When we turn our focus to labour recruitment challenges, then, these are factors that must be considered as part of the problem.
That said, food processing is still a sector with a lot of potential. It's a sector that could and should be recruiting and creating more jobs for Canadians.
UFCW is very concerned about the exponential growth of the temporary foreign workers program in recent years. We strongly recommend a more varied approach to the situation facing our industry, one that prioritizes the expansion of federal and provincial nominee programs and one that makes sure that Canadians are fully aware of the opportunities and pathways that exist in the food-processing sector.
Government needs to ensure that investments are being made in developing domestic labour markets. We've seen data to suggest that there is an inverse relationship between TFW usage and public investments in active labour market policy initiatives, which quite frankly is no way to build the future.
Going forward, we urge the committee to recommend a stakeholder-based approach to developing recruitment, skills and strategies for the sector. UFCW, for instance, is very well positioned to help champion the food service and industrial trades. If employers were compelled to work with us on these issues, perhaps through the LMIA process, to identify domestic labour sources, that could result in better outcomes that benefit the sector as a whole.
In any event, the last thing we want as the food workers union is to see Canada's entire food system become reliant on a temporary, precarious and vulnerable workforce, such as we have now in primary agriculture. To do so would mean less stability, security and food sovereignty for one of Canada's most crucial sectors. With that said, thank you to the committee for the invitation and for shouldering this very important work. I look forward to answering any questions you might have.
In any event, the last thing we want as the food workers' union is to see Canada's entire food system become reliant on a temporary, precarious and vulnerable workforce, such as we have now in primary agriculture. To do so would mean less stability, security and food sovereignty for one of Canada's most crucial sectors.
With that said, thank you to the committee for the invitation and for shouldering this very important work.
I look forward to answering any questions you might have. Thank you.
Thank you for your question.
The key we're looking at here again comes back to a series of strategies that I noted. One is ensuring that we have access to the appropriate labour pool that we can effectively produce and process the products domestically. The challenge relative to selling into the U.S. comes into the added cost of logistics and transportation, and also looking at the market conditions for commodity pricing at the time the product is sold, which will fluctuate.
We've already heard some key pieces around Ontario and Canada. When we start looking at the other opportunities for growth in Ontario, when we start looking at key pieces around automation and innovation, it's perhaps the greatest opportunity we have, because if we can't find labour and we need to start moving down the path of increased automation and/or innovation around the production line, as we heard Mr. Johnstone talk about, it's the speed of the line and how it's operating and other tools that we can drive within that line. It is a labour gap of moving the product through, even at an increased speed with fewer workers, unfortunately, to try to meet the demand of the product in the market at a lower cost.
We are dealing with a competitive environment that requires our finding the most efficient model of producing, processing and shipping the product to its destination. Unfortunately on a global level other countries have implemented strategies including low-cost labour in some cases. In other cases it's incentives and support to their processing sector to enable them to be successful through their tax model, and through their corporate structure to enable them to structure their business to have an incentive to even be in existence within the country.
Thank you for your question.
It's a good question, and I apologize to the interpreters because I have it on the English channel.
I'll be very quick. I want to talk about the situation today, because we're dealing with a very unique environment where we have multiple layers of authority and multiple layers of responsibility to ensure the safety of the workers.
First it's getting them into the country, and the protocols we are working with to move them from their point of origin to the processing facility and/or area they're working within or the farm they're working on.
The fundamental challenge we're dealing with right now is the unknown. We all recognize the recent changes to the entry requirements into Canada and the challenges we're now dealing with, targeting a March 14 date, without a clear understanding relative to whether the temporary foreign workers are required to stay in a government-issued hotel and/or whether they will be exempt to enable them to transfer seamlessly to the farm for the quarantine period.
There is a range of challenges we're looking at that continually add more costs, so we look back at the issue of costs in the system.
The other piece around this is municipal and provincial.
On the issue of today, if we have a foreign worker coming into the country, they land in Toronto. If they have to hold in Toronto for three days because of the new measures and then they have to go to the Atlantic provinces, they have to hold for another 14 days in quarantine. Now we are up to 17 days out of the workforce, which is also a burden on the individual.
Thank you so much, Mr. Chair.
Thank you to all of our witnesses.
I'll start with Mr. Johnstone. I wanted to talk to you about the recent closure in Red Deer at the Olymel plant. We had a representative from Olymel appear before our committee to talk a little bit about that.
I wanted to get your perspective to start off with. How are the workers doing at that plant? How are they dealing with the new situation they find themselves in?
Also, could you maybe open the conversation up a bit more broadly from labour's point of view? We have found during the course of the study that meat-processing plants have become so concentrated that when they get shut down, it has such a huge cascading effect on the whole supply chain.
From your point of view, how are we to inoculate our processing plants and, of course, the workers who work in them from these future shocks to the system?
Thank you, Alistair. That's a very good question.
I can tell you that the situation at Olymel is really the worst fears for these workers. When they get up every morning and go to bed every night, they think about when the next outbreak is going to occur. The most recent one has been at Olymel.
As I mentioned in my introductory remarks, our members are very frightened to go to work, and with very good reason. There have been some changes in the plant. I heard mention that some plexiglass shields have been introduced. It's certainly the case in most, if not all, of the larger processing facilities. They put some distancing in the lunch rooms and whatnot. Really, as long as the line keeps rolling at a top speed, you can't really do anything about the density on the floor. In terms of an outbreak, it's a bit of a ticking time bomb. We just saw that at the plant in Red Deer.
I can tell you that when that does happen, on top of the strains that folks have by going to work and the stresses associated with that, when they are forced out of a job, the onus is on them to adapt to that new reality for them. There have been some new programs set up throughout COVID, of course. There's the CRSB is the latest incarnation of that support. Again the onus is on the employee to file for that, unlike in some other jurisdictions.
We understand that in places like Denmark, which has pork processing as a huge part of its economy, that is not the case. In those scenarios, the administrative piece is handled directly between employers and governments. Not only are employees in that scenario getting their full pay, but it's a seamless approach for them. It's handled directly by the employer and the company.
It's something that I think would certainly go a ways to assisting our members who just want to go to work every day. They bear the brunt of these outbreaks when they happen in many ways. Certainly and most apparently it's their own personal health, but also in the more practical ways when it comes to trying to make ends meet. It's a difficult situation in a meat plant in multiple ways.
Thank you to all the witnesses.
Mr. Lemaire, it's great to see you. It's great to have you before our committee.
I'll go back to MNP afterwards, but I'm going to make a prediction here that at some point we're going to hear the pleading for the private sector to make more investments as we heard the late Minister Flaherty, about 10 years ago, after the recession had passed, plead with the private sector to make more investments. I know in general the manufacturing sector had asked for the accelerated capital cost allowance, which was done in the fall economic statement in 2018.
Mr. Lemaire, in terms of those tax measures, are your members using that, or is it not working? Should we be doing other measures? I know you talked about more tax incentives. I would be curious to find out what those could be.
I'll turn to Mr. Lemaire and the CPMA.
One of our previous witnesses was the Agri-Food Innovation Council. I was really interested in your comments in your opening statement about the tremendous potential that exists for value-added products. Despite the challenges you listed, I know that there have been some success stories. There are companies that are making it in Canada under current conditions. That's what I'm really interested in.
I asked the AIC about some of the common threads that weave through these success stories, and they say it's the presence of an ecosystem that can bring together researchers, entrepreneurs, industry reps, investors to mentor entrepreneurs and so on.
Can you talk to our committee about some of those success stories, about any members of the CPMA who have found success under current conditions in innovative food processing, and about what led to their success?
Yes, most definitely. As an example, I can talk about Sliced, out west, under the Star Group. When you start looking at where and how they found success, you see that, number one, they ensured that they had control over their production base. They had an internalized ecosystem where they managed it from start to finish. They also invested heavily in automation and the innovative production line. They used state-of-the-art technology in their production and their fresh-cut operations so that they could ensure they were processing the vegetables and the fruit product going through in the most effective manner.
Then, the other end comes out relative to the key attributes on the packaging piece and managing your cost centre. We continually look at the overall cost and structure, from your production to your package to the consumer. You have to be able to manage it all. At the same time, the piece that we are now seeing more and more is the sustainability component that starts flowing into that full value proposition.
They've looked at all of these pieces and brought all of those elements together. Even pivoting during COVID and looking at how they can redistribute and re-manage that supply line into the market is fundamental.
There are stories like that across the country. I totally believe that the opportunity is there. The model we're seeing and where we have opportunity moving forward is in really trying to drive this back into a regional model where, for our sector, we can centralize production with the growers so that they can move it together and into the market.
Mr. Johnstone, I'm very pleased to have the chance to ask you my question again.
In your presentation, you said that you saw an inverse relationship between the use of foreign workers and investment.
Since the start of the committee's work, we've seen both issues. There's under-investment in the industry in the country. However, the labour shortage is so severe that foreign workers are needed.
Did you really say that? I'd like you to elaborate on this.
How do you reconcile these two issues? Are foreign workers covered by the agreements in place in the plants represented by your association?
They are, and historically we're very proud of the way that we have used our collective agreements to leverage provincial nominee programs in order to secure real pathways to citizenship, and that's something that we haven't touched enough on.
To your point, Mr. Perron, TFWs have been coming into our membership, absolutely. That's been the case especially in meat plants. We're very proud of the way we have used our contracts to leverage provincial nominee programs in order to secure real pathways to citizenship for migrants.
This is something you probably haven't talked about enough on this call: that the federal government has set up a federal nominee program and provinces have the ability to exercise the nominee program, though Ontario has historically lacked. This has to be seen as a pillar in terms of meeting the needs of the sector.
Having somebody as a migrant, as one of the temporary foreign workers, coming into this country for 30 years and being on a hamster wheel is in nobody's interest. If we're going to build security and stability and longevity in our sector, we need to allow people to come here to lay roots and build lives; that's key.
To your other point, about the inverse relationship between active labour market policy investments and the expansion of the temporary foreign worker program, we're just citing OECD data. This data clearly shows that public investments in such things as activating the underemployed and providing opportunities for people who have taken themselves out of the labour market to upskill—the percentage in terms of Canada's GDP of such investments into those programs—has declined at exactly the same rate that our use of temporary foreign workers has climbed over the last 20 years.
Mr. Johnstone, I'll continue with you.
I agree with your sentiments about the strength of provincial nominee programs and identifying where particular gaps are. It's why my wife is in Canada. She immigrated to Canada from Australia because of the B.C. provincial nominee program, which identified her skills as being in shortage here on Vancouver Island.
You referenced the existing agri-food pilot program. Continue, if you would like to, any thoughts you have on that particular program. Also tell us if there's a series of concrete recommendations you would like to see us make as a committee in our report. That's what our ultimate aim is with this report: we want to make those kinds of recommendations and have the federal government respond to them.
If there's anything else you want to add in terms of getting stakeholders more involved or anything we can do about encouraging our universities to reach out to get more Canadians connected to those jobs, we would appreciate it.
The agri-food pilot was put into effect last year. I just recently asked for an update of data on the way it has been performing. I have yet to receive it, so I don't have any data on how it's rolling out.
The commitment was 2,700 new opportunities for permanent residency for agri-food workers, mainly focused on the meat sector.
The criteria are still very high. They include a level 4 for English. We know that many TFWs come into the country who perhaps haven't attained that facility in language. As far as I know, the program is not accompanied by any opportunities to strengthen language skills.
It is also not enough, quite frankly. We've heard the numbers—30,000, 65,000.... You know, 2,700 a year is an important start, but it's not even close to being—to address your second point, Mr. MacGregor—what needs to be a real pillar of the solution to the crisis facing the sector; that, taken together with significant substantive investments in activating and developing domestic labour markets that are in keeping with the trajectory we are seeing with the use of temporary foreign workers.