:
Good afternoon, everyone.
[English]
I shall call the meeting to order. Welcome to the seventh meeting 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.
[Translation]
Today's meeting is taking place in a hybrid format, pursuant to the House Order of September 23, 2020. 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.
To ensure an orderly meeting, I would like to outline a few rules to follow. Members and witnesses may speak in the official language of their choice. You have the choice, at the bottom of your screen, of either Floor, English or French. Before speaking, please wait until I recognize you by name. A reminder that all comments by members and witnesses should be addressed through the Chair. When you are not speaking, your mic should be on mute.
[English]
With that, we are ready to begin. I would like to welcome our witnesses for the first hour this afternoon. With us today, from the Agricultural Producers Association of Saskatchewan, we have Mr. Todd Lewis, president. Welcome, Mr. Lewis.
From the Cowichan Green Community, we have Ms. Judy Stafford.
We shall start with the opening statements. Each organization has seven and a half minutes to do its presentation. We'll start with APAS.
Go ahead, Mr. Lewis.
:
Good afternoon, everyone, and thanks for the opportunity to present to the committee today.
My name is Todd Lewis. I operate a grain and oilseed farm at Gray, Saskatchewan, with my brother and nephew. I am the president of the Agricultural Producers Association of Saskatchewan, or APAS.
APAS is Saskatchewan's general farm organization, representing over 16,000 farms and ranches, as well as 32 associate member organizations. We are a proud member of the Canadian Federation of Agriculture on the national level.
Saskatchewan producers are very big players in Canada's agricultural sector. We manage 40% of Canada's cultivated farmland and 35% of our nation's grasslands. Agriculture and food contribute $142 billion to the Canadian GDP, and Saskatchewan represents 10% of that total production. Agriculture and food make up 12% of Canada's total exports, and Saskatchewan agricultural producers make up one quarter of that total, which is worth $15 billion.
We are world-leading producers of several commodities. We have grown from being historically known for our wheat production as the breadbasket of the world to now being the world's leading producer of many other commodities. Canola was developed at the University of Saskatchewan in Saskatoon, and we are the world leader in canola production. Saskatchewan is the leading producer and exporter of lentils, flax, durum wheat, field peas, mustard, canary seed and malt barley. We sell high-quality cattle and hogs and meat products to international markets.
There's a common theme here, and that is our reliance on export markets for the large majority of our production. We have always relied on the international marketplace. Our distance from larger population centres in North America has been a disadvantage for the processing of consumer food products, so our supply chain has been focused on the shipment of bulk commodities for export by rail to distant ports.
Historically, provincial and federal governments have placed a high priority on increasing the value added to agricultural products through processing. Recently, we have had both levels of government set ambitious targets for value added and export growth, and ambitious targets for increases in production. There's a continued growth in demand for agricultural products worldwide and a strong desire to take advantage of this demand.
Producers share these goals. We would like to see the increased opportunities and added market stability that selling to local processors would provide, and we would like to see the increase in employment and economic activity for our communities.
Building on our worldwide reputation for high-quality and sustainable products, we can grow the processing sector. We can add value to our existing commodities, and we can take advantage of new opportunities. We can respond to the need for animal protein in emerging economies. We can build on our capacity in biofuels and biomaterials. We can develop opportunities with nutraceuticals, vegetable proteins and fibre products.
We have seen an increase in further processing in recent years. We are selling more canola oil from crush plants on the Prairies, and further processing of pulse crops for vegetable protein markets is being constructed. If we are to build for the ambitious production and export growth targets, Canada is going to have to focus on the sectors and regions that currently export unprocessed products and overcome the historical hurdles.
I will lay out a few examples.
Trade access is key. One barrier to the export of processed products is the trade and non-tariff barriers. Our industry is subject to wild swings in demand and prices due to trade wars and arbitrary decisions by foreign governments.
A fair market return is essential. Profit margins for farms and ranches are decreasing, and our input costs are increasing above the rate of inflation. Access to information on new opportunities is critical.
Transportation is also a key factor. We ship long distances to both domestic and international markets, and processed products require different transportation systems than bulk shipments of raw commodities.
Competitiveness is essential. It's hard to compete with jurisdictions that have lower costs, and we make it worse when we impose costs like the carbon tax that can't be passed along to prospective customers.
Access to modern high-speed Internet is essential to both processors and producers who are contributing to their supply chains. Access to adequate water and power supplies is essential. Access to labour resources is also essential.
Continued public research on crop and livestock development is essential. Canola was developed through a public program, and that investment created hundreds of billions of dollars of economic activity.
We need far-reaching investments like the one announced for irrigation recently. Irrigated production has huge potential in Saskatchewan, and the expansion will open the doors to new processing opportunities.
As producers, if we are being asked to increase our investment in increased and diversified production, we need a commitment to improve business risk management programs. This is especially important to young producers and new entrants. There is a major generational transfer of agricultural operations under way, and the new generation needs improved risk management to allow for the investment to expand the industry and meet growth targets.
Thanks for the opportunity to serve as a witness today. I look forward to the discussion and to your questions coming forward.
:
Thank you for inviting me to present today.
First of all, I want to acknowledge that I am located here on the unceded territory of the Cowichan people.
My name is Judy Stafford and I am the executive director of Cowichan Green Community, a non-profit organization focused on improving food security and educating on the importance of a strong local food system.
We feel that you can't have local food security without a vibrant agriculture sector. Within our mandate, we tackle everything from advocating for backyard chickens to teaching children that french fries actually come from potatoes grown in the ground, covered in dirt. We operate two teaching farms. We produce the Cowichan local farm map and the Island Farm and Garden magazine. We manage the Cowichan food recovery project, the reFRESH Cowichan Marketplace—a low-cost grocery store—and we run a Meals on Wheels program and various other food security initiatives.
We employ 34 staff, as tackling food insecurity is more than a full-time job. It's daunting. Cowichan is tied for first place in B.C. for the highest levels of child poverty. One in six children on Vancouver Island experiences food insecurity, and more than one in 10 families worry about having enough food to eat. Before COVID-19, there were 4.4 million food-insecure people in Canada. That number is expected to double.
When COVID hit, CGC quickly ramped up our programming as increased demand—specifically for meal services—escalated. We set up an emergency food task force and 25 organizations, including local government and the school district, have been meeting weekly since March to determine how to best service our community and ensure no one goes hungry.
During a typical month, members of the task force provide over 8,000 meals and 5,000 food hampers. They give out tens of thousands of grocery store gift cards and food coupons, and they recover and redistribute more than 15,000 pounds of food. Collectively, the task force has raised over $1 million for Cowichan to support food and temporary housing.
Here on Vancouver Island, a shocking 97% of our food is imported, making us highly vulnerable to instability in transport and trade. Disruptions in the food system represent catastrophic impacts to our most vulnerable citizens.
Among the challenging emergency responses this pandemic has elicited, there have also been opportunities for our local agriculture sector. In my neighbourhood alone, I've seen at least half a dozen cute little farm stands pop up over the summer, selling everything from eggs to homemade soaps to vegetables. In Cowichan, there are almost 700 small-scale farms, and with almost 10% of this region's land base capable of agriculture production, there is room for many more.
The Duncan Farmer's Market is one of the largest in B.C. and it's open year-round. The Cowichan Valley Co-operative Marketplace, our local online farmer's market, was founded with support from CGC in 2014. They've struggled as an organization for many years, with a very good week of sales equating to $2,000. During the height of COVID, the co-op had to scramble and hire several staff to process and distribute over $25,000 a week in sales. You couldn't find a freezer around here to save your life. Some local producers were noting record sales, to which I contributed substantially, as noted by the half a cow and pig that are in my freezers.
Many farmers are struggling with ongoing challenges, such as navigating horrendous regulatory hurdles, getting into large retailers and competing on price. Until I read the briefing note calling for fair business practices in preparation for this presentation, I had no idea of the rampant unfair and unethical practices going on in this sector. It's shocking.
A very successful local hothouse grower of cucumbers and tomatoes went bankrupt here after they were forced to reduce their prices to match the prices of vegetables imported from Mexico. After 38 years, a local family-owned bakery closed its doors—going from 40 staff to zero—as a result of Sobeys purchasing Thrifty Foods.
According to a recent Dalhousie report, the overall price of food is going to continue to be a problem. Beef is up an average of 6% to 8%. We've all seen prices creep up and the California wildfires are going to have long-term consequences for years to come. Combining this with the information provided in the briefing note, local, small-scale farmers are definitely the underdogs in a very unfair fight.
Even with countless challenges, the farmers we have the privilege of working with at CGC are very passionate, unbelievably hard-working, and we do everything we can to support them. This is the time for organizations such as CGC and others across the island, B.C. and Canada to shine. We've been waiting for some kind of shift in thinking for increasing support for local agriculture and getting it the recognition it deserves.
This past June, a group of food security organizations that form the Island Food Hubs presented to the Select Standing Committee on Finance and Government Services for British Columbia. We urged government to put a stronger focus on localized food systems, because we feel that food security and the local food discussion should be a pillar of all budgetary considerations. We were so disappointed to see that food was omitted in the provincial budget 2021 consultation document.
Comparatively speaking, the federal government has begun putting stronger emphasis on food through the creation of the federal food policy, releasing a food policy for Canada's food guide in June 2019, with over $134 million in initial investments to support that policy.
As part of that investment, CGC is working on securing funding through the federal local food infrastructure fund to build a commercial kitchen with larger-scale processing equipment to provide much-needed processing space, and increased access for value-added production for our local farmers. We're working on a HACCP facility, and hopefully providing food to our new hospital being built in 2024, which has committed to a 30% local food procurement.
I have been working with the federal staff since August. I am providing my fifth round of clarifications. I was dismayed, however, to hear in an earlier session of this committee that the fund has been exhausted, so hopefully, our application is in the processing pile and not dead.
We have also applied to B.C.'s community economic recovery infrastructure fund for a mobile abattoir. In Cowichan, there are only three processors, with none providing service to small-scale poultry farmers. There is a four-month wait-list to harvest beef, with some farmers having to resort to travelling three hours to a processor, or going off the island. The situation is dire for animal production.
In closing, the information in the briefing note was shocking, when we work on the ground with people in our community already facing undue hardships from poverty and struggling to put food on their tables. Of course, with limited food budgets, people are going to shop at the big box stores for cheap, heavily subsidized food. To have the five grocery store monopolies holding the purse strings is definitely unfair and tipping the scales in the wrong direction.
People, no matter what their income, should be able to enjoy fresh, local, healthy food, but more often than not, it comes down to a choice of dollars versus quality, and that's not okay.
Even though there are more uncertain times ahead, I do feel optimistic. We're seeing the awareness of the importance of a strong local food economy increasing. Attending presentations like these and seeing the time and energy that's being put toward these issues is a step in the right direction. I will enjoy even more walking around the corner from my house to pick up eggs from my local farmer, knowing we're doing good work.
Thank you to all of you for your efforts, and thank you for giving me this time.
I also look forward to addressing any questions.
:
Definitely abattoirs, as I brought up, present a hurdle for anyone trying to do livestock care. We used to have a very vibrant dairy industry. We had a lot of quota for chickens and cows. Those have left the island for a variety of reasons. A major one was changes in regulations that were just too prohibitive for the small-scale farmer to run their own little processing and their own abattoir, when they would need a bathroom separate from the farmhouse. I even heard they would need one bathroom for the girls and one for the boys, but that might have changed.
When the processing regulations shifted a few years ago, we lost a lot of abattoirs right off the island completely. Definitely processing is the number one hurdle, especially with poultry and beef, which is mostly what is raised here, and again there's the kitchen capacity of a small-scale farmer. Maybe they just want to grow potatoes and not a huge amount of vegetables.
There isn't storage here. There are no cold storage facilities here in Cowichan at all. That's another thing that would be part of our hub.
Also, to be honest, there isn't a lot of manpower. Labour is expensive, so one of the services we want to set up in our new kitchen is a processing service so you can drop off your vegetables. You've already worked all day. You've harvested all day. Maybe you've been at two or three farmers' markets. You can drop off your excess, and we'll process it for you and give it back to you with a fee for service. One of the things I'm hearing from farmers is, “I don't have time to process”, so we're hoping to provide that service as well.
Then there's competing on price, as I said in my presentation. It's very, very hard to grow an organic carrot and sell it at a price that has value for you and your family, when carrots in Walmart are dirt cheap.
I want to thank the witnesses for their time and their testimony. It's very informative.
Ms. Stafford, thank you for taking the lead on that with the land acknowledgement, because you know that we are all across the country here, so I wouldn't mind taking the time to say that here in Kitchener—Conestoga, in this region of Ontario, I'm on the traditional lands of the Anishinabe, the Haudenosaunee and the Neutral peoples, so I appreciate your leadership in that. That was kind of you.
One thing I notice as I look at my notes here is your strong relationship with the local food producers and the local farmers. It's really rewarding to hear, and it's the same feel as in my community here. That relationship you have, which I saw on the website when I researched you, is so important to our well-being, and it really makes a difference as far as including our processing capacity is concerned.
We have companies here in Kitchener—Conestoga, like Enviro-Stewards, that are working with food manufacturers, helping them reduce food loss, and doing some of the same projects that you're doing in your own riding, which I appreciate.
Also, you mentioned the commercial transport van and a refrigerated truck. Again, we have Wilmot Family Resource Centre here, Woolwich Community Health Centre, and Community Support Connections, which is our Meals on Wheels. It's always nice to share best practices and how we can make the most of our food.
We were looking at food waste as part of the processing issue. Can you explain how that refrigerated truck and the transport van you have would work and how you are able to share the food that exists?
:
Our van is on the road all day. First of all, it drives around in the mornings and goes to the local grocery stores, as I mentioned. Other food producers will call us, or farmers will call us if they have a glut. Especially during the summertime, we would drive by several farms as well and pick up whatever they weren't able to sell, and we'd give tax receipts for that.
Then it comes back to.... Right now, because of COVID, it's back in our central location. If we were using a warehouse...so it's a bit chaotic, to be honest, because it's a shared space. It's all sorted. We do get some that is compost, so we work with farmers and we also distribute anything that's not edible. Then everything else is distributed. We have 25 local food organizations, The Salvation Army, food banks and shelters. The temporary housing sites we're working with right now all get boxes every day. Again, anything that is not quite up to par is turned into Meals on Wheels.
We also process frozen meals that we sell in our low-cost grocery store. One of our suppliers does allow us to sell the food, so we do sell the food as a social enterprise, and that pays for staffing to operate a food store. Through that, we distribute about 10,000 dollars' worth of food in a coupon. People can still come in and shop, but they're on a list, so they're not actually giving us money. That is a very, very critical program since COVID. We started it for two months and now we're however many months in, but it is expensive. Some of the food is purchased by folks in the community. We have 100 families in that program right now.
The food really gets around. Nothing goes to waste. Anything we can't use gets picked up by farmers.
:
I think we're ready to resume the meeting.
Let me introduce our witnesses for this second hour. First, from Government of Yukon, we have Matthew Ball, director, energy mines and resources department; and Kirk Price, director, agriculture branch. Welcome to our committee, Mr. Ball and Mr. Price.
From Food Processors of Canada, we have Denise Allen, president and chief executive officer. Welcome, Ms. Allen.
From the Ontario Ministry of Agriculture, Food and Rural Affairs, we have John Kelly, deputy minister; and David Hagarty, assistant deputy minister. Welcome, Mr. Kelly and Mr. Hagarty.
With that, we'll start with the opening statements.
For the Government of Yukon, you have seven and a half minutes. Go ahead. The floor is yours.
I'm speaking to you today on behalf of Deputy Minister Paul Moore. With me today is Kirk Price, our director of agriculture.
We need not take up too much of your time today, but I wanted to ensure that the north was represented.
Yukon agriculture has been a key part of Yukon life for over 100 years. We import much of our food from the south—from Ontario, from Alberta, from British Columbia—but Yukon farms continue to fulfill the important role of providing fresh, healthy products to feed communities.
You'll find that there's a little bit of every farm across the country up here, albeit often on a much, much smaller scale. Yukon farm operators specialize in a variety of products—vegetables, fruits, dairy, eggs, honey, sod and bedding plants. Hay remains the largest portion of the Yukon's industry overall. Yukon producers breed and raise a variety of livestock as well, including cattle, pigs, sheep, goats, horses, ponies, llamas, alpacas, you name it. We also have bison and elk up here. Producers breed and raise poultry across the spectrum as well, with turkeys and eggs and so forth.
:
Thank you, Matt, for passing that over.
Thank you, members of the standing committee. It's a pleasure to be here today and represent Yukon.
Just to build on what Matt said, the agriculture industry is small, but locally, it's very important for Yukon. This has become probably even more evident during the COVID-19 pandemic. There is a strong demand for Yukon locally grown and processed food. There is a strong support from Yukoners to have these things available for Yukoners.
I'll give you just a little history. Prior to 2006, our regional capacity for inspected slaughter of livestock was limited to one facility. It was located where it was relatively difficult to get animals to the abattoir and back out to market. In 2006, the Yukon government purchased the mobile abattoir to help facilitate farmers to raise livestock, and help grow and support that industry.
The current situation in Yukon is that we don't have any federally inspected meat for local abattoirs, but we do have territorial inspected meat. That works fine for our local industry, right now. Since 2006, we've seen a lot of growth, and it continues to grow. There's a lot of support, locally, for self-sufficiency and supporting local farmers. Today, we have two private abattoirs, and we still operate our one mobile abattoir around the south.
Just to give you context, we're not dealing in thousands or tens of thousands of animals; we're dealing with hundreds of animals. In 2020, partly due to the pandemic, we have seen a sharp increase in that. We've seen a 40% increase in red meat. Last year was the first year we had white meat abattoir ready to go, and we've seen an increase in production in that sense.
Our programs do support local meat production that we operate in Yukon, and it's basically to help increase our self-sufficiency. There's a lot of room for more local growth in the sector to feed Yukoners. As farms increase production, the need for processing facilities will continue to be a challenge for us in terms of these things. We're working with local farmers and our local agriculture associations to help overcome these challenges right now.
:
Good afternoon, Chair and committee. Thank you for the opportunity to appear today.
I'm Denise Allen. I'm president and CEO of Food Processors of Canada. For more than 35 years, we have been the leading voice of Canada's food and beverage processing facilities.
The recent allowance of overconsolidation in Canada's grocery retail sector has resulted in only five retailers controlling more than 80% of what Canadians can purchase, placing our food system and supply at risk. This incredible imbalance has created an environment where retailers can arbitrarily impose increasing and unrealistic financial pressure on food producers and processors.
Not only are their business practices viewed as predatory during a national crisis, but, if left unchecked, these fees and fines will diminish Canada's ability to attract investment in food production and innovation, reduce our ability to compete effectively against large multinationals, eliminate selection and choice for consumers who wish to support local farmers and brands, and threaten our collective ability to protect our food sovereignty and security.
Retailers such as Walmart and Loblaws have adopted unfair and unethical business practices where our food producers and processors struggle to maintain output to ensure Canadians enjoy what they come to expect in their food system—safety, selection and quality products from Canadian brands they enjoy.
The scale of the retail fees and fines is both unprecedented and untenable. The recent fees imposed by Walmart and Loblaws companies alone will cost suppliers approximately $1 billion per year, and will ultimately pay for these retailers' infrastructure costs, while no return on investment or growth is provided to suppliers.
Further, the threat of retailers' escalation of fees and fines places Canada's primary producers at risk, as food processors purchase in excess of 40% of Canada's farm gate output, for which they add value and sell both domestically and internationally. Our landscape requires immediate intervention to protect future growth and sustainability for local and national food systems.
Recent months have emphasized how important it is for Canada's food supply chain to be resilient and robust. The COVID-19 pandemic highlighted potential risks and issues which indicate that our nation's reliance on imported food products leaves our population without access to vital processing infrastructure and allows for the potential of food disruptions as borders thicken and concerns over protectionism increase.
The current and ongoing crisis has forced us to examine all aspects of our food production and processing capacity. We have learned that Canadians want their food to be grown and processed at home and that they feel our government needs to increase its support for its agri-food sector.
Canadians feel that having a small number of grocery chains competing results in grocery prices being higher than they need to be, and at this time the same majority of Canadians feel that our current supply chain needs intervention. In short, Canadians understand and want a robust, competitive food sector to ensure food choice and supply.
Now is the time to consider our lessons learned in recent months and act to strengthen our domestic food system. It has become vitally important that we look to those practices of large grocery retailers to understand the severest threats to our food supply chain and act to ensure that more competitive, fair and accountable retail practices are enforced.
Retailers' use of arbitrary fees, fines and deductions from supplier payments is taking place while those same suppliers continue to produce food under a backdrop of reduced capacity to support social distancing on lines, increased operating expense to support PPE requirements and workplace safety, funding unplanned capital investment to support necessary infrastructure changes to plants and equipment, and creating incentives for workers during a national labour shortage.
Our current atmosphere of uncertainty will ultimately force small and medium-sized enterprises to reconsider their future if we do not rebalance the food system geared toward the runaway profit for only the large grocery retailers, which comes at the cost of farmers and suppliers.
The heavy-handed nature of these retailers must be addressed to ensure future investment in agriculture and agri-food business. Canadians want a balanced food supply. Retailers have aggressively and unilaterally dictated their terms, with no mechanism to allow suppliers to voice their concerns. Moreover, the disadvantage at which retail fees and fines place the suppliers extends to primary producers in a way that will see a reduction in farm gate output and consumer selection of food choices and a decrease in Canada's export capabilities.
Canadians do not wish to rely solely on food produced elsewhere. The current shape of Canada's food system must be changed to allow farmers and value-added food processors to continue to serve consumers in a way they both want and deserve.
Governments across Canada are committing to strengthening our food system. The recent Speech from the Throne indicated that investments would be announced to strengthen local supply chains here in Canada. Strong support from Canadians encourages a government role that would ensure there is a balance between our retailers and our agricultural and agri-food businesses.
A grocery code of conduct would be a key piece of legislation that would effect the change needed to establish fairness and accountability in grocery retail practice in Canada. Experience in other jurisdictions shows that significant grocery concentration requires a code to balance retailer-supplier relationships. Codes in countries such as the U.K., Ireland and Australia have been proven to improve competition and support greater collaboration in the broader supply chain.
The focus of the code would encourage good-faith negotiations between grocery retailers and their suppliers, reduce punitive penalties and create greater transparency and accountability. Even more interesting, after the legislative code was implemented in the U.K., prices for consumers decreased, and the industry culture shifted to one of collaboration and consumer focus.
We are respectfully calling on government to intervene and level the playing field, as this is the best way to address the inequities in the food supply chain that threaten investment and increase price inflation for the consumer. A legally binding and enforceable code to monitor, establish and enforce compliance is recommended. While changes to Canada's Competition Act may be helpful in addressing some issues, that is in no way a substitute for a code of conduct.
Constitutional jurisdiction for the development and implementation of a retail code of conduct falls within the provinces and territories; however, the federal government has a large and key role to play in establishing a code of conduct. First, the federal government must consider the importance of our sector to Canada's COVID-19 recovery and, in doing so, must consider a series of changes or enhancements to the Competition Act to enable the bureau to address anti-competitive behaviour of retailers.
I'll add a cautionary note, however, in that increasing the reach of the Competition Bureau to investigate anti-competitive behaviours is necessary, but that alone will not create the change required. Investigations are reactionary and prolonged. A proactive approach is preferred over a lengthy enforcement process, which may or may not address the root cause.
Other actions that will greatly assist fairness and accountability include conducting a study into the issue, establishing an industry working group, developing legislation in both the provinces and the territories, and structuring federal oversight to the provinces and territories' approach to establishing such legislation.
We are eager to work and partner with the federal government to this end, and I thank you very much for your time today.
:
Good evening, everyone.
[English]
Thank you very much for inviting me to speak before the Standing Committee on Agriculture and Agri-Food. I'm pleased to provide an overview of the Ontario food-processing and beverage-manufacturing sector.
I'd like to begin by expressing gratitude and acknowledging that we're on the traditional lands of the Anishinabe and specifically the traditional territory of the Mississaugas of the Credit First Nation.
We're in a unique time, with the COVID-19 pandemic. Nothing has shown how crucial the food supply system is more than the pandemic. Our food processors will be an integral part of our province's economic recovery from this outbreak.
I'd like to begin by highlighting some of the things we have in our food and beverage sector that make us part of the entire food sector.
The agri-food sector in Ontario supports more than 860,000 jobs and contributes more than [Technical difficulty—Editor] to the province's economy. In 2019, we had more than 4,400 food- and beverage-processing establishments in the province, the most in the country. [Technical difficulty—Editor] employs approximately 106,000 people. Many of the largest employers are international players. More than a quarter of the establishments in Ontario are in rural communities, as well. Among those establishments with employees in Ontario, the vast majority are considered either micro or small, with fewer than 100 employees.
Ontario is an ideal location for food and beverage processors. Our competitive advantages include quick and convenient access to major North American markets. There's a huge U.S. and Canadian population within a single day's drive of most processing plants in Ontario, including Chicago, St. Louis, Philadelphia, New York, Washington and Montreal. We have access to superior end-to-end supply chain solutions, including processing, packaging, specialized storage and transportation, in addition to 3.6 million hectares of cropland growing over 230 agricultural commodities. We have low corporate tax rates; we have a highly skilled, multicultural workforce.
We have capitalized on these assets to become one of the largest food- and beverage-manufacturing jurisdictions in North America, with annual manufacturing sales of more than $47 billion. The majority of Ontario’s agri-food products are value-added products, for example meat products and edible preparations like soups and sausages.
Our agri-food sector will be a critical contributor to the federal government’s goal of achieving $75 billion in exports by 2025. It's a strategic sector for us and an essential service that has the potential to take advantage of the opportunities in the growing local, national and global markets.
However, our sector faces a number of immediate challenges, including structural ones, as it struggles to remain competitive and innovative in this uncertain global environment.
Aging plants, outdated technology and inefficient equipment are limiting productivity growth and reducing our competitiveness. Some food and beverage manufacturers have plants that are 75 or 100 years old. Our capital investment in Ontario significantly lags that of other, competing jurisdictions, such as the United States, Germany and the Netherlands.
To match the level of annual capital of other countries, Ontario food and beverage manufacturers would have to increase their annual investment substantially. It's estimated that more than half of Canadian food-processing businesses are foreign-owned. While foreign direct investment is great and has increased, Ontario competes with head offices in other jurisdictions that make the investment decisions. As countries recover from COVID, there may be pressure for international companies to bring that money back and repatriate their investments to their home countries.
The majority of Ontario’s food and beverage manufacturers are small and medium-sized businesses and are not capturing the economies of scale that their much larger international competitors are achieving. Processors are also facing competitiveness from increasing input costs, such as those for energy, labour and raw materials, while being at the same time pressured by retailers to provide finished products and at lower cost, as the previous speaker alluded to. Of note, we are now seeing food processors asked to absorb additional fees to cover in-store upgrades and the shift to e-commerce.
Prior to COVID, industry reports indicated that 85% of food manufacturers struggled with labour shortages. This drives up the costs and also impacts upon their ability to operate at full capacity. COVID highlighted how reliant the agri-food sector is on labour and how vulnerable it is to labour disruptions.
Ontario typically brings in 20,000 temporary foreign workers to work in a lot of different areas, such as planting, growing and harvesting. Approximately 600 of these temporary foreign workers work directly in food and beverage processing. Disruptions early on in the pandemic generated real concerns for us that some of these crops would be affected by lack of labour.
We need to learn from the lessons of 2020 to ensure that workers can come to Canada next year without delay and do so safely. Outbreaks among employees at meat-processing plants, for example, caused temporary shutdowns, and measures had to be taken to slow the spread, resulting in reduced capacity. While less dependent on temporary foreign workers, the nature of the work of meat processing is made more prevalent through COVID when we have a serious spread.
Labour disruptions from the virus emphasize how dependent the sector is on labour. Other jurisdictions have made more advancements in automation, have reportedly struggled less and have had fewer production delays. The extended closure of even one large processor would have been a threat to the food security of Canadians and also to the income of our farmers.
In general, COVID-19 has put incredible strain on the food and beverage manufacturers, and it has exacerbated existing issues that I've already mentioned, such as aging infrastructure and lagging investment. Due to the pandemic and the rapidly changing market conditions that accompany it, some businesses are currently operating below capacity and/or have struggled to pivot towards retail, away from the struggling food services industry. Only time will tell if this is a temporary or permanent change.
The domestic supply chain has always been a priority. COVID-19 has revealed vulnerabilities and has exacerbated weaknesses that will not easily be resolved post-pandemic.
For example, when an entrepreneur fails in the U.S., the old adage there is to “try, try again” and celebrate the effort, whereas when an entrepreneur fails in Canada, it's not a mark of experience but solely one of failure. We need to enhance our risk tolerance for entrepreneurs and our acceptance of those.
To achieve the goal of increasing Canadian agri-food exports from $55 billion to $75 billion, as per the Barton report, requires major transformation in the sector. The industry needs to be aligned with future market needs, to scale up where possible, and to ensure its continued viability and success through improvements in competitiveness and productivity.
The same issue—
:
Certainly, various bodies, I guess, both provincially and federally, are now openly talking about this.
Mr. John Kelly: Yes.
Mr. Alistair MacGregor: Of course, our meeting today is public and, hopefully, the retailers might be able to see the writing on the wall and we can get some action on that.
Thank you very much for those comments.
Mr. Ball, maybe I'll turn to you.
I live in British Columbia, so I'm your southern neighbour. I've had the pleasure and the opportunity to visit Yukon before. It's certainly a beautiful part of Canada. You're both very lucky to live where you live.
I wanted to hear a bit more from both of you, because you do have a large territory and a relatively small population. I thank you for your comments about how food processing may not be a huge sector but it's very important locally.
If you were to look at how our federal committee is conducting its study and the ultimate recommendations we're going to make to the federal government, could you maybe expand a little more on some of the things you would like to see our committee zero in on when we make our recommendations to the federal minister as they relate specifically to Yukon?
You know the Northwest Territories and Nunavut as well. I'm sure they have issues and concerns similar to yours.
:
Thank you for the question.
We could spend quite a long time in terms of what we need to get us supported federally. I think the one concept that is brought up now and again is the access to broadband. We do have relatively good access in some of our core communities, but it is an ongoing concern in some of the rural areas. For some of you, “rural” might be the whole of the Yukon, of course, but for us that's referring to areas mostly outside of Whitehorse and some of our cities.
We have also been looking at the option of a processing centre, an innovation-type centre, and looking for an opportunity there as to how that sort of space could be supported, but again, it really does rely on federal and territorial support to get those types of spaces built up and then operationalized as well. Also, it requires the backing of our industry that they will use these spaces, knowing that they're there to support it.
Overall, the recommendations from across the country and supporting jurisdictions, from Ontario and B.C. and so forth, and making sure we're meeting their needs, are critical, but also with a nod to the north, in that there are some special circumstances up here in terms of how we operate and our future in farming.