I call the meeting to order.
This is meeting number 26 of the Standing Committee on International Trade. Today's meeting is taking place in a hybrid format, pursuant to the House order of June 23. Members are attending in person in the room and remotely, using the Zoom application.
I need to make a few comments for the benefit of the witnesses and members.
Please wait until I recognize you by name before speaking. When speaking, please speak slowly and clearly.
For those participating by video conference, click on the microphone icon to activate your mike. Please mute it when you are not speaking.
With regard to interpretation, for those on Zoom, you have the choice at the bottom of your screen of “floor”, “English” or “French”. For those in the room, you can use the earpiece and select the desired channel.
I would remind you that all comments should be addressed through the chair. For members in the room, if you wish to speak, please raise your hand. For members on Zoom, please use the “raise hand” function. The clerk and I will manage the speaking order as best we can, and we appreciate your patience and understanding in this regard.
Should any technical challenges arise, please let me know. We may need to suspend for a few minutes to ensure that all members are able to participate fully.
Pursuant to Standing Order 108(2) and the motion adopted by the committee on March 21, the committee is resuming its study on trade opportunities for Canadian businesses in the Indo-Pacific.
We have with us today by video conference Raphael Gaudreault, chief operating officer of Arianne Phosphate Inc., and Brendan Byrne, chairman of the Grain Farmers of Ontario. In person, from Soy Canada, we have Brian Innes, executive director. Welcome to all of you.
We will start with opening remarks and then proceed to rounds of questions.
Mr. Gaudreault, would you like to start with an opening statement of five minutes?
Thank you, Madam Chair.
Arianne Phosphate is a mining company headquartered in Chicoutimi which is launching a phosphate production project in Saguenay—Lac-Saint-Jean. Arianne Phosphate owns a phosphate deposit in Lac à Paul, a fully approved project that is ready to build, 200 km to the north of the city of Saguenay.
The asset is one of the largest undeveloped deposits in the world and capable of producing environmentally friendly phosphate concentrate. Owing to its purity and low level of contaminants, the Arianne company's phosphate can be used to produce fertilizer and specialized applications like food, animal feed and lithium iron phosphate batteries.
We are planning to build an open pit mine, an ore processing plant, and a deepwater port, in addition to leveling 240 km of forest roads to ship our annual three million tons of phosphate concentrate. When fully operational, the business would require approximately 375 employees.
Phosphorus is a key element in agriculture, and because nothing can be substituted for it, it is indispensable for crop development. It promotes root development and enhances resistance to drought. Recent disruptions in the world food chain resulting from quotas on exports from China and Russia have been aggravated by the situation in Ukraine. As a result, the selling price has increased considerably, and some countries, like India, have had to review their supply strategies.
Canada has not been a phosphate producing country since 2013, when Agrium, now called Nutrien, closed the mine in Kapuskasing, Ontario. We are therefore now 100% dependent on imports, mainly from the United States, which itself is a net importer. The economic performance of Canada's prairie provinces is now dependent on our capacity to obtain supplies of phosphate from overseas, even though the product is one for which Canada should be a net exporter.
There are potential clients for Arianne Phosphate around the world. The Indo-Pacific sector is particularly interesting, because it is a steadily growing market for phosphate product imports, whether for use in the traditional fertilizer or technological applications like the manufacturing of batteries for the electrification of transportation.
That being the case, the current study being conducted by the committee on trade opportunities in the ASEAN countries is very important for Canada's phosphate industry and for Arianne Phosphate. It's an opportunity for Canada to play an international role with a with a future-oriented product that addresses global needs: the use of fertilizer to enhance food productivity, and the development of lithium iron phosphate batteries for the global energy transition.
Although phosphorus is an abundant element on Earth, its geographical distribution makes it very vulnerable in terms of supply security, given that world reserves are mainly concentrated in North Africa and China.
The quality of the concentrates produced in these countries is also much lower than for those in Canada. The origin of our phosphate is igneous rather than sedimentary, making it possible to achieve a concentrate that has a much higher level of purity and that is virtually free of heavy metals or radioactive elements. This is very important for its use in fertilizer, and even more so for battery manufacturing, a subject that was studied by the committee last winter. Indeed, only a limited percentage of world phosphate reserves is suitable for the production of phosphoric acid that meets the technical specifications of battery manufacturers.
Canada has a role to play in solidifying its strategic advantage in phosphorus. It's disappointing to see that this metal of the future is not included in Canada’s Critical Minerals Strategy. The government is also relying heavily on mining exploration, but few mining projects are underway in Canada. There are various reasons for this, including the lengthy time periods required and strict regulations, not to mention the lack of support for mining infrastructure development.
If Canada hopes to grow its expertise and export opportunities with the ASEAN countries to meet growing demand, including for phosphate, then government policies need to be in tune with the needs of the mining companies, including ours.
We applaud a future free trade agreement with the ASEAN countries, and believe that it is an opportunity for our industry that should not be missed. We simply hope that the government will be there to implement policies that are favourable to the future development of our sector.
My name is Brendan Byrne, and I am the chair of the Grain Farmers of Ontario. I farm corn, wheat and soybeans in Essex, close to Windsor.
Thank you for inviting me to join you today to talk about the Indo-Pacific trade opportunities and what they will mean for grain farmers in Ontario.
We support efforts to expand Canadian export opportunities in this area. New markets help farmers manage market volatility risks. Right now, we are in a volatile commodity market.
To start, I would like to tell you about the Grain Farmers of Ontario. We represent the grains and oilseed industry in Ontario.
When many people think of Canada's farmers, they don't realize the unique qualities of the farms east of Manitoba and the contribution of Ontario's commodities to Canadian exports. Grain Farmers of Ontario represents 28,000 farmers from across the province, from Windsor to the Quebec border and as far up as Thunder Bay. Ontario grain covers six million acres, and our farmer members grow a rotation of crops, including soybeans, corn, wheat, oats and barley.
Our main export crop is soybeans. Over 70% of the soybeans we grow are destined for countries outside of Canada. Exports include both commodity beans used to feed livestock and specialty soybeans used to make tofu and natto beans. These are a staple in many of the countries in the Indo-Pacific region.
The soybeans grown in Ontario are some of the world's most sought after. We are a dependable supplier that countries can rely on. Specialty soybeans grown in Ontario are unique. Ontario farmers are able to produce exceptional quality food-grade soybean on their farms because of summer weather in Ontario. Hot humid summers and the cool nights created by the Great Lakes make a perfect soybean for specialty markets that are in high demand in the region of the Indo-Pacific.
Over the last few years, thanks to advancements in innovative farming techniques and seed technologies, the yields we have achieved on our cornfields have increased significantly. We have enjoyed an increase in new market opportunities created through Canada's new trade agreements.
Canada has gone from being a net importer of corn to a corn exporter in just the last 10 years. The opportunity for growth will continue as we achieve higher yields on the same amount of land.
However, our exports are not just in our crops. There is an opportunity for the value-added exports from renewable fuel made from soybeans and corn. Canada's livestock exports depend on our crops for feed as well.
The grains and oilseed farmers and the Ontario grain industry that is created from our crops contribute $18 billion to the Ontario economy. We have a strong domestic value and industry and export business. The grains industry in Ontario creates 75,000 jobs.
I am proud to be a part of this industry, not just because of our significant economic contribution, but also because, as farmers, we take seriously our responsibility to protect the environment. Ontario's grain farmers are committed to preserving biodiversity in the areas where they farm, including protecting the local soil and waterways that keep our fields healthy, our food safe and our communities sustainable.
Quite simply, trade [Technical difficulty—Editor].
I've come out of our field today. We're ready to take some soybeans off. They're ready to harvest. The beans are ready to go to the local elevator to be shipped to export markets around the world.
Today I'm feeling confident because we have good prices, but it's been a very stressful year. Every year we need to manage risks—the weather and the markets—but the extreme market conditions we experienced this spring are something that I've not seen in my lifetime. Many producers across the province have stated the same.
The cost to produce this year's crop was higher than we've ever experienced. Fertilizer is one part of that price: Shortages were real, right up to the time of planting. Retailers were rationing fertilizer because shipments were blocked by sanctions put in place in Canada. This year, Ontario farmers paid 238% more than they did in the spring of 2020. A few years ago, before the pandemic, we had good prices, but then they dropped because, for political reasons, China decided to stop imports on soybeans directly from Canada. The drop was drastic. Soybean exports to China went from $1.7 billion in 2018 to $33 million in 2019. With today's prices on fertilizer, fuel, transportation and seed, if the same drop were to happen again here, it would be devastating for Ontario farmers.
We need to have more customers around the world and in this region so that we're not vulnerable to these types of political decisions made by one country on our exports. To us, the Indo-Pacific represents a growing market for farmers. Farmers face a lot of risks when growing a crop, and market diversity is one risk management strategy that we can count on. We support any efforts to develop more market opportunities in this region and are thankful to be here to express that.
Thank you very much.
Thank you very much, Madam Chair.
Thank you to the committee for the opportunity to be here. I'm here representing the soybean value chain. This includes our farmers across the country, our seed developers, our processors and our exporters. We have a diverse industry from the Atlantic Ocean to the Rocky Mountains, and it includes farmers like Brendan.
Soybeans are the third most valuable crop here in Canada, with exports around $3 billion in 2021. We produce world-leading food-grade soybeans, as Brendan explained, for things like soy milk and tofu as well as commodity beans that are crushed into meal for livestock as well as oil for humans and oil for biofuel.
With more than 70% of our production exported, we're very focused on global markets. We appreciate your attention to the Indo-Pacific, because it's a really important growth opportunity for us. Before I describe the most important ways we can increase growth in trade, I'd like to share why we see it as such an important opportunity.
From a soybean perspective, the Indo-Pacific is the heartbeat of global soybean demand. Take the ASEAN region as an example. It imports approximately $9.1 billion of soybeans each year. Our Canadian exports are worth about $380 million to this region. There's a lot of opportunity for us to grow market share. At the same time, demand is growing significantly for our products in these regions.
For example, looking at the Philippines and the annual growth rate for soybeans used for food purposes, the growth rate has been approximately 12% every year over the last five years. It's a large market and a growing market for us. For all of us, the question facing us today is how we can take advantage of this demand to increase the growth opportunities. For us, it means better access to these markets, and to do that we need three things.
First, we need to eliminate tariffs and establish ongoing regulatory co-operation on plant, animal and environmental health issues through our trade agreement negotiations with Indonesia. Eliminating tariffs would be really helpful for us, because we face uncertainty. Should Indonesia decide to, they could raise tariffs on our products up to 27%. But eliminating tariffs is not enough. We also need to address non-tariff issues like sanitary and phytosanitary issues or other barriers to trade related to regulations. These issues can appear suddenly. They can create costs and create risks, and can even stop our exports.
In conversation with government last week, I asked when the last time was that we had regulator-to-regulator interaction between Canada and Indonesia. The answer...? I'm still waiting to hear it too.
Secondly, we need to secure access to India for our food-grade soybeans. Increasing food-grade exports to India is a real opportunity for growth, given the size of that economy and the growing demand for our products. Currently, we face tariffs of 45% on our soybeans going to India. The tariffs are also very unpredictable. They could be changed, at a moment's notice, up to 100%.
Our soybean trade with India is actually quite interesting. We import a lot of organic soybeans from India that come into Canada without a tariff. While we as Canadians face really high tariffs exporting our soybeans into India, Indian soybeans come into Canada tariff-free. It's also interesting, because other countries can export to India without the tariffs that we face. That has caused us to not be able to take advantage of opportunities in India. Recently, our food-grade soybeans were trading at a $100-per-tonne premium into India, or the opportunity was there, but because India could source without a tariff from other origins, we ended up selling those soybeans elsewhere.
The third thing we need to do is invest in industry-government collaboration to proactively prevent non-tariff issues throughout the ASEAN and Asia-Pacific and Indo-Pacific regions. Increased collaboration and investment would reduce risks and costs while helping to enable innovation on Canadian farms.
I will give you two examples of how this is hurting us and how it could be made better. The first example is in Vietnam, where we are unable to export our soybeans in bulk. While beans produced just steps away, in some cases, in the United States can be exported in bulk vessels to Vietnam, we are not able to do that because of concerns around sanitary and phytosanitary issues.
Secondly, when it comes to regulation of seed and crop protection technologies, throughout the regions, regulations are evolving. The result that ends up happening is that as regulations evolve, they may not evolve in the same way that they are evolving in Canada. Technology for new seeds and new crop protection products may be approved here but not in our export markets. That means we can't use them until they're approved.
Thank you very much, Madam Chair.
Thank you to all of the witnesses. It has been very informative.
I'm going to start with Mr. Byrne from the Grain Farmers of Ontario.
I note that you observed that we've gone from being a grain importer over the last 10 years to now being a grain exporter, which is terrific news, and it demonstrates the importance of diversifying our trade and pursuing further trade arrangements around the planet, including with less traditional partners. That is really important.
I also note that you indicated that notwithstanding the important work that you and all of your members are doing as grain farmers in Essex and around Ontario, you have never before seen extreme weather conditions of the type you've seen this year, which, to my mind, just underscores the importance of addressing climate change and addressing it aggressively because it affects all of us whether we're individual residents or running massive farming operations.
In terms of the question for you, Mr. Byrne, you commented about China and what had happened over the past few years with that trading relationship, and you emphasized the importance of exploring different markets and opening up new markets and volunteered your assistance in that regard. Among the ASEAN group—we're talking the Indo-Pacific and more broadly ASEAN—are there specific nations you'd identify? I draw your attention to the fact that the speaker just after Mr. Innes was talking about Vietnam and Indonesia. Can you target us toward a few different nations that you think would be particularly attractive for us to be pursuing initiatives on with respect to freer trade, particularly in grains?
Could I turn to Mr. Gaudreault?
Your testimony was really fascinating, in keeping with your experience and your point of view. Thank you very much.
Mr. Gaudreault, you commented on this issue with respect to not just traditional fertilizer uses of phosphate but also obviously with respect to electric vehicle battery production, and I wonder if you could comment on this. Last year we spent some time specifically on combatting the Build Back Better Act and some of the potentially punitive aspects that would have applied to vehicle battery production here in Canada had it not been scaled back, and we saw that Build Back Better has been scaled back and now we're looking at the U.S. Inflation Reduction Act.
Could you comment upon that turn of events, how that impacts an industry like yours and where you see phosphate in terms of the future of battery production for electric vehicles in this country so that we can aid the move toward electrical vehicles both in North America and around the planet?
I'll say very briefly, Monsieur Gaudreault, that you've been well heard with respect to the critical minerals list. I will take that information back to the team in the minister's office.
Mr. Innes, I would indicate to you that having more regulatory conversations between the nations working on these trade agreements is something we're actively pursuing, particularly on sanitary and phytosanitary standards.
Thank you, all, for your evidence today.
Thank you for the question.
For food grade soybeans, the greatest demand, which is currently growing, is definitely in the Indo-Pacific region. Whether in Indonesia, Vietnam, Japan or South Korea, soy-based products are in very high demand in all these countries, as are tofu and soy milk.
Much of our soybean exports to Indonesia for example, is used to make soy milk. It's therefore safe to say that this region is central to international demand for soybeans, particularly for our identity-preserved or IP soybeans, which are produced in Quebec by Prograin, Ceresco, and other companies that export to Asia and the Indo-Pacific region.
In the world of soybeans, soybeans are the number one agri-food export from the United States into Canada—soybeans and their products—so while we're a major exporter to the globe, we're actually also a major importer of things like soybean meal from the United States, just based on the significant back-and-forth trade that happens—
An hon. member: Like our cars.
Mr. Brian Innes: Like our cars, yes, and like processing facilities in Windsor and across the border in Michigan. Farmers like Brendan can often have the opportunity to sell to the United States as well.
If we look at the trade between the North American partners, we don't export a lot of soybeans to the U.S., if at all. It really depends on market conditions, and Mexico is not an important market for us. It's served significantly by the Americans. They have a much larger soybean production, and it would be a bit like selling ice to the Eskimos, so to speak.
I thank you for the question. We're very much part of an integrated economy.
I'll go back to Brian.
Soybeans are the third most important food crop in Indonesia after rice and maize. The demand for soybean consumption tends to increase annually. In 2020 the figure was about 3.28 million tonnes, while the domestic production was 0.63 million tonnes. Thus, about 83% of the soybean needed was imported.
Can you tell the members of the committee what the cause of this annual increase is, in your opinion, and how Canadian soybean contributes to meeting the Indonesian demand for soybean? Also, do you believe the world trend will continue?
Thank you to all the witnesses. I suppose maybe we should have this meeting in Essex today, because if we're talking about Harrow, we're talking about Essex and we're talking about batteries. It's been a really fantastic meeting that's been full a lot of information so far.
Monsieur Gaudreault, I will not be able to get to you in my line of questioning, but if you would please reach out to my office, sir, I would love to have a conversation with you with regard to batteries.
Madam Chair, farmers feed cities. We see those signs right across Essex. Everybody knows that. It's not only Canadian cities. We now have an opportunity for trade.
Mr. Byrne, I just want to let you know that I got home late last night and woke up this morning to my soybean field: It's now turning. Before very long, my yield will be part of this conversation as well.
Just recently I visited ADM. For those who don't know, ADM is a crushing plant and then an export plant in the LaSalle-Windsor area. That's where freighters and trains come and do a bunch of exporting from. Generally speaking, I'm pretty well versed on this site.
Just as a point of interest, the shadow minister for agriculture, John Barlow, will be in Essex on Saturday. I'll be having a conversation with him as well on a lot of these various fronts. There are a lot of things in the mix right now.
Specifically, Madam Chair, through you to Mr. Byrne, I understand the costs. I understand the price of grain. I understand the price of fuel. By the way, I understand the lack of fertilizer and then the price of fertilizer, if you can even find it. In the last session of Parliament, Mr. Lawrence brought forward a private member's bill to take the tax off gas to dry our grains. I believe Mr. Lobb will be introducing that very shortly. Is that something that would help farmers to invest more and have more grain going forward?
I think that in general anytime a farmer can invest in his own operation versus sending the money out to the government side it's a positive on our end.
In this case, a lot of people are doing exactly the same thing they would be doing on their farms to dry their grain, but they're having to send out cheques of $8,000, $10,000 or $20,000 to dry it down, and, as you would know, we don't have a reliable source that we could change to. Usually some of these pieces come into play to enact change, but there's nothing currently reliable that we can switch to from natural gas and propane. We certainly look forward to that private member's bill continuing and we hope that it will pass.
Chair, through you, I'd like to go back to Mr. Byrne, please.
Maybe less than a couple of weeks ago, I was fortunate enough to address the Essex County Federation of Agriculture, and they certainly had a lot of concerns with regard to the fertilizer side of things. I asked them, “If we give you some relief, how much more capacity does Ontario have specifically?” I'm wondering, when I say capacity, if we gave the proper relief to the farmers, how much more could Ontario export? Are there any numbers for that, sir?
Okay. I'm sorry about that.
Anytime we're using less fertilizer because it costs more or because there is a tariff being applied to it, that is going to directly affect food production, because farmers are going to make decisions based on the amount they can put into the crop with the expectation of the return, knowing full well that they are at the mercy of the weather.
We certainly hope tariff relief comes. We'd like to see the tariff removed—we're the only G7 nation that has enacted that—so that we can provide as much food production as possible, not only for Ontario and Canada, but also for those areas around the world, especially in and around Ukraine, where we could maybe help out. It's certainly going to be needed.
Thank you, Madam Chair.
Thank you to all the witnesses attending today.
I'd like to, through the chair, direct my question to Mr. Gaudreault.
Further to the question Mr. Virani asked earlier, global demand for phosphate is increasing at a rate of 2% to 3% each year, indicating a phosphate production requirement of four to six million tonnes per year.
What other uses of phosphate beyond EVs and fertilizers are contributing to the growing demand?
Maybe I'll start and then Brendan can add his perspective as well.
When we look at our soybean sector, we're really export focused, and so access to the Indo-Pacific is about accessing growing demand to grow our exports but it is also very importantly about having options, and about having diversity.
I'll let Brendan elaborate on what he said in his opening remarks on the impact of instabilities when there's a problem in one market and you can't sell there, or you have difficulties selling there, and what happens on the producer side when that happens. However, from an industry perspective, we want to have as many options as possible, as many open channels, if you will, because that helps us have growth but also helps us have diversity when challenges come up.
I would probably look to Mr. Innes for that last part in terms of our largest competitors.
I'd say that it's probably 35 years ago or so when my family—my uncle and cousin—went on a trade mission to Japan, which was looking at our identity preserved soybeans. Even at that time, they were known as the best in the world. When you were looking for identity preserved food-grade soybeans, you looked to Ontario.
We've continued that all the way through, including pieces on sustainability and on making sure that everybody knows exactly what has been put into that crop. I can't speak to the growing regions in those other areas, but I know that the soybeans grown here in Ontario are perceived as a very high-quality crop around the world.
Thank you, Madam Chair.
Thank you to all the witnesses for being here.
When this committee was looking at trade with regard to Canada and the U.K., I know that one recommendation we heard at the time was to put a chapter on small business into trade agreements. This chapter would enhance the ability of SMEs to benefit from trade agreements through things such as information sharing.
Would having SME-focused measures in trade agreements in the Indo-Pacific benefit your organizations?
I'd like to ask all three of our witnesses here that question. Maybe we'll start with Mr. Innes.
I'll start, but I certainly want to hear from the ground, from Brendan as well.
When it comes to soybean varieties, they're very sensitive to the amount of heat, so we need to continue to invest in varieties that fit the geographic conditions we have; our temperatures are getting warmer, which is generally a good thing for what we're able to grow, both in eastern and western Canada. Also, they need to be able to withstand periods of prolonged lack of moisture or drought and to be able to take more extremes, whether they be cooler temperatures in the spring or hotter temperatures in the summer.
Brendan, I'm sure that on the ground you can add to that.
Thanks again to the presenters for this important discussion.
Interestingly enough, there's a gentleman from Sault Ste. Marie, Gerry Fowler, from Manna International, who is a broker that does organic soybeans. He represents a number of farmers in southern Ontario and mainly ships into Europe. He and I have discussed the industry. One of his concerns—not tariff related—is shipping containers and the shortage thereof.
Brian, and perhaps the other speaker, could you update us on what's happening with the shipping containers and shipping? That's one piece of the question.
Further on, where are you guys shipping to? Which ports are you entering into and distributing to in the Indo-Pacific region? I'd be interested to know. The sub-question or thought on that is about the South China Sea. We see certain security concerns from our friends and allies, such as Japan, with some of the claims that China makes in certain areas. Are there any concerns and what do you do to deal with those issues in the South China Sea?
Thank you very much for the question on containers. Containers are really important for our ability to export. In fact, almost all of our food-grade soybeans are exported in containers and, of all the grains in Canada, soybeans are the greatest users of containers for export. About 40,000 containers of soybeans are exported from Canada every year. They're loaded in places like just south of Montreal and farms near Essex, all across the country, including in the Prairies and even in the north.
What we see is that what's happening in the container system is a concentration of market power, which is giving us poor service and discriminated rates here in Canada. What we see is that relative to our competitors—in the earlier question about what our American competitors are facing—our shippers continue to have a really hard time getting competitive service and competitive rates for containers to ship our soybeans.
It's a challenge for us and it's a real challenge on the ground for farmers like Brendan, who are about to harvest their soybeans this year, because we still haven't shipped last year's crop. There's a limited amount of storage available for our soybeans. Thankfully, we're looking for a good crop this year, but that challenge of poor service means that our shipments have backed up and we haven't kept up with what we'd like to export.
Our container shipments go through Montreal and they go through Vancouver and Prince Rupert, so we utilize the ports both east and west for soybeans. It's a critical part of our competitiveness. They're an important link to get food from places that can grow it, like Canada, to people who consume it right around the world.
Unfortunately, it's not just about COVID and supply chains. It's about the concentration of market power, which is really hurting our small and medium-sized enterprises.
Mr. Lewis might be able to attest that some of our rural Internet outside of Essex is not the greatest. I apologize for that.
When the shipping containers or that logjam happens and farmers are unable to get the crop off and delivered in a timely fashion, it can delay harvest and cause some of these other stresses. We already have a mental health crisis on the farm side, as well, that we're trying to tend to.
With any pieces like this, we want to make sure that the containers are available, so that when the farmers harvest, the delivery ports we would use are available to take the seed—because they've already had access and were able to ship out last year's crop, as I said—and not hold it while this year's is coming off.