AGRI Committee Report

CHAPTER 3: CONCENTRATION IN THE AGRI‑FOOD SECTOR, VALUE ADDED, ORGANIC FARMING AND BIOTECHNOLOGY

Witnesses associated the themes addressed in this chapter with the government’s regulatory role in agri-food. While considering it necessary that the government establish standards and regulations in the field, witnesses nevertheless thought it should be flexible and, in certain cases, simply play the role of spectator rather than that of direct intervenor.

A. Concentration of Agri-food Businesses

In recent years, farmers have lost considerable influence both downstream and upstream from the farm. Globalization of the agricultural economy has transformed the agri‑food “chain” into an agri-food “web” and forced many businesses to merge their operations. This convergence strategy enables a business to integrate its various operations so it can better dominate or even a control a sector. Whereas a business previously could limit itself to selling agricultural inputs, it can now extend its operations right to the consumer’s plate, while carrying out non‑conventional agricultural activities such as the production of biofuels or nutraceuticals.

While the agri-food web was being rationalized, farmers remained roughly what they had always been: individual entrepreneurs, generally independent of one another, whose connections to the market were limited to a few links upstream and downstream from the farm. As the agri-food system economy has evolved, farmers have adapted their production methods and become more efficient, but have not created alliances that would have enabled them to increase their influence beyond the farm. Cooperatives and the supply management system have enabled some farmers to maintain their influence, but many are still facing declining margins. In a market as competitive as agri-food, it is not easy for a player to regain the influence he has lost. It seems clear, however, that the solution to this situation will lie in a market approach which will enable farmers to gain more from their production. Witnesses moreover informed the Committee that the challenge in agriculture is not merely to produce, but to market from the farm. For that reason:

RECOMMENDATION 13

The Committee here reiterates the importance of its other recommendation — recommendation 10 — on cooperatives and emphasizes that it is necessary for the government to be flexible and innovative. The Committee further recommends that the government support, notably through tax incentives, the new generations of cooperatives and other corporate structures owned by farmers, as well as the efforts of farmers who are developing business plans to market their own products.

B. Canadian Wheat Board

The Standing Committee cannot travel to consult Canadians without triggering discussions on the Canadian Wheat Board (CWB) as those for and against a mandatory CWB appear to share hearing time and each make valid arguments, it is often difficult to determine exactly whether one group is more right than the other.

It is still striking, however, that this debate has gone on so long. There is no other example of this kind of situation in the field of Canadian agricultural policy. Some producers who benefit from supply management may have different views on the orientations of their marketing system, but their arguments never take on the scope of those concerning the CWB.

When visiting Ontario and Quebec, the Committee observed that the grain producers of those two provinces

We can only observe that it is not healthy for the grain sector to have devoted so much energy for so long to a debate which invariably comes to a dead end. However, one emerging factor is a concern. As a result of the current transition characterized by low grain prices and producers’ loss of influence over pricing, one of the ways that could be adapted to restore more power over markets to farmers would be to increase on-farm economic activities. This path is moreover that concerned by certain recommendations made in this report. It is also part of the new vision for agriculture (see box).

Witnesses again informed the Committee that the producer direct sales process (better known as the buy-back policy) established by the CWB is not flexible enough and that it does not encourage local processing activities. The voices of organic wheat producers were also part of this debate. Organic production is considered a niche market and a good way for certain young farmers to start out in agriculture, particularly because of low production costs. However, the terms and conditions imposed on organic production are often perceived as a deterrent. Changes made over the years to improve the buy-back policy have not always put an end to criticism, which, on the contrary, is now on the increase.

In the Committee’s view, the Agricultural Policy Framework affords interested parties an excellent opportunity to innovate and experiment with new avenues. Consequently:

RECOMMENDATION 14

Whereas additional on-farm activities and local value-added processing are an excellent way to give farmers more influence in pricing, the Committee recommends that the board of directors of the Canadian Wheat Board authorize, on a trial basis, a free market for the sale of wheat and barley, and that it report to this Committee on the subject.

C. Value Added: From Traditional Farming to the Life Sciences

Canada’s new agricultural strategy is based to a large degree on value added, and the Standing Committee’s meetings show that a number of players in the agri-food sector support this approach. The Committee was able to visit the Food Research and Development Centre in Saint-Hyacinthe, which enables entrepreneurs to develop higher value-added products quickly and profitably. The Centre offers a library service, access to information service and a commercial pilot facility rental service, which are powerful levers for innovating and creating products.

As defined by the vast majority of agri‑food sector stakeholders, creating value added embraces every means by which farmers can secure a larger share of consumer spending in this area. This definition thus includes direct sales and on-farm processing, the production of products specific to niche markets, and involvement in transportation or processing industries. Farmers and other agri‑food sector participants displayed considerable interest and frustration in this regard. The initiatives of farmers and entrepreneurs are too often blocked by government or bureaucratic meddling. Witnesses emphasized that the government’s role has a number of facets, including being simply less present at times.

Value added, which is the component of knowledge-based products, is a concept that embraces a host of economic activities, some of which, such as the life sciences, for example, are new. All issues relating to biotechnology, new foods, nutraceuticals and the agricultural production of non-food products such as biofuel will require the government to think in new ways, just as they have made it necessary to adopt new marketing strategies. Biofuel production is an economic activity the cascading repercussions of which are highly promising for the agricultural production sector. Governments will thus have to think about developing a better renewable energy policy. Consequently:

RECOMMENDATION 15

As a result of the many positive effects that renewable fuels may have on agriculture and the environment, the Committee recommends that the government establish a comprehensive policy in this field and support its development, particularly through tax incentives.

D. Biotechnology in Agriculture

Although it has its detractors, biotechnology is a way of the future for agriculture. Biotechnological applications for farm production, particularly in the grains and oilseeds sector, are relatively recent, and it is thus entirely natural —  and healthy — for the present debate to be taking place. Governments, consumers, farmers and private and public sector scientists must engage in a process of consultation and dialogue. At a time when the very definition of genetically modified products varies from individual to individual and from one country to the next, consultations such as those conducted by the Committee across Canada and those the Standing Committee held in Ottawa specifically on the labelling of genetically modified food and its impacts on farmers¹ are still the best tools for informing people, demystifying the question and determining the direction biotechnology will take. Some groups called for a moratorium on the development of new bioengineered products, but most witnesses were in favour of dialogue and better dissemination of information in the field.

Furthermore, the Canadian Wheat Board reiterated its recommendation on bioengineered wheat and barley before the Committee: approvals of those two grains in Canada should not be authorized unless markets require and accept them. To the extent everyone acknowledges that it is ultimately the consumer who decides and that producers are now more than ever attentive to market signals, this policy seems trivial. Citing canola as an example, the Alberta Association of Canola Producers told the Committee that, contrary to certain beliefs, Canada has not lost markets as a result of the production of bioengineered canola. Although it appears to be more accurate to say that producers have lost “sales” rather than markets, it must be acknowledged that Canadian producers are adjusting to demand from buyers, particularly in Japan, some of whom demand conventional canola, others not. Canola, bioengineered or otherwise, thus essentially remains subject to free market conditions.

The chapters of this report on the environment and R&D address specific biotechnology issues that were raised during the Standing Committee’s cross-Canada meetings.

E. Organic Farming

Organic farming is part of the arsenal of a group of farmers taking aim at market niches. Some would like Canada’s agricultural policy to take a resolute step toward organic farming, but, in the minds of others, organic farming is a value-added activity which also has a positive impact on the environment. Organic farming does not compete with conventional agriculture, but rather complements it. This is an expanding sector because the market is stimulated by the demand of customers requiring this type of product. Because it requires fewer inputs, is generally carried out on a smaller scale than conventional farming and appears to generate good income, organic farming may in some instances be a promising alternative for young farmers wishing to establish themselves. The major problem facing this type of farming is typical of non-traditional sectors, that is to say the development of a vision for its growth and development.

In the United States and the countries of the European Union (EU), there is a mandatory minimum standard for organic agriculture. Those countries also require that certifying organizations meet the provisions of ISO Guide 65, an international standard defining correct certification practices. Starting in 2005, every country wishing to export to the EU will have to have adopted a national organic farming standard and a certification process deemed equivalent to those of the EU.

The national organic farming standard developed at the Canadian General Standards Board was published in 1999. It is a consensus document that serves as a guideline for certification agencies and is not a mandatory minimum standard for organic production in Canada. There are more than 40 organic product certification agencies in the country, and each uses its own standard. Some provinces such as Quebec have thus regulated the industry and impose a mandatory minimum standard to maintain the integrity of the "organic" designation and to prevent consumer confusion. Some feel that the absence of a mandatory minimum national standard for organic production undermines the industry’s credibility among consumers in Canada and in international markets.

The federal government is also involved in a program to assist certification agencies that so wish in obtaining Canadian Standards Board certification. Organic product certification agencies certified before the end of March 2003 will be able to claim up to 50% of their accreditation expenses to a maximum of $25,000. Accreditation guarantees that the certifying agency meets:

This accreditation system must enable organic farmers certified by accredited agencies better access to certain export markets. However, it is considered expensive for certification agencies which are often owned and managed by the organic farmers themselves. Since the program started in June 2001, only two certification agencies have applied to the Canadian Standards Board for accreditation. Furthermore, many fear this system does not meet the requirements of certain markets, particularly that of the European Union.

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In view of the requirements of the main organic products export markets, the Committee recommends that the government and the organic sector move to establish a mandatory minimum standard for organic farming and an affordable accreditation system for certifying agencies.

Furthermore, since organic farming complements conventional agriculture, the government should develop a research strategy specifically to meet organic farmers’ needs.

Establishing a minimum standard would undoubtedly provide a practical tool for marketing organic products, but this sector is still coping with a more fundamental problem which constitutes a major challenge for its survival: the issue of crop contamination through cross-pollinization between organic crops and those produced by bio-engineered seedlings, an issue that was raised on a number of occasions. It is imperative that buffer zones be established permitting organic certification, but this has proved problematical in certain agricultural regions. Some witnesses suggested that agricultural regions reserved for organic production be created in the provinces. However, this approach seems quite unfeasible, indeed even impossible. For example, the transportation of grains over long distances constitutes a crop contamination vector which could even affect protected regions. Solutions to this problem are not clear, but the right to produce organically must nevertheless be respected in the same way as the right to produce in the conventional manner. One of the best solutions to facilitating the cohabitation of both methods appears to reside in research and innovation specifically based on this problem.