:
Thank you and good morning, Mr. Chair.
Good morning to all committee members. Thank you for the invitation to appear before the committee today. I want to start with a brief introduction to our organization.
Pulse Canada is the national industry group that represents farmers, processors, and exporters of pulse crops in Canada. Canada is the world's largest exporter of pulses, accounting for 37% of global trade. We export pulse crops like peas, beans, lentils, and chickpeas to more than 150 countries, and we continue to grow.
Canadian farmers grew more than 4.6 million tonnes of peas in 2016, which is an increase of 44% from the previous year, and 3.2 million tonnes of lentils, which is an increase of 36% from 2015.
Many of you know that the United Nations declared 2016 the International Year of Pulses. As a result of the work of a global pulse team, to date there have been more than 2.85 billion media impressions generated in an effort to inform consumers and the food industry on the nutritional value of pulses, their contribution to important health issues such as diabetes and cardiovascular disease, and the increasingly important role that pulses can play to improve the environmental footprint associated with food.
Pulses are becoming much more than a trend with consumers, and interest continues to grow as we near the end of our international year. The food industry is already acting with new product launches and launches of reformulated foods that boast higher protein and fibre levels on the fronts of packages. The reformulation of food with nutritious ingredients that have a smaller environmental footprint will become increasingly important, and should be a cornerstone of Canadian and global approaches to improving human and planetary health.
It is important to note that the success the pulse industry is experiencing today has ties to an important partnership with Agriculture and Agri-Food Canada that dates back over 20 years. The pulse industry in Canada has been a partner in developing projects and delivering results from the onset of programs offered under agriculture policy frameworks. This industry-government partnership has been highly effective in fostering economic growth and building Canada's pulse sector into a global leader in pulse production and exports. It has also enabled the pulse sector to become a leader in cross-sectoral, multi-commodity initiatives within Canada to address such issues as transportation, market access, and sustainability, which impact the entire sector.
The next policy framework agreement, as outlined in the Calgary Statement, can build on the lessons and successes of past frameworks. Industry and government collaboration can ensure that framework policies and programs enhance private sector initiatives to create sustainable growth, innovation, and competitiveness for all stakeholders.
I'd like to begin by putting forward some views on the importance of investing in continuous improvement and transformational innovation.
The pulse industry welcomes the Calgary Statement as a framework to support sector strength and competitiveness and to foster transformational innovation. Canadians must do more than just react and adapt to change: we must create and capture the opportunities of the future.
The policies and programs of the next policy framework will need to recognize the difference between incremental growth and efficiency and transformational innovation. Elements of programs—including eligibility criteria, desired outcomes, and evaluation of success—need to recognize that by definition, innovative approaches will be different from activities focused on strengthening an existing business model.
Much of what the pulse industry identifies as priorities under markets and trade require investment into continuous improvement. The ongoing competitiveness of Canada's agrifood sector requires that a range of products destined for more than 150 countries around the world be moved in an efficient and predictable manner. Customers in every market need to know that the quantity and quality of product that has been purchased will be delivered within the delivery period specified in the contract. Reliable transportation remains a top priority.
To fully utilize market access and new trade opportunities, Canada must remain focused on continuous improvement in domestic transportation. The next policy framework must continue to support efforts that focus on improving the performance of Canada's transportation system as a key element of fostering growth in Canada's export sector.
Access to international markets is critical for continued profitability and growth. With increasing success in addressing tariff barriers through bilateral free trade agreements, non-tariff barriers are the key obstacles to capitalizing on market opportunities.
An emerging access obstacle for agriculture is the fact that neither the process nor the timing of maximum residue limit establishment is synchronized between regulators like the Codex Alimentarius at the international level, the European Food Safety Authority, and regional groups like PMRA here in Canada and the EPA in the United States. Rather than seeing a strengthening of alignment at the international level, we see more national approaches, with several key countries moving away from Codex to establish their own national systems.
Recent examples include China, South Korea, Hong Kong, Turkey, and Taiwan. Now India, Mexico, and the UAE and others are also issuing national MRLs.
Pulse Canada and its partners across the agriculture sector strongly support an expansion of efforts under the next policy framework to identify and manage this specific category of trade vulnerabilities. There is a need to quantify and build data on the growing extent of misalignment of MRLs in order to more precisely identify and manage specific risks. Reliable data will assist in management of vulnerabilities and corrective action, as well as development of common positions within grower and community groups internationally on the need for predictable, science-based international standards and trade rules.
The Canadian agriculture industry must also continue to improve its efforts to build capacity to respond to market demands for sustainable products from the food industry and other markets. Market demands for sustainable agriculture products are diverse and have varying requirements for assurance. The next policy framework should continue to support the Canadian agriculture industry as it develops a science-based, robust, flexible approach that is aligned with market requirements and leverages existing programs and tools where appropriate.
Food's role in contributing to climate change is an important consideration for everyone. However, a critical question is whether the obligation is on the consumer to change consumption behaviour to reduce the impact of diet on sustainability indicators like greenhouse gas emissions, or whether this must fall solely on the shoulders of the farm and agrifood sector. The pulse sector strongly supports a shift in thinking to emphasize a dietary approach to healthy people and a healthy planet. Market-driven approaches will provide the right incentives to keep Canadian agrifood competitive in global markets.
Value-added processing is another focus area where investment into continuous improvement will generate returns. The addition of value in Canada, including all types of processing—cleaning, splitting, bagging, or processing into consumer food products—adds jobs and market stability. The food manufacturing industry continues to be highly interested in offering products with improved nutritional quality and health benefits to meet consumer demands. Canadian grains, oilseeds, and pulses are well positioned to take advantage of these opportunities. The next policy framework can continue to support ingredient processing that improves the nutritional value and health potential of ingredients in food products.
The next policy framework can also set Canada apart on the world stage by fostering transformational innovation in food. Pulse Canada believes that Canada can differentiate its food system by strengthening the connection between food, human health, and environmental health, while simultaneously enhancing the profitability of the agriculture sector and the food industry.
Investments in transformational innovation are focused on creating opportunity through new offerings. Compared to those focused on incremental improvement, investments in transformational innovation are intended to create a novel product or service, and thus are inherently more risky for all stakeholders within the agrifood value chain. Without the benefit of knowing the full economic value of the investment in innovation in advance, measurement of success must include assessment of potential value. In these cases, measuring what you can learn can be more important than what you earn in early stages.
Investments in transformational innovation are closely linked to the next policy framework themes of risk management, environmental sustainability, climate change, and value-added agriculture and agrifood processing.
For example, a focus on sustainable food would be transformational innovation that addresses socially important issues and priorities of the next policy framework. In this context, sustainability includes human health, environmental health, and economic health. Nutritious food can deliver health outcomes. Nutritious food can also deliver environmental outcomes through reformulation and by keying on dietary footprints. Nutritious and sustainable food can deliver economic outcomes by recognizing the need for all players in the agrifood system to be profitable while also ensuring affordable food for consumers.
Putting food in front of consumers that delivers health, environmental, and economic outcomes requires forward-looking research that goes beyond existing programs. With this in mind, the next policy framework must be open to novel approaches to thinking about solutions that build the resilience and growth prospects for the medium and long terms.
In sum, the right policy framework will deliver programming that builds on success and supports continuous improvement and programming that recognizes the importance of creating future opportunities through transformational innovation.
Thank you.
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The Calgary Statement outlined six overarching objectives for the next framework. All are critical to the future of our industry. I will touch on how a few of these areas can support our sector.
The produce industry is a unique entity. This important economic engine is made up of rural, provincial, national, and multinational companies, all working together to increase the consumption of fruit and vegetables.
We make an important contribution to national economic output and employment. In 2013, the fresh fruit and vegetable sector supported over 147,000 jobs, created $11.4 billion in real GDP, and contributed $1.3 billion in personal income tax and $840 million in corporate taxes—yet significant potential for growth still exists. This growth will be fostered by many factors, including access to markets, effective regulatory frameworks, and the continuous commitment by both government and industry to innovation and improvements in the sector.
While science, research, and innovation form their own priority area under the Calgary Statement, these are cross-cutting issues that will help us achieve results in multiple areas. Dramatic improvements in innovation have supported our industry's ability to not only maintain and improve the traditional fresh items available to Canadians but also to dramatically expand those offerings. Additionally, improvements to technology and innovation have improved such areas as inputs to grow crops, how fields are monitored and augmented, the transportation of produce, new product development, data sharing, produce identification, and much more.
Public support for research is also important to ensuring that the benefits from the commercialization of new discoveries extend across the sector and not just to one private company. This enables national industries to benefit and grow and for those gains to reach more Canadians.
Examples of positive public-private investments are already reaping rewards for both our sector and for Canadians. After fire blight nearly decimated the Canadian pear industry, Agriculture and Agri-Food Canada researchers developed a new pear that was resistant to the disease and had a longer shelf life. This, combined with investments in storage technology, allow for this Canadian pear to be available on grocery shelves from November through to March. After 20 years of development, the Vineland Growers Co-operative launched the Cold Snap pear to consumers in November 2015. The variety is now licensed to Canadian industry and grown in Ontario and Nova Scotia, and plantings of this Canadian variety have also begun in Europe and the United States.
The produce industry faces many opportunities, but also many challenges. Labour, environmental sustainability, and consumer demands are all areas that fit under the new policy framework, and I'm going to quickly touch on a few of these now.
We are all aware that the availability of labour is an issue for our sector, and without labour all else fails. The Canadian Agricultural Human Resource Council estimates that horticulture represents 50% of the labour gap in Canadian agriculture; that means the horticultural sector is short over 29,000 workers. This highlights only the shortage at the grower level and does not include shortages through the rest of the supply chain, which would surely add thousands more. Automation and robotics are used in planting, picking, and packing of produce, all helping to reduce the demand on labour while also reducing waste and improving productivity, but automation cannot replace all labour needs.
Another challenge is environmental sustainability and the need not only to reduce the use of inputs like water and crop protection tools but also to meet emission reduction targets and adapt to our own changing climate. Technology has already allowed us to make substantial progress in these areas. Drones and other innovations are being used to monitor fields, improve irrigation, and reduce the use of pesticides and other crop protection tools, but more can be done, and investment in innovation will be essential to getting us there. As well, while support for environmental sustainability is critical at the grower level, it should not be forgotten across the rest of the supply chain.
The third area noted is the changing tastes and demands of Canadians. This is both a challenge and an opportunity for our sector. As Canada's population becomes more diverse and consumer demands become more complex, research support can help Canadians and the fruit and vegetable sector meet complex demands through the development of new varieties and the adaptation of non-traditional crops to be grown in Canada.
Along the same vein, different age groups have different expectations in terms of product offerings and convenience, not only in Canada but on a global level. Our industry has been at the leading edge in providing value-added products to consumers to meet their demands for ready-to-eat products that fit their busy schedules, from bagged salads to pre-cut apple slices to pre-made cauliflower rice. Support for innovation in this area is important, not only to ensure the continued development of new and exciting products that make eating a healthy diet easier for Canadians but also to support research to address the different food safety concerns for these products.
Additionally, I do not want to omit the growing issue of food security. Food security is a concern for both industry and government. Innovation and research in the produce supply chain supports long-term solutions in food production, distribution, and storage infrastructure for rural, remote, and northern communities, and the scope of this issue should find its way into the framework moving forward.
Support for innovation does not only mean support for research and development of new technologies in Canada, but also ensuring that Canadian agriculture is able to assess the latest technology from all over the world. For example, some of you had the opportunity to visit Peak of the Market in Winnipeg and witness their state-of-the-art equipment in their packing facility in action. It was funding under Growing Forward 2 that helped Peak make these investments. They received support to purchase equipment that included new robots with custom-designed hands capable of filling retail bins, a custom-made unloading and pallet system, metal detectors for all packed products, and an automated pallet replacement system. In addition to a projected 30% increase in productivity, the new equipment also helps ensure a higher quality of produce reaches the consumer, reducing bruising and damage to vegetables and creating a better work environment for staff. While the majority of the new equipment was made in Canada, some pieces were sourced and customized from the Netherlands, Germany, and the United States.
The funding model moving forward is vital. The foundation for Canada's fresh produce supply chain is made up of approximately 25,000 small, medium, and large-sized farms that produce vegetables, fruits, and potatoes. The produce industry is one of narrow margins with little bandwidth to absorb rising costs. It is critical to the sustainability of the industry that research and innovation enable the industry to increase its productivity and reduce costs. There is strong support within our sector to continue with the model of 75% government and 25% industry funding for research, but there are concerns that the contribution from government could decrease. There is little ability in our industry to increase the dollars devoted to these research projects at this time. A decrease in the ratio of the government contribution for research projects will only have an effect of decreasing the number of projects overall.
In closing, it is critical that the next agricultural framework allow for flexibility to meet changing needs. In the coming months, our industry expects the publication of the Safe Food for Canadians regulations. This is significant regulatory change, and support will be needed to ensure that our sector and the agrifood industry is able to meet the new requirements being delivered in the coming years.
Given the substantial investment that our federal and provincial governments will be making under this framework, it is important to ensure that the regulatory burdens are not counterproductive to our efforts. A responsive, science-based regulatory framework that allows for the timely approval of new ingredients, product, and processes is essential.
Support under the framework must also be matched by support to achieve these goals through other means. Market access concerns for fresh produce are normally non-tariff barriers related to food safety or plant health. Industry alone cannot meet the requirements of foreign governments in these areas. If AAFC and CFIA are not adequately resourced to respond to plant health and food safety requests from our international partners, other support or investment to market access will have little results.
Moving forward, we must remember the demands of tomorrow cannot always be foreseen. The Canadian produce industry works in a fast-paced market and needs to be flexible to meet changing demands. Government support should work to be reactive and flexible to enable our businesses to grow.
Again, thank you for the time. I look forward to your questions.
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The agrifood industry has been pretty clear in its expectations about addressing two key things. One is to ensure that we create the right conditions within the legislative and regulatory framework to support effective service level agreements. With the introduction of Bill , which gave shippers in this country a right to service level agreements, we made progress. With the introduction of the Fair Rail for Grain Farmers Act, we made additional progress by defining the rules of the game, by defining the operational terms that could be included in service level agreements.
The next piece that needs to be addressed, from the agriculture industry's perspective, is financial accountability. We're looking forward to seeing some move to include financial consequences in the framework that supports service level agreements. Both parties need to be held financially accountable for the commitments and obligations they make when they enter a service level agreement.
On the other hand, not every bit of traffic, not every shipper, not every location, will be covered by a service level agreement, so we need to ensure that the act in general, and the agency, create conditions whereby adequate and suitable service is provided to all in areas, even where service level agreements don't cover traffic. In that regard, we're looking to an enhancement of the Canadian Transportation Agency, with greater resources, a stronger mandate, the ability to act on their own motion, and the ability to introduce interim orders ex parte. These types of things are of critical importance to us. That agency has to be informed by enhanced public performance reporting, so we agree with the Emerson report recommendations that we need to enhance public performance reporting.
Things like interswitching have proven very successful in a short period of time, both as a means to actually access another carrier and as a tool in leverage in negotiations to access better capacity and better service. We'd like to see that made permanent.
There are a number of things we think need to be done to enhance that overall regulatory environment with respect to the act and the agency, and we're looking forward to seeing that addressed. We're also looking forward to seeing some of the commercial aspects of the interaction between railways and shippers enhanced through the regulations and legislation that pertain to service level agreements.
:
Good morning, Mr. Chairman, and esteemed committee members, and thank you for the invitation to appear here before you today to speak about the next agricultural policy framework.
On behalf of the Canadian sheep industry, I'd like to thank you for the invitation to speak about our sector's key requests for the next policy framework.
We've had the privilege of being part of the agricultural policy framework engagement strategy and working with operations levels on program design, so today's appearance provides our industry a chance to highlight our key priorities and we appreciate this opportunity.
In June of this year, the Canadian Sheep Federation joined Canada's livestock sectors in advocating for a national, sustainable model of animal health risk management within the next agricultural policy framework. This commitment to building resiliency within Canadian livestock production needs to go beyond ad hoc initiatives of the past and include legacy funding for priority areas such as surveillance, biosecurity planning, diagnostic capacity-building, regulatory modernization, research, vaccine development, emergency response, and financial risk mitigation.
Committed funding needs to be pan-Canadian and multisectoral in nature, breaking down jurisdictional barriers and bringing all industry groups into the decision-making process. Maintaining an effective infrastructure of facilities and trained professionals to conduct disease surveillance is the only way of detecting new incursions of important production-limiting diseases, and more importantly, preventing these incursions from spreading.
Federal support in terms of field sampling, diagnostic services, and epidemiologists must be available to continue and improve surveillance activities. Each sector can prioritize areas of risk, but all sectors require the necessary infrastructure in place to support these surveillance activities.
The Canadian sheep industry manages a list of important diseases for which surveillance is needed. This list includes the likes of bluetongue, Cache Valley virus, scrapie, vesicular diseases including foot and mouth disease, rabies, peste des petits ruminants, and the list continues.
In order to effectively manage disease surveillance, emergency response, and disease containment, Canada needs a functional traceability system. The recent announcement that TraceCanada funding was revoked because the organization failed to deliver a national multispecies database clearly demonstrates the risk involved with privately held repositories of traceability data. We often draw on international examples of livestock traceability systems as we move ahead with the design of our own program, but we all too often overlook the fact that, in these comparative jurisdictions, federal government supports key traceability activities such as data management.
Moreover, deferring the cost of supporting traceability solely to producers puts the program's compliance, engagement, and sustainability at risk. The next agricultural policy framework needs to establish dedicated funding for a national multispecies database that supports traceability in Canada if we're ever to have a program that sees everyone participating.
Likewise, industry funding must be available federally and provincially to support traceability implementation for a full range of stakeholders, including money to support reporting infrastructures for stakeholders, communications, engagement, and program improvements through the early years of its implementation as we learn through the growing pains.
In keeping with support for a strong national animal health policy, federal and provincial governments need to commit to sustainable funding for institutions that safeguard animal health by supporting responsible antimicrobial use and surveillance in Canada, such as the Canadian global food-animal residue avoidance databank and an expanded version of the Canadian integrated program for antimicrobial resistance surveillance, or CIPARS.
For minor-use species such as the sheep industry, the responsible use of veterinary drugs is supported by ensuring that producers and veterinarians alike have appropriate access to medically important pharmaceuticals. However, the Canadian sheep industry struggles with access to veterinary drugs, veterinary biologics, and pesticides. In the past year we've seen an adaptation of the Pest Management Centre's approval process that led to supplemental approvals for two new veterinary products for use in sheep in Canada. We also saw the first-ever trilateral joint review of a veterinary product, conducted by Canada, Australia, and New Zealand, that led to the approval of an important pain-relieving drug.
Critical to the sheep industry's competitiveness is funding for the expansion and ongoing support of these two particular initiatives.
Long-term predictable agricultural research funding is essential to strengthening the sector, as is a coordinated and collaborative approach to research that avoids duplication of efforts and eliminates research gaps. Increased funding of AAFC's internal capacity to meet basic research needs underpins the foundation of agricultural research in Canada, and we need to bring that back.
AAFC must in turn work with existing universities and provincial expertise centres such as our own CEPOQ to prioritize key research needs established by industry rather than competing for resources and projects. The sheep industry would like to see investments in research whose outcomes help optimize production and performance and improve flock health, manage market expansion and expectations, and improve the business performance and profitability of the Canadian flock.
Research funding, however, must not end with the conclusion of research projects. Research that can't be implemented in real time is of very little benefit if it can't be translated by stakeholders into profitability and productivity. Technology transfer that sees the interpretation and implementation of research findings must also be well funded.
Investments in market development will support industry growth and prosperity, but those investments should not focus solely on international markets. For some sectors like our own, there is tremendous potential to capture domestic market share and displace imports with Canadian products.
Funding for capacity-building is essential to kick-start market development for some sectors, and should be considered as part of a market development funding stream. Additionally, governments across Canada must commit to partnering with industry and working proactively in the development of an agreed-upon national food strategy that includes supporting producers as they continue to build upon existing food safety assurance programs to meet the needs of processors, retailers, regulators, and consumers.
Canadian agriculture, particularly the livestock sector, has faced increased scrutiny from the public eye, real or perceived. The next agricultural policy framework needs to provide support to the sector, not only by ensuring funding to stakeholders as they work to strengthen consumer confidence domestically and abroad but also in terms of validating and supporting scientifically sound production practices.
Funding needs to be available to industry to respond to public trust pressures, and federal agencies need to ensure that changes to policy related to food production are driven by the science of farming and not in response to a public opinion poll.
Along these lines, the sheep industry would like to see funding available federally and provincially to all stakeholders handling livestock, from the farm gate to the processing facilities, as they work to meet animal care standards set out in our codes of practice and implement other practices related to enhanced humane handling in terms of equipment, personnel training, proper restraining, and electrical stunning.
It's clear that we're in an era of climate and environmental change. The agricultural sector needs to manage its role in environmental sustainability and requires funding to help implement changes in production that will protect our environment for future generations of farmers. At the same time, the sector needs to learn to adapt to climate change that impacts animal health and disease incursions, changes feed and food production, and alters what we know about environmental stewardship.
Producers need funding that helps manage changing disease risks, parasites on farms, and plant diseases, while helping to manage carbon emissions in this new era of carbon fees and taxes.
Canadian farmers need to be able to mitigate financial risk if they're going to stay in business, but with fewer and fewer farms choosing to participate in the current suite of business risk management programs, the level of financial risk facing producers, industry, and governments continues to increase.
The Canadian Federation of Agriculture recommended changes to the BRM program that we support, suggesting a list that includes restoring AgriStability's payment trigger to when program margins fall below 85% of a farmer's historical reference margins; eliminating AgriStability's reference margin limitation provisions, and exploring alternative approaches that limit payments for producers in profitable situations while ensuring coverage of allowable expenses for those facing negative margins; establishing mechanisms such as premium credits, kick-starts to AgriInvest, waived AgriStability fees, and enhanced access to capital for beginning farmers; establishing a supplementary program to the existing AgriStability program to address the lack of support currently available to diversified farm operations; enhancing and amending the outcome of the AgriInvest program to reflect its role in managing all financial risks, not limited to small risks as it currently stands; and amending AgriRecovery to cover multiple years of extraordinary costs or losses resulting from the short-term impact of a single event or recurring events that could not effectively be mitigated.
Aside from the funding eligibility, there's much within the agricultural framework, design, and delivery that could benefit from change. The current funding structure that requires industry matching funds needs to be re-examined. Twenty-five per cent is too high for some sectors and industry groups required to fund more than one project to help advance the industry. This practice makes it impossible for us to sponsor multiple projects. The same can be said of individual projects funded provincially.
Funding streams need to be designed with enough flexibility to allow smaller industry the opportunity to access funds and support projects needed to advance the industry.
:
Good morning. My name is Hans Kristensen. I'm a producer from New Canaan, New Brunswick, and the maritime representative on the Canadian Pork Council board of directors. I'm joined today by Gary Stordy, the Canadian Pork Council's manager of government and public relations.
I would first like to thank the members of the House of Commons Standing Committee on Agriculture and Agri-Food for the invitation to appear before you this morning to discuss the next agricultural policy framework.
In the time allotted for my testimony this morning, I will outline some of the opportunities in the domestic and export markets, business risk management tools, and animal health.
However, I would like to take a moment to thank Prime Minister and the Minister of International Trade, , for their commitment to signing CETA. This historic trade agreement, initiated seven years ago under the previous government, is certainly something that we can all celebrate.
The Canadian and EU markets for pork complement each other. While this relationship holds great promise, we look forward to the government officials resolving the outstanding technical barriers that limit our ability to fully capitalize on what was achieved. Our industry was very pleased to see markets and trades highlighted in the July 2016 Calgary Statement following the meeting of the federal, provincial, and territorial ministers. In fact, CPC's priorities align closely with the areas identified in this statement.
There is tremendous opportunity for Canada's pork producers. Canadian consumers include pork as part of a healthy diet, and there is a growing export demand, fuelled both by population and by income growth worldwide. This demand will be strengthened once the CETA and TPP agreements are successfully implemented. Further growth is possible in China, the ASEAN group, and India, all of which are Government of Canada priorities.
Our industry recognizes that opening or maintaining market access is never easy; however, it has to remain a priority for government departments such as Global Affairs Canada, Agriculture and Agri-Food Canada, and the CFIA. These departments need the flexibility and a full team with the financial backing to efficiently address market access issues.
There is work to be done to better capitalize on existing access. While we appreciate the efforts of the market access secretariat, CFIA's comparative lack of attention to export issues versus other domestic priorities is detrimental to efforts to address the needs of a global market.
Producers work hard to increase the demand for Canadian pork in domestic and export markets through CPC's on-farm programs, such as Canadian Pork Excellence, and each producer has a role to play in supporting the larger infrastructure of processing and trade. This is why producers support a core BRM suite of programs that can help manage market risk.
Risk management is a fundamental cornerstone in any business venture with volatility in revenues and costs—exactly like the Canadian pork sector. However, some of the changes made to key programs under GF2 have significantly reduced the capacity to assist the hog industry. Both the federal and the provincial governments need to improve programs and seek new and novel approaches to risk management.
AgriStability has been the most useful program to the sector in the past. However, its effectiveness in managing a significant price drop declined substantially with the reduction of positive margin coverage from 85% to 70%. At 70%, the program provides at best minimal protection in an extreme decline, but little else. The program needs to return to the 85% level to be effective.
In addition to this, we must also address the dual problem of the complexity and unpredictability inherent in the current AgriStability program structure. In order to be truly effective, any BRM program must be both predictable and responsive in a timely manner to ensure producers can make decisions to react to market conditions today with the confidence and the future protection provided to them through the existing suite of BRM programs.
The AgriInsurance and AgriInvest programs have proven to be of limited value to our members in their current state.
The AgriInvest program has not been effective in helping hog producers manage the short-term drops that are no longer covered by AgriStability. It is not effective in helping producers make investments to manage risk or improve market income. Even small income drops in commercial-sized operations are not addressed by a maximum government contribution of $15,000 per year. This level does not reflect the economic realities and scale of production of current production practices in Canada.
Producers need a variety of tools such as mortality insurance and a hedging program to find the best options for their operations. Currently, a significant percentage of government expenditures dedicated to business risk management is dedicated to production insurance. Unlike crop producers, however, those involved in livestock production do not have access to a production insurance program. Other initiatives, such as price insurance, do not work for hog producers.
For the past decade, there have been ongoing efforts to develop mortality insurance or a production insurance type of program for livestock. Issues around coverage, the cost-sharing of administration, and premium costs have proven difficult to overcome. Industry and governments need to recommit to developing an effective, affordable program for implementation by a 2018 target.
On AgriRisk, initiatives have enabled the sector to explore options from approved access to hedging programs. Currently, many Canadian pork producers are unable to take advantage of this useful management tool due to the fact that they would be financially unable to provide the large cash injections that may be required through margin calls in the open market. Without a range of risk management tools and strategies, hog producers face a combination of production, market, and financial risk that can undermine the success of a farm. Pork producers need a program to mitigate the risk of margin calls so that hedging becomes a useful and used business risk management tool
To seize the opportunity in the marketplace due to industry branding or trade deals, reinvestment is required. Infrastructure, especially the hog barns themselves, must be renewed. The Canadian Agricultural Loans Act program, designed to increase the availability of loans to farmers, can be a mechanism to further strengthen the hog industry. However, the program's utility is limited, and as a result it has not been useful to producers.
While producers have benefited for the past 18 months from a fair market return, that does not erase several years of sustained losses by our industry. The fact is that financial institutions' confidence has not yet returned to the industry in terms of allowing us to reinvest in the industry and borrow for barns and access capital. We are also in a situation where it's much more difficult to access capital to reinvest in an existing structure than it is to enhance or expand structures.
The current limitations to loans are constricting and unreflective of current farm business practices. An updated program should reflect commercial farm sizes and more complex farm structures. The maximum loan limit needs to increase dramatically and expand in scope.
The pork industry remains focused on the issues of disease prevention. Nothing is more foundational to our success as an industry and an exporter than animal health. In recent years, we have learned some powerful lessons in this regard, through outbreaks of circovirus, H1N1, and PEDv in hogs. We believe that Canada now faces an opportunity to build a robust national animal health strategy that will better prepare us for the risks of the future. A number of initiatives are ongoing through the National Farmed Animal Health and Welfare Council and a livestock market interruption strategy. That should continue.
We also believe that initiatives such as traceability, on-farm biosecurity, surveillance, and diagnostic capacity-building should be priorities in the next agricultural policy framework. Much was accomplished under past frameworks, and much remains to be done with the new policy framework.
The Canadian Pork Council looks forward to joining with its industry and government partners to ensure that together we can capitalize on the strength of Canada's agriculture and agrifood industry and realize its full potential in helping to build and enhance the economy of Canada.
I'd like to thank the members of the standing committee for giving me the opportunity to present here this morning.
:
Traceability has been a bit of a bumpy road of late in our industry. We've had a national ID program for 12 years. Producers have been paying for their portion of traceability for over a decade now. What we lack to make that system effective in our sector, and I think in all but the hog sector...in the pork industry they have a full traceability system, but four of our species groups that will be regulated to it have yet to complete that list.
It requires a database to manage the information, primarily, because traceability is all about information management. We see some challenges in being able to keep that infrastructure in place. In addition to having supported the cost of the producers' portion of traceability, there's an expectation, at least in what we've seen in the traceability negotiations so far, that the producers have to support the full cost of traceability. That means data management, and that means managing the information and ensuring those databases are in place. That's a very costly venture.
As an example, in the sheep sector, aside from the price of tags, aside from a producer's time to report information and manage the information on a farm, and aside from all the other stakeholders' investments in time and reporting capacity, the database is expected to cost just our sector in excess of $130,000 annually. For an industry of 11,000 producers, that's a significant cost.
When we talk about traceability models and the gold standard of what a traceability program looks like, we often refer to countries like Australia and the system they have. We also know that their government funds that database management, that very costly portion of it. There are some security risks to be had with privatizing that information, first and foremost, and then there's a concern over what that increased cost means for a producer's cost of production on an animal and whether producers can sustain that in the long term. If they can't support the cost of it, then there isn't a program when the federal government isn't supporting it, at least in some capacity.
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We like to think there is, yes. Producers in New Brunswick will take credit for that.
Both the province of New Brunswick and the hog industry suffered a severe setback some years ago with the closure of the only federally inspected processing plant in New Brunswick, which at the time put the industry in severe distress. A lot of people thought it provided us with a death sentence.
What happened instead was that the remaining producers in New Brunswick got together. We did a really hard and comprehensive review of our industry and where we were at, and we looked at our strengths and weaknesses as an industry. We figured out that up to the point of weaning a piglet, we were very competitive and had done well. Past that, our geographical location, now coupled with our lack of processing facilities, eroded that advantage.
We evolved our industry to handle two types of production.
One is simply SEW production, which was exporting SEW piglets to be finished in the U.S. They were still owned by the Canadian producer, but in U.S. contract facilities. They were also going into Quebec to support finishing facilities in partnership with processors in Quebec, as part of an integrated value chain.
The other model was that we used our isolation and biosecurity programs to produce specialty pork. We were producing antibiotic-free pork and pork raised in stall-free environments and cage-free environments. Both of these have proven successful, and they have allowed us to sustain a production in New Brunswick. While production is now less in pounds of pork, because we're not finishing or providing them, we have increased the total number of animals now being produced in the province of New Brunswick, as of the day the plants were closed. It was just a matter of adaptability.
That's a very good question and a very complex issue. Again, we'll go to innovation here.
I can only speak about my personal experiences in Atlantic Canada, but we are in exactly the position you just described. We're a geographically isolated area which affords us biosecurity and disease-free status. It makes us an excellent area for housing farrowing facilities. However, it does limit our access to resources such as veterinary services, along with many others.
What we've had to do as producers is become more self-reliant and more resilient. We've had to take more of an in-house approach to animal health and animal health programs. We do have regional veterinary services in Atlantic Canada. However, we do not have access to a swine specialist vet in our province. We use one out of Nova Scotia. It limits the availability of that person on our site to approximately two times a year. What we have done, though, is we've adapted and we use today's technology. We do video conferencing with our vet. We literally will send pictures back and forth. We'll send samples to the lab. The results will go to the vet. We'll do phone conferencing. It is a challenge in being geographically isolated, but it's one that we accept and adapt to in order to maintain the biosecurity and the enhancement.
There's an inherent advantage to that, in a way that's sort of an offset. It is that every time someone accesses my facility, whether it's an industry expert or a veterinarian or a sales professional, there's an inherent risk to my biosecurity and protocols have to be followed.
By becoming more resilient, using technology—the Internet, teleconferencing, video conferencing—to try to follow some of those programs, we can maintain the advantage of biosecurity and isolation and overcome the lack of resources available on a farm.
It is a great question, because it is definitely an infrastructure challenge in our sector specifically, and it's more widespread. It's not necessarily a case of being geographically distinguished or separate.
We have in our industry a very limited access to competent, experienced, and willing small ruminant veterinarians across the country, and it does make it a challenge to ensure that we're having validations for different insurance programs.
When we see regulations change to further limit access to antimicrobials and veterinary drugs and to require veterinarian-client-patient relationships, or VCPRs, whereby drugs have to be administered only under one of those and you have to have an attending veterinarian come on farm and validate the issue and the correct treatment, that becomes an increasing problem.
When we've been part of the discussions on regulations with respect to vet drugs and how they change, we need to keep in mind that it is a challenge to access competent veterinarians who are willing to make the farm visits and to do so economically for producers. When a vet fee is $100 and the animal is worth $100, we don't want to leave producers where they have to make a choice between animal welfare and bottom line.
I don't know how this next agricultural policy framework manages that infrastructure challenge, but I do like the ideas that Hans brought up, which were video conferencing and remote access to veterinarians. I think we're going to need to see some flexibility within the veterinary practices to understand those limitations to access and to provide some creative ways to create these relationships that allow producers to have access to treatment and medications in a responsible manner that respects the proper and sustainable use of veterinary drugs.