Book 2 - Hot issues: deputy minister's transition book 2023, AAFC

Sustainable Canadian Agricultural Partnership

Purpose

To provide an update on the Sustainable Canadian Agricultural Partnership (Sustainable CAP) which comes into effect April 1, 2023, as the successor to the current Canadian Agricultural Partnership (CAP), a federal-provincial-territorial (FPT) framework.

Background — agriculture frameworks

The five-year Framework agreements are a cornerstone of how federal, provincial, and territorial governments support the agriculture and agri-food sector.

Since 2003, AAFC has worked in partnership with provinces and territories on the following five frameworks:
- Agricultural Policy Framework (2003-2008)
- Growing Forward (2008-2013)
- Growing Forward 2 (2013-2018)
- The Canadian Agricultural Partnership (2018-2023)
- The Sustainable Canadian Agricultural Partnership (2023-2028)
CAP and the previous frameworks have allowed FPT governments to work together to develop and implement policies and programs to assist the sector in addressing challenges and seizing opportunities by encouraging investment, adaptation, and sustainable growth.

While each new Framework represents an opportunity to advance a renewed approach to support the sector, it also builds on lessons learned throughout the Frameworks to ensure continuity, and make modifications to meet changing priorities and needs.

Overview of the Canadian Agricultural Partnership

The Canadian Agricultural Partnership (CAP) aims to strengthen and grow Canada's agriculture and agri-food sector. This FPT partnership includes a $3 billion five-year (2018-2023) investment in strategic initiatives and funding for business risk management programs (average of $1.7 billion per year).

Strategic initiatives
- More than $1 billion in federal programs and activities that are national in scope and are funded and delivered by Agriculture and Agri-Food Canada
- $2 billion in cost-shared programs that are funded 60:40 (F:PT) and delivered by provincial and territorial governments (PTs)
Business risk management programs

An average of $1.7 billion annually (combined federal and provincial/territorial) for demand-driven business risk management programs to assist producers in managing significant risks that threaten the viability of their farm and are beyond their capacity to manage.

Key shifts from CAP to the Sustainable CAP

The Sustainable CAP builds off of the 5 priority areas from CAP, with greater emphasis on achieving environmental, economic and social objectives.
- Bolster climate change and environment action across the framework
- Update the suite of Business Risk Management programs to be simpler, more timely and predictable and explore options to integrate climate risk and readiness
- Strengthened approach to Performance Measurement and Results with shared targets complemented by proportionate spending requirements
- Enhanced focus to encourage the participation on underrepresented groups in the sector
- Continued enhancements to Science and Innovation, Market Development and Trade and increased emphasis in other focus areas (for example, Labour; Indigenous Participation; Mental Health)
- Reflecting the sustainable development approach and competitiveness throughout the framework
Overview of the Annual Ministerial Conference — July 2022

On July 22, 2022, Federal, Provincial and Territorial Ministers of Agriculture announced the Sustainable Canadian Agricultural Partnership, which set forward an ambitious path forward to advance the five priorities agreed to in the Guelph Statement.

This new five-year agreement will inject $500 million in new funds, representing a 25% increase in the cost-shared portion of the Partnership over what is currently provided under the Canadian Agricultural Partnership

Ministers also agreed on the need for a more robust results strategy for the Sustainable CAP including: improved data sharing; results reporting; and a commitment to contribute to common, measurable outcomes, over the lifespan of the Framework, in particular contributing to:
- 3-Mt to 5-Mt reduction in greenhouse gas (GHG) emissions
- $250 billion in sector revenues and $95 billion in sector export revenues by 2028
- Increase in proportion of funded recipients that are Indigenous Peoples, women and youth over the five years of the partnership
Ministers agreed to a new Resilient Agricultural Landscapes Program, a $250 million investment by FPT governments which will support ecological goods and services provided by the agriculture sector

Ministers agreed that 12.5% of cost-shared spending ("proportionate spending") would go to activities that reduce GHG emissions or increase carbon sequestration

Changes to Business Risk Management programs, in particular:
- Raising the AgriStability compensation rate from 70% to 80% bringing up to an additional $72 million per year to better support farmers in times of need
- Starting in 2025, participants in the AgriInvest program with allowable net sales (ANS) of >$1 million will be required to have an agri-environmental risk assessment (for example, Environmental Farm Plan) to be eligible for the matching government contribution
- PTs and AAFC will conduct a one-year review on how to reflect farmers' production-risk-reducing environmental practices with AgriInsurance premiums. Following the review, each PT will launch an AgriInsurance premium pilot.
- AAFC, in consultation with PTs, will undertake a comprehensive review on integrating climate risk with BRM programs
Key milestones towards implementation of the Sustainable CAP

The Guelph Statement

The Guelph Statement, announced by FPT Ministers on November 17, 2021, set out the vision, priorities and guiding principles for the successor Framework to CAP.

Multilateral Framework Agreement

The Multilateral Framework Agreement (MFA) outlines the roles and responsibilities of FPT governments and a commitment to implement policies and programs that reflect the vision and priorities articulated through the Guelph Statement.

FPT negotiations on the MFA commenced in the fall of 2021.

The MFA was finalized on January 31, 2023 and is in the process of being signed by PTs.

AAFC received Order-in-Council authority to sign the MFA on February 13, 2023.

Bilateral agreements

Since September 2022, AAFC has been engaged in negotiations with PTs on bilateral agreements which outline the specific program details, activities, and planned spending for the $2.5 billon in the Framework's cost-shared envelope.

AAFC is looking to finalize and sign bilateral agreements in the coming weeks to ensure a smooth transition from CAP to Sustainable CAP on April 1, 2023.

Next steps

The following steps remain to successfully implement the Sustainable CAP:
- Minister Bibeau to sign the MFA once sufficient PT signatures have been received to meet entry-into-force requirements (two-thirds of PTs representing at least 50% of farm cash receipts)
Once the MFA is signed, next steps are:
- Ministerial signature of MFA signature pages as they are received from remaining PTs
- Finalization and ministerial signature of bilateral agreements with all PTs
- Announce details and prepare to implement federal-only Sustainable CAP programming
African Swine Fever

Overview and AAFC response

Canadian hog sector

The Canadian hog sector contributes an estimated $28 billion to the economy and supports roughly 100,000 jobs (Source: Canadian Pork Council).

There are 7,330 hog farms and 26 federally inspected processing facilities. In 2022, 28 million hogs were produced. Inventories are concentrated in Quebec (31%), Ontario (26%) and Manitoba (23%).

Slaughter capacity also resides primarily in Quebec (38%), Ontario (19%) and Manitoba (28%).

Currently, 13 million hogs are in the production pipeline.

The Canadian hog sector is highly integrated with the United States sector.

In 2022, over 1.39 million tonnes of pork, valued at $4.8 billion, were exported to 77 countries.

Top 3 markets for Canadian pork are United States, Japan and China.

About African Swine Fever

ASF is a contagious and fatal disease for pigs that has spread from Africa to Asia, parts of Europe and, most recently, the Dominican Republic and Haiti.

While the virus cannot be transmitted to humans, it has a high mortality rate in infected pigs and can survive for prolonged periods of time in animal products.

A single positive case of ASF in Canada would require that all pork and live-hog exports (70% of domestic production) halt immediately. This would have significant financial consequences for producers and processors as they grapple with lost markets and price declines driven by an oversupply of pork relative to domestic demand.

Initial impact

Disease management and eradication: The Canadian Food Inspection Agency (CFIA) is responsible for containing and eradicating the disease as quickly as possible.

Trade: Immediate loss of all export markets (70% of domestic production).

Surplus hogs: Given the border closure, millions of surplus animals would need to be culled, generating extraordinary costs for industry as well as concerns around animal welfare, farmer mental health and the environment.

Pork producers: Hogs with no market would back up the pork production cycle, and depopulation decisions would need to be made quickly. Live hogs destined for the U.S. would be an urgent priority for euthanization.
- It is estimated that at least 50% of the hog herd (7 million hogs) would need to be culled.
Pork processors: Processors would lose the majority of their market overnight. Export-oriented processors or smaller-sized establishments might eventually cease operations.
- Processors would not be able to take on the extra work of depopulating and disposing of producers' surplus hogs without assistance to cover extraordinary costs.
ASF could arrive in Canada any day

Red represents ASF-infected countries; white represents ASF-free countries

Source: World Organisation for Animal Health World Animal Health Information System (OIE WAHIS).

Description of the above image
A map showing that there were small pockets of ASF in Asia, Africa, and Europe in 2018. Beside it is a second map showing that, in 2019, the majority of Europe and Asia and a slightly larger swath in Africa was infected with ASF. Finally, a 2020 map showing a slightly larger area infected with ASF compared to 2019, still in Asia, Africa, and Europe.

Summer 2021 — ASF has reached the Americas, with ASF confirmed in the Dominican Republic and Haiti, further increasing the risk of entry into Canada.

The highest risk pathways are thought to be international travellers (clothing, equipment, or illegal pork products), or through illegal commercial shipments of feed.

Current prevention and preparedness efforts

CFIA and Agriculture and Agri-Food Canada (AAFC) have played an active role in developing and executing on an ASF Pan-Canadian Action Plan, a federal-provincial-territorial (FPT) industry effort to coordinate and prioritize ASF-related prevention and preparedness work across the country.

In December 2021, the Minister was mandated to, "take every necessary precaution to prevent the introduction of African swine fever within our borders, and continue to work with provinces and territories and industry stakeholders on prevention and preparedness measures, including a cost-shared response plan."

Work remains ongoing with provincial and industry partners.

In August 2022, the Government of Canada announced an investment of up to $45.3 million to enhance efforts to prevent ASF from entering Canada and prepare for a potential outbreak. This includes:
- $23.4 million to AAFC to support industry's prevention and mitigation efforts. Program launched November 16, 2022.
- $19.8 million toward CFIA's surveillance and international activities
- $2.1 million to enhance Canada Border Services Agency's (CBSA) border control activities
Pan-Canadian ASF Action Plan

To date, there has been significant coordination with the provinces and industry groups to advance the Pan-Canadian ASF Action Plan.

Action Plan pillars
- Pillar 1: Prevention and enhanced biosecurity
- Pillar 2: Preparedness planning
- Pillar 3: Ensuring business continuity
- Pillar 4: Coordinated risk communications pillar
Pillar 1: Prevention and enhanced biosecurity

First line of defence to protect the Canadian swine population from ASF by limiting the potential sources of virus introduction

To prevent entry into Canada and reduce spread if it does enter:
- Import controls led by CBSA and CFIA
- Biosecurity led by CFIA and industry
- International engagement led by CFIA
- Authorities for wild pigs led by multiple departments (AAFC, CFIA, Environment and Climate Change Canada, Canada Border Services Agency [CBSA], etc.), as well as industry associations and U.S. counterparts (United States Department of Agriculture, Plant Health Inspection Service)
Pillar 2: Preparedness planning

An early and rapid disease response will be critical to stop the spread of the virus and mitigate the impacts of an outbreak.
- Diagnostic and surveillance, led by CFIA
- Response plan and procedures, led by provinces and territories, CFIA and industry
- Training and exercise, led by CFIA, provincial governments and industry
Pillar 3: Ensuring business continuity

Impacts of an ASF outbreak may be mitigated through proactive engagement with trading partners and by providing support to help the sector adapt to market changes.

Zoning, led by CFIA and industry

Zoning is an internationally recognized approach to disease control that also manages trade risks. A zone can be established around a defined area, on a geographical basis.

Canada confirmed and is working to develop zoning arrangements with some trading partners.

Compartmentalization, led by CFIA and industry

Compartments are a voluntary and separate population control established prior to the introduction of ASF based on management and biosecurity practices rather than geography.

Compartment acceptance requires negotiation with trading partners.

Market interruption response, led by AAFC, provincial governments and industry

Immediate: Develop a national coordinated approach for surplus hog management, with flexibility for regional needs - includes assessing and investing in infrastructure for depopulation. AAFC has established an incident management system.

Longer-term: Industry adaptation and sector transition planning.

Pillar 4: Coordinated risk communications

Work is underway to develop risk-communications plans to address prevention, preparedness, response and recovery actions related to ASF.

Industry, CFIA, AAFC, provincial governments

Prevention
- Awareness campaigns
- Travel and domestic
Preparedness
- Planned messaging
- Public trust
- Coordinate communication amongst players
Next steps
- Ongoing engagement with provinces and industry via existing Working Groups to discuss ASF response and preparedness
- FPT-Industry Deputy Minister Tabletop Exercise planned for April 27, 2023
- FPT-Industry targeted engagement on immediate response programming being planned for late winter/spring 2023
- FPT Ministers Meeting planned for March/April 2023
- Annual FPT Ministerial being planned for July 2023
Annex: Roles and responsibilities

CBSA
- Enforce import controls to prevent entry of ASF into Canada
CFIA
- Lead disease control and eradication activities.
- Handle compensation for animals destroyed, where appropriate.
- Secure international acceptance of zoning and compartmentalization approaches.
- Lead strategy to regain disease-free status and international acceptance.
AAFC
- Help provincial governments develop cost-shared programs for depopulation and disposal efforts (including maintaining animals awaiting welfare depopulation).
- Coordinate discussions in multi-jurisdictional areas, such as welfare culls at processing plants, to facilitate a consistent, national approach.
- Develop and deliver federal support programs, where appropriate, that meet national needs.
- Lead the public communications response to the market interruption and hog surplus challenge in conjunction with PT and industry partners.
Industry
- Proactively manage business risks by leveraging existing programming and private risk-management tools and making business decisions based on market conditions.
- Implement on-farm biosecurity standards to help mitigate against disease introduction.
- Lead on surplus hog depopulation and disposal activities on the ground, as well as developing and implementing biosecurity measures, supported by FPT governments, as necessary.
Provincial–territorial governments
- Coordinate surplus hog depopulation and disposal efforts on the ground, with the assistance of AAFC (for example, funding transfer, coordination, oversight, wellness / mental health support).
- Coordinate the development of a strategy to manage healthy surplus hogs across provinces.
- Facilitate implementation of mass carcass-disposal options, and work with municipalities to establish capacity.
- Develop and deliver support programs that meet regional/sector needs, in co-operation with municipalities and industry.
Canadian retail fees and Canadian grocery code of conduct

Background — Grocery retail concentration and fees

Market concentration gives large retailers a dominant position and significant market power
- top 5 retailers control approximately 80% of sector
Retail fees on suppliers are not new
- retail fees are the total dollar spent by suppliers with retailers to get products on shelves (that is, trade spend)
- long standing issue for processors and producers
- some fees are mutually-beneficial and predictable
- increase in other fees seen as unilateral, retroactive or unpredictable in recent years
Canadian Grocers' Market Share by Sales, 2021

Retailer Market share (%)
Loblaw 28
Sobeys 20
Metro 11
Costco 9
Walmart 8
The rest 24
Source: Who's Who Report 2021, Canadian Grocer
Retail fees placed on suppliers (see Annex 1) generally range from mutually beneficial to contentious

Mutually beneficial
- marketing fees; shelving and listing fees
Contentious
- recovery of retailer costs and investments; retroactive and unilateral fines
Calls for action

The announcement of new retail fees in summer 2020, combined with challenges and costs associated with the COVID-19 pandemic, resulted in increased attention to the impact of retailer practices on the rest of the food supply chain
- Stakeholders, including producers, processors, and some retailers, called for action to ensure fair, transparent and predictable business practices for the agri-food industry
- Retail fees are related to commercial dealings between two businesses and primarily fall under provincial jurisdiction, making a mandatory, national approach less straightforward
FPT ministers created a working group, chaired by federal and Quebec ministers of agriculture, to assess the impact of retail fees on the agri-food industry
- Key findings were published in July 2021 (Annex 2)
- Ministers called on industry to lead a collaborative process to develop a proposal to improve transparency, predictability, and respect for the principles of fair dealing
Industry-led process

Industry leaders responded, creating a collaborative supply chain engagement model to develop a Grocery Industry Code of Conduct.

Progress updates were provided to FPT Ministers
- December 17, 2021
- March 31, 2022
- July 21, 2022
- November 11, 2022
Dialogue to date has contributed to a positive change in business culture across the supply chain.

FPT governments are actively monitoring industry progress and providing facilitation support (AAFC and Quebec Ministère de l'Agriculture, des Pêcheries et de l'Alimentation).

Industry Steering Committee
- 9 industry associations
Business Working Group
- 37 businesses
Business Sub-Working Group
- 8 businesses
Industry Sub-Committee on Governance
- 5 industry associations
Current status

Draft provisions and high-level details for dispute resolution and governance were submitted to FPT Ministers in November 2022
- Joint ministerial statement in January 2023 commended work to date and encouraged swift implementation
Industry is now moving to the consultation phase, aiming for implementation of a Grocery Code of Conduct in 2023 that will
- formalize acceptable/unacceptable business practices to ease tensions between suppliers and retailers
- create a more predictable and transparent business environment that supports investment and innovation
- create a clearly identified process for dispute resolution
There is currently industry consensus that the Grocery Code will not
- directly rebalance market power
- regulate fair supply
- determine an acceptable level for retail fees
Considerations: Industry progress

Significant efforts have been expended to date
- Momentum needs to be maintained to achieve success
Level of participation is critical to realizing an effective Code of Conduct
- Widespread participation across the food supply chain in the voluntary model will be important to its success
- However, most important will be the active participation of the large retailers
- If desired participation is not achieved, a regulated solution may be recommended by industry
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Considerations: Policy context

Significant public attention on food supply chains
- Food inflation, retailer profits, supply chain challenges
Parliamentary committees continue to call for a Grocery Code of Conduct
- Standing Committee on Agriculture and Agri-Food (AGRI) (April 2021, June 2022)
Review of legislation and policy underway to improve competition in the sector
- Competition Bureau Market Study on Competition in Canada's Grocery Sector
Path forward

In concert with the work of industry, the FPT working group will continue to monitor the progress to develop the Code of Conduct, encourage the path towards implementation, and support efforts where appropriate (for example, potential funding, communications).

Winter 2023
- Finalize overall draft model
  - Code, legal construct, adjudication model
Spring 2023
- informal consultations within industry associations
- formal, public consultations
Summer 2023

Begin implementation via
- creation of non-profit corporation — Grocery Code Adjudicator's Office
  - recent request of $2 million to assist with corporation formation
- appointment of a Grocery Code Adjudicator
- planned review 18 months after implementation
Annex 1: Examples of retail fees

Advertisement Out-of-Stock Fees

Penalties charged to suppliers should they short product while on promotion.

Core/National Agreements

In general, Core Agreements between retailers and suppliers establish national sales objectives and provide a bonus to the retailer for attaining the stated objective. These agreements may result in 'preferential treatment' since retailers are incentivized to provide more shelf space to suppliers with a Core Agreement, in order to achieve their sales targets. These agreements can make it difficult for new suppliers to compete.

Electronic-Commerce Development Fee

A percentage-based fee vendors are required to pay on all products sold by the retailer via its electronic-commerce platform. The purpose of this fee is to offset investments to accelerate expansion of online grocery distribution and electronic-commerce capabilities.

Exclusivity Fees

These typically do not exist on their own but are a negotiating 'chip' which can be swapped for slotting fees.

Extended "Blackout"/"Price Freeze" Period

Food retailers will unilaterally impose a price freeze (that is, mandatory 'black out' periods) during which suppliers are forbidden from requesting price increases. These usually coincide with holiday periods (for example, from September to January). If suppliers face a price increase on ingredients during that period, they have to postpone raising their price, and in some instances, they have to provide the retailer twelve weeks' advance notice. If the retailer accepts the new price, the increase is valid from date of acceptance and is not backdated to the date of initial notification.

Extra Terms

A 1% to 2% deduction, applied by some large retailers on its suppliers, to finance store renovations or recent acquisitions.

Infrastructure Development Fee/ Strategic Acceleration Allowance

This fee, typically expressed as a percentage of the cost of goods purchased by the retailer, is charged to vendors to offset the retailers' infrastructure costs, which could include remodeling of stores and logistics networks, building new distribution centres, and/or implementing new and upgraded systems to improve supply chain efficiencies.

Late Delivery Fees

Fees that are deducted off-invoice by the retailer as a penalty for deliveries being made later than indicated on the purchase order. These fees generally range between $500 and $1,000 per order, or $200 to $500 if the retailer is given advance notice of the delay.

Over and Above (O&A) Fees

These fees are a percentage of the suppliers' sales, typically from 1% to 15% that is deducted by the retailer for marketing support (for example, promotional flyers) and distribution. O&A fees are a common practice in the industry but vary from one company to another. They are applied to all suppliers, including established players and newcomers.

Payment Terms

Generally, suppliers in the industry will offer a 2% reduction on payments made within 10 days, or charge no interest for payments within 30 days. However, some large retailers mandate other standard payment terms (for example, no interest for payments made within 90 days). In addition, some retailers take a 2% deduction from the wholesale invoice, even if payment occurs outside the 10-day window. While this practice is not necessarily a barrier to entry for suppliers, it is a major cost constraint because there is no guarantee of when, or how much, payment will be received.

Shelf Listing Fees/Slotting Fees/Listing fees

A 'shelf listing/slotting fee' is charged by the retailer to allot shelf space for each food item. These are lump-sum payments due upon approval with no guarantee of minimum sales duration. While it is generally understood that space will be reserved for 12 months, the retailer is not obliged to respect this timeframe. The assessment of Shelf Listing/Slotting Fees is viewed by many suppliers as the most controversial retailer practice because there is no set fee table. These fees are established through negotiations between the retailer and supplier.

Unloading (Lumper) Fees

Drivers are forbidden from participating in the offloading of their trucks in almost all retailer Distribution Centres. As a result, every center employs an on-site third-party company (known as 'lumpers') to handle this service. These fees cost $50 to $500 depending on the number of pallets and time it takes to unload.

Unsalable Merchandise Fees

In the past decade, the liability for product damaged either in-transit or in-store has been transferred from retailer to manufacturer. This fee is charged to the supplier as a percentage of annual sales (for example, 1% to 1.5% for shelf-stable goods) and is usually accounted for in the suppliers' pricing of most products.

Source: List developed with information from various sources, including Simon Dessureault (University of Guelph) and Sean Lippay (Strategic Food Solutions)

Annex 2: FPT working group key findings

Concentration in the retail sector enables retailers to use their bargaining power to levy a range of fees on suppliers to supply and market their products in store. Recently, retail fees have increased in their form and scale, and they have changed in the manner in which they are imposed.

The unpredictability and lack of transparency in how some fees are levied, along with limited and often complex recourse for dispute resolution, has led to an overall straining of supply chain relationships from retailers down to primary producers. This has also cultivated the perception of Canada's investment environment as less attractive to some food manufacturing companies.

There are other secondary impacts of this dynamic, including preventing small processors and producers from accessing the market, impeding innovation, and creating particular supply and price challenges for independent retailers and the local producers they purchase from.
Agriculture and agri-food transportation and supply chains

Agriculture and agri-food supply chains during the pandemic

Overall, during the COVID-19 pandemic the food supply chain continued to provide Canadians with reliable access to food and maintained healthy economic growth.

However, the pandemic did disrupt the food supply chain from producers to consumers in a variety of ways, particularly in terms of crossing provincial and international borders.

These pandemic challenges underscored pre-existing vulnerabilities, and shone a spotlight on the need for more resiliency in Canada's food system.
Canada's Food Supply Chain
Description of the above image
Canada's supply chain is a connected system beginning with
- input and service providers, followed by
- primary producers;
- wholesale distributors;
- food and beverage processing
- food retailers and the food service, and ending with
- the final end consumer.
The food supply chain functions in the same fashion whether goods are being imported into Canada or whether goods are moving to export.
Vulnerabilities within agriculture and agri-food supply chains

During the pandemic:
- Labour and travel restrictions created challenges and highlighted the essential nature of food workers
- Border closures, shifting demand and transportation disruptions caused challenges for delivery of exports and imports
- Demand fluctuations, business closures and outbreaks caused production back-ups and created food surplus in some areas and shortages in others
- Existing food supply vulnerabilities were amplified due to income loss and limited transportation in rural and remote Indigenous communities
- Increase in food prices continues to put pressure on many Canadian households
Natural disasters (for example, British Columbia floods), border blockades and Russia's war against Ukraine (see Annex A) further magnified these issues.

Current focus: National Supply Chain Strategy
- Supply chains are referenced in 10 mandate letters
- Budget 2022 Commitment to Develop a National Supply Chain Strategy (led by Transport Canada) — $603.2 million for supply chain investments
- National Supply Chain Summit, January 2022
  - Agriculture Minister led a session on pandemic impacts on the agricultural sector
- Supply Chain Task Force launched in 2022 (See Annex B for membership)
  - Process included targeted engagement with agriculture commodity groups, producer associations, and the Food Sector Network (industry-government working group to engage on emergency management issues affecting the food sector)
  - Final report tabled October 2022
- Supply Chain Regulatory Review launched — led Treasury Board Secretariat
  - Seeking stakeholders' feedback in identifying irritants along the supply chain
Supply chain programming already supported through Transport Canada's National Trade Corridors Fund:
- $4.6 billion over 11 years (2017 to 2028) for infrastructure owners and users to invest in critical transportation assets
Intersection of Supply Chain Strategy with AAFC mandate mainly focused on grain

With an annual value of $47 billion, grain production accounts for just over 55% of Canadian farm cash receipts.

Grain exports are key to competitiveness. Of the near 90 million metric tonnes of grain produced in Canada annually, approximately 50 per cent is exported.

Canadian grain has to move longer distances to port than any of our international competitors.
- Rail is the only practical way to move grain over such long distances — about 1 million truck trips to move Western Canadian grain export volumes to port versus 4,104 unit trains.
- 94% of all export grain traffic uses rail transportation either for movement to port or directly to final destination in the United States or Mexico.
- Pulse and special crops exports have grown considerably in recent years. These grains tend to move by container so demand for empty containers has increased .
Given the critical importance of rail, challenges and concerns about predictability and quality of rail service consistently identified as top supply chain issue for grain stakeholders.

Grain sector reliance on transportation by rail

Producers and grain companies contend that the railways' market power causes rail service and capacity issues that hurt the grain sector.
- Two main railways (Canadian National and Canadian Pacific) transport grain to North American customers and to marine ports for export;
- Unpredictable rail service and disruptions can have negative impacts on shippers — including contract penalties, demurrage and lost sales — which have repercussions across the supply chain;
- Forecasts show increased export growth in agriculture, forestry, mining and petroleum, which will likely increase pressure on railway capacity and exacerbate service problems if strategic investment are not made. Pressure greatest at the Port of Vancouver.
Concentration of market power: Although technically a duopoly, the rail system often operates as a spatial monopoly, as about 99% of grain elevators are served by only one railway.

"Unreliable rail service, ineffective dispute resolution mechanisms and lack of confidence that rail service providers will be able to meet shipper needs (and rail's overall ability to scale up its capacity to meet demand, seasonal or otherwise) are significant challenges raised by shippers. Industry also expressed concerns about the significant shortage of rail workers and crews, which affects suppliers' ability to rely on rail for timely delivery of products." — Final Report of The National Supply Chain Task Force 2022.

National Supply Chain Task Force recommendations of greatest relevance to agriculture

Addressing port congestion

Changes to port governance and improved port infrastructure.

Expand Canadian Food Inspection Agency and other government services to process commercial goods at ports.

Extended interswitching

Expand the interswitch distance beyond the current 30 km across Canada to give shippers more rail options and to address shipper–railway power balance issues.

Agency revisions

Revise the Canada Transportation Agency's mandate and provide it independence, authority and funding to deliver that mandate.

Improve 'own-motion' investigations and data collection.

Supply chain visibility and digitalization

Digitize and create end-to-end supply chain visibility for efficiency, accountability, planning, investment and security.

Supply chain labour issues

Develop a supply chain labour strategy.

Create a labour council to address labour disruptions

Supply chain office

Establish a supply chain office to unify the federal government's responsibility and authority over transportation supply chain management.

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Other transportation issues impacting the grain sector
- ongoing concerns about railway competition, reliability and resiliency
- actions to address port congestion (Transport Canada and Vancouver Fraser Port Authority)
  - Active Vessel Traffic Management Implementation (intended to strengthen marine safety, ease the flow of goods, and manage environmental and social impacts)
  - efforts to develop solutions to permit loading grain in inclement weather
- stakeholder concerns about Vancouver Fraser Port Authority, notably the perceived conflict of interest in being a developer and regulator, changes to port infrastructure fees
- responsiveness and functionality of the existing legislative tools and recourse mechanisms, including:
  - Canada Transportation Act: continued calls for increased competition provisions for rail
  - Canadian Transportation Agency (Agency): need for strengthening "own motion" powers
- concerns about labour reliability and stability, including calls for essential service rules to avoid strikes and other disruptions
Grain and transportation engagement forums

Crop Logistics Working Group
- Government–industry working group established in 2020, focused on studying challenges facing the grain sector in the context of the Government's long-term transportation agenda
Data and research initiatives funded by AAFC and Transport Canada
- Grain Monitor: An independent third party (Quorum Corp.), supported by AAFC and Transport Canada, tasked with monitoring overall efficiency of prairie grain handling and transportation
- Agriculture Transportation Coalition: Supported by AAFC, a third party looking at data at a granular level, reporting on daily and weekly performance of rail for grain transportation
Key interlocutors
- Western Grain Elevator Association
  - Viterra
  - G3
  - Cargill Ltd
  - Parrish & Heimbecker
  - Paterson Foods
  - Louis Dreyfus
  - Richardson International
- Pulse Canada
- Canadian Canola Growers Association
- Grain Growers of Canada
- Canadian National (CN)
- Canadian Pacific (CP)
- Food Sector Network
Annex 1: Agriculture-specific elements of Canada's response to Russia's war against Ukraine

On June 23, 2022, AAFC announced a temporary increase to the interest-free limit for advances under the Advance Payments Program (APP) in order to assist producers with sudden increases in input costs (for example fuel, fertilizer and seed). The interest-free limit increased from $100,000 to $250,000 for the 2022 and 2023 program years.

To help Ukraine and its farmers, Canada has provided $52 million to the United Nations Food and Agriculture Organization to support agricultural export solutions, including $50 million for grain storage and $2 million for technical lab equipment to facilitate export certification requirements. AAFC worked closely with Global Affairs and other partners to secure this funding.

In support of the Ukrainian economy, Canada has temporarily waived tariffs and trade remedy duties on imports originating from Ukraine, including for supply-managed products (for example chicken). The measure came into effect on June 9, 2022 and will expire after one year.

Canada is doubling funding to the Agricultural Market Information System (AMIS) to $250,000 Canadian dollars. This fund is an important agricultural sector initiative launched by the G20 in 2011 to enhance food market transparency and responses to food security issues.

The government is also working on options to provide additional support for farmers in Eastern Canada most impacted by the tariffs on Russian fertilizer.

Annex 2: National Supply Chain Task Force members and consultations

Co-chairs
- Louise Yako: Former President and Chief Executive Officer of the British Columbia Trucking Association
- Jean Gattuso: Former Chief Operating Officer, Lassonde Industries Inc.
Working group members
- Robert Armstrong, President, Chartered Institute of Logistics and Transport North America (CILTNA)
- Keith Bruch, Former Vice President of Paterson Global Foods
- Shauna McMillan, Executive Leader & Supply Chain Professional
- Stephane Roche, Vice President and Chief Operating Officer
- Howard Eng, former Greater Toronto Airports Authority President & Chief Executive Officer
- Gretchen Pohlkamp, Partner, NovaPark Consulting
Agriculture stakeholders consulted
- Animal Nutrition Association of Canada
- Canadian Oilseed Processors Association
- Cereals Canada
- Canadian Canola Growers Association
- Canadian Cattlemen's Association
- Canadian Federation of Agriculture
- Canadian Federation of Independent Grocers
- Canadian Meat Council
- Canadian Pork Council
- Canadian Poultry and Egg Processors Council
- Canadian Produce Marketing Association
- Canola Council of Canada
- Fertilizer Canada
- Fruit and Vegetable Growers of Canada
- Food Health and Consumer Products of Canada
- Keystone Agricultural Producers
- Pulse Canada
- Quorum
- Soy Canada
- Saskatchewan Wheat Development Commission
- Western Canadian Wheat Growers Association
- Western Grain Elevator Association

Retailer	Market share (%)
Loblaw	28
Sobeys	20
Metro	11
Costco	9
Walmart	8
The rest	24
Source: Who's Who Report 2021, Canadian Grocer

Sustainable Agriculture Strategy

Agri-environmental context

The success of the agriculture sector depends on natural resources.

strong interdependencies between productivity and the agricultural ecosystem, including climate and weather, land use and soil health, water quality and use, and biodiversity benefits and threats

Climate change and extreme weather events are already impacting the sector and will create greater challenges in the coming years and decades

continued international pressure to demonstrate increased ambition on climate change and other environmental issues

Producers have different challenges and opportunities than other sectors in the fight against climate change.

there are barriers to widespread adoption of beneficial practices, including managing risks to production and ensuring the adoption of such practices is economically viable

A number of initiatives, including recent historical investments in agri-environmental programming, are underway to further support the sector (for example, Agricultural Climate Solutions (ACS): On-Farm Climate Action Fund, ACS: Living Labs, Agricultural Clean Technologies).

Sustainable Canadian Agricultural Partnership will build on past federal-provincial-territorial frameworks and recent federal programming
mitigating and adapting to climate change is one of four missions driving Agriculture and Agri-Food Canada's Strategic Plan for Science

Agriculture is a driver for the Canadian economy

The agri-food sector is an engine of growth for the Canadian economy and plays a key role in strengthening domestic and global food security.

With global population expected to grow to 9.7 billion by 2050, Canada is one of a few countries with capacity to produce more food — but this growth needs to be environmentally sustainable.

This needs to be done within a context of:

supporting Canada's national targets of reducing greenhouse gas (GHG) emissions by 40% to 45% below 2005 levels by 2030 and net-zero by 2050.
increasing resilience to impacts of climate change that farmers are experiencing right now.
ensuring a healthy environment to support the long-term resilience of the sector.

In 2022, Canada exported $92 billion worth of food products, making it the fifth largest exporter of agriculture, agri-food and fish and seafood products in the world (behind the European Union, United States, Brazil and China).

The Canadian agriculture and agri-food system generated $134 billion, or 6.8% of Canada's gross domestic product (including food retail and food services) in 2021.

**Gross domestic product growth, by sector, 2013 to 2021**
Sector	Annual GDP growth (%), 2013–2021
All industries	1.7
Crop/animal production	2.9
Mining, oil and gas extraction	2.4
Manufacturing	0.3
Finance and insurance	4.0
Source: Statistics Canada

There have been notable environmental achievements in Canada's agricultural sector

Agricultural production has almost doubled in the last 20 years while total GHG emissions have increased only slightly.

The sector is taking action to promote stewardship and report on sustainability through improved metrics, certification and industry-led sustainability assurance systems.

Agri-food companies are increasingly making sustainability commitments.

Canada ranked seventh among the top 10 performers in 2022 (Global Food Security Index 2022).

Description of this image follows. — **Decoupling of agricultural emissions from GDP**

Decoupling of agricultural emissions from GDP - Index (2007=100)
	Net emissions	Agriculture GDP	Net emissions per GDP
1997	112.4	70.8	158.7
1998	110.6	76.1	145.3
1999	108.7	86.9	125.1
2000	106.9	85.2	125.4
2001	103.7	77.7	133.4
2002	100.4	71.0	141.4
2003	102.9	84.8	121.2
2004	103.9	96.3	107.9
2005	102.9	97.7	105.3
2006	97.1	96.1	101.1
2007	98.6	87.1	113.2
2008	98.6	100.3	98.3
2009	94.3	96.8	97.4
2010	94.3	94.5	99.8
2011	95.7	98.1	97.6
2012	100.0	100.0	100.0
2013	105.3	122.8	85.7
2014	104.1	107.6	96.8
2015	105.7	113.9	92.8
2016	108.1	122.9	88.0
2017	107.6	126.7	84.9
2018	111.7	125.7	88.9
2019	112.6	124.3	90.6
Source: NIR, Statistics Canada, AAFC's calculations

Agriculture and environmental issues

Despite these achievements, some environmental issues persist in the sector.

Adaptation and resilience: Producers are feeling the impacts of climate change now — shifting precipitation patterns, extreme and unpredictable weather events, and increased temperatures are affecting yields and costs.
Biodiversity: Diverse agricultural landscapes can provide habitat for a greater diversity of species. Loss of forage, grasslands, and pasture lands, and increases in annual cropping have all contributed to declines in biodiversity.
Water: Risks to water quality from pesticides and phosphorous have been increasing. Changes in precipitation and extreme weather will increase the need for enhanced water management in many regions.
GHG emissions: Livestock, crops, and on-farm fuel use represented 10% of Canada's total emissions in 2020 (69 Mt).

Economic sector	Megatonnes CO₂ equivalent	Percent of total
Agriculture	69	10.0
Waste and others	50	7.4
Oil and gas	179	27.0
Electricity	56	8.4
Transport	159	24.0
Heavy industry	72	11.0
Buildings	88	13.0
Source: Greenhouse gas sources and sinks in Canada: executive summary, 2022

Most of Canada's agricultural emissions are from biological sources: for example, nitrous oxide from nutrients added to soils, methane from livestock digestion.

Why a Sustainable Agriculture Strategy?

Challenges

There is no "one size fits all" solution — diverse production practices and regional conditions across 193,500 Canadian farms.
Market volatility, rising input costs and increased supply chain risks as barriers to adoption and risks backsliding on environmental progress.
A balance will be required to stay competitive, increase food production while also advancing sustainability goals.
Advancements in mitigation must not be at the expense of other agri-environmental issues.
Insufficient data hinders the ability to measure progress and pathways to 2050.

Opportunities

Leveraging knowledge transfer, climate champions in the sector and broader dialogue to bring behaviour change.
Identifying solutions that can work for both producers seeking to increase yields and improving environmental outcomes.
Reward stewardship, create market opportunities and leverage value chain environmental commitments by industry.
Comprehensive approach needed to prioritize multiple agri-environmental co-benefits at the same time.
Engage broadly on viable solutions and a measurement framework that works for the whole value chain.

Proposed Sustainable Agriculture Strategy goals

The agriculture sector plays an important role in contributing to Canada's 2030 GHG emission reductions targets and reaching net zero by 2050 while remaining competitive and supporting farmer livelihoods.
The agriculture sector is resilient to short and long-term climate impacts, while maintaining productive capacity, and has adapted to changing contexts due to climate change.
Environmental performance is improved in Canada's agriculture sector, contributing to the environmental, economic, and social benefit of all Canadians.
Canada has improved capacity to measure, report on, and demonstrate the environmental performance of the agriculture and agri-food sector.
A comprehensive and integrated approach is taken in addressing agri-environmental issues in the agriculture sector, across policy, programming, and partners in the value chain.

Sustainable Agriculture Strategy overview

Will help set a shared direction for collective action to improve environmental performance in the sector over the long-term, supporting farmer livelihoods and the long-term business vitality of the sector.
Will build on past and current successes, recognizing action already taken by producers to meet environmental objectives while growing production and supporting Canada's role as a global food provider.
Will bring together, under one umbrella, action needed on environmental issues in the agriculture sector and will seek alignment and coordination with other initiatives (for example, National Adaption Strategy, Global Methane Pledge, and the development of the Canada Water Agency).
Will set a long-term vision (to 2050) and coordinated and integrated approach.

Climate change mitigation

What we know

In 2020, total agricultural emissions from production were estimated at 69 mega tonnes of carbon dioxide equivalent (10% of Canada's total).
Canada's total agricultural GHG emissions have stayed relatively stable since 2005, and is projected to increase slightly by 2030.
Emissions associated with crop production increased by 102% between 1990 and 2020.
Canadian soils have been a carbon sink since 1990s due to increase in no-till/low-till practices.

Current national and international commitments

Reduce GHG emissions in Canada by 40 to 45% by 2030; achieve net-zero emissions by 2050.
Canada supports the Global Methane Pledge to reduce global methane emissions by 30% by 2030.
Reduce emissions from fertilizer use by 30% by 2030.

**Main sources of Canada's agricultural emissions in 2020**

Agricultural process	Percentage of main sources of Canada's agricultural emissions in 2020
Enteric fermentation	35
Manure management	11
Direct emissions from synthetic and organic fertilizers	18
Crop residue decomposition	7
On-farm fuel use	19
Other	10

Types of greenhouse gases emitted by the agricultural sector in 2020

Greenhouse gas	Percentage of greenhouse gases emitted by the agricultural sector in 2020
N₂O	36
CH₄	38
CO₂	25

Adaptation and resilience

What we know

The agriculture sector is already experiencing impacts of climate change including higher temperatures, shifting precipitation patterns, and more frequent and intense weather events.

This is increasing risk of

crop and livestock loss
declining soil health
incidence of pests and diseases
supply chain disruptions

Sample of national and international commitments

Canada's National Adaptation Strategy, a shared vision for climate resilience in Canada, out for consultation.
Canada is party to the Convention to Combat Desertification.

Increase in annual average number of days greater than or equal to 30ºC predicted across Canada in a business-as-usual scenario (change from 1976-2005 period to 2021-2050 period)

Adaptation and resilience — current challenges

Risk of contamination of surface water by phosphorus in Canada in 2016

Biodiversity

What we know

Biodiversity benefits production through pollination, pest management, soil formation, nutrient cycling and water purification. Agricultural landscapes with more biodiversity are also more resilient to climate change impacts.
Wildlife habitat capacity in agricultural landscapes has remained generally stable, but low, in Canada, to 2015.
There have been strong pressures to convert land to annual cropping since 2015.
Declines in biodiversity on agricultural landscapes have resulted from the conversion of habitat such grasslands, wetlands and forage/pasture lands to annual crops, as well as increased use of chemical inputs.

Sample of current national and international commitments

Canada is Party to the Convention on Biological Diversity and is committed to contributing to its global goals and targets, including protecting 30% of natural habitats by 2030.
Canada is developing a domestic biodiversity plan to achieve targets adopted in the Kunming-Montreal Global Biodiversity Framework (2022-2023).
The Government of Canada works to protect animal and plant species at risk through the Species at Risk Act and the Agriculture Species at Risk Action Plan, currently under development in 2023.

Number of terrestrial vertebrate species using cover types on agricultural landscapes, 2015

Land cover type	Number of species using cover type for feeding and reproduction on agricultural land
Wetland	267
Forest	337
Pasture (Native Grassland)	303
Pasture (unimproved)	339
Cropland (fruit and berry)	94
Cropland (perennial)	83
Cropland (annual)	29

Soil health

What we know

Healthy soils are fundamental to the sustainability of agriculture in Canada.
In general, soil organic matter has been increasing on agricultural lands in Canada.
Decreasing soil carbon levels, decrease in soil cover days, and higher risks to soil erosion are seen in Eastern Canada.
In 2016 Canadian agricultural soils removed 11.2 million tonnes of carbon dioxide from the atmosphere.
Soil biodiversity is an important component for healthy soils.

Sample of national and international commitments

Canada supports the"4 per 1000" Initiative — encourages voluntary action to increase the quantity of organic carbon in agricultural soils by 0.4% each year, in the first 30 to 40 centimetres of soil.
Convention on Biological Diversity includes a voluntary commitment to develop a soil biodiversity indicator.

Building the strategy: Engagement approach

Ongoing engagement and consultations

Issues identification and scoping, 2021and early 2022: completed
Launch formal consultation process and advisory mechanism — Sustainable Agriculture Strategy Advisory Committee, fall 2022/winter 2023
Integrate measures for improved environment and climate outcomes, ongoing
What We Heard report and draft strategy, spring/summer 2023
Sustainable Agriculture Strategy, late 2023

With stakeholders

Four stakeholder workshops, early 2023
Ongoing dialogue and consultations with the sector (Sustainability Sector Engagement Table — Sustainable Agriculture Strategy Advisory Committee; The Canadian Agricultural Youth Council; Canadian Food Policy Advisory Council)

With provinces and territories

Through Agriculture and Agri-Food Canada's established federal-provincial-territorial working groups at senior and working levels, ongoing

With producers

Four regional producer workshops, early 2023; regional outreach, ongoing

With Indigenous partners

Distinctions-based approach to engage with National Indigenous Organizations

All target audiences

Web-based survey, December 12, 2022 until April 2023
Written submissions, December 12, 2022 until April 2023

Upcoming stakeholder workshops

January 26, noon to 3:00 p.m. Eastern Standard Time — Session 1 — Goals and outcomes
- Discuss goals and environmental outcomes desired under the Sustainable Agriculture Strategy, to set "where we want to be" in the sector in the next 25 years
February 8, noon to 3 pm Eastern Standard Time — Session 2 — Data, measurement and targets
- Discuss the challenges with data in measuring progress towards environmental outcomes
February 21, noon to 3 pm Eastern Standard Time — Session 3 — Approaches to reach outcomes (Part 1)
- Discuss approaches that could be successful at advancing environment and climate outcomes in the sector
March 9, noon to 3 pm Eastern Standard Time — Session 4 — Approaches to reach outcomes (Part 2)
- Continuation of Session 3 discussion on approaches that could be successful at advancing environment and climate outcomes in the sector

Other upcoming milestones and events

April 2023: Launch of Sustainable Canadian Agricultural Partnership
- Climate change and environment a priority area

International

Agricultural Mission for Climate Summit, May 8-10, 2023, Washington DC
- Springboard event in the lead up to United Nations Framework Convention on Climate Change Conference of the Parties 28.
G20 Agriculture Ministerial meeting, June 17, 2023, India
Food and Agriculture Organization Conference (43rd Session), July 1-7, 2023, Rome, Italy
- Canada is Chair in 2023.
Asia-Pacific Economic Cooperation Food Security Ministerial, August 2023, Seattle
- United States being the host for 2023, Minister may wish to attend if Secretary of Agriculture Tom Vilsack attends
United Nations Climate Action Summit, September 2023, New York City
International Bioeconomy Summit, October 2023
- Canada is hosting
United Nations Framework Convention on Climate Change Conference of the Parties 28, November 30-December 12, 2023, Dubai, United Arab Emirates

Plant breeding innovation

Purpose

The purpose of this presentation is to provide an overview of:
- What plant breeding innovation is and responsible regulatory bodies
- Canadian Food Inspection Agency's (CFIA) proposed guidance updates for Part V of the Seeds Regulations
- Industry perspectives
- Current status and next steps
Plant breeding innovation overview

Plant breeding is done using a number of methods, ranging from conventional plant breeding methods like cross pollination to using more advanced technologies, such as gene editing.

Plant breeding is regulated by Health Canada (for food) and CFIA (for feed and seed).

Canada's regulation of products of plant breeding innovation aims to ensure the release of products of plant breeding innovation does not negatively affect human health or pose a threat to environmental safety.

Canada's regulatory guidance on plant breeding is in need of modernization to properly account for new and emerging breeding technologies such as gene editing. Health Canada's updated guidance on novel foods was published in July 2022.

Gene editing allows for precise changes to plant DNA, and has the potential to provide growers with benefits such as improved yields and improved resistance to disease, insects, and environmental stresses. This can help Canada achieve its economic growth and sustainability goals.

Overview of the Canadian Food Inspection Agency's updated guidance

Considering feedback received, along with reviews of available scientific literature, CFIA has developed draft guidance to reflect that:
- Herbicide-tolerant plants remain subject to Part V of the Seeds Regulations (meaning a pre-market assessment is required as well as a publication in its Plants with Novel Traits database notifying intention to release into the environment).
- All plants with foreign DNA will remain subject to Part V.
- Plants developed through conventional breeding, or resembling conventional breeding (including many products of gene editing), are not expected to require assessment by the CFIA.
Plant developers can request a Regulatory Status Determination for any plants that are not clearly exempt to receive additional advice from CFIA in a timely and predictable manner through a new formalized process.

Industry perspectives

Conventional sector

Current uncertainty in the regulatory path, and time and costs associated with pre-market regulatory assessment, inhibits investments in innovation.

The sector is keen to see CFIA publish the guidance which has been under discussion since 2018.

To address transparency concerns, the sector implemented a voluntary database to publicly disclose gene-edited varieties.

Organic sector

The sector believes the updated guidance will lead a to a lack of transparency around gene-edited varieties, as plants with no foreign DNA are not required to be published in CFIA's Plants with Novel Traits database.

The sector is concerned organic producers may inadvertently purchase and grow gene-edited varieties, which are prohibited for use in organic production.

Doing so could have the following consequences:
- Loss of organic certification for producers who inadvertently grow gene edited varieties
- Loss of international market access if organic sector unable to provide assurances about the absence of gene-edited varieties in exports.
Current status and next steps

In response to concerns from the organic sector, AAFC has established a technical committee composed of organic and non-organic sector stakeholders and government officials to enhance the database and develop supporting mechanisms to adequately meet varietal transparency needs.

The technical committee held its first meeting in January and has met four times to date. The next meeting will take place during the week of February 20.

The technical committee is aiming to complete its work by March 10, 2023.

AAFC is also considering creating a separate working group to address other concerns the organic sector has raised in these meetings, including co-existence between the two sectors, and testing to ensure organic compliance, among other issues.

Overview of Health Canada's updated guidance

Health Canada developed two new pieces of guidance for the Novel Food Regulations focused on products of plant breeding. The two new pieces are:
- Guidance on the novelty interpretation of products of plant breeding, and
- Guidance on the pre-market assessment of foods derived from previously assessed genetically-modified (GM) plants.
The goal of the new guidance is twofold:
- to provide greater clarity, predictability and transparency regarding the regulation of novel foods derived from plants, including those developed using gene editing technologies; and
- to provide an efficient and predictable pathway to commercialization for new products
Along with the two new pieces of guidance, Health Canada also created a new transparency initiative, an online database which will keep Canadians informed about the release of non-novel gene-edited products of plant breeding.

Health Canada implemented its updated guidance for the Novel Food Regulations in spring 2022.
Fertilizer — Supply chain and tariffs

Purpose
- To provide a background on fertilizer, Canada's fertilizer market, market issues including the tariff on Russian fertilizer imports and Agriculture and Agri-Food Canada's (AAFC) efforts to support the sector.
Fertilizer 101

Nitrogen (N), phosphorus (P) and potassium (K) are the most important macronutrients plants rely in large quantities to grow. Each plays a unique role in plant growth and plant health, and therefore one nutrient cannot be substituted for another.

Depending on the nutrient, fertilizers may be available as a liquid, gas or granular, each requiring specialized equipment to apply.

Farmers largely depend on synthetic fertilizers that are manufactured or mined from natural resources due to their high nutrient density. Synthetic fertilizers are often 5-10x more concentrated than biological alternatives like manure or compost.

Synthetic fertilizers, particularly nitrogen fertilizer, directly contribute to yield. Many of Canada's primary field crops like corn, canola and cereal crops would not be financially viable without the use of synthetic fertilizer.

While efficiency technologies are emerging, there are currently no valid cost-effective alternatives to synthetic fertilizers.

Canadian fertilizer market

Nitrogen

Canada is a marginal net exporter of nitrogen fertilizers with production concentrated in Western Canada. Eastern Canada is reliant on imports and it is significantly more cost effective to import by sea as opposed to rail shipments from Western Canada.

Phosphorus

Canada is 100% reliant on imports, over 80% of which are imported from the United States. Canada possesses phosphorous deposits but does not have any active mines.

Potassium

Canada is self-sufficient in potash and is the largest single producer and exporter globally holding 31% of global reserves, followed by Russia and Belarus. In response to the decreased availability from Russia and Belarus, Canadian companies increased production capacity by 11% in 2022.

Canadian fertilizer plants

Open dots indicate main ports. Grey lines indicate railway systems. Dark green, filled circles represent nitrogen plants. Light green filled circles represent potash plants.

Description of the above image
Canada's fertilizer production is concentrated in Western Canada and is comprised of both potash and nitrogen fertilizer plants. All of Canada's 10 potash mines are located in Saskatchewan, while Canada's 10 nitrogen fertilizer plants are located across Alberta (8), Saskatchewan (1), Manitoba (1) and Ontario (1).

Historic high fertilizer prices

Fertilizer is a global market and Canadian prices are influenced by international demand (crop prices), supply factors, production capacity and the regulatory environment.

In recent years, prices more than doubled, reaching historical highs due to growing commodity prices, restricted supply of natural gas (a primary feedstock in the production of nitrogen fertilizer), and tightened global supply due to the world's largest producers (China and Russia) restricting exports, and supply disruptions caused by Russia's invasion of Ukraine.

While global prices are stabilizing since their peak in 2022, fertilizer is still the largest on-farm expense and a top-of-mind concern for producers.

Green Markets Weekly North America Fertilizer Price Index

Description of the above image
Green Markets Weekly North America Fertilizer Price Index

The Green Markets Weekly North America Fertilizer Price Index is used above as an indicator for North American fertilizer prices and to depict recent market volatility. In 2021, the index rose from $412 and peaked at $1107. After a slight decline in early 2022, the index rose again in late March to $1270. Since then, the index as steadily decreased and currently sits at $545 as of late February 2023. The index is constructed using the fertilizer benchmark prices of US Gulf Coast Urea, US Cornbelt Potash and New Orleans Louisiana Barge Di-ammonium Phosphate. The index is value weighted based on the annual global demand of each nutrient.

Fertilizer supply concerns in 2022 and 2023 outlook

Eastern Canadian distributors traditionally fill their storage with 70% of the following season's fertilizer needs in the fall. The remaining 30% arrive on a just-in-time basis in early spring.

In response to Russia's invasion of Ukraine, Canada banned Russian and Belarusian vessels, and applied a 35% tariff on all imports from both countries, including fertilizers.

These measure impacted the just-in-time imports, compounded already high prices and presented significant challenges for Eastern Canada which long relied on Russia for 40% of its nitrogen fertilizer supply.

While the region's largest distributor maintained its orders and paid $34.1 million in duty after receiving vessel ban exemptions, others made the decision to cancel orders and source elsewhere at considerably higher prices. In both instances, these unanticipated costs were transferred down to producers. Ultimately, the sector received the fertilizer it needed, albeit just in time and at higher prices.

For 2023, Eastern Canadian distributors are on track to have sufficient fertilizer supplies from non-Russian sources. While prices are stabilizing, they are expected to remain relatively high and some growers may make changes to planting plans (for example, more soy which is less nitrogen fertilizer intensive as opposed to corn).

Government response

The tariff was renewed in October 2022 by Finance Canada until May this year.

Since the implementation of the tariff, associations representing growers have advocated for compensation.

Advance Payments Program changes

In spring 2022, Agriculture and Agri-Food Canada amended the Advance Payments Program, a low-interest federal loan. The interest-free portion of this program was increased from $100,000 to $250,000 for the 2022 and 2023 program years. As a result, most recent estimates suggest that participating producers will save an average of $8,600 in interest costs over these two years.

Potential options for the use of the fertilizer tariff collected

Minster Bibeau has publicly stated that AAFC is looking at options to use an equivalent amount of the $34.1 million collected through the Russian tariff to assist Eastern Canadian farmers impacted by the tariff and increase fertilizer prices.

Canada's fertilizer emissions reduction target

Policy context — Fertilizer emissions

Under Canada's Strengthened Climate Plan, Canada committed to:

setting a national fertilizer emission reduction target of 30% below 2020 levels by 2030; and
working with fertilizer manufacturers, farmers, provinces and territories, to develop an approach to meet it.

In April 2021, in line with its obligations under the Paris Agreement, the Government of Canada announced a new greenhouse gas (GHG) emissions reduction target of 40% to 45% below 2005 levels by 2030.

These broad climate change objectives highlight the need to reduce absolute GHG emissions across all economic sectors. This includes agriculture, which accounts for approximately 10% of Canada's GHG emissions.

Breakdown of Canada's greenhouse gas emissions by economic sector, 2019

**Breakdown of Canada's greenhouse gas emissions by economic sector, 2019**
Economic sector	Megatonnes of carbon dioxide equivalent (Mt CO₂ equivalent)	Percentage of total
Oil and gas	191	26
Electricity	61	8.4
Transport	186	25
Heavy industry	77	11
Buildings	91	12
Agriculture	73	10
Waste and others	51	7.0
Total	730	100

Overview of the fertilizer emissions target

To help Canada meet the fertilizer emission reduction target of 30% below 2020 levels by 2030, our proposed approach is focused on reducing emissions from fertilizer application. This target is not about establishing a mandatory reduction in fertilizer use.

The goal is to maximize efficiency, optimize fertilizer use, encourage innovation, and to work collaboratively to improve nutrient management and reduce emissions while maintaining and improving the quality and yields Canadian agriculture is known for around the world.

Synthetic nitrogen fertilizers have contributed to record harvests in the last decade, and helped drive increases in Canadian crop yields, grain sales, and exports. They have played a critical role in Canada's agriculture system, and will continue to do so — particularly now, when concerns over food security are paramount.

Why nitrous oxide?

Nitrogen (N) is an essential nutrient for agricultural crops. However, the application of N fertilizer creates nitrous oxide (N₂O), a potent greenhouse gas with a global warming potential 298 times that of CO₂ over a 100-year period.

Total N₂O emissions (direct and indirect) from synthetic N fertilizer application in Canada have increased by 92%, and fertilizer use has increased by 89% since 2005. Fertilizers now account for more than one-third of all N₂O emissions in Canada. In addition, emissions from crop production, of which nitrogen fertilizer application is a major driver, are forecast to continue increasing by 2030.

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Overview of engagement

Spring 2021: Informal discussions on the target with stakeholder organizations
March 2022: Release of the discussion document and Online Survey
April 2022: Public town hall to exchange ideas and share next steps
Fall 2022: Technical workshops focused on data and measurement, beneficial management practices and innovation
2023: Engagement under the Sustainable Agriculture Strategy

What we heard — key messages

Throughout the consultation process, specific actions to achieve the target were highlighted and include (additional details in the Annex):

Increasing adoption of beneficial management practices (BMPs) with decreased upfront costs and demonstration of their success and profitability on the farm.
Supporting innovation to help the sector on a path forward, with financial support and improved infrastructure.
Improving measurement and reporting of GHG emissions from fertilizer application, with minimal reporting burden for the farmer, and open data sharing while protecting data privacy.
Engaging frequently with farmers, involving them directly in research efforts to use their deep knowledge of landscape and farming practices.

The full report will be released in March 2023.

Current programming — Agricultural Climate Solutions

Agricultural Climate Solutions (ACS) is a multi-stream program that will help to develop and implement farming practices to tackle climate change. Through agricultural practices, such as shelterbelts or cover crops, farmland can store carbon and reduce greenhouse gas emissions. ACS includes:

Living Labs ($185 million, 2021-31) aims to accelerate co-development, testing, adoption, dissemination and monitoring of BMPs that sequester carbon and/or mitigate GHG emissions, including nitrogen management.
- 9 Living Labs in British Columbia, Alberta, Saskatchewan, New Brunswick, Nova Scotia, and Newfoundland and Labrador were announced in 2022; all include a nitrogen management component.
On-Farm Climate Action Fund ($670 million, 2021 to 2028) supports farmers in adopting BMPs that store carbon and reduce greenhouse gases in three areas: nitrogen management, cover cropping and rotational grazing practices.

Current programming — Agricultural Clean Technology Program

Agricultural Clean Technology Program ($495.7 million, 2021-28) — aims to create an enabling environment for the development and adoption of clean technology that will help drive the changes required to achieve a low-carbon economy and promote sustainable growth in Canada's agriculture and agri-food sector.

The Adoption Stream will support the purchase and installation of commercially available clean technologies and processes with a priority given to those that show evidence of reducing GHG emissions, and other environmental co-benefits.
The Research and Innovation Stream will support pre-market innovation, including research, development, demonstration and commercialization activities, to develop transformative clean technologies and enable the expansion of current technologies.

Reaching the target: Early options and considerations

Engagement and consultation process note that while challenges exist, there are solutions for reducing emissions.

The feedback from consultations suggest that the BMPs identified in the AAFC Climate Change Roadmap are a good basis to reach significant reductions, especially when coupled with complementary policy and programming.

The question is now: Which ones we have to bolster to reach the target, and which additional policy and program tools should be deployed?

Policy toolbox

Increasing adoption of BMPs
Third party support for expansion efforts
Research and development (measurement and data)
Fertilizer Industry-Government Working Group
Education and awareness

Annex 1: Online consultation topline results summary

Opposition to perceived Government of Canada interference in on-farm activities, including fertilizer use.
Mistrust of current data on fertilizer usage and emissions, as well as asking for improvements of data collection methods.
Desire for improved communication and engagement between government and producers.
Identified barriers to reducing emissions from fertilizer, primarily lack of resources (financial, government funding) and training or knowledge of alternative products and methods.
Acknowledgement that farmers are already implementing sustainable and emissions reducing practices such as 4R, and should be awarded for early adoption.
Different approaches to emissions reduction to respond to regional differences should be considered.
Producers should not have to absorb the time and cost of enhanced data collection, there is a perceived need to transfer the cost to the data use (government).

Online survey

Open March 4 to August 31, 2022
A total of 3,725 full or partially completed online responses, 1,250 fully completed responses
Almost 50 sector associations provided feedback via survey (included in 'other' below)

**Demographics**
Province/territory	%
Alberta	38
Ontario	25
Saskatchewan	12
British Columbia	11
Manitoba	7
Quebec	3
Other	4
Total	100
Note: n = 3,408

Stakeholder type	%
Member of the public	54
Producer/farmer	38
Scientist, agronomist, biologist, or consultant	3
Agriculture-related business owner or employee	2
Other	2
Notes N=3,357 Statistics include both full and partial respondents. Stakeholder type 'other' includes 47 associations/organizations/NGOs, 12 local/regional/provincial governments, 9 others and 7 students.

Annex 2: Media coverage

Summer 2022

Misconceptions about the target (there is a "ban" on fertilizer use, an approach is mandatory, confusion around access to federal funding, etc.)

AAFC's proactive communications and engagement efforts throughout early Fall included:

Key messages, Q&As and speaking points for the Minister's proactive media interviews.
Social media messages shared factual information and pointed to more extensive Q&As on our website.
Op-ed developed and shared with minister's office to proactively distribute to members of the media.
Communications products to policy clients for information sharing through ongoing stakeholder calls.

Fall 2022

A more neutral-to-positive shift in the narrative. Sentiment had changed, based on media scanning metrics. Overall rise in more fact-based coverage was seen.

Today

Back to misinformation campaigns about the target.

AAFC's communications team is working on a media package to accompany the What we Heard Report Release. Fertilizer team has been speaking at public conferences and meetings.

An introduction to the use and regulation of agricultural pesticides in Canada

Purpose

The purpose of this presentation is to provide a brief overview of
- the role of pesticides in agriculture
- how pest control products are regulated in Canada
- Agriculture and Agri-Food Canada's (AAFC) role in pesticides and pest management
- the Pest Management Regulatory Agency's transformation initiative
- Maximum Residue Limits and the pause on increases
- COP 15 Pesticide Target
The role of pesticides in agriculture

Pesticides are an important tool to support stability and growth in the agriculture sector.

Worldwide, an average of 35% of potential crop yield is lost annually due to weeds, pests and diseases.

In the absence of pesticides, corn crop yields would drop by 50% across Canada and the USA―equivalent to $56 billion of crop value―due to unchecked weed growth.

A total of 130 million kilograms of pesticide active ingredients are sold in Canada annually at an estimated direct market value of over $3 billion.

Pesticides support Canadian growers in adapting to the proliferation and migration north of pests caused by climate change.

Pesticides also enable no till farming, allowing for carbon sequestration.

"Pesticides play a significant role in food production. They protect or increase yields and the number of times per year a crop can be grown on the same land." (World Health Organization, 2020)

The regulation of pesticides in Canada

Strict regulatory oversight is required since pesticides can present risks to the environment and human health if conditions of use are not followed.

The Pest Management Regulatory Agency (PMRA) is a branch of Health Canada that regulates pesticides in accordance with the Pest Control Products Act (PCPA).

PMRA's work covers pesticides used in agriculture to control weeds, plant diseases, and insect damage to crops and livestock.

PMRA is required to conduct pre-market risk assessments of new products, conduct re-evaluations (15 year cycle) and special reviews of registered products, and specify Maximum Residue limits (MRLs) for pesticides that may remain on food.

AAFC's role in pesticides and pest management
- Research and development of alternative pest management solutions
- Promoting reduced risk solutions for priority pest issues
- Facilitating the alignment of MRLs internationally to support Canadian agriculture and agri-food exports
- Facilitating grower prioritization of pest/crop issues for minor crops
- Generating data to support registrations of grower priorities
- Supporting other departments with Regulatory jurisdictions, primarily PMRA
AAFC has no regulatory or enforcement role leading to a unique relationship with growers, in contrast to Health Canada, Environment and Climate Change Canada and the Canadian Food Inspection Agency.

PMRA transformation

In August 2021, the Government committed to strengthen the pesticide review process by
- undertaking a targeted review of the PCPA
- pausing increases to MRLs until at least spring 2022
- creating a new expert panel process to provide science-based advice to PMRA
- increasing the availability of independent data to support pesticide review decisions
- improving transparency
The Minister of Health's mandate letter includes a commitment to modernize and strengthen the PCPA to support transparency and use of independent scientific evidence and input into decision making to better protect human health, wildlife and the environment from risks associated with pesticides.

In January 2022, $50 million in new funding over three years was provided ($42 million for Health Canada, $7 million for AAFC, and $1 million for Environment and Climate Change Canada starting in 2021-22) to deliver on these commitments.

Agriculture stakeholder reactions (positive)

Following numerous stakeholder meetings, PMRA received over 100 written responses to the consultation that closed at the end of June — many from the agriculture sector.

Agriculture stakeholders are:
- supportive of the business process improvements upon which they have been consulted for over three years and are anxious to see them implemented
- supportive of improved access to real-world data (water monitoring and use information) to refine risk assessment and provide a more accurate regulatory decisions
- supportive of transparency in general, but feel that the PCPA is already more transparent than most regulatory systems and question the value of further investment
Agriculture stakeholder concerns

Agriculture stakeholders are:
- concerned that the transformation initiative will deviate from the current science-based approach to regulation due to it being announce with the MRL pause — despite assurances from PMRA to the contrary;
- opposed to the Science Advisory Committee, questioning the need for the independent advice on general pesticide science questions where PMRA scientists are more experienced and have also expressed concerns regarding the motives for creating the committee
- opposed to opening the PCPA stating that "Legislative changes are not required to implement initiatives under PMRA's transformation agenda"
- concerned that many transformation elements announced on August 4, 2021 are too expensive given the limited improvements to the regulatory system, and that they will detract from efforts to improve re-evaluations and deal with the growing backlog of work at PMRA
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COP15 pesticide target

COP15 (the UN biodiversity conference) concluded in December 2022 in Montreal with an agreement that includes a commitment to reduce the risk from pesticides on the environment.

This commitment does not represent a mandatory reduction in pesticide use.

AAFC will work closely with the sector and our partners (Environment and Climate Change Canada is overall Government of Canada lead on the agreement) to develop a domestic biodiversity plan to achieve the goals set out in the COP15 agreement.

Maximum Residue Limits

Maximum Residue Limits (MRLs) represent the maximum amount of pesticide residues that are expected to remain in or on food commodities when a pesticide is used according to its labelled directions.

MRLs are technical non-tariff measures used in trade and are critical for importing and exporting food. Misalignment of MRLs internationally can result in non-tariff barriers to trade.

PMRA establishes MRLs in Canada by the using internationally recognized methods and following an extensive scientific review of pesticide residue data.

Canadian Food Inspection Agency enforces MRLs for both domestic and imported foods.

AAFC facilitates the alignment of MRLs internationally to support Canadian agriculture and agri-food exports.

Current issue

Industry is appealing to Government to lift the pause on MRL increases in cases where it is supported by science advice.

Book 2 - Hot issues: deputy minister's transition book 2023, AAFC

Table of Contents

Sustainable Canadian Agricultural Partnership

Purpose

Background — agriculture frameworks

Overview of the Canadian Agricultural Partnership

Strategic initiatives

Business risk management programs

Key shifts from CAP to the Sustainable CAP

Overview of the Annual Ministerial Conference — July 2022

Key milestones towards implementation of the Sustainable CAP

The Guelph Statement

Multilateral Framework Agreement

Bilateral agreements

Next steps

African Swine Fever

Overview and AAFC response

Canadian hog sector

About African Swine Fever

Initial impact

ASF could arrive in Canada any day

Current prevention and preparedness efforts

Pan-Canadian ASF Action Plan

Action Plan pillars

Pillar 1: Prevention and enhanced biosecurity

Pillar 2: Preparedness planning

Pillar 3: Ensuring business continuity

Zoning, led by CFIA and industry

Compartmentalization, led by CFIA and industry

Market interruption response, led by AAFC, provincial governments and industry

Pillar 4: Coordinated risk communications

Industry, CFIA, AAFC, provincial governments

Prevention

Preparedness

Next steps

Annex: Roles and responsibilities

CBSA

CFIA

AAFC

Industry

Provincial–territorial governments

Canadian retail fees and Canadian grocery code of conduct

Background — Grocery retail concentration and fees

Canadian Grocers' Market Share by Sales, 2021

Retail fees placed on suppliers (see Annex 1) generally range from mutually beneficial to contentious

Calls for action

Industry-led process

Current status

Considerations: Industry progress

Considerations: Policy context

Path forward

Winter 2023

Spring 2023

Summer 2023

Annex 1: Examples of retail fees

Advertisement Out-of-Stock Fees

Core/National Agreements

Electronic-Commerce Development Fee

Exclusivity Fees

Extended "Blackout"/"Price Freeze" Period

Extra Terms

Infrastructure Development Fee/ Strategic Acceleration Allowance

Late Delivery Fees

Over and Above (O&A) Fees

Payment Terms

Shelf Listing Fees/Slotting Fees/Listing fees

Unloading (Lumper) Fees

Unsalable Merchandise Fees

Annex 2: FPT working group key findings

Agriculture and agri-food transportation and supply chains

Agriculture and agri-food supply chains during the pandemic

Vulnerabilities within agriculture and agri-food supply chains

Current focus: National Supply Chain Strategy

Intersection of Supply Chain Strategy with AAFC mandate mainly focused on grain

Grain sector reliance on transportation by rail

National Supply Chain Task Force recommendations of greatest relevance to agriculture

Addressing port congestion

Extended interswitching

Agency revisions

Supply chain visibility and digitalization