The impacts of Bill C-280 will be felt across the industry, said Marcus Janzen, an Abbotsford grower of greenhouse peppers and president of the board of directors for the Fruit and Vegetable Growers of Canada. Mr. Janzen looks over an eight-week-old crop of peppers at a greenhouse in Abbotsford, B.C., on Dec. 14.Jimmy Jeong/The Globe and Mail
Quinton Woods will never forget the day the farm lost around US$200,000, an entire year’s profit, because of a shortfall in Canadian bankruptcy laws.
Gwillimdale Farms, based in Bradford, Ont., sold its crop a few years ago to a U.S. buyer who filed for bankruptcy before paying the cheque. The farm could not afford to pay a hefty fee to submit a claim, and there was no point in reprocessing inventory that, if still sitting in the warehouse, was long spoiled.
For decades, this was a perpetual risk faced by fresh-produce growers across Canada. However, on Tuesday night, the Senate passed Bill C-280 – creating a trust for growers in the case of bankruptcy. The bill amends Canada’s Bankruptcy and Insolvency Act to establish a financial protection system for fresh-produce sellers in Canada.
The industry has long advocated for the change. Large-scale packers often work with hundreds of growers. A bankruptcy could have devastating impacts across an entire region. The gap in financial protection also complicated trade relationships with the U.S., which had a dedicated trust for growers, but because the same mechanisms were not in place in Canada, did not extend these protections across the border.
“This changes the game,” said Mr. Woods, sales and plant operations manager at Gwillimdale Farms. “It offers us the contractual certainty that everyone along the supply chain needs.”
But growers and analysts question whether this bill goes far enough. Canadian producers are struggling to stay competitive with the U.S., where government support goes far beyond financial protection and includes sizable tax cuts, large investments in infrastructure, and a farm bill that focuses on the long term that dwarfs anything on the table in Canada.
Fresh produce is grown by farmers who rarely package and retail in-house. Instead, they sell to a wholesaler who markets the product to retailers. The growers are not paid on delivery, but after the product is sold to retail. The timeline for payment is typically around one month but can take longer.
If the packer files for bankruptcy before paying, the grower will get little value from repossessing the inventory: the produce is either sitting in a warehouse, spoiled, or already integrated into the food supply.
Insolvencies within this sector are uncommon, said Massimo Bergamini, executive director of the Fruit and Vegetable Growers of Canada (FVGC), but they do have far-reaching impacts. For example, in January, 2023 Lakeside Produce – one of the largest consolidators in Canada’s greenhouse capital, Essex County – filed for creditor protection. The company owed $18.3-million to around 300 unsecured creditors, including six-figure debts owed to produce and logistics companies across the region.
The bankruptcy had “huge ripple effects” across a vulnerable sector, said Richard Lee, executive director of the Ontario Greenhouse Vegetable Growers, the association that represented Lakeside Produce and many of its creditors.
Lacking financial protection is also a trade irritant for Canadian growers who export large quantities to the U.S. The USDA Perishable Agricultural Commodities Act (PACA) offers a financial protection mechanism to sellers. However, because Canada did not have a reciprocal system, growers north of the border were required to post a bond worth double the value of the shipment just to initiate a formal claim through PACA. This cost was untenable for many growers, including Gwillimdale Farms.
The Canadian changes won’t cost the government, said Mr. Bergamini. Instead, when a grower sells product to a consolidator, the value of that product will be put in trust. Should the buyer file for bankruptcy, the deemed value of the produce will be taken out of the estate. For example, if the value of the product was $200,000, this money would be paid to a grower after other assets (such as equipment) were repossessed and sold.
“It is an important statement that shows policymakers understand the importance of food security in this country,” he said.
Because Bill C-280 also matches the U.S.’s PACA, it paves the way for the Americans to restore Canadian sellers’ access.
The impacts will be felt across the industry, said Marcus Janzen, an Abbotsford grower of greenhouse peppers and president of the board of directors for FVGC. Without financial protection, the sector relies on trust and reputation, making it hard for new players to enter the market.
However, while a solid step in the right direction, this is not sufficient, said Sylvain Charlebois, director of the Agri-Food Analytics Lab at Dalhousie University.
“It is a step forward for agriculture, but it remains a patchwork solution,” he said, pointing to examples of longer-term thinking like the U.S. farm bill – the primary instrument of the country’s agriculture and food policy. This gives U.S. farmers more support and emboldens them to take more risks, he said.
“Canada is just about crisis management,” he said. “And not looking at the big picture.”
This failure to think long term is having a big impact on the fresh-produce sector, said Mr. Bergamini, who has seen a number of growers decide to set up shop in the U.S. instead of Canada. A 2018 report from the FVGC Greenhouse Vegetable Working Group found that in the previous three years, Ontario-based greenhouse operators had invested more than $250-million across the border.
This is largely because of the costs of business in Canada, said Mr. Bergamini. For example, many growers in Essex County are facing water moratoriums and steep development charges that has made expansion expensive or untenable, said Mr. Lee.
In comparison, growers in the U.S. benefit from huge infrastructure spending under the Biden administration’s Inflation Reduction Act, combined with hefty federal and state tax breaks.
For Canada to be competitive with the U.S., it needs to go beyond financial protection and get more ambitious, Mr. Bergamini.
“When food insecurity is a leading concern in Canada, one would expect the government to be more sensitive to the needs of the food sector,” he said.
Editor’s note: An earlier version of this article incorrectly stated the amount that Lakeside Produce owed to unsecured creditors as $187,889-million. This version has been corrected.