Question Period Note: BUDGET 2023

Q1 – What new funding was provided in Budget 2023 for supply-managed sectors? Q2 – How did Budget 2023 support food security for vulnerable Canadians? Q3 – How did Budget 2023 support farmers in the use of fertilizers? Q4 – How did Budget 2023 support farmers struggling with the cost of inflation? Q5 – How did Budget 2023 support preparation for the potential introduction and spread of foot and mouth disease?
Q6 – How did Budget 2023 support the development of new agri-technologies? Q7 – How did Budget 2023 address the ongoing challenges faced by the wine sector?

R1 - Budget 2023 provided up to $333 million over ten years for a new program, the Dairy Innovation and Investment Fund, to support the dairy sector in managing and adding value to a growing surplus of solids non-fat.
The program, which launched in September 2023, will support investments in processing capacity for solids non-fat-based products. Ultimately, it will create opportunities for dairy farmers and processors, while building a more sustainable dairy sector. R2 - While Canada’s supply chains remain resilient, some communities face unique challenges accessing nutritious, healthy food.
Budget 2023 provided an additional $10 million to the Local Food Infrastructure Fund to strengthen food security in Northern, rural, and Indigenous communities across Canada.
Investments to improve food access complement other measures to address food security barriers for vulnerable Canadians, such as the $2.5 billion Grocery Rebate that provided targeted inflation relief to Canadians who have been struggling to afford the rising cost of food. R3 - Fertilizer is an essential input for food production. Budget 2023 allocated $34.1 million to the already established On-Farm Climate Action Fund to help Eastern Canadian farmers impacted by high fertilizer prices in their adoption of nitrogen management practices to optimize the use of fertilizers. R4 - Budget 2023 committed $13 million to increase the interest-free limit for loans under the Advance Payments Program from $250,000 to $350,000 for the 2023 program year, building on relief provided in 2022. R5 - Our government works to protect animal health and prevent the introduction and spread of animal diseases. Strict measures are in place to prevent foot and mouth disease from entering Canada, including animal and food import controls and declarations for travellers at the border.
Budget 2023 announced $57.5 million over five years and $5.6 million ongoing to establish a foot and mouth disease vaccine bank for Canada and to develop foot and mouth disease response plans.
This funding will secure 30 million doses of vaccine to enable a rapid emergency response and help mitigate prolonged market disruptions to trade should an outbreak occur. R6 - As a science-based department, modern laboratories and research infrastructure are essential to developing innovative agri-technologies and solutions to help the sector continue to grow sustainably.
Investments to restore AAFC’s research facilities will lead to better delivery of research outcomes and better results for farmers. These investments will also help meet greenhouse gas emission reduction targets. R7 - In 2021, the Government announced a two-year wine sector support program to help licensed Canadian wineries adapt to ongoing and emerging challenges in Canada’s wine industry.
This program was intended to be a temporary support to the wine sector. It will deliver up to approximately $166 million in support for Canada’s wine sector by the end of 2023-24.
Budget 2023 announced a proposal to temporarily cap the inflation adjustment for excise duties on all alcoholic products at 2 per cent for one year only, as of April 1, 2023, which was enacted by Parliament through C-26. This provides meaningful cost savings to wine producers, as well as producers of other alcoholic products, and improves their ability to invest in their operations and future innovation.

Dairy Innovation and Investment Fund
Budget 2023 proposed to provide up to $333 million over ten years, starting in 2023-24, for a new program to support industry efforts to manage the surplus of solids non-fat (SNF). This funding is part of the $1.75 billion compensation package for the impacts of the Canada-United States-Mexico Agreement (CUSMA).

This program, which launched on September 29, 2023, will support innovation and investments into large-scale projects to help the sector manage the structural surplus of SNF. Overall, it will help improve the competitiveness and sustainability of the Canadian dairy sector, while contributing to its growth. It is the last step in fulfilling the Government’s commitment to full and fair compensation for supply-managed sectors for the impacts of recent free trade agreements.

Local Food Infrastructure Fund
Budget 2023 proposed to provide $10 million in 2023-24 to top up the Local Food Infrastructure Fund (LFIF) to strengthen food security in Northern, rural, and Indigenous communities across Canada. LFIF is a 5-year, $60 million initiative ending March 31, 2024. It was created as part of the Government of Canada's Food Policy for a healthier and more sustainable food system in Canada. LFIF supports community-based, not-for-profit organizations with a mission to reduce food insecurity by establishing and strengthening their local food system. Since its launch, over 900 projects have been funded through LFIF.

Grocery Rebate
As an additional effort to provide Canadians with relief on grocery prices, the federal government is proposing a one-time grocery rebate. According to Budget 2023, for 11 million low- and modest-income Canadians and families, the Grocery Rebate provides eligible couples with two children with up to an extra $467; single Canadians without children with up to an extra $234; and seniors with an extra $225 on average. This one-time payment was delivered in July 2023 through the GST/HST credit mechanism. The Grocery Rebate was equivalent to double the GST/HST credit amount that Canadians received in January 2023.

Fertilizer
On March 3, 2022, the federal government implemented a 35 per cent tariff on all Russian imports, including fertilizer. Ontario, Quebec, and Atlantic Canada rely heavily on fertilizer imports. While Canada is a major producer and net exporter of nitrogen fertilizer, the vast majority of the production resides in Western Canada (Alberta) and is either used regionally (55%) or exported (45%) to the United States. Due to prohibitive transportation costs, there is no movement of nitrogen fertilizer from Western to Eastern Canada.

Since Russia is one of the major global producers of nitrogen fertilizer, it has historically been a major supplier for Eastern Canada. (Eastern Canada usually imports 85-90 per cent of its fertilizer from Russia). For the 2022 season, as the vast majority of fertilizer purchases were made before the tariff was put in place, and not all buyers were able to change their sourcing following the tariff implementation.

Inflation
Across the country, producers are facing general inflation, increased costs on key inputs–like fertilizer, due to Russia’s war against Ukraine, supply chain disruptions and higher debt-servicing costs due to the surge in interest rates. Over the past three years, agricultural production costs in Canada have increased by nearly 30 percent. These higher costs of production create cash flow challenges for producers as they must commit to paying for their farm inputs (e.g., seed, fertilizer and feed) before knowing what their revenues will be for that year.

Year-over-year volatility has created cumulative pressures for farms, most of which are farm families facing inflation of household expenses as well. The increases in the interest-free limit for loans under the Advance Payments Program provide eligible producers with a relief in interest fees from their beginning of the season loans.

Foot and Mouth Disease Vaccine Bank for Canada
Foot and mouth disease (FMD) presents one of the greatest economic threats to Canadian animal agriculture and is viewed as the most important transboundary animal disease in the world. A single case of FMD in Canada would result in a full and immediate border closure to exports from all livestock sectors. Without the vaccine bank, it would take at least 18 months for Canada to regain access to foreign markets and cost the Canadian economy between $19.4 billion and $65.2 billion.

While Canada has access to 312,000 doses of vaccine from the North American Foot and Mouth Disease Vaccine (NAFMDV) Bank, it falls well below the estimated 1.9 million to 2.7 million doses required to control a large outbreak. Funding provisioned through Budget 2023 will enable CFIA to secure a strategic reserve of 30 million doses of FMD vaccines. Without this stockpile, Canada would be at a disadvantage given the now heightened global demand. This vaccine bank will help protect Canada from the emerging threat of this disease, maintain public confidence in the Canadian food supply, and help mitigate prolonged market disruptions to trade should an outbreak occur.

AAFC Laboratory Asset Renewal
Agriculture and agri-food science continues to evolve at a rapid pace. However, AAFC’s real property infrastructure is aging. Additional funding committed in Budget 2023 will contribute to AAFC’s ability to undertake the modern research activities and produce the quality of research outcomes needed to help support Canada’s strong economic position in the global agriculture and agri-food system.

This investment will supplement AAFC’s real property capital budget to renew research facilities through recapitalization of aging infrastructure, while reducing greenhouse gas (GHG) emissions and meeting other legislative and policy requirements.

Wine Sector Support Program (WSSP)
In 2018, Australia initiated World Trade Organization (WTO) dispute settlement proceedings on a range of Canadian federal and provincial wine measures that it alleged were inconsistent with Canada's WTO obligations. At the federal level, the dispute involved the federal excise duty exemption for 100% Canadian wine. On July 27, 2020, Canada and Australia announced a partial agreement to settle the dispute. Canada agreed to repeal the federal excise exemption by June 30, 2022.

Budget 2021 proposed $101 million over two years, starting in 2022-23, to implement a program to support the wine sector in adapting to “ongoing and emerging challenges”, including the re-application of an excise duty on 100% Canadian wine. The WSSP was established to provide production-based support to the wine sector in fulfilment of that commitment, with a total allocation of up to $166.3 million.

Budget 2023 further provided a temporary cap to the inflation adjustment for excise duties on all alcoholic products at 2 per cent for one year only, beginning April 1, 2023. Alcohol excise duties are automatically indexed to inflation at the start of each fiscal year. The wine sector estimated that this could result in a 6.25% increase next year. Limiting the increase to 2% represents a significant cost savings to the industry.

• Budget 2023 is about building a stronger, more sustainable, and more secure Canadian economy for everyone, including Canadian producers.

• Budget 2023 announced investments to ensure a competitive and sustainable agriculture and agri-food sector. This includes support for livestock disease preparedness, improvements to research infrastructure, interest relief, and programming to support innovation and growth.

• The Government is providing relief to help with grocery prices, to support community organizations that work to increase food security, and to reduce supply chain vulnerabilities.