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John Ivison: The reality about food and drug shortages in Canada due to COVID-19

The cumulative impact of straining supply chains could be food price inflation as high as 15 per cent, according to one think-tank.
The cumulative impact of straining supply chains could be food price inflation as high as 15 per cent, according to one think-tank.

Canada’s food and drugs supply is secure, despite the COVID-19 crisis, the government insists.

There are no shortages or disruptions to production, importation or export, says the Canadian Food Inspection Agency on its website.

But, while shelves remain stocked, Ottawa is offering Canadians a rosier, more partial picture than the facts warrant.

The reality is that producers say there is likely to be less meat available because of COVID-related production plant closures.

The reality is pharmacies say they are facing restricted shipments of drugs from wholesalers, in part because of an export ban on drugs in India, where many pharmaceuticals are manufactured.

The reality is a shortage of foreign agricultural workers is likely to impact the availability of fresh produce.

The cumulative impact of straining supply chains could be food price inflation as high as 15 per cent, according to one think-tank.

While the government has been focused on ensuring that Canadians have the means to buy groceries, it is fair to say it has been slower at ensuring there is food on the shelves for them to buy.

The most immediate issue is processing plant shut-downs. Smithfield Foods in South Dakota announced it was closing its pork plant, after an outbreak among its employees, a closure that puts America’s meat supply at risk, according to the company’s CEO.

In Canada, an Olymel pork slaughterhouse in Quebec, a Maple Leaf Foods poultry plant in Ontario and a Harmony Beef plant in Alberta have all closed at different times. The industry is particularly prone because of the elbow-to-elbow nature of the work, which makes social distancing a problem.

Some plants have already gone down to 50 per cent capacity to try to improve worker safety.

There will be less meat for sure. The question is how much

But the United Food and Commercial Workers Canada union has written to the two largest beef processing plants in Canada – JBS in Brooks and Cargill in High River, Alta. – asking to close them down for two weeks for a deep cleaning. They process up to 80% of Canada’s beef.

“There will be less meat for sure. The question is how much. Supply (of livestock) is not an issue. Getting it processed is more the problem,” said one executive.

The industry would like to see the federal government step in to coordinate the movement of livestock if plants go down. It is an issue for hogs in particular, which cannot sit on feedlots and end up being culled by the thousand if there is no processing capacity.

“There is a lack of coordination from the centre,” said the industry executive.

The federal government is gradually responding to criticisms that it has not been present. Justin Trudeau announced a $20 million boost to the Canadian Food Inspection Agency’s budget on Tuesday, money he said is ear-marked to pay for more inspectors.

The pharmaceuticals market is no less turbulent. The panic buying that ensued in March, combined with an export ban in India, source of around half of Canada’s generic drugs, has resulted in new controls on availability. The Canadian Pharmacists Association has recommended restrictions of 30-day refills on prescriptions, from 90-days, to avoid critical shortages. The key player in this process is Canada’s largest drug distributor, McKesson, which has been restricting shipments to pharmacies for the past few weeks.

David Simmonds, vice-president of communications at McKesson, said that global supply chains are stable and current stocks should last into the fall. “But if we get to September or October with no relief, we will need to revisit it,” he said.

If there are not critical shortages, there are shortages none the less.

Simmonds offered the example of muscle relaxants, which are in high demand because they are needed for patients using ventilators. While hospitals may be able to access the drug, local pharmacies may not.

Clint Mahlman, president of London Drugs, said manufacturers and wholesalers have been limiting orders to historic demand levels or less.

Another area of concern is the harvesting of fruit and vegetables. The government has released $50 million to cover the wages of temporary foreign agricultural workers for the period while they are in 14-day quarantine after arriving in Canada. The federal government has also extended the visas of the 15,000 workers already in the country, many in meat plants.

Canadians will have enough food to eat. But it will be more expensive

But there are grave doubts that farms will get the number of agricultural workers they need – Ontario, for example, usually attracts 24-28,000 foreigners. Unemployed Canadians may take their place but they are likely to be hired by employment agencies and there is no mechanism as yet for those agencies to receive the government’s 75 per cent wage subsidy.

All of these factors are likely to drive up prices. The need to keep workers safe is slowing down production. There are component shortages. Clint Mahlman said one hand sanitizer supplier told him they could produce more but they needed to find a supplier of bottles and caps.

China is ramping up its manufacturing capacity but there are bottlenecks at ports and airports. The cumulative effect, according to a recent report by the CD Howe Institute, is likely to be food price increases estimated at between 10-15 per cent. That number is not helped by the depreciation of a Canadian dollar that has fallen seven per cent since the start of this year, relative to the U.S. dollar.

Canadians will have enough food to eat. But it will be more expensive.

And we may yet hear Ottawa echo the appeals of wartime governments to save food: “Sow the seeds of victory, plant and raise your own vegetables”.

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