AGRI Committee Meeting

STANDING COMMITTEE ON AGRICULTURE AND AGRI-FOOD

COMITÉ PERMANENT DE L'AGRICULTURE ET DE L'AGROALIMENTAIRE

EVIDENCE

[Recorded by Electronic Apparatus]

Tuesday, March 31, 1998

• 0909

[English]

The Chairman: I call the meeting to order. Good morning, everybody. Pursuant to Standing Order 108(2), this is a briefing session on the proposed medicated feed manufacturing regulations.

This morning we have, from the Canadian Feed Industry Association, Robert J. Flack, who will be giving the presentation; Ken MacKenzie from Ritchie Smith Feeds; Charles Lapointe from Ralston Purina; and Bruce Quinn from Pharmacia & Upjohn Animal Health.

Welcome, gentlemen. I think we're ready to roll. Mr. Flack, if you want to make any further introductions of your people, go ahead, and then we'll take your testimony.

• 0910

Mr. Robert J. Flack (Canadian Feed Industry Association): Mr. Chairman, you mentioned everyone's name. It's a pretty broad cross-section representing the Canadian feed industry in Canada from British Columbia through Quebec and the maritime provinces, so if there's a question about any region or specific role the feed industry plays in Canadian agriculture, I'm pretty sure it can be answered today.

I'll speak for 20 to 30 minutes. We have some slides, power point, that hopefully will tell the story we're trying to communicate. Medicated feed regulations probably aren't in the top 10 of your hit parade in terms of issues you're dealing with, but nonetheless we think they're very important, not only to our industry but to farmers and, obviously, the Canadian consumers.

Ultimately, our goal is to provide safe, nutritious quality food in Canada, and the feed industry plays an important role in that.

The Canadian Feed Industry Association, for your information, is seven years old next year, so we're not a new fly-by-night organization. We've been involved in Canadian agriculture for seven decades now, and hopefully we'll continue to play an important role as animal agriculture in Canada continues to expand.

On our objectives today, we first of all want to talk about what we do so you'll have a better understanding. We talk in our own nomenclature and understand what the feed industry's all about, but appreciate that not everyone does, so we'll talk about what we do and who we are. Secondly, we want to talk about a recommended medicated feed regulation that replaces the one already proposed.

What is feed? There are different textures of feed. Feed goes to the nutrition of livestock and poultry. It comes in many forms, shapes and sizes. The feed industry, like the food industry in Canada, supplies nutrition. The only difference is we supply it to animals, whether it's in the poultry industry or the cattle industry, and especially businesses like the equine industry, the dairy industry and obviously the swine industry. It's a large and important business in agriculture.

What is in feed? If you take a look at what we put in our products that feed animals throughout the country, the major ingredient in feed is grain, and that can be corn, barley or wheat as a basic grain. Second would be proteins such as soya bean meal or canola meal, minerals and vitamins to fortify and balance the ration, and finally medication and additives that make up approximately 1% of the entire diet, which is what we're going to focus on here today.

When you take a look at the feed industry and what it's made up of, there are various components. You can have complete feeds, which are a complete diet. You also have supplements, which are primary protein sources of feed, and finally pre-mixes—more vitamin and mineral bases that make up a complete feed. For today, we'll talk about complete feeds.

Who manufactures feed in Canada? For the sake of today's discussion, I think it's important to really note that half the feed in Canada is produced on the farm through on-farm mixing; half the feed is produced in commercial feed mills, representing 100% of everything manufactured.

• 0915

So for the sake of today's presentation, it's important to remember that the industry represented here today, the Canadian Feed Industry Association, comes from 50% of the commercial side. The 50% on-farm is not represented by this association and has representation through other farm organizations we'll talk about in a minute. But it's important to note for today's presentation that we control or have input into the commercial side and very little impact, if any, on the on-farm side.

A commercial feed mill, as you can see in this slide, is an establishment, and there are commercial feed mills like this throughout Canada. They are high-investment and employ new technologies to manufacture feed. Again, the primary purpose of commercial feed mills is to market feed to end-users, to the farmers, and finally, to prepare the various types of feed I talked about, complete feed supplements or pre-mixes.

On-farm, it's usually a mill that is right at the farm gate, where the grains produced on the farm are manufactured into feed for livestock consumption. On-farm milling usually does not entail the sale of feeds; it is simply the consumption of feeds for that particular livestock on that particular farm.

The commercial feed industry, as you see here, has sales of $3.2 billion and is growing. I point out again this does not include on-farm; it's the industry that's represented here today. We employ some 9,000 people throughout the country. There are 100 companies in Canada, representing approximately 520 feed mills, and there are 1,500 dealers and distributors. You might see a dealer as you drive through a small town—with the various logos and franchise agreements—that distributes feed as well. But the commercial feed industry in itself is a large and significant industry in Canada.

Where are we throughout Canada? Ontario and Quebec have the vast majority of the feed business in Canada, with Quebec at 34% and Ontario at 33%. The prairie provinces are the fastest growing region in Canada with respect to the commercial feed industry, with 23% of the industry there, and Atlantic Canada and British Columbia are represented respectively at 5%.

So I've talked about what we do and who we are, and what I want to talk about a little bit now is the recommendation for a new medicated feed regulation that is different from the one already proposed.

Why feed medication? Sixty percent of all feed manufactured in this country is medicated. The purpose of feed medication is the prevention and treatment of disease and the promotion of growth.

Who controls medication? The health industry approves all drug manufacturers in this country. Along with the Canadian Food Inspection Agency, it also inspects feed manufacturers in terms of the medications that are used at the feed mill, commercially, and for some on-farm producers as well.

Why do we need a feed regulation? This is probably getting to the heart of why we're here today. First of all, we have a tolerance concern, an opportunity, whereas, based on how we define and test feeds today, we have 25% of medicated feeds supposedly out of tolerance. I think the agency will agree that we need to define how we measure that tolerance, that there are improvements to be made there. But the important point to make is that while there is an out-of-tolerance problem, there is no food residue problem in this country. And food safety in particular is not a concern in Canada based on this out-of-tolerance concern.

The inspection agency produces, on a regular basis, sampling programs and testing, and those results are available. We can pass those results around later on, if you'd like.

Mr. John Harvard (Charleswood—Assiniboine, Lib.): Does out of tolerance mean non-compliant?

Mr. Robert Flack: No. I'll turn it over to Dr. Quinn here.

• 0920

Dr. Bruce Quinn (Canadian Feed Indsutry Association): That's a very complicated problem. The tolerance range we usually use for medicated feeds is 75% to 125% of the labelled target concentration. Of those samples, 25% are considered to be outside of that range, usually on the lower side of the compliance range. But that doesn't necessarily mean the medication is not in the feed. There are a lot of other factors that can contribute to these out-of-tolerance results other than the fact that the medication was not added.

In a nutshell, then, although we have a concern about out of tolerance, we haven't defined it adequately enough to be able to say it's a bona fide problem.

Mr. Robert Flack: Both our industry and the agency, I believe, recognize that we have to improve our testing procedures. I might point out as well that the out-of-tolerance issue includes all feeds produced in Canada, not just commercial feed mills. It includes the on-farm segment as well.

Is that understood? Is there another question there?

Mr. Howard Hilstrom (Selkirk—Interlake, Ref.): I assume, Mr. Chairman, you're just jumping in a little bit here when an issue arises...?

The Chairman: We're trying to get the presentation done first, and then we'll ask questions.

Mr. Howard Hilstrom: Very good.

Mr. Robert Flack: Our goal, along with the agency's goal, is to drive the 25% out of tolerance down to zero. We want to do it for consumer reasons and for our trading partners. As you know, food exports have been expanding. As we enter new markets, food safety, quality, and compliance issues are important in the trading agreements. The feed industry wants to bring that tolerance down.

Obviously, it's important to the industry members. I might point out that our entire industry, the commercial feed industry, supports coming up with the regulations. So we're not here to say we don't want a regulation; we're here to say we want to come up with a regulation to improve the tolerance level in place today.

How do we improve compliance? First of all, we have to find the source of the problem. Again, remember that the problem doesn't lie with just the people represented in the industry here today; the problem lies on the farm as well, as over half, or half, of the feed is produced there.

When you take a look at what the Canadian Food Inspection Agency has proposed, they've come up with medicated feed establishment registration regulations, or MFERRs, which focus on concentrated medications only. I'll talk about the difference between a concentrated drug and a diluted drug in a minute.

So it focuses only on concentrated medications. It will touch only a few manufacturers throughout the country, the majority of which would be in the commercial segment. There would be some on-farm feed manufacturers covered as well, but the vast majority of the feed manufactured in this country would not be covered under the proposed regulation. We're here today to talk about how we can improve that coverage and make it a more meaningful and beneficial regulation.

The agency's rationale for MFERRs, we believe, is that they believe concentrated drugs—and again, I'll talk about that in a minute—present the most risk in terms of improving the tolerance levels and being out of compliance. The regulation would register only 25% of feed manufacturers in Canada, so fully 75% of people—companies and on-farm situations—that produce feed in Canada would not be covered under this regulation, because they do not use a concentrated drug.

I think their idea is to talk about and get some compliance or get some regulations in place for the concentrated portion of drug use in animal feeds, and then later focus on the other manufacturers. We don't think that's the right approach, and we have some suggestions to improve the regulation.

We sat down last night and talked about how to explain the difference between a concentrated drug and a diluted drug. So for simplistic reasons, the smaller blue circle with the six black dots represents a concentrated drug, and the larger blue circle with the six black dots represents a diluted drug.

• 0925

When you buy or use feed medications in Canada, you can add them in two ways. Let me use the analogy of orange juice. You can go into the local grocery store and buy a can of concentrated orange juice. The pulp is in the can. You go home, add water to it, stir it and you have a container of juice. Or you can go into the grocery store and buy a ready-mixed container of orange juice. At the end of the day you end up with the same amount of orange juice, but you buy one in a diluted form and one in a concentrated form. The same is true with animal medications.

Manufacturers, roughly 25% of the industry, use concentrated drugs and 75% of the industry basically uses diluted forms of drugs. We appreciate there's a concern with concentrated drugs, but we don't feel that's where the problem is, because it's not what you mix, it's how you mix it. So when you take a look at feed manufacturing in Canada and think of a feed mill, a big mixer bowl, that's where the drugs get mixed and ultimately get diluted and put into rations or tonnes of feed.

The important point to note, and what we're going to talk about here, is it's not whether it's concentrated or diluted that's the concern, because at the end of the day you end up with the same amount of medication in feed. It's how you mix the drug at the feed manufacturing facility, we believe, where there's the opportunity to improve compliance or tolerance throughout the industry.

We may have to come back to that. I realize it's not as simple as it looks, but it's important to note we feel concentrated drugs are not the problem; it's all uses of animal medications, and it's how they're mixed, where there's the opportunity to improve.

The commercial industry, the people represented here today, feel the proposed regulation is the wrong regulation and won't solve the problem. It will not improve the tolerance levels of 25% that we talked about earlier.

We've communicated with Minister Vanclief in terms of our concern with the proposed regulation and our proposal to improve, and made the following commitments to the Minister of Agriculture and Agri-Food in the fall of 1997. We agree we need to increase compliance, and that is an important objective we have. We are not looking to get out of a regulation at all as an industry. We would like to see a mandatory regulation, and the commercial feed segment represented here today supports that. We're not looking for volunteer-type situations. It's a mandatory regulation. We want to implement it as quickly as possible and as quickly as the proposed regulation has been proposed.

It's important to note we don't want to duplicate a program that already exists in the province of Quebec. Today the province of Quebec has a permit system, which we'll talk about a little later. The proposed regulation, the MFERR, will duplicate or piggy-back what's already there, and we don't think that will fly in that province.

I think the commitment we also made to the minister and proposed to the agency is that we respect the fiscal restraint the government has in place, and we think we can come up with a system that respects the resource concerns and opportunities in agriculture and agrifood.

• 0930

Again, 50% of feed is produced on the farm and 50% is produced at commercial feed mills. When you take a look at the regulation we're proposing, you will see that it will bring compliance to both sides of that equation, not just to our own side. That's our conclusion, which is simply that we cannot have a regulation that represents only 25% of the industry. We need a regulation that covers all mills using concentrated and/or diluted drugs, whether it be in a commercial setting or an on-farm setting. The proposal we're going to talk about covers that area.

Our proposal is called, for name's sake, for today's presentation, “a medicated feed permit regulation”. So again, it's a regulation, and it's a practical regulation. It's comprehensive in that it covers both concentrated and diluted forms of medication, and the most important point this slide shows is that it will be a national program. It would cover all provinces, all regions and all types of manufacturing settings in feed manufacturing throughout Canada.

We presented this regulation to the Food Inspection Agency last December and we want to point out that we presented it for discussion purposes. We think we have a good basis for a program here, but that doesn't mean we're not willing to modify it or be flexible to change to meet some of the specific demands our industry and the inspection agency may have in terms of improving tolerance. As of right now, we're still waiting for an official response.

Our regulation, the medicated feed permit regulation, is based on a Quebec model that has been in place for 10 years, so it's important to note that what we're proposing is not brand new and blue sky. It is based on a system that has been in place in the province of Quebec for 10 years, where it is mandatory, and again, for our model, I emphasize the word “national”. Both on-farm and commercial settings throughout Canada would be covered under this permit regulation.

The medicated feed permit regulation includes all feed manufacturers. It would include concentrated and diluted medications—again, both sides of the equation—and it would involve permits and third-party monitoring, which would help in the resource issue in terms of compliance or approval.

The third-party monitoring would have to be approved by the Government of Canada, just like passports, as an example, and for the third-party monitoring the people who would actually go out and inspect the feed manufacturing sites would be agribusiness professionals, whether it be agricultural engineers, veterinarians, etc., people who have a vested interest in representing the food industry in Canada professionally. It would issue permits to those who pass the inspection and those permits would be issued not by the industry or those third-party individuals but by the Government of Canada.

Again, we believe it would be cost-effective and would respect the fiscal restraint that is in place.

The medicated feed permit regulation we're proposing is basically already in place. Again, if there are some modifications to be put in place, we're willing to talk about it. We're flexible and willing to do so. But by following the Quebec example, it has already shown that (a) it can be done and (b) one-third of the feed manufacturing industry, or 34%, as the earlier slide indicated, is already covered today.

The proposed regulation by the industry has zero coverage today, and if they were to say they recognize that Quebec's program is a good program and that we wouldn't implement the proposed regulation, I guess the question we would ask is, if it's good for Quebec today, why is that program not good for the remainder of Canada?

Again, the Quebec model represents both concentrated and diluted forms of medication and it would represent 100% of the feed manufacturing industry in Canada, not 25%.

• 0935

We're at a stalemate today. Basically in Canada there is no feed organization that supports the proposed MFERR by the agency. By feed organization I mean companies like those represented here today, provincial associations and the Canadian feed industry associations. The national Canadian Feed Industry Association does not support the proposed MFERR. There are no farm organizations in Canada that support MFERR. Finally, there would be duplication in Quebec, which would obviously be a very big problem, and I don't think we want to do that.

To emphasize the zero support by farm groups, Minister Vanclief again was sent some correspondence by the following groups. The Canadian Federation of Agriculture doesn't support the MFERR. The Canadian Feed Industry Association does not support the proposed MFERR. The Canadian Pork Council and the Canadian Cattlemen's Association do not support the MFERR. The Canadian Turkey Marketing Agency, the Canadian Aquaculture Industry Alliance and the Canadian Egg Marketing Agency do not support the MFERR. Finally, the Canadian Animal Health Institute does not support the MFERR. There is zero support for this proposed regulation. We've tried to be proactive to come up with the regulation we think will work.

Where do we go from here? There are two points I think it's important to identify. We've been waiting since December for a reaction to our permit regulation. I want to make it abundantly clear today we are cooperating. We are not trying to evade a regulation. We're not trying to ignore the regulation. We're not trying to be disruptive in any way. We want a regulation. We just want one that works and is not just compliant for part of the commercial feed industry, but for 100% of the national feed industry.

Our position is simply that we will cooperate on a comprehensive concentrated and diluted medications regulation. We'll cooperate on a comprehensive and national regulation. We do not and will not accept a regulation that is not comprehensive and effective, as we think the proposed MFERR is.

The Canadian Feed Industry Association wants to be a partner in food production throughout Canada, where food safety, food compliance and food quality are a hallmark of professionalism and commitment, because without it we don't expect our industry to grow. Obviously food exports and the expansion of the Canadian food industry help the Canadian feed industry and give us an improved market to build upon, so we want to have a regulation that works and helps our industry grow because we think it makes common sense.

Our request to you today, ladies and gentlemen, is to please recognize the shortcomings of the proposed medicated feed establishment registration regulation. We would like you to support our medicated feed permit regulation proposal because it's comprehensive, national and effective. We would appreciate it if you would communicate your support for our proposal to Minister Vanclief.

That concludes the formal part of our presentation, Mr. Chairman. Obviously we are hoping and willing to answer any questions you may have.

Thank you.

The Chairman: Thank you very much.

Why are all those organizations not supporting it? What difference would it make to the cattlemen as long as—

Mr. Robert Flack: The cattlemen produce a lot of feed on the farm from feedlots throughout Canada, and they use medications in those feeds. Probably the vast majority of the feedlots of cattlemen today do not have a regulation in place, so why would they want one?

The Chairman: So they don't agree because they don't want any regulation.

Mr. Robert Flack: If they had their druthers, I would probably say that's the case. But I think we have a better chance of getting compliance or involvement with a permit system than we do with the MFERR. Remember that the proposed MFERR doesn't cover the vast majority of them anyway. But that doesn't mean there are other tolerance problems or compliance problems on the farm.

The Chairman: But if it doesn't affect them, why would they be opposing it?

• 0940

Mr. Ken MacKenzie (Canadian Feed Industry Association): I think the point is that Canada is becoming even more of a food exporting nation. We want to export pork. We want to export beef. For these producer groups to be able to do that to Japan, the U.S. and other countries, it's really important to make sure that we still have and maintain the reputation of having the highest standard of food quality.

Mr. Robert Flack: We don't think it's fair, quite frankly, that our industry and certain on-farm manufacturers have to live with the regulation, which we want to do, when 75% of the industry doesn't. It doesn't make sense. If food safety and improving that 25% out of tolerance is the goal, then why not include the entire industry?

The agency, I think, will say they don't have the resources to do it today. And that's a fair statement. They don't. But what we're proposing, through third-party verification, would help to alleviate that problem. I'm not saying it's easy, but it's a lot better than having 75% of the industry not represented.

The Chairman: Who would pay for those third-party inspections or whatever?

Mr. Robert Flack: The industry.

The Chairman: The industry would pay.

Mr. Hilstrom.

Mr. Howard Hilstrom: The feedlots you're talking about.... First of all, you're suggesting that the Quebec model is good for the whole country. I have a little problem with that because your industry in Quebec, a lot of it—not totally but a lot of it—is based with the dairy and the poultry industry, and those are supply market products through which you can control your costs and you can control what you get for your produce.

In the west here, we're not quite in the same situation. Our feedlots often—the bigger ones always—have veterinarian input. They have to sell their product at the slaughterhouse and it's federally inspected there. Excessive tolerance or excessive out-of-tolerance type medication in the beef, or whatever, is going to be picked up.

That brings me back to wondering if that isn't why they are objecting to this as a cost. There are already checks in place that ensure that a quality food product is being sold to the consumer.

Mr. Robert Flack: Well, I'd make two points. First, it's important to know that in the province of Quebec probably the largest consumption of on-farm feed is the swine industry, which is not a supply-managed commodity. Second, I guess I'd turn around and say if veterinarians and the infrastructure is in place in western Canada, what's wrong with issuing permits to ensure that the compliance is there and the measurement is there—that is, if it is perfectly in place? Remember, we're trying to improve 25% out of tolerance, and I don't think the cattlemen in western Canada can sit there and say that their industry mixes medications perfectly with zero tolerance.

Mr. Howard Hilstrom: We're developing quite a large on-farm, on-ranch backgrounding of calves and cattle and we're talking lots of herds under 500 head being backgrounded or fed out. These fellows can't afford any more permits and regulations than are already in place. The industry, the cattle industry in particular, is developing guidelines, practice guidelines, and there are already government regulations in place controlling this. I can understand why they have a problem with this.

In any event, I'll have to study your Quebec proposal a little closer to see just what that is. By way of general comment, I guess we can certainly say that this isn't the first time a whole industry is against a particular government bill, but we'll kind of ignore that for the moment.

Okay, so you're promoting that the whole country should go with this Quebec plan, basically, with possibly small modifications. It is, in your opinion, an excellent plan for the whole industry, is that right?

Mr. Robert Flack: Yes.

In your particular part of the country, or any particular part of the country for that matter, if a person backgrounding cattle or feeding cattle on one side of the county doesn't have to live with the regulation, and someone feeding hogs on the other side of the county does, it's a problem.

• 0945

Mr. Howard Hilstrom: Yes, the cost of producing anything, a lot of things go into it.

Could you tell me whether your industry has spoken with the agriculture ministers of the provinces on this one?

Mr. Robert Flack: Not all. We have spoken to some.

Mr. Howard Hilstrom: Of the ones you did speak to, what are they saying about this? And could you indicate the provinces they came from?

Mr. Robert Flack: I'll let Charles talk about Quebec a little, because that's obviously where the example is.

Mr. Charles Lapointe (Canadian Feed Industry Association): Yes. In the parallel between the beef industry and the swine industry there are a lot of values recognizing that the two industries have been and are facing similar challenges. Look at the economics or look at the non-controlled aspects of the industry.

I think the value of what's been done in Quebec is not that it's coming from Quebec, it's because there are ten years of experience with that. So we're not coming with something that's unproven.

In Quebec also there was—just as you mentioned earlier, Mr. Chairman—at an early stage some questions from some producers. But once you recognize that you have to move ahead and you're not in the feed industry or you're not in the production industry, but you're in the food industry, you have to have something that covers the whole industry. From that basis, there is something so logical about it that everybody recognized over the years that it was a tremendous opportunity to build a solid foundation for the future of food quality systems.

So that's been the basis. Everybody we've been talking to, at different government levels, recognizes that. I am talking about the provincial level in Quebec and the same thing in other provinces. It is a proven solution and it's a solution that covers the whole industry.

As you said, there is sometimes some resistance, because when you want to move ahead as in industry, there are some players who don't necessarily see the vision behind it. In this case, I think the vision is clear and, again, it has been accepted. It has also been an opportunity to develop the mentality of the producers and the players in the industry.

Mr. Howard Hilstrom: Everybody recognizes that the feed-to-consumer plate is something every player in the whole industry is concerned with. There's no question about that whatsoever. It's just that regulations, particularly government regulations at times, due to the nature of the particular industry—whether it's milk, dairy, pigs, chickens, pork or whatever—can be harder on a particular segment or a particular industry than they are on other industries.

I'm wondering if this isn't the reason why some of the organizations that are against this particular bill are not in favour of it, if one of the basic reasons is that it's going to be a bigger hardship on some types of industry, possibly the feedlot industry, than others.

Mr. Charles Lapointe: As we look at Quebec, I think that's a solid point of comparison. But there could be some changes over the years. Depending on your type of operation, there are really two types of permits and two different processes that involve different costs, too. It has that flexibility. Again, it covers everybody. Behind a food quality system, covering everybody is fairly critical.

Mr. Howard Hilstrom: I have one last question.

Do you have any hard empirical data and statistics showing the problems that have arisen from the excessive medication, or whatever, whether it's excessive? Have you supplied those to us, or will you?

Mr. Robert Flack: There's no residue problem in food today. We want to point that out.

Mr. Howard Hilstrom: You are clear on that, okay.

Mr. Robert Flack: That's a very important point; we do not have a problem.

Mr. Howard Hilstrom: That's what I'm saying, too.

Mr. Robert Flack: We don't. And in terms of the testing, we can show you—

Mr. Howard Hilstrom: Okay.

Mr. Robert Flack: It is agency information.

Mr. Howard Hilstrom: That's fine, then. Thank you, Mr. Chairman.

The Chairman: A quick question, to follow up a little. Has the Quebec ten-year deal shown improved compliance?

Mr. Charles Lapointe: Based on all the official numbers here, the rate is better by 5% in Quebec. So there's a significant difference.

The Chairman: It is 5% over what percent?

Mr. Charles Lapointe: We're talking about the 25% non-compliance, so Quebec would be around 20%.

The Chairman: Around 20%.

Mr. Charles Lapointe: And it covers the whole industry, too. It also covers farm mixing, which is very significant because it is 100% of all the manufacturers of feed. As Mr. Flack showed earlier, you have the commercial mills with fancy equipment, but also the on-farm mixer. So there is an improvement of 5% versus the rest of Canada, and this is significant, considering it covers everybody, even the unsophisticated operations.

• 0950

Mr. Robert Flack: Mr. Chairman, there are two things. You may not think 5% is a lot off 25%, but I think we all recognize that how we come up with that 25% out of tolerance needs to be improved. We'll question that it is as bad as that number would show, quite frankly, but we don't have an army of detail to justify that here today. But I think along with the agency and ourselves, we agree that there are improvements to be made there.

Again, I want to point out that by implementing the proposed MFERR, on top of the Quebec permit system, will not fly in Quebec, and if there is improvement to the permit system that already is in Quebec, we've said let's modify it. Let's sit down and talk and say, okay, if we want to get that down lower, what do we need to do, end product monitoring, as an example, or whatever? If we need to step up some inspection process there and do so, then great, whatever it may be. I think we're not speaking, obviously, on behalf of the Province of Quebec, but having said that, we think they would be open to constructive dialogue.

The Chairman: We'll ask an ex-deputy minister for the province, Madame Alarie.

[Translation]

Ms. Hélène Alarie (Louis-Hébert, BQ): First of all, I would like to thank you for appearing before us.

It is very obvious that in Quebec the MFEER would be dismissed out of hand because we do not want to slide backwards. Our system represents ten years of efforts. It must be noted that it took ten years of efforts by the industry, by producers and by consumers. It did not happen overnight, it was a gradual education process. It is obvious that we are not going to move back because we believe we have additional protection. We found out, especially in Quebec, that this protection makes us more competitive in the export market.

I think we need to look at this from the perspective of the export market. Take for example our competitiveness in the pork market. We can sell in the markets of Europe and Asia precisely because we have this protection. If we are just barely meeting the requirements of these markets, it means that we will rank behind Denmark that is a very important competitor of ours. This is why I wonder how anyone could be reluctant to implement this.

I was listening to the questions. Whatever the industry, whether it be beef, dairy, eggs or pork or whatever, I wonder how anyone could be reluctant when you view this issue from the perspective of the export market. We talk about increasing and doubling our exports. We want to take a greater share of the export market. In order to achieve this, the protection the industry needs is also needed by the producers. So I have some difficulty understanding the reluctance that is being shown.

You talk about the commitments you made. Could you elaborate a little bit on the fiscal restraints. What are they? Do you have any figures or data on this aspect? Among the commitments you describe in your brief, you talk about your objective, mandatory regulation, quick implementation, avoiding duplication with the Quebec program and respect of fiscal restraints. I would like you to elaborate on the latter aspect.

[English]

Mr. Robert Flack: I don't remember talking about taxes.

[Translation]

Ms. Hélène Alarie: This is at page 97 of the document, in the commitments to the Minister.

Mr. Charles Lapointe: I do not see where we talked about taxation.

Ms. Hélène Alarie: Sorry.

[English]

Mr. Robert Flack: We're recognizing that the government doesn't have the manpower to go out and hire 100 inspectors to inspect the feed manufacturing. They don't have the resources. So to a certain degree, the industry would be self-regulated, with the permit grantors being approved by the Government of Canada and the permits themselves being issued by the Government of Canada. But I hope I didn't talk about increasing taxes.

• 0955

[Translation]

Mr. Charles Lapointe: We were rather talking about the government's budgetary limits,

[English]

or budget restraints in terms of costs.

[Translation]

Ms. Hélène Alarie: Do your figures show the proportion of the cost of mandatory inspection in Quebec relative to the total cost of production? Is there a major additional cost? What proportion of the cost does the inspection system represent?

Mr. Charles Lapointe: I regret I do not have in front of me the precise cost figures for inspection, but we could provide you the exact numbers. I do not want to throw figures around. The important thing is that we use outside professionals. So we hire somebody who is committed to the community and to the people. However, the whole system is a bit costly if compared to solutions that are provided free to the producer.

Ms. Hélène Alarie: Okay.

[English]

Mr. Robert Flack: Christine Mercier is the general manager of our association. Can you talk to that, Christine?

Ms. Christine Mercier (General Manager, Canadian Feed Industry Association): The costs that are incurred in Quebec to do this are...primarily there's a cost for the permit. The permits vary from $28, I think, to maybe $50 or $60, depending on the type of permit you want to obtain. And there are additional costs that have to be incurred to have the verification of your equipment done in order to obtain the permit. That will vary depending on how many samples you have to take to do your mixer validation and this type of thing. There are laboratory costs that have to incurred.

Overall I don't know what the exact amount is, but it's reasonable. I think the mixer validation and some of these requirements that are regulated in Quebec are things that commercial and feed manufacturers do regardless of whether it's a regulatory requirement. The requirements are flexible in that they are designed to fit the type of operation you have.

So there are costs for the permit, which are under $100 on a yearly basis, and there are additional costs to perform the mixer validation tests and other requirements to obtain the permit.

[Translation]

Ms. Hélène Alarie: Indeed, I never heard it said in Quebec that these costs are excessive, neither by the industry nor by the producers. If it is true that the costs are not out of line, I think we need to make this effort to safeguard our expanding market. It is important from this perspective, in my view. Thank you.

[English]

Mr. Robert Flack: Mr. Chairman, just out of interest, to give everyone a sense of how many permits would be required nationally, in 1996 the Province of Quebec issued 1,100 permits. We figure there would be an additional requirement throughout the rest of Canada for 8,000 permits in order to bring everybody on board.

The Chairman: Mr. Parliamentary Secretary John Harvard.

Mr. John Harvard: Thank you, Mr. Chairman.

Let me go through two or three things with you, Mr. Flack, a couple of observations and a couple of questions.

First, you mentioned that there is this matter of non-compliance and yet you say there is no residue problem. To a layman that might represent some kind of a discrepancy, so you may want to address that.

Second, you brought forward a rather long list of names of organizations who are opposed to MFERRs, and I have very much an open mind on this. It would appear to be that the organizations who oppose the proposed set of regulations disagree with the MFERRs for very different reasons. For example, in your presentation, you're really calling for a broad regime of regulatory control, whereas some organizations, as intimated by Mr. Hilstrom, wouldn't want any regulation at all. So there is very much a difference in the opposition to the set of regulations. My guess is that at the bottom a lot of the criticism or of the objections would have to do with cost, and that's understandable.

• 1000

When the CFIA people were here the other day, they talked about registration fees. I guess what I'd like to know from you is, if the Quebec regime is put in place for the entire country, what kind of registration fees we are talking about? For example, the typical feedlot operator in, say, Mr. Hilstrom's riding who perhaps has 400 or 500 head of cattle or whatever, what's it going to cost him? What's it going to cost to have this Quebec regime, if I can call it that, put in place on a national basis?

I have two other questions. I hope you're marking these down. Is there very broad support in Quebec? In other words, are the on-farm operators and the commercial operators pretty well happy? If that's the case in Quebec, why wouldn't it be in every other province?

Finally, on the permit system, exactly what goes into the permit system? What are the basic requirements of the permit system? What would an operator have to meet to get a permit? And in that permit, would there be a requirement to obtain what I would call “medical prescriptions”? Can you just address some of those things?

Mr. Robert Flack: Yes. I'm just writing them down, thank you.

We recognize that there is a tolerance problem, and again, maybe I'll get Bruce to talk about the difference between what we consider to be tolerance and compliance, because there is a difference.

Dr. Bruce Quinn: Yes. There's certainly a discrepancy, I think, between relying on the results of an antibiotic assay in feed and turning that around and calling it “non-compliance”.

The vast majority of out-of-tolerance results that we see on assay are below the lower limit of tolerance. And that suggests to me that we don't really have a problem with compliance as much as we have a problem with the assay being able to recover or to detect the antibiotic in the feed. It's like trying to find a needle in a haystack. If you have a needle in a very small haystack and you take a sample from that haystack, you're very likely to find that needle. But the larger your haystack becomes, the more difficult it becomes to find that needle.

Truly, when we're trying to detect some of these drugs in feeds, they're at very low levels, and we're literally trying to find a needle in a haystack. Sometimes we're not as successful as we should be. So there is an inherent problem with the ability of the assay methods that we use to detect the drug. That's why the results for out of tolerance are low, because we have difficulty finding the drug when we know it's there.

As for the issue of this not being a human safety problem, I'd like to comment on a couple of things in that regard.

First of all, medicated feeds are often not fed to more mature livestock that are close to being slaughtered for human consumption. A lot of the drugs are used when animals are younger, when they're experiencing significant periods of stress. These drugs will help to prevent and treat diseases that would otherwise result in severe impairments to the ability of these animals to grow normally. And also, not using these drugs would result in fairly high levels of death in many livestock operations. These drugs are usually used early in the production cycle as opposed to later on.

I think the other reason that we don't have residue problems with manufactured feeds containing antibiotics or other drugs is that the recommendations for the use of medications in feeds usually require that the medicated feed be withdrawn from the animal's diet for a specified period of time before the animal is slaughtered for human consumption.

• 1005

Even if there are errors and there's a higher concentration of drug present in the feed than should be, and that is very rare, the withdrawal period provides a significant margin of safety to ensure that we won't run into valid residue issues in the animal products. When regulators and when the pharmaceutical industry establishes the data and the recommendations for the use of these products, we impose fairly large margins of safety to ensure that we don't run into these problems.

Mr. Robert Flack: This is a report that's put out by the food inspection directorate, food production and inspection branch, Agriculture and Agri-Food, on pesticides, veterinary drugs, agricultural chemicals, environmental pollutants and other selected impurities in agrifood commodities. It's put out by the government, the Food Inspection Agency, and I'll just pass it around. It's not the most exciting reading you'll have for the day, but again, we don't have a food residue problem.

The Chairman: But how would you know? You know the drug is there.

Mr. Robert Flack: No, you're talking about feed.

The Chairman: Yes, in the feed.

Mr. Robert Flack: But end product monitoring; that's meat, eggs and poultry.

The Chairman: Yes, okay.

Mr. Robert Flack: That's the true test.

Mr. John Harvard: Can you get to the cost now?

Mr. Robert Flack: I'm going to ask Christine Mercier to talk about cost.

Ms Christine Mercier: We just looked at the cost for the permit system. Maybe I can just explain how it works, first of all.

Anybody who wants to buy either concentrated or diluted forms of drugs in Quebec must obtain a permit. In order to obtain a permit, they must demonstrate that their equipment can properly and homogeneously mix, time after time, the level of medication they are going to be using to make that complete product.

There are two type of permits. There is a medicated pre-mix permit, and in order to obtain that permit you have to do one mixer validation test a year, which is verified by a third party. The results of that testing are more stringent than they would be for the second type of permit. The cost to get the medicated pre-mix permit is $26 a year, and the mixer validation test must be done twice a year.

The second type of permit is a medicated feed permit. For that, the mixer validation test must be done once a year. The results of the testing are less stringent because in most cases that type of permit would apply to manufacturers who make feed on the farm, and their equipment is different from the equipment that is used in a commercial mill. The cost to obtain the medicated feed permit is $21 a year.

There are costs incurred when you do the mixer validation test. You have to take, I think, 10 samples per test. Those samples have to be analysed in a laboratory. The whole process of the mixer validation has to be verified by a third party, and in some cases there are costs incurred to do that. If you pass that mixer validation test, then there's the cost of the permit.

Mr. John Harvard: What about this registration fee?

Ms. Christine Mercier: As far as this medicated feed permit system in Quebec goes, there's no registration per se. It's the cost of obtaining a permit. With the medicated feed establishment registration regulations, there would be a registration cost spread out over a three-year period. Every three years, you would have to register your establishment under these regulations.

Mr. John Harvard: And at what cost?

Ms. Christine Mercier: At the time that we were discussing, there was a proposal made to charge, I think, $1,250 for a commercial establishment once every three years and $750 for the on-farm establishment.

Mr. John Harvard: So it's a little over $200 a year for an on-farm operation?

Ms. Christine Mercier: Spread over three years.

Mr. John Harvard: Using concentrated drugs.

Ms. Christine Mercier: Yes.

Mr. Charles Lapointe: We're talking here about the support. There's a broad support for the program, because you're talking about a few hundred dollars a year, which won't break an organization. But on the other hand, when it started there was a clear vision—and I think it's something we may have, and there was some reference to that earlier—developed from the swine industry, and also based on export and also increasing the value in the eyes of the consumer.

So for a few hundred dollars a year, you're talking about really working your marketing side and having something that is also a solid foundation on which you can build over the years.

• 1010

Mr. John Harvard: Where does the money from the registration fees go and what is it used for?

Mr. Charles Lapointe: It goes to the provincial government right now.

Mr. John Harvard: What would it be used for? Would it be used to pay inspectors? What would it normally be used for? What would it support?

Mr. Robert Flack: It would go toward the cost of permits—the registration and issuing of permits, I guess.

Mr. Charles Lapointe: Essentially, the annual fee is more of an administration fee. It's not very different from registration fees or whatever. There's a minimum cost there that really addresses the administration.

Mr. Robert Flack: Remember, it's the Province of Quebec, not the Government of Canada, that issues the permit.

Mr. John Harvard: But if the regime you propose were adopted on a national basis, the registration fee would go to the federal government to be used for whatever it does in this regard.

Mr. Robert Flack: Right on.

The Chairman: Mr. Proctor.

Mr. Dick Proctor (Palliser, NDP): Thank you very much, Mr. Chairman. I apologize for being here a little late this morning.

You may have dealt with it before I arrived, but last week when the CFIA folk were here, they were not supportive of the Quebec model, but did talk somewhat about the Food and Drug Administration in the United States on the regulatory system of medicated feed. I don't know whether you talked about that this morning.

The Chairman: No.

Mr. Dick Proctor: Would you comment on how you see the FDA regulations?

Mr. Robert Flack: Who wants to comment on that? Is there a specific—

Mr. Dick Proctor: The point I think we heard last week from Ms. MacKenzie was something to the effect that the Quebec regulations have not greatly improved feed compliance in that province over other provinces. They don't stack up with the FDA regulatory system.

Mr. Robert Flack: I'll get Christine to comment on that.

The Chairman: You might as well stay there. You seem to know what's going on.

Ms. Christine Mercier: In the United States, the FDA has a regulation that is referred to as the good manufacturing practice. It applies, for the most part to concentrated drugs and it is now moving toward a system that would incorporate more diluted types of products as well.

I think there's recognition in the United States that although its system of GMP regulations has been in place for quite some time—I don't know how many years—there is a situation with the use of diluted drugs that has to be addressed as well. So it is moving toward an establishment-type system where it's now concentrating mostly on those who use concentrated drugs, but the intent is to expand that to other products as well.

I don't know whether or not the expansion would be as regulated on diluted products as it is now currently on concentrated products, but certainly there is a move in that direction to incorporate the use of all drugs.

The MFERRs per se more closely reflect what the FDA has in place with its GMPs, but the U.S. also imposes other restrictions on the movement of medicated products from Canada to the United States that MFERRs would not resolve. Even if we had a regulation in place in Canada that was identical to the U.S. GMPs, essentially there would still be requirements in place that would not allow us to send our medicated products south of the border. I think it's also important to note that the current Canadian feed regulations are not harmonized with the U.S. feed regulations at this time.

Mr. Robert Flack: Christine, you might also mention that in terms of our own GMPs and ultimate accreditation, our industry is not resting on its laurels, so to speak. We're aggressively implementing. Do you want to talk about that for a second?

Ms. Christine Mercier: We have developed some good manufacturing practices that in large part encompass most of the requirements outlined in the MFERRs, but we've extended that to include all types of medications, whether they are concentrated or diluted drugs, as well as other food safety problems we have to address, such as salmonella and so forth.

• 1015

So we have developed some good manufacturing practices. They are in many cases already in implementation, and in other cases they're being implemented. To support this particular process, control system, we have developed a HACCP-based accreditation program for the feed industry.

We are currently in our sixth training session. We will be holding, in total, seven training sessions from across the country, in every region of the country, to allow our feed manufacturers to have HACCP training so that they can implement these GMPs and HACCP principles in their feed mills.

Mr. Dick Proctor: Thank you for that. I have just one other question.

Ms. MacKenzie, when she was here last week, also said, in effect, that third-party verification in Quebec is not really third-party verification as the agency sees it, and I wonder if we could get a reaction from this group this morning in terms of that, or perhaps—

Mr. Robert Flack: It's simple. We don't agree with her.

Mr. Dick Proctor: Why not?

Ms. Christine Mercier: As to the verification that is done in Quebec, there is a group of professionals that are recognized in Quebec as capable of verifying the mixer validation test. That group includes professional agrologists, agricultural engineers, veterinarians, or professionals that have experience in feed manufacturing or in calibration of equipment used for that purpose. The system works very well in Quebec, because there are quite a few third-party verification groups that handle the verification.

I really don't understand the scope of her comment as to why it's not considered valid. It's considered to be done very professionally in the province of Quebec, and it's done by recognized individuals, professionals, that are recognized by the provincial government.

Mr. Ken MacKenzie: In fact, we're proposing that Agriculture Canada approve and bless who would be those third-party verifiers.

Mr. Robert Flack: Absolutely, and it's also important to point out that you say that the Quebec program has not proven to be as good. Then let's modify it.

The Chairman: In compliance, I think, is—

Mr. Robert Flack: In the tolerance area...fair enough. So if there are things that we need to do to improve it, let's improve it. But remember, the proposed regulation will only target 25% of the existing industry.

Secondly, quite frankly, you don't have a problem with the main commercial feed mills in Canada that have the equipment, the mill, the technology. That's not your problem, in our humble opinion. So if you bring in a regulation that leaves 75% of the industry excluded, and you bring in a regulation that's going to piggy-back something in Quebec, and you're going to bring in a regulation that doesn't recognize the on-farm segment at all, it doesn't solve....

Sure, they don't like the Quebec problem. It's not perfect. It's a hell of a lot better than what they're proposing, which is nothing.

Mr. Charles Lapointe: It is somewhat puzzling to realize that we would establish a program, because we don't have the resources—with the government, that's the fiscal question—just to cover 20% or 25% of the industry. Nobody's pretending that what we're putting there won't evolve over the years.

Mr. Robert Flack: That's their problem.

Mr. Charles Lapointe: It will evolve, but let's take the opportunity now to build a solid foundation.

Mr. Robert Flack: Let's cut to the chase. That's why they don't want to do it; they don't have the money. And if they can target.... Their inspectors know where our feed mills are, they know where to go, they don't know where all the on-farm situations are. It's going to be tough; we grant that.

At 25% you're going to have 100 permits to give out versus 9,000. It's a lot easier to do.

Mr. Charles Lapointe: There are two situations here that I think could be embarrassing if, at some point in time, you have to answer to the total...and say we don't have a program that covers...but it's because we have restrictions in our budget. You need to cover 100% of the industry.

Mr. Robert Flack: Or don't have one.

Mr. Charles Lapointe: Number two, in Quebec, at the beginning, that was a vision. In terms of marketing at the international level, we will have the best program in North America. Now we have the opportunity to have something across Canada. Do we want to keep this imbalance?

Mr. Robert Flack: Don't tell me that in the United States of America on-farm mixing is verified or registered through their medication program. Give me a break! We own companies in the States, and I'll put our system up against theirs any day of the week, thank you very much.

• 1020

The Chairman: Mr. Denis Coderre.

[Translation]

Mr. Denis Coderre (Bourassa, Lib.): I understand your logic very well, but I understand ours less this morning. I believe that some things are clear. I would simply like to ask Mr. Vanclief some questions.

It has been shown that the system in Quebec is not perfect, but it works. I am trying to understand the logic here. Given that we have resolved the deficit problem, I imagine that the budgetary constraints that you talked about, Mr. Lapointe, are no longer an argument. Could you nevertheless explain to me what their impact is? I am always thinking about the consumer. I am new here and the more I hear, the more I ask myself questions.

Could the fact that we are not covering 100% with the regulation have an impact? It has been shown that there are to some extent holes all over the place. Therefore, if we follow your logic, there must necessarily be some impact at some point on the quality of the product the consumer is buying.

If you are telling me that some farmers mix medication with their feed and if there is no regulation that applies 100%, there will most certainly eventually be an impact on the quality of the product. Am I way off the mark or am I right in saying that?

[English]

Mr. Robert Flack: Two points. First of all, we don't have a food residue problem today in Canada. Remember that. We don't have a problem today. We have a tolerance problem we want to improve. That's very important.

So we don't have a problem today. Why test the system? Let's come up with a regulation that can work, that can improve the tolerance, that even more so prevents the possibility of an end product or a food residue problem.

Secondly, if we're going to be world traders, as we are—we do in excess of $20 billion of agrifood trade out of this country—and if we're going to continue to see that grow, which I assume we want to do, and our industry wants to be part of, it won't necessarily be the Canadian consumer but our trading partners' consumers that will demand that as well. It's not that the Canadian consumer is not important, but the type of regulation can be a selling point, it can be a marketing point, in terms of....

You talk, madam, about Asia and Europe in terms of the swine business. Absolutely; they don't have those regulations in the United States of America.

[Translation]

Mr. Denis Coderre: It is obvious, Mr. Flack, that it is not perfect in Quebec, but there has been some education and the system works. It is not a matter of territory; it is a matter of common sense.

You are saying that there are no residues. Let us follow through with this logic. If there are no residues, then why create this regulation? If we want to ensure that there will not be any further down the road, then this regulation must exist. You are telling me that there are no residues today, but if we continue, the tolerance level might eventually be a problem. There are two possibilities.

[English]

Mr. Robert Flack: Remember one thing: this association is not telling you there's no residue problem. The Government of Canada is telling you there's no residue problem.

[Translation]

Mr. Denis Coderre: But you are telling me that there is one.

[English]

Mr. Robert Flack: Pardon me?

Mr. Denis Coderre: Are you telling me there isn't?

Mr. Robert Flack: No, I'm saying there isn't. You said, “You are telling me”. I'm saying, to be clear, the government is telling you.

Mr. Denis Coderre: I'm not trying to put forward a problem here. I'm just trying to understand.

Mr. Robert Flack: There is a tolerance problem that we want to improve upon. We just think the solution makes a lot more sense if it can be 100% compliant rather than the simple targeted audience, which won't solve the problem. We want to solve the problem.

The Chairman: Mr. Bruce Quinn.

Dr. Bruce Quinn: I think we should look at this situation from a risk management perspective. The sampling that's done by the government isn't all-inclusive. Not every animal slaughtered for human consumption is tested for residue. It's a statistical sampling program that is used.

As a result of that, there is always an inherent risk that one animal, so to speak, with a residue could slip through the system and end up on a consumer's plate. We need to come at this issue from a risk management perspective, to say that what we want to do is implement programs that will minimize, as much as is humanly possible, the risk of anyone ever coming into contact with an animal food product that contains a residue.

• 1025

[Translation]

Mr. Denis Coderre: That is precisely the context in which I brought up the question. Obviously, on the one hand, it is a matter of quality standards . If we want to be competitive in the export market, we obviously need global regulations. It must be said that we are on the leading edge.

Furthermore, if you are telling me that there are no residue problems and that the idea here is really to work on the tolerance issue, then explain to me why it would be logical to have these global regulations. I am being the devil's advocate here and I am saying that there is no problem. Why would you want this to apply 100% across the board?

[English]

Dr. Bruce Quinn: Yes, let me go on. I think your question is very important.

If we all agree that what we want to do is minimize the risk of a food residue, the next step is to say that we do not want to expand our testing program because it's too costly, it's too prohibitive to do that. What we need to do is find ways to manage the process more effectively so that we're assured the end product that is produced is going to meet the standards of quality that everyone expects.

Having said that, if we can implement that, what we then do is improve or enhance consumers' perception, be they domestic or export consumers, about the quality of products that we have and can provide. This will then help to protect our export markets and ensure that we have the confidence of our buying partners in the quality of the products that we produce.

[Translation]

Mr. Denis Coderre: Mr. Lapointe has been dying to respond.

Mr. Charles Lapointe: The marketing issue is also important. I had the opportunity to meet with Japanese buyers who had come here and who had formulated very clear requirements relating to the manufacturing of feed, the quality of the water, etc.

A little earlier, we were talking about beef or hog producers. I believe it is important that we take advantage today of the opportunity to include these people in the development of a high- quality system. Perhaps our buyers do not give recognition to all these requirements, but I know that in Asia there are very definite requirements relating to the way in which animals are raised and nourished, both in water and in feed.

Mr. Denis Coderre: Is the real problem, Mr. Flack, not a problem of attitudes? Is it not true that producers fear over- regulation and that they do not want to be constantly faced with this type of regulation?

[English]

Mr. Robert Flack: Sure.

The Chairman: Mr. Hilstrom.

Mr. Howard Hilstrom: Yes, the questions in this conversation have raised a tremendous number of questions here, but I'll be as concise and quick as possible.

Mr. Harvard brought up some really good points clarifying that the beef industry and hog industry are not against having some kinds of regulations. But the point is that there is a tremendous amount of regulation right now.

I think you should also be clear on the statistics. Canada exports around $28 billion worth of products, and 54% of our beef products go out of this country already. So don't be telling me there aren't good controls and regulations on this already.

Mr. Robert Flack: We didn't say that.

Mr. Howard Hilstrom: Now, I'm not here to be competitive with our witnesses. We appreciate that you've come in to give us the wisdom of your industry. These are important parts, though, because there well may be press or whoever listening to this committee hearing, so it's important that the facts be precise and not just be used to gain some advantage.

So that's it in regard to the regulations.

On the question of cost, what we end up with is cost on top of cost on top of cost, with $100 here, $100 there, $500 here, $1,200 there. I'm telling you that margins are tight a lot of the time, on everything right from the big feedlots on down.

I have one question in regard to the permits. With these permits, you have the two levels there for a medicated feed permit and medicated pre-mix. I assume there is probably a condition in there so that one of these allows someone making medicated pre-mix to sell to other people, and one allows you to use the medicated feed permit only for yourself so that you can't resell mixed feed, medicated feed. Is there a condition in there like that, yes or no?

• 1030

Ms. Christine Mercier: Yes. If you're a producer on the farm and you have a medicated feed permit, you're not supposed to be selling that product to your neighbour.

Mr. Howard Hilstrom: That's right.

Ms. Christine Mercier: It's not a product that's been manufactured for commercial sale.

However, the smaller mills in Quebec will obtain a medicated feed permit as well. It's not exclusive to the producer on the farm who makes feed. There are smaller commercial operations that only make medicated feed, they do not make pre-mixes. They will opt to obtain the medicated feed permit, and in that case they are commercial establishments and they can sell that medicated feed to a producer.

Mr. Howard Hilstrom: In regard to this whole risk management perspective and the questions from Mr. Coderre, the “what if” tone of that is very poor and it's dead wrong. By way of general comment, I'm sure Lyle Vanclief will not support that kind of a conversation there.

One last thing here, your medication descriptor up there on the wall there had a nice big blue picture there with six dots, and a little blue picture also with six dots.

The fact is that when medication is put into feeds there, it has to be spread consistently throughout the feed, or otherwise you're going to get one hog eating a big chunk of antibiotic and other ones not. Why would anybody producing feed do that, when they're going to end up with a whole bunch of dead hogs? I don't care who it is, they're going to make sure that spread is spread out there, whether you can detect it or not. If it's at such low levels that you can't detect, then it's obviously very low concentrate in that feed mix.

Mr. Ken MacKenzie: That's precisely the point, Mr. Hilstrom. The permit system accomplishes two, maybe three things.

First of all, the person getting the permit has to demonstrate the ability to mix those six dots in his mixer, whether it's from a diluted pre-mix or a concentrated pre-mix. You're exactly right. The ability to mix repeatedly and accurately is critical to the whole feed manufacturing process, whether it's commercial or on the farm. You're absolutely correct, that's where it's at. The beauty of this simple system is that it does this.

Secondly, the permit identifies who all these people are so that should there be an issue they can be identified and dealt with on an exception basis. None of us want onerous regulation or extra costs. But we need to be able to identify situations and issues as they arise, and so this is a minimal cost way of accomplishing that.

Mr. Howard Hilstrom: Those are more or less my questions; I think we're out of time. There's a big discussion here that's very important and super vital, and as a committee I'm sure we'll be going over this further. But those are all the questions I have for now, Mr. Chairman.

The Chairman: Madame Mercier, does the Food Inspection Agency also inspect Quebec?

Ms. Christine Mercier: Yes, the national feeds regulations are applied across the board in all provinces, so the Canadian Food Inspection Agency also inspects commercial and some on-farm manufacturers that make medicated feed in Quebec, as they do across the country.

The Chairman: So right now it's being duplicated. Is that the only province where there are double inspections?

Ms. Christine Mercier: As far as we know. I believe in British Columbia there is a provincial regulation that really focuses more on the sale of drugs in that you have to obtain a permit to be able to sell certain things, either over the counter to a producer, or some things have to be sold through the feed. But it's more of a formality; there's no requirement to calibrate equipment or anything like that. It's a permit that's paid, I believe, once a year, and I don't know what the cost is.

The Chairman: I'm assuming the user fees or the costs that are incurred in Quebec are a very small part of the true cost of the inspections, of the program?

Mr. Ken MacKenzie: It's really an administration fee to get the permit.

• 1035

The Chairman: So what would happen with the new regulation as proposed? Would that be 100% cost-recovered or 50% cost-recovered or...?

Ms. Christine Mercier: We would assume that the cost of getting the permit would cover the government administrative—

Mr. Robert Flack: Industry would have to pay the $1,250 or whatever it is.

Ms. Christine Mercier: Under MFERRs, yes.

Mr. Robert Flack: The proposed regulation.

The Chairman: Right.

Mr. Charles Lapointe: Plus a consulting fee from the expert—

The Chairman: What percentage of the true cost would that be, do you know?

Ms. Christine Mercier: It's difficult to say.

Mr. Robert Flack: We'll have to get back to you on that.

The Chairman: Mr. Proctor.

Mr. Dick Proctor: Was there a time when the government, either the federal government or the Quebec government, would have absorbed all of the cost for the testing? Or has there always been a charge back?

Mr. Charles Lapointe: There's always been a charge back, from the beginning.

Mr. Dick Proctor: Has that gone up in recent years or has it remained fairly constant?

Ms. Christine Mercier: It's come down.

Mr. Dick Proctor: It's come down?

Ms. Christine Mercier: Initially, I think, the medicated feed permits were close to the $50 range and I believe the medicated pre-mix permits were more expensive as well, for reasons I really don't know about, but in any case they've come down over the last several years. They're now almost half the cost they were originally.

Mr. Charles Lapointe: I would see no reason why they would not recover the cost—

Ms. Christine Mercier: Right.

Mr. Charles Lapointe: —because it's well accepted, and really, the hurdle was more at the beginning, so I would assume that they are recovering the cost.

Mr. Dick Proctor: Do you know how many inspectors there are in Quebec?

Ms. Christine Mercier: They are multidisciplinary. In other words, they inspect for various commodities. One inspector will be assigned to a region and will do fertilizer, seed and feed inspections. I believe it's similar to the system that the Canadian Food Inspection Agency has, where their inspectors inspect for a number of commodities in one specific region.

Mr. Dick Proctor: Okay.

The Chairman: They only have 27 inspectors, I understand, across Canada. How often would your mill in Kensington be inspected in a ten-year period?

Mr. Robert Flack: It depends on how close the inspector lives to the plant.

The Chairman: So you may not be inspected for a long period of time.

Mr. Robert Flack: Maybe.

Ms. Christine Mercier: It varies.

Mr. Robert Flack: Kensington is a bad example because of the type of mill it is.

The Chairman: Okay, but take any mill—

Mr. Ken MacKenzie: They're in our mill every three months.

Mr. Robert Flack: They're at our Baden plant or the Woodstock plant every three months.

Mr. Charles Lapointe: Yes, every three months.

The Chairman: Every three months is sort of the regular—

Mr. Robert Flack: Yes. There are some plants we have that don't use a lot of medication, like our Prescott plant, which might not get a visit more than once every two or three years. And I'm generalizing. I can get it exactly per plant, but—

The Chairman: How often do you think they'd be on the farm, inspecting an on-farm mixer, like a large cattle operation in Alberta, for example?

Mr. Ken MacKenzie: Right now?

The Chairman: Yes.

Mr. Ken MacKenzie: They don't at all.

The Chairman: They don't at all? Only on a—

Mr. Robert Flack: There could be some situations where they use concentrated drugs that they know of and they could do inspections there.

Mr. Ken MacKenzie: Or if there's a trace-back of some issue and they're asked to go in by the inspector for the health of animals or something.

Mr. Robert Flack: The bottom line is that the vast majority of producers who manufacture their own feed on the farm are not inspected at all.

Mr. Ken MacKenzie: Yes.

Mr. Robert Flack: So is that fair?

The Chairman: So would the proposed regulation increase the number of on-farm inspections?

Mr. Robert Flack: Absolutely. That's why we are proposing it.

Mr. John Harvard: It's a different proposal—

The Chairman: Not yours.

Mr. Robert Flack: I'm sorry. I missed the question.

The Chairman: I'm talking about the Food Inspection Agency's regulation—

Mr. Robert Flack: No.

The Chairman: MFERR.

Mr. Robert Flack: They wouldn't be the ones doing it.

The Chairman: There would be no increase?

Mr. Robert Flack: No. They wouldn't be doing the inspection. The third-party verification people would. They would issue the permits.

Ms. Christine Mercier: I think the question is whether under the MFERR system there would be more on-farm inspections done by the agency. Am I correct?

The Chairman: That's right.

Mr. Robert Flack: If they don't have more people doing it, if they don't have more resources for doing it...I don't know. You would have to ask them.

Mr. Charles Lapointe: We want to just look at what the number of commercial organizations is versus our mixers. What would the numbers be in that case, Christine?

Ms. Christine Mercier: I don't know how many on-farm feed manufacturers there are across the country in Canada. It varies by species and provincial layout.

Mr. Charles Lapointe: Earlier we got about 10,000 permits.

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Ms. Christine Mercier: We did an internal survey across the country, in each region, each province, and tried to determine how many on-farm feed manufacturers there were. Again, this would apply to manufacturers of medicated feed. There are on-farm feed manufacturers who don't necessarily add medication to their feed. This would apply to the on-farm manufacturers who make medicated feed.

When we did our survey we were able to determine—not with 100% accuracy but we were still able to get a good idea—how many commercial mills would be involved and how many on-farm feed manufacturers who make medicated feed would require a permit. It's our estimation that there would be approximately 8,000 to 10,000 permits, in addition to those already issued in Quebec, to cover the majority of those who would be using medications on the farm and in commercial mills.

Mr. Charles Lapointe: You're talking on one hand of 520 commercial facilities and 10,000, so you're not talking about the same resources. That's why you have to go to a third-party approach. With 500 versus 10,000, you're not dealing with the same resources. That's why, again, it ties in with budget thinking. That was there in Quebec 10 years ago, when the program was to cover 100%.

Mr. John Harvard: But you indicated at the beginning, Mr. Flack, that if the agency went ahead with MFERRs, 75% of your industry would be left unregulated insofar as medicated feed is concerned. Is that right?

Mr. Robert Flack: Absolutely.

Mr. John Harvard: That's a whopping number, 75%. If you have 75% of the industry unregulated, how much of our food are they producing? They must be producing a lot of it.

Mr. Robert Flack: I can't give you the exact number, but obviously it would be a lot.

Mr. John Harvard: I have only one other thing. My memory fails me, but when the CFIA people were here last week they mentioned prescriptions and veterinarians. I raised this earlier and you didn't answer the question. Under the Quebec scheme, is there a cost that we've haven't talked about yet, a cost in acquiring prescriptions for whatever from veterinarians? Are we perhaps overlooking a cost here, or some requirement that there is some resistance to that is outside of Quebec? Could you help me there?

Dr. Bruce Quinn: Yes, there is an additional cost associated with a veterinary prescription being issued. The Feeds Act—

Mr. John Harvard: Is this in Quebec?

Dr. Bruce Quinn: Yes. That applies across Canada outside of Quebec where medications are used, other than those that are specified in a document called The Compendium of Medicating Ingredients Brochures, issued by Agriculture Canada. In Quebec, all medicated feeds have to have a prescription. Outside of Quebec, only those that deviate from the published specifications need to have a veterinary prescription.

Mr. John Harvard: Who pays for the prescription and who provides the prescription in Quebec?

Dr. Bruce Quinn: The veterinarian provides the prescription and the producer ultimately pays for it.

Mr. John Harvard: Your typical on-farm operator, say, would they need a lot of prescriptions in any given year? Is this a substantial cost?

Dr. Bruce Quinn: It depends on a specific situation. If the producer is using the same medications for a long period of time, fewer prescriptions are required versus those who are going to be changing medications frequently. It depends on their needs. It's a very difficult question to answer. They will vary, depending on the specific livestock operation.

Mr. John Harvard: But there is a particular cost the Quebec people face that other Canadians outside of Quebec don't face.

Dr. Bruce Quinn: That is correct.

Mr. John Harvard: Yet you're saying that they still find that regime quite acceptable and are quite comfortable living with it.

Mr. Charles Lapointe: But this is not part of the permit program we're talking about. That's another program that is there in Quebec. But you're right about your comment that people are not complaining about it. However, that's over and above what we're talking about here.

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Mr. Robert Flack: This will not encompass—

Mr. John Harvard: No, but if you're talking about taking the Quebec program, more or less, and applying it to the rest of Canada, are you also, even though the prescriptions are a companion to the Quebec program, suggesting in your proposal that when we take the Quebec program we also pick up the prescription requirements for the rest of the country?

Mr. Charles Lapointe: This is not something related to manufacturing per se, because in Quebec even if you buy complete feed as a producer and the level of medication in that feed is within the MIB, you still need to have a prescription. So that is not part of the manufacturing side.

Ms. Christine Mercier: I think the veterinary prescription status exists in all provinces. If you want to use a medication over and above a level that's been approved by Health Canada and Agriculture and Agri-Food Canada through what we call the medicating ingredients brochure, you require a veterinary prescription.

In Quebec, they introduced an additional program whereby it didn't matter what level of drug you were using in your feed; even if it was an approved level in the MIB, you were required to have a vet—

Mr. John Harvard: What's MIB?

Ms. Christine Mercier: It's the medicating ingredients brochure. This is something that is separate from the permit system in Quebec. There are two separate sets of regulations.

We are not proposing that veterinary prescriptions be required for all levels of drugs across the board or across the country. They are required now for certain levels, and in Quebec, in addition, they are required for basically all levels. But we're not proposing that the veterinary prescriptions be required for all levels across the country.

The Chairman: Mr. Steckle.

Mr. Paul Steckle (Huron—Bruce, Lib.): I want to extend my apologies for being late. I had another engagement this morning so I missed your presentation. In my earlier life and in my father's life we were buying feed from your plant our of Baden, so I'm putting it into perspective that I'm fairly close to this industry.

I'm interested in who we're talking about in third-party inspections. Who are these third parties? I'm sorry if I missed that part of it, but it's question I have for myself personally. Who are these people?

Mr. Christine Mercier: First of all, it's not really an inspection per se. The third-party verification is a professional who will go in to verify that the mixer validation, or that specific requirement to obtain a permit, is being done properly, and they're following certain guidelines and procedures that have been prescribed in order to do this. The people who do that verification are recognized by the provincial government in Quebec to do the verification.

Examples would be a professional agrologist, a veterinarian, an agricultural engineer, or a professional who has experience in pre-mixes and feeds or experience in the calibration of equipment used for that purpose.

Mr. Paul Steckle: That brings me to the point. In my own farm operation currently, those kinds of people are coming in, but they come in from sources such as you. You send them in.

I'm getting to the point of costing. Costing in your business can be passed on to a further end-user, which happens to be the farmer who is marketing hogs or cattle or whatever.

If there's a cost incurred directly to the farmer, there is no place for him to go. He cannot in any way, shape or form include that in the costing of the production of his piglets and hogs, because hogs are the highest tonnage users of feed, as I understand it in reading some of the material. There's no way. We know where hog prices are. They're either over the top or down in the bottom, or out the bottom in many cases.

So I'm saying to you, farmers fear these kinds of regulations for that very reason. They have no escape. They're caught. But you can pass it on. In a sense, the poultry business can pass it on because it has a marketing system that allows it to just price based on food and feed input costs. But hog producers and cattle producers, being free enterprises such as they are, cannot do that.

We listened just last week to some presentations that indicated the Americans in some ways are doing things better than we are. That is not what I was given to understand over the many years I've been in this business. I thought we had a better system than the Americans did. Who is inspecting over there?

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We won't get into the poultry side, the processing plants, and how they do things over there versus how we do them. Yet we're given to believe that somehow we have.... We have views here that seem to be in conflict with each other. I find that really sort of disturbing this morning.

Ms. Christine Mercier: I'm not an expert on how things are done in the United States, but the GMP regulations that I was referring to earlier are essentially handled by each state. I believe in some cases there are FDA inspectors who will go out and do the inspections in the commercial feed mills—I'm referring to the commercial feed mills now. In other situations, the state is either supposed to drum up money so that they can have the resources to go out and do those inspections.... So the actual delivery of the inspections will vary from state to state.

I really don't have any concrete numbers to give you. I can probably try to get some as to what the percentage of delivery of those inspections is in some of these states. But my understanding of it is that there's no perfect system, and certainly the system they have now has its drawbacks.

In the United States, they are looking at certifying people to go in and do some of these inspections. I know the American feed industry association is working very closely with the FDA in trying to find options that would deliver better inspection in the commercial feed mills. So there probably will be some form of industry participation in the future on some of these inspection activities.

Mr. Paul Steckle: Well, the objective of....

Go ahead.

Mr. Robert Flack: My point is I hope we haven't left you with the impression that we want to increase the cost.

Mr. Paul Steckle: No, it's not you that's doing that.

Mr. Robert Flack: Okay. That's great, because it's the regulation I was....

Secondly, even within the commercial feed industry, if your plant uses diluted drugs, you don't have a cost to pass on. So there will be discrepancies—

Ms. Christine Mercier: That's right.

Mr. Robert Flack: —in commercial feed producers that use concentrated drugs or commercial feed producers that use diluted drugs. So it's not a level playing field, even on the commercial side of the business.

Mr. Paul Steckle: I think the objective of any change in regulatory systems, in doing so, particularly as government would view changes, is they should be positive changes, minimizing cost, of course, but the ultimate objective would be to have the safest food source and supply as we're entering into the 21st century, and we should never forget that. That would be my view in terms of how we address this measure. It would be our goal to do that. The end-user is obviously the one we have to be concerned about, the consumer.

Mr. Robert Flack: Absolutely.

Mr. Paul Steckle: The image we have as a Canadian producer of those food supplies in the small world we're living in today is very important. It's very important that we do not lose that image, and that in fact we do produce the safest food source for the people who are buying our products.

The Chairman: Thank you very much, Paul. I just want to say in conclusion that this has been going on, I understand, for seven years.

Mr. Ken MacKenzie: Since 1993.

Ms. Christine Mercier: Four or five years.

With respect to the medicated feed establishment registration regulations, the discussions have been going on since 1995. Prior to that, there were discussions about a regulatory framework to address this issue. It has evolved—

The Chairman: Hopefully now the minister, with our trade agreements and so on, will be anxious to get this settled. So we will be making recommendations to him to say let's get on with life here and get something that—

Mr. Robert Flack: I hope you get that same feeling from us, that enough is enough and let's get something in place that's comprehensive, national and fair.

The Chairman: Thank you very much.

Mr. Robert Flack: Thank you.

The Chairman: Colleagues, next Thursday we have Bill C-26. If you have any witnesses that you want to call forth—from the Reform Party, or the NDP Party, or the Liberal Party—let me know this week.

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Mr. Dick Proctor: So it's a week?

The Chairman: We'll start Thursday with the departmental witnesses, and then after the break we'll finish up in a very short period of time, I understand.

Could you call Mr. Hill and ask if he has anybody he needs...?

A voice: So that's for Thursday?

The Chairman: Yes, Thursday is when the bill starts. The bill was referred to us last Friday. We'll be getting our first witnesses, who will be departmental witnesses, on Thursday, and then when we come back from the break we'll have anybody else from the industry who you think wants to appear. Okay?

Thank you very much. The meeting is adjourned.