AGRI Committee Meeting

37th PARLIAMENT, 2nd SESSION

Standing Committee on Agriculture and Agri-Food

EVIDENCE

CONTENTS

Tuesday, September 30, 2003

¹

1535

The Chair (Mr. Paul Steckle (Huron—Bruce, Lib.))

Mr. Bruce Saunders (Second Vice-President, Dairy Farmers of Canada)

The Chair

Mr. Bruce Saunders

Mr. Bruce Saunders

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1540

The Chair

Mrs. Cheryl Gallant (Renfrew—Nipissing—Pembroke, Canadian Alliance)

Mr. Bruce Saunders

Mrs. Cheryl Gallant

Mr. Bruce Saunders

¹

1545

Mrs. Cheryl Gallant

Mr. Bruce Saunders

Mrs. Cheryl Gallant

Mr. Bruce Saunders

Mrs. Cheryl Gallant

Mr. Bruce Saunders

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1550

Mrs. Cheryl Gallant

Mr. Bruce Saunders

Mrs. Cheryl Gallant

Mr. Bruce Saunders

Mrs. Cheryl Gallant

Mr. Bruce Saunders

The Chair

Mr. Louis Plamondon (Bas-Richelieu—Nicolet—Bécancour)

Mr. Bruce Saunders

Mr. Louis Plamondon

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1555

Mr. Bruce Saunders

Mr. Louis Plamondon

The Chair

Mr. Bruce Saunders

The Chair

Mr. Larry McCormick (Hastings—Frontenac—Lennox and Addington, Lib.)

º

1600

Mr. Bruce Saunders

Mr. Larry McCormick

Mr. Bruce Saunders

Mr. Larry McCormick

Mr. Bruce Saunders

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1605

Mr. Larry McCormick

Mr. Bruce Saunders

Mr. Larry McCormick

The Chair

Mr. Rick Borotsik (Brandon—Souris, PC)

Mr. Bruce Saunders

Mr. Rick Borotsik

Mr. Bruce Saunders

Mr. Rick Borotsik

Mr. Bruce Saunders

Mr. Rick Borotsik

Mr. Bruce Saunders

Mr. Rick Borotsik

Mr. Bruce Saunders

Mr. Rick Borotsik

Mr. Bruce Saunders

Mr. Rick Borotsik

Mr. Bruce Saunders

Mr. Rick Borotsik

Mr. Bruce Saunders

Mr. Rick Borotsik

Mr. Bruce Saunders

Mr. Rick Borotsik

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1610

Mr. Bruce Saunders

Mr. Rick Borotsik

Mr. Bruce Saunders

Mr. Rick Borotsik

Mr. Bruce Saunders

Mr. Rick Borotsik

Mr. Bruce Saunders

Mr. Rick Borotsik

Mr. Bruce Saunders

Mr. Rick Borotsik

Mr. Bruce Saunders

Mr. Rick Borotsik

Mr. Bruce Saunders

Mr. Rick Borotsik

Mr. Bruce Saunders

Mr. Rick Borotsik

Mr. Bruce Saunders

Mr. Rick Borotsik

The Chair

Mr. Dick Proctor (Palliser, NDP)

Mr. Bruce Saunders

Mr. Dick Proctor

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1615

Mr. Bruce Saunders

The Chair

Mr. Dick Proctor

Mr. Bruce Saunders

Mr. Dick Proctor

Mr. Bruce Saunders

Mr. Dick Proctor

Mr. Bruce Saunders

Mr. Dick Proctor

Mr. Bruce Saunders

Mr. Dick Proctor

Mr. Bruce Saunders

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1620

The Chair

Mrs. Rose-Marie Ur (Lambton—Kent—Middlesex, Lib.)

Mr. Bruce Saunders

Mrs. Rose-Marie Ur

Mr. Bruce Saunders

Mrs. Rose-Marie Ur

Mr. Bruce Saunders

Mrs. Rose-Marie Ur

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1625

Mr. Bruce Saunders

Mrs. Rose-Marie Ur

The Chair

Mr. Rick Casson (Lethbridge, Canadian Alliance)

Mr. Bruce Saunders

Mr. Rick Casson

Mr. Bruce Saunders

Mr. Rick Casson

Mr. Bruce Saunders

Mr. Rick Casson

Mr. Bruce Saunders

Mr. Rick Casson

Mr. Bruce Saunders

º

1630

Mr. Rick Casson

Mr. Bruce Saunders

Mr. Rick Casson

Mr. Bruce Saunders

The Chair

Mr. Rick Borotsik

Mr. Bruce Saunders

Mr. Rick Borotsik

Mr. Bruce Saunders

º

1635

Mr. Rick Borotsik

Mr. Bruce Saunders

Mr. Rick Borotsik

Mr. Bruce Saunders

Mr. Rick Borotsik

The Chair

Mr. Bruce Saunders

The Chair

Mr. Bruce Saunders

The Chair

º

1640

Mr. Bruce Saunders

The Chair

Mr. Claude Duplain (Portneuf, Lib.)

Mr. Bruce Saunders

Mr. Claude Duplain

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1645

Mr. Bruce Saunders

The Chair

Mr. Dick Proctor

Mr. Bruce Saunders

Mr. Dick Proctor

Mr. Bruce Saunders

Mr. Dick Proctor

The Chair

Mr. Rick Casson

º

1650

Mr. Bruce Saunders

Mr. Rick Casson

Mr. Bruce Saunders

Mr. Rick Casson

The Chair

Mr. Claude Duplain

Mr. Bruce Saunders

The Chair

Mr. Larry McCormick

The Chair

Mr. Bruce Saunders

The Chair

Mr. Réjean Bouchard (Assistant Director, Policy and Dairy Production, Dairy Farmers of Canada)

The Chair

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CANADA

Standing Committee on Agriculture and Agri-Food

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NUMBER 044

l

2nd SESSION

l

37th PARLIAMENT

---

EVIDENCE

Tuesday, September 30, 2003

[Recorded by Electronic Apparatus]

¹  (1535)  

[English]

    The Chair (Mr. Paul Steckle (Huron—Bruce, Lib.)): Ladies and gentlemen, I'm going to call the meeting to order. It's past our starting time, and we have the members at the table.

    This afternoon we want to continue our review of the issue surrounding BSE, particularly as it pertains to Dairy Farmers of Canada today. We have before the committee as witnesses Bruce Saunders, who is no stranger to this table, second vice-president of Dairy Farmers of Canada, and Réjean Bouchard, assistant director of policy and dairy production, also no stranger to this group.

    Gentlemen, we're going to give you some time to put your case forward. I believe you have a presentation, in both languages, I presume.

    Mr. Bruce Saunders (Second Vice-President, Dairy Farmers of Canada): That is correct, Mr. Chairman.

    The Chair: Okay.

    Bruce, you're first, are you?

    Mr. Bruce Saunders: Yes.

    The Chair: Go ahead.

    Mr. Bruce Saunders: Thank you for allowing us to appear before you today to discuss the impact BSE is having on the dairy industry.

    Let me start by saying that producers are appreciative of the work you and the Government of Canada have done on getting the border partially reopened and maintaining consumer confidence in beef products, which in itself was a major success, in my view.

    I'm going to address the top issues for dairy producers, options for cull cows and bred heifers, the inadequate number of slaughter facilities, and the border reopening. I will also share with you the efforts by dairy producers and our proposed solutions.

    I would like to start off by addressing the financial impact that is weighing on dairy producers. As Mr. Duplain, parliamentary secretary to the Minister of Agriculture and Agri-food, pointed out at the August 11 meeting, the dairy industry is facing losses of at least $300 million a year. We are talking about sales value of $1.5 million a day for dairy calves, replacement heifers, and culled cows. In addition to this lost revenue, producers are also dealing with the challenge of maintaining these animals and the extra milk that is being produced as bred animals continue to calve. As you are aware, the WTO decision in 2002 limited our ability to export any extra milk that is produced. Because we cannot export it, we must discourage the production of over-quota milk.

    The key difference between beef and dairy producers is that for dairy it was less of an immediate impact, as we didn't have the finished cow to worry about immediately after May 20. But dairy does have two serious problems. One is the culled cows, at least twice the culled rate of beef. The second problem is that we were sending approximately 65,000 head of breeding stock across the border for sale every year. For many producers the sale of culled cows and breeding heifers was their net profit at the end of the year. The drop in price and border closure also mean a significant shortage in cashflow.

    The second problem is bred heifers that were normally sold to the United States. They can no longer be exported. According to information gathered by the Canadian Livestock and Genetics Association, export and domestic sales of dairy replacement heifers in 2003 were on track to top 100,000 head, with a value of $200 million. As of May 20, 37,000 head, valued at $69 million, had been shipped. Traditionally, 65% of our exported heifers go to the United States. That border, as you well know, has been closed, shut off, and now those animals are staying in Canada. They are staying on our farms and are actually pushing the cull rate even higher, because our producers are saying, if I've got a young heifer, I'll keep her, and I'll sell an older cow. It is further increasing the cull rate for dairy producers. When you add this compounding problem to the usual cull rate of dairy cows, you can understand why, with the border closed, we now face the potential inability to ship all cull cows to abattoirs in Canada.

    There's a growing sense of frustration with producers in many provinces, because we do not have the facilities. Prior to the border's being closed 70% of our cows had actually been shipped live to be slaughtered in the United States. As trade increased to the U.S., our local abattoirs gradually closed. Competition being what it is, the smaller abattoirs could not continue to compete against the large-scale plants. Now we face a situation where we need those small abattoirs back and we need them located throughout the country. Manitoba doesn't have any, B.C. doesn't have any, the Maritimes don't have any, and in Ontario most of our cows end up going to Montreal.

    DFC is of the opinion that over the next few months, if producers bring these animals forward on a progressive basis, we can actually get all these animals culled and slaughtered, but they've got to come forward. Dairy Farmers of Ontario made the decision to send a letter to our producers advising them to start shipping culled cows, to start to send them through the system. We think there is the opportunity to get them all disposed of in abattoirs, but this is not going to happen quickly, rather, it might not get totally resolved for many months. Having more abattoirs, having local abattoirs would definitely help improve that.

    If you combine both dairy and beef, you're looking at a culling of about 700,000 animals over the course of a year.

    There is a general acceptance that with respect to cull cows, for anything over 30 months of age it is going to be difficult to get the border to reopen, and this situation isn't going to change in the short term.

    Our producers have a difficult decision to make, to move these culled cows now or wait for a reopening that may not come. Some producers were gambling on the fact that the border would be open by now, but now we're in a situation where a lot of farmers have to make the same decision at the same time. We are taking a look at our herds. We are trying to figure out what it's going to cost to feed these animals if we want to wait. Most producers are coming to the decision that they're going to have to cull cows because they can't afford to wait for the border to reopen.

    We need to recognize the feed ban that took place in 1998, which both Canada and the United States adopted. Recognition of this ban should qualify any animal born after 1998 for export to the United States if the border does reopen to any degree.

    We recognize the Minister of Agriculture and the CFIA have worked hard to get the border reopened, and our producers are encouraged by recent reports that the government is continuing to press for a full reopening of the border. Well, we need that market to be reopened for cull cows and bred heifers. We also need alternative solutions within Canada, such as culling facilities in all provinces.

    Producers are struggling with difficult decisions and the impact is increasingly visible in our communities. The impact on producers is not only monetary, but emotionally frustrating as well. Almost every dairyman saw that particular animal's birth, helped it to be born, raised it, and fed and milked it twice a day for its entire life. You don't take the decision to dispose of that animal lightly. Because of the distance to abattoirs and the low value of culled cows, some producers may kill and compost on the farm. I don't think any of us want this to be the main solution.

    The dairy industry has been working with the minister and the department and the beef round table. I personally am participating in the round table subgroup dealing with the issue of cull cows. We had requested the federal government put forward more dollars into the system to enhance the price of these culled cows to lessen the stress on producers when making this difficult decision, but the request was turned down at last week's federal-provincial ministers meeting. It is our hope the federal government will look at that request again.

    We remain committed to working with the government and other agricultural organizations on finding solutions for dairy producers affected by this crisis. This includes the Canadian Federation of Agriculture and the promotion of their four-point compensation package to help producers get over this crisis. The package includes a cash advance program, a revenue deficiency program to back up the cash advances, maintenance of the normal breeding herd at 2003 levels, and a low-interest loan program. We also continue to look for other solutions to help ease the strain and stress felt by our producers.

    This concludes my remarks, Mr. Chairman. I'd be pleased to take any questions. Réjean has already been introduced.

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    The Chair: If you have no further comments, Mr. Bouchard, we will begin the questioning.

    I should point out that Mr. Saunders has to leave here by five o'clock in order to meet his flight arrangements, so we will try to accommodate him.

    Are you first, Mrs. Gallant?

    Mrs. Cheryl Gallant (Renfrew—Nipissing—Pembroke, Canadian Alliance): Yes, Mr. Chair. Through you to our witnesses, first, I'd like to start my questioning with Bruce Saunders.

    I welcome Bruce as a Bruce County farmer as well as vice-chair of the Dairy Farmers of Ontario.

    Bruce, I know many of your neighbours are cow-calf producers, so we certainly appreciate the perspective you bring to this crisis in addition to your speaking on behalf of dairy farmers. For many Ontario dairy farmers, perhaps 20% of their income is affected by the BSE crisis. Is that figure about right?

    Mr. Bruce Saunders: Mr. Chairman, probably on average that is an accurate number. If you have a producer who is just selling cull cows and perhaps some bull calves, he's probably in the 8% to 10% range. Most of our farms also sell breeding stock, and that's what's going to bump them up into that 20% average, so I could accept that number as being very accurate.

    Mrs. Cheryl Gallant: If this is the case, and as you understand the APF, will the APF be sufficient to deal with the losses of the dairy farmers?

    Mr. Bruce Saunders: As I understand the APF--and as you know, dairy has said all along under the old NISA and this APF that we choose to get our returns out of the marketplace under normal situations--if the loss on a dairy farm was 20%, to use your number, then that wouldn't trigger the 30% loss or the 70% threshold; therefore, there wouldn't be any payment coming to dairy producers in this particular case.

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    Mrs. Cheryl Gallant: The minister is saying that any losses to dairy farmers certainly would be covered by the APF, so are you still urging Ontario not to sign on to the APF?

    Mr. Bruce Saunders: Actually, I think you'll find the Dairy Farmers of Ontario and the other supply-managed commodities have worked with the entire gamut of the organization: beef, pork, grains, and oilseeds have come up with a common position in which we indicate where and how we could advise our minister to sign an APF--under what conditions. We have reached agreement with that group. All it does is say that within the proposed APF, there's recognition of the three pillars of supply management and the fact that if there is a payment, unless it's a disaster, from an income stabilization point of view, dairy is excluded from the revenue and expenses on the farm, and the other aspects of the farm can actually be part of the APF.

    So that's the only intervention that supply management in dairy have had with regard to being in or out of an APF.

    Mrs. Cheryl Gallant: Supply management was almost lost at Cancun, which seems to follow the federal government's decision with the APF to retreat from supporting dairy farmers in supply management. Could the reason the government is insisting that Ontario sign on to the APF be that it's planning to capitulate to the WTO and phase out supply management?

    Mr. Bruce Saunders: I think you are reaching for a lot of what-ifs to get to that conclusion. We have seen all along statements by the government and most parties that they support supply management, and I have to accept those parties and those governments at their word.

    Cancun was an interesting program. I think, with regard to trade, Canada has a tough row to hoe on this one. We are the sole voice out there supporting what we do. I think what we do is right. I think the government thinks what we do is right, and I would hope that every stone is turned over to make sure what we have comes through in the final package. I would hope this is just one small interim step in getting to that final package.

    Mrs. Cheryl Gallant: A concern I'm hearing from our beef producers as well is the whole issue of slaughter capacity, which you alluded to. With cull dairy cows being anywhere from 30 months to 10 years old, we may never see the border reopened to these cattle, but at the same time we do not have the facilities to process them in Canada. So the issue does need to be addressed.

    While I appreciate there is provincial responsibility here, do you see a role for the federal government in increasing slaughter capacity?

    Mr. Bruce Saunders: I think the federal government, through the CFIA, which is actually, I believe, the body that has to recognize a slaughter facility and make sure it meets all standards when it gets up and running, could have a role to play in expediting the opening of some of these plants, making sure that once the structure is there, all avenues are used to make sure it quickly comes on stream, rather than roadblocks being put up.

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    Mrs. Cheryl Gallant: Last week the federal and provincial ministers of agriculture rejected the beef industry value chain round table's proposal for the culled cow compensation program. Was the dairy industry supportive of that program?

    Mr. Bruce Saunders: The dairy industry was supportive of the concept of the program. The board of directors of the Dairy Farmers of Canada felt the 10% cull rate that was put on the table was not sufficient to actually meet the requirements of the Dairy Farmers of Canada, or dairy farmers in general, and that we would be entertaining, if the program were to go forward, interventions to have two rates, recognizing the two rates of cull that actually happened.

    Mrs. Cheryl Gallant: Are the Dairy Farmers of Canada a member of the value chain round table?

    Mr. Bruce Saunders: Yes, we are. That happened in the last month and a half.

    Mrs. Cheryl Gallant: Is the main market for dairy cows domestic, or is it the United States?

    Mr. Bruce Saunders: If we talk about prior to May 20, probably close to 65% of the dairy meat that was produced was ending up in the States to be slaughtered. Some of that meat came back. So when you did the total net, you ended up with in the vicinity of 45% to 50% of the meat that was produced from cull cows here in Canada that did not get consumed in Canada. It actually was consumed someplace else.

    So now we have the issue of how we consume that.

    The Chair: Thank you, Ms. Gallant.

    Mr. Plamondon.

[Translation]

    Mr. Louis Plamondon (Bas-Richelieu—Nicolet—Bécancour): I think you're being very easy on the government, given the positions it has adopted recently. You're part of the roundtable. My colleague discussed this with me earlier. The roundtable was set up by the government and now, the government is rejecting a proposal by its own panel and you say you're prepared to wait it out. You don't seem disappointed at all.

    Do you not get the feeling the government was merely trying to buy time by creating this roundtable group and that it was really planning all along to turn down all requests for assistance?

[English]

    Mr. Bruce Saunders: I'm not going to defend the government or anything, but to go by the history of what I see, the governments, both federally and provincially, created a financial program that recognized the drop in slaughter prices for fed cattle and culled calves. That ran the gamut from May 20 through to September 1. I would say the people I was participating with in the beef round table were of the view that with the putting forward of another proposal, the government would have recognized that problem and said, okay, maybe we do have to put forward more dollars. So it was with confidence in where the government was willing to go that we partook in that.

    Were we disappointed in the fact that there wasn't a program? Yes, but not to the point of having rallies or whatever. We still feel it's important that we work with the governing bodies at all levels, provincially and federally, to try to strike a deal and a program that'll work for all of us. So it's from that perspective that we haven't brought the troops out yet. I think it was a good program, I think it was a simple program. It was a program that was going to, in my view, put dollars into the producers' hands. That would have allowed those cattle to come forward in a nice orderly fashion and alleviated some of the potential problems that are out there and may happen yet.

[Translation]

    Mr. Louis Plamondon: You've provided a long answer, but what you're basically saying is that the government abdicated its responsibility and failed to provide any support beyond September 1. Yet, you needed assistance after that date and you didn't get it. However, you were asked to participate in a roundtable and engage in group discussions. However, you need tangible support in the form of money.

    Speaking of tangible assistance, have you managed to wrest any concessions from your business partners, that is from the banks, insurance companies or credit unions, in the form of lower interest rates or compensation in some form or another. This would show that the parties that benefit financially from lending you money understand your situation. That would also allow you to demand more from the government, because you would be able to demonstrate the generosity of the private sector that finances your operations.

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[English]

    Mr. Bruce Saunders: Thank you.

    First, those of you who are familiar with Quebec know that Quebec has sought partnerships with the entire industry in Quebec, with a lending institution; it's under the acronym of GO. So it's trying to get synergies and relationships with all elements, feed companies, banks, etc. It was created with the idea of having a common goal on trade, but it has the potential to have exactly the same common goal on this aspect. So I think there's a groundswell there.

    I'll give you a personal example, though, of where I see industry doing exactly what you're talking about. In my particular area--and I think it's across Ontario--the local pesticide companies have said they will provide a rebate on all pesticides used on particular crops in the coming year for any of the companies that sign up. First Line Seeds is one instance in Ontario. If you buy First Line seed, the pesticide company will give you a rebate on the purchase of the pesticides for that crop. That's new. We haven't done it ourselves as an overall umbrella organization, but it's happening within the various bodies at the local level.

[Translation]

    Mr. Louis Plamondon: I have one last question, Mr. Chairman. I'd like to talk for a moment about the negotiations in Cancun which centred largely on the supply issue. In La Terre de chez nous, the trade paper of the Union des producteurs agricoles, and in particular of dairy farmers, some very unflattering things were said about the federal government's attitude during the course of these negotiations. It was felt the government's actions contradicted the broad principles espoused by the ministers when they had answered questions in the House or made statements in public. In response to several questions about agricultural issues raised in the House by my party, the Bloc Québécois, the two ministers had stated bluntly that they would defend the supply management system and that this matter was not open to negotiation. Yet, Quebec's dairy farmers say they were surprised to see government officials in Cancun discussing the possibility of reducing tariffs by 100 per cent, that is of lowering them from 299 per cent to 199 per cent, when in fact official ministerial statements had never hinted at this possibility.

[English]

    The Chair: Monsieur Plamondon, you're over the seven minutes.

    I'll give you a short response, Mr. Saunders.

    Mr. Bruce Saunders: In the Cancun agreement, as I saw it, it was a proposal that was being put forward by the chair of the negotiations. Did our government endorse it? No. I think they said there were a number of problems with it. I reiterate the fact that we're going to have to fight hard to keep what we've got. Retention of over-quota tariffs is the bottom line. I have a number of producers in Ontario that read La Terre de chez nous, and they tell me what it says.

    The Chair: Thank you, Mr. Saunders.

    Mr. McCormick.

    Mr. Larry McCormick (Hastings—Frontenac—Lennox and Addington, Lib.): Thank you very much, Mr. Chair, and thank you, gentlemen, for being here.

    I just wish one of our colleagues was back in the room. But you know, the glass of water is half empty or half full.

    First, the Dairy Farmers of Canada is a very professional group of business people, and you're a very powerful group. I'm glad you're here today. The BSE is a disaster. But I've got to make a comment about supply management. It is a domestic marketing system. It must be protected, will be protected. I believe in it as much as anyone in this country, and I'll fight for it. Over-quota and that is a different story, which we can talk about at another time.

    I just want to put on the record the average price that a producer would receive for a cull cow in the last three weeks. What would be the approximate price per pound they would get? If I'm allowed to use pounds or not--I don't know.

º  (1600)  

    Mr. Bruce Saunders: Yes, pounds is what I'll deal with on that one. We're probably looking at between eight cents and twelve cents per pound, maybe up to fourteen cents for a really good one.

    Mr. Larry McCormick: So they would get eight to twelve cents a pound. Of course, that would go to a packer--whatever packer. Where is that meat ending up? We had the packers here this summer. Our program, your tax money, could have been quite successful if the packers had paid a fair price when the program was offered. Every dairy farmer's in the beef business, but where did those cows you shipped that you were no longer milking end up in the last month, probably? Where does that ground beef go?

    Mr. Bruce Saunders: We hear tell that a number of the local fast food chains, like McDonald's, have indicated they're using Canadian beef, so I assume it's ending up there. Some will end up in the retail stores. As I said, if we're actually killing twice as much of that type of beef as we have the ability to consume in Canada, some of that has to be ending up in freezers.

    Mr. Larry McCormick: You know, we tried as hard as we could when the packers were here to find out where the money was disappearing. Yes, they lost money in the first three weeks, possibly four weeks, but since then they've made huge returns. Of course, the returns are so large that now it's coming out, and they're admitting they're making this major amount of money on their investment, at the expense of our producers. I just have to state that again.

    I'd like to get your ideas on what we should be working toward. At this beef round table, this value-added round table, are they working together to include the milking cows as well as their own beef cows? What ideas do you have on how we can use this? We've heard different ideas on what we might do to market this beef.

    Mr. Bruce Saunders: I attended the round table meeting in Calgary, which was probably the fourth or fifth round table, but the first one I had attended. The topic of that meeting was culled cows, and whether it was a dairy culled cow or a beef culled cow, it made no difference to the discussion; it was a four-legged animal that was to be culled. So from that perspective it was a good meeting, as far as everybody participating in counting the numbers.

    Processors at that meeting said that if the animals came forward in a regular pattern so the plants could stay open all the time, there would be the ability for them to kill the number of cows that had to come forward to make that 700,000 number. The problem at that time was that their plants were actually “going dark” because there weren't enough animals coming forward, and they had to shut the plants down for one to three days, or whatever, because of lack of supply. That related back to not enough return for the cow, so the farmer wasn't going to put her on the truck. That was the ripple effect.

    At that meeting, they were looking at whether there was the ability to make better use of the meat of the animal. Were there some strip loins we could feature somehow? Could we find a new market and make better use of cutting these animals? I've been led to understand they're doing that right now--in other words, more functional use of that product.

    What we can do, what we have to do, and what the entire meeting was talking about was not allowing any further supplementary imports of that type of beef. We're given to understand that's actually happening, but it's imperative that there be no further supplementary imports until this problem has ceased.

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    Mr. Larry McCormick: That is happening today, and I'm glad you've brought it up. We have to be there, and I hope we can count on support around the table. We have to be there with our own government and make sure that doesn't happen.

    I want you to clarify whether your shippers are sending enough cows now that these slaughterhouses are busy enough, for example, in Montreal, to handle these cows. If they don't handle them they're going to come back and say they don't have enough beef, and then they're going to want to bring it in.

    Mr. Bruce Saunders: I think you have it exactly right. That's the danger of not having enough cows coming forward. My understanding--and I stand to be corrected by someone with more numbers--is they are not coming forward in the right fashion to satisfy that.

    If I can go back to your first question, there are some other markets that perhaps are being opened up--countries offering to take some product. I think we have to try to fill those markets and enhance the creation of them if at all possible--Russia and Hong Kong, for example.

    Mr. Larry McCormick: Thank you, Mr. Chair.

    The Chair: Mr. Borotsik.

    Mr. Rick Borotsik (Brandon—Souris, PC): Thank you, Mr. Chairman.

    I certainly have sympathy for the Dairy Farmers of Canada, but I have to hold back my enthusiasm, because there are others out there who are suffering substantially more than the Dairy Farmers of Canada. There are those who don't have 80% or 90% of their revenue streams--they in fact have zero percent of their revenue streams right now. They're the cow-calf operators, and in my area, feedlot operators, who have no market domestically. They have to go to the U.S. As you're well aware, live cattle are not open, so they have had zero percent, and they have zero revenue stream. So I have sympathy, but it's just not quite as much as you'd probably get from me.

    You also said in your dissertation that you have to discourage the overproduction of over-quota milk. Of course you do; that's the whole aspect of supply management. You can keep an 80% to 90% revenue stream by controlling that production. So you have options that aren't open to other people.

    I have two questions. The culled cows are obviously important to you, and I appreciate that, and they are more important or equally so to the beef producers. We continually hear that there are 700,000; your number is 100,000.

    You said something in your presentation about having two rates for culled cows. Can you expand on that? Are you suggesting that the dairy cull should have a different percentage of that one-seventh from what we have currently?

    Mr. Bruce Saunders: Just to clarify, 100,000 is the number of bred heifers that we actually have coming forward every year. On the cull rate I'm talking about, we average roughly 25% to 30% cull rate in the dairy--

    Mr. Rick Borotsik: Which is a 10% cull rate for the beef.

    Mr. Bruce Saunders: Yes.

    Mr. Rick Borotsik: So what are your cull numbers on an annual basis?

    Mr. Bruce Saunders: Do you mean the actual number of cows? I may have seen it someplace. It should be roughly 200,000 to 250,000.

    Mr. Rick Borotsik: Do you mean out of the total 700,000?

    Mr. Bruce Saunders: Yes.

    Mr. Rick Borotsik: So it's still less.

    Mr. Bruce Saunders: It's about one-third.

    Mr. Rick Borotsik: You talked about a two-rate cull rate. What did you mean?

    Mr. Bruce Saunders: That was in reference to a question that was asked to me. The proposal was put forward to the ministers and they turned it down.

    Mr. Rick Borotsik: At the round table.

    Mr. Bruce Saunders: In that proposal, the cull rate was going to be 10%. Therefore, if you had a herd of 100 cows you would get 10%, or 10 times whatever the number was, and that would be the dollars you got.

    Mr. Rick Borotsik: You were suggesting a different rate for dairy.

    Mr. Bruce Saunders: The Dairy Farmers of Canada's board of directors were of the view that if our actual rate was 25%, we should have a different number from 10%. They didn't necessarily say--

    Mr. Rick Borotsik: Even though you can still maintain an 80% or 90% revenue stream?

    Mr. Bruce Saunders: I'm telling you what the board of directors felt was appropriate.

    Mr. Rick Borotsik: Okay. On these culled cattle, you've supported the CFA, as you've indicated in here, in their four-point plan for cash advance programs and revenue deficiencies. You say here that you will also continue to look for other solutions to help ease the strain and stress felt by your producers.

    As I understand it, the Georgian Bay group have indicated that they will in fact be able to accommodate a substantial number of those culled cows. Why is that not in your presentation? Have you looked at the Georgian Bay group and their proposal?

º  (1610)  

    Mr. Bruce Saunders: The Georgian Bay group, which is a group of milk producers with no quota, are putting forward a plan to have an export program that would be WTO compatible. They don't have quota; therefore they could export their milk legitimately.

    It's a view of many, including some government individuals, that the ability to run that type of program in the same country where a supply management program is run is not likely to be WTO compatible. You might start it, but you'd have a challenge within a year, and then you'd have to go through all the WTO processes.

    Mr. Rick Borotsik: So the Dairy Producers of Canada is not prepared to look at the Georgian Bay group as another option for reducing your culled cows?

    Mr. Bruce Saunders: At this time, no.

    Mr. Rick Borotsik: Not at all. So you would much rather keep the culled cows and look to government for some sort of assistance.

    Mr. Bruce Saunders: The Georgian Bay group was only handling the milk that was coming forward from those cows; it wasn't handling the actual culling of those cows. That's the area we've been looking at--moving those cows to slaughter.

    Mr. Rick Borotsik: Do you still accept that the CFA's programs are available? There was a question earlier, and I'd just like to confirm it.

    With the APF and the moneys that have been announced and all the new, wonderful risk management programs that have been identified by the government, with your 80% and 90% revenue streams, is it your opinion that the dairy producers of Canada would not be able to access any of those dollars coming from the federal government with respect to BSE?

    Mr. Bruce Saunders: As I read the program right now, I concur with your analysis--

    Mr. Rick Borotsik: So you could not access it.

    Mr. Bruce Saunders: --because the trigger is 70%--

    Mr. Rick Borotsik: And you're at 80% to 90%.

    Mr. Bruce Saunders: Using your numbers--

    Mr. Rick Borotsik: No, they are your numbers, please.

    Mr. Bruce Saunders: Okay, using our numbers, then....

    Mr. Rick Borotsik: Thank you. Please do that.

    I have one more question.

    We know the government is trying, beyond anything I've seen before, to get this border open to live cattle. That is the lifeblood of my area. The live cattle that I see are going to be live-to-slaughter and are going to be under 30 months.

    This problem that you have before us right now is, in my opinion--and I hope you concur--not a problem that is going to go away in the very near future. We've heard anywhere between four and seven years with respect to animals over that 30-month age limit.

    You haven't really given us a lot of options here. Will dairy producers start ratcheting back on those animals in their production so that they can reduce the difficulties that culled cattle are going to cause us? Are they going to change their methods of operation? This is not a tomorrow thing; this is four and seven years down the road. Live-to-slaughter, 30 months, has to be open, but I don't see over 30 months coming for quite a while.

    Can you give me your vision as to what dairy producers are going to do to reduce their culled cattle in the near future?

    Mr. Bruce Saunders: Thank you.

    My view is similar to yours, and I think we have to start communicating that to producers, rather than not--

    Mr. Rick Borotsik: Exactly.

    Mr. Bruce Saunders: --and as I mentioned in my presentation, Dairy Farmers of Ontario has already started to do that.

    For the very reason that we probably wouldn't be eligible under APF and that the culled cow is a small part of dairy, the production of the milk is the key component of Dairy Farmers of Ontario. Therefore, we will produce that milk with however many cows it takes, and that will then dictate how many culled cows we have. But the production of the milk is the key point.

    Mr. Rick Borotsik: Could you take a cow longer?

    The Chair: You're way over your time, Mr. Borotsik.

    Mr. Proctor.

    Mr. Dick Proctor (Palliser, NDP): Thanks very much, Mr. Chair.

    Thanks to the Dairy Farmers of Ontario.

    Bruce, I don't know whether you were at the meeting a week ago yesterday, but in your opinion, what was the chief stumbling block to the government not buying into the CFA four-point proposal?

    Mr. Bruce Saunders: I wasn't there. I was at a meeting of DFC here in Ottawa. I honestly can't answer that question. I don't know.

    Mr. Dick Proctor: Was it money? Was it the provincial governments as well as the federal government that were not keen on this?

º  (1615)  

    Mr. Bruce Saunders: Again, I honestly don't know. All I've seen is the same press release that you've seen.

    There was a teleconference last Friday, which I found out about after it was on, from the beef round table. It may have had more information. I was not part of that, so I don't know.

    The Chair: In response to that, my understanding is that they were asking for money per cow, but there was no plan for how they were going to get rid of the cows. So the farmer was going to be paid but was still going to have the cows. So when you figure that and factor that together, that presents a bit of a conundrum. I think that's part of the answer.

    Mr. Dick Proctor: You mentioned, Bruce, bred heifers and the fact that they're not going across the border. Most of those, I gather, go to the United States--not entirely, but I think you said 65%. Are you hearing about any problems on the other side, that people would hope that border would reopen, or is that a major concern for American dairy producers?

    Mr. Bruce Saunders: No, I think our imports into the United States of live animals make up about 5% to 6% of the animals that enter the dairy herd in the States, and any time you end up with a shortage, it does cause increased prices.

    On this side of the border there is a group of our producers who are not licensed milk producers but raise Holstein heifers, and they are suffering big time. They would fall into our category of the APF because their loss is greater than 70%--big time.

    Mr. Dick Proctor: Could you just explain a little further what is happening with those folks who are...?

    Mr. Bruce Saunders: They're farmers who have chosen the occupation of raising Holstein heifers from calves of yearling age and up, or whatever, breeding them, and then offering them for sale. Unless they can find a domestic market here in Canada, which has really shrunk in value as well, they don't have a market for those animals.

    So we're seeing bred heifers that were going for $2,800 to $3,000 prior to May 20 now going for $1,000 to $1,200. And if she isn't a good animal, she won't even be bought. So these guys are really hurting.

    Mr. Dick Proctor: Are you seeing some of the manifestations of that hurt, or are some of those folks having to sell at rock-bottom prices and get out? Has there been any evidence of that to date in your...?

    Mr. Bruce Saunders: They're definitely selling at rock-bottom prices. I have yet to hear of any bankruptcies, but we've only been in this for five months. If it continues and we're here still talking about this thing next spring, we won't be talking about one or two bankruptcies, but each and every one of us sitting in this room will have a list of local bankruptcies.

    Mr. Dick Proctor: What about the lending institutions? As far as you are aware, have they been fairly understanding through this? There are some rumours that it's getting more difficult, and that they're pressing people for repayment on loans.

    Are you or the Dairy Farmers of Ontario hearing anything?

    Mr. Bruce Saunders: We have not yet had any letters to our board, and I personally haven't heard any rumours to that effect. I can understand how it might happen when you have loans that are guaranteed through equity, the livestock, which has a value. If that value drops by two-thirds, your security just went out the window and a bank could start getting cold feet.

    So I haven't heard anything, but I wouldn't be surprised.

    Mr. Dick Proctor: You responded to a question from Mr. McCormick about supplementary imports and the fact that we have stopped those for good reason, but is it reasonable to think we can do that in perpetuity, if we are forced to look at this through the long end of the telescope? It's going to be some time.... Wouldn't we expect countries like Australia, New Zealand, and others that export a lot of ground beef and lower cuts of meat to Canada to say “Just a minute here, we have our own problems”? Is that unreasonable?

    Mr. Bruce Saunders: I'll sit here and say I don't think it's unreasonable for us to say “You can't come in”. As long as we maintain our WTO commitments and import the certain volume that we must import, then I think we can make an argument that, “Hey, we have as much devastation right here now as you have in your country, and until this changes, these are the new rules”—but always while maintaining our required imports under the WTO.

    Mr. Dick Proctor: Thank you.

º  (1620)  

    The Chair: Thank you, Mr. Proctor.

    Ms. Ur, you have five minutes.

    Mrs. Rose-Marie Ur (Lambton—Kent—Middlesex, Lib.): Thank you for presenting once again.

    In your presentation today, Mr. Saunders, you made a statement that “DFC is of the opinion that over the next few months, if producers bring these animals forward on a progressive basis, we can actually get all these animals culled...”. I've heard rumours that there seems to be a lack of interest within the industry to do so. When this program was put forth after May 20, I don't think we were looking at the situation being where we are today.

    What can DFC do or suggest to these farmers to encourage them to bring their animals forth? To my knowledge, what happened at the meeting of provincial ministers and with Lyle is that the proposal put forth was $330 per head, plus whatever they got at.... But there was no stipulation whether they had to sell them or whether they kept them, so this was really just prolonging the inevitable.

    So how do you see this circumstance being fixed?

    Mr. Bruce Saunders: The reason the round table suggested just a dollar payment rather than tying it to slaughter was that many of the beef producers there, and dairy producers as well, saw what happened when the program was announced last summer. The week that program was announced, the bottom dropped out of the market.

    Mrs. Rose-Marie Ur: Guess who got that?

    Mr. Bruce Saunders: The individuals involved didn't want to see that happen again. The thought process—whether it can be accepted or not—was that if we have a program that isn't tied to slaughter, but is tied to an animal, if an individual chooses not to slaughter, at least some dollars are available to him to feed that animal through. I think there was a possibility of actually having accepted that program and having said this is the program, and by doing this we're bridging all the way through till some date next summer.

    We're talking about the cull rate for a year, which could have been accepted on that basis. Then there wouldn't have been any avenue for culled cows, anyway, and for us to come back seeking another program for a period of time. It didn't happen, so maybe we'll be coming back.

    Mrs. Rose-Marie Ur: Right. Thank you.

    You're looking into other markets or other options available for this extra meat, which I'm sure we can't all consume here in Canada. Have you thought of perhaps looking at canning beef or things like that? Is that reasonable, or would it be profitable enough?

    Mr. Bruce Saunders: I don't know the economics of it. I do know that it is feasible. I sat in on one of your last hearings, when you had the processors here. One of the processors actually said there was freezer space in research centres in Alberta, and that you could put truckloads of carcasses in there and then bring them out. A canning plant could actually take them and put them in there. It sounds like an excellent idea for this particular emergency.

    There are other jurisdictions that have had this problem. In the U.K., for instance, when the government slaughtered animals of over 30 months' of age, it bought every animal at full market price and just said to the farmer, “Here it is”. It's part of the program; it's part of the cost of that program. We haven't gone there yet, but they've been willing to put compensation forward.

    I think there's always interest in developing new markets for some of this product. I think members of Parliament have been looking at food aid and whether there is a possibility of using that. Any of these ideas have to be explored to enhance and use up some of this beef.

    Mrs. Rose-Marie Ur: Your short-term concern is certainly the culled cows, but I think that in the long term it is the replacement of stock for meeting your quota, as well. Is it not going to be a problem if you have to hang on to these animals and not be able to replace them with proper stock?

º  (1625)  

    Mr. Bruce Saunders: What we're actually seeing, though, is that the heifers are coming on to the farm and displacing the older animals. So the replacement is almost happening too much, in some cases.

    In our particular situation in dairy, we've had a tougher time making milk this year. We're still making it, but we're milking more cows to get that milk. That may change with all of the new feed.

    Mrs. Rose-Marie Ur: Thank you.

    The Chair: We'll move to Mr. Casson.

    Mr. Rick Casson (Lethbridge, Canadian Alliance): Thank you, Mr. Chairman.

    Thank you, gentlemen, for being here today.

    One of the statements in your presentation was that “For many producers the sale of culled cows and breeding heifers was their net profit at the end of the year”. So in your industry, the net profit of dairy producers is the culled cows.

    Mr. Bruce Saunders: Yes.

    That's really virtually to say that on those particular farms, the production of the milk and sale of the milk are covering all of the other expenses, and the sale of the culled cow and calf—bull calves, or whatever—ends up being the net at the end of the year. It's simple analysis that says that if you have a 10% net, and you lost 10% of your sales, you have no net; your net is zero. It's simply to say that the culled cows had a dollar value, and that dollar value is gone. As in all businesses, when you lose revenue, in effect, you're losing revenue right off the bottom line, or right off the net.

    Mr. Rick Casson: You talked about these producers who have gone into strictly the bred heifer industry. They're not dairy farmers, they're just dealing with bred heifers. Now there's no sale for them at all. They're in a very unique situation, similar to some of the beef people. They have these animals, they're coming, they're maturing, they're calving. How are these people dealing with the milk? They don't have facilities to milk them, obviously, so what's happening there at the moment? Is this milk just being poured down the drain, or what's happening?

    Mr. Bruce Saunders: A number of factors have made it less of a problem. Your scenario is exactly right if these other factors hadn't happened. But since last August, we've probably increased our quota in the national system by about 8%, just through consumption, growth in consumption, special classes as well, so that has required more animals to do it. I've already mentioned the fact that we're not getting the milk on an individual cow basis as well as we did other years, so it's taking more cows. So there are more stalls being used to produce that milk.

    So at this stage, as of the first of October, we're not seeing that crunch of a whole bunch of extra cows, and those heifers are being utilized mostly on dairy farms.

    Mr. Rick Casson: When will that happen? When will that crunch come?

    Mr. Bruce Saunders: That crunch could happen as early as December, and definitely into the spring.

    Mr. Rick Casson: I suppose our hope is the 30-month or younger yet coming through for that.

    Mr. Bruce Saunders: I hope so too.

    Mr. Rick Casson: I believe you indicated, and I'm not sure I heard you right, that you are under the understanding that there are over-quota permits being issued for offshore lean beef. Is that what I heard?

    Mr. Bruce Saunders: There were supplementary imports of beef, but I believe there were no new ones issued as of July 9. All we were saying in our presentation is don't issue any more until this is ended.

º  (1630)  

    Mr. Rick Casson: The culled cow problem is unique because of the fact that these animals are the older animals so that we can't use the 30-month rule on them. Trying to find a value for culled cows in this country is going to be a problem. Until we find that value, the producers will not bring them forward, so it's a death spiral of such until we can put a value on them.

    I was told that the value of the beef that we can get out of a culled animal, in comparison to the beef that comes in from offshore--that's 75,000 tonnes, and we do a lot without tariff--is about $200. I don't know what it costs for a processor to process them, but if the value of a culled animal's processed meat is $200, the producer is going to end up with nothing. It still doesn't add up.

    Mr. Bruce Saunders: On a marketplace scenario, the value of culled cows probably is between zero and where it is now. I've heard packers talking about this program and virtually saying if your competition is the offshore--New Zealand, wherever, Argentina--

    Mr. Rick Casson: Uruguay.

    Mr. Bruce Saunders: --you have to price your domestic supply culled cows at the price to be comparable to that. So from a straight market solution, that's where it is.

    Mr. Rick Casson: There's been talk, and I think I've seen it reported somewhere, that the Mexicans own some bred heifers in this country, and they are trying to figure out ways to get them down there. First of all, they have to accept them, I suppose, through this BSE issue. Do you know of that? Is it a fact that the dairy producers have these animals, or who has them, and what's the problem with getting them down there?

    Mr. Bruce Saunders: I would think if it exists it's on a one or two individuals basis. The animals I know of in my province, in the herds that are actually just raising heifers around me, are locally owned. We understand Mexico is willing to take these bred heifers. The difficulty Mexico is having is they need a letter from the United States saying that they will continue to take the feeder calves out of Mexico if there are Canadian breeding stock going in. I don't believe that letter has happened yet, and until it does, we have what we have.

    The Chair: Thank you, Mr. Casson.

    Mr. Borotsik.

    Mr. Rick Borotsik: We know that the government hasn't accepted the programs that have been outlined, particularly the $330 set-aside and other financial programs that have been proposed. If we continue on in that fashion, which I have no reason to believe we won't--Mr. Vanclief has announced his $600 million about seven times, and it's the same money, there's no new money there--could you please give me your worst-case scenario as to where we will be six months from now?

    I know you're dealing with the dairy producers. I appreciate that, Mr. Saunders. I have other worst-case scenarios in the beef cattle industry. But can you tell me what your worst-case scenario is six months from now?

    Mr. Bruce Saunders: From a dairy perspective, which is all you're asking for--

    Mr. Rick Borotsik: From a dairy perspective--that's all I can ask, yes.

    Mr. Bruce Saunders: The worst-case scenario probably is the instance where there are farmers who decide that if an animal has no value they will not send it to market, but rather they will dispose of it at home. There are proper ways of doing that, and I'm sure our farmers will do just that--composting, etc.--but none of that has a good image for any industry. That's the concern we have.

    To make a comment, I think I started saying the consumer confidence is great and is amazing. We're probably the only country where the consumption of beef went up when the disease actually hit. That is due to everybody speaking the right words.

    Instances like my worst case don't help that image. The one fear I have is of losing that image because of this.

º  (1635)  

    Mr. Rick Borotsik: I share your fears.

    We know the financial proposals and this $330 set-aside has been proposed, but if--and it's a big if, because, as I said, I don't think the minister or the government are prepared to do it--that happened, how long an extension does that give us in trying to resolve the long-term problem? Remember what I said: 30 months and over. This isn't a short-term solution. How long does that give us? Then do we look at a second-year program, a third-year program, and a fourth-year program? I'm trying to grapple with this.

    There are no easy solutions, by the way. I don't think anyone is right or wrong, but I'd like to hear your opinion.

    Mr. Bruce Saunders: I think it's fair that you're trying to grapple with it. Producers are doing exactly the same thing.

    I think that if the program had been accepted, the numbers were based on a yearly culling rate, and therefore it could have been accepted as that being a year package.

    We are always going to say that we need.... In this particular instance, this is a disaster beyond the making of any individuals, and from that perspective, similar to the people who are in Halifax right now who will be seeking help, we have to seek help for our producers on this particular issue all along. In dairy, as I said, we say we want our returns out of the marketplace, and we do, but in this case the marketplace went away from us through no fault of our own. Therefore, we think there is realm and reason for compensation.

    Mr. Rick Borotsik: As a last remark, I agree with you 100% that this is extraordinary. This is a crisis such as we have never seen before in the industry. It's one we have never dealt with before. I have producers who can tell horror stories right now in the cow-calf operation and the feedlot operation.

    I don't want to put any words in your mouth, and I don't want you to say anything you don't want to say, but do you feel the government is treating this as an extraordinary crisis, or is it just trying to deal with it as a typical agricultural problem that we have from year to year?

    Mr. Bruce Saunders: I think there is effort by the government to treat this extraordinarily when I see that CFIA has actually appointed a point person to be the BSE guy who's responsible for talking to the United States, etc. That's new.

    Do I think there is room to change some of the attitude? I have to say yes. To me, the APF works within the realm of a man-made disaster, perhaps a crop failure, or grasshoppers, or that type of thing, which tends to be regionalized, but when there is a disaster that hits the entire country through no influence of the actual producers, in my view, that's one of the weaknesses of the APF. I think APF has to say that in national disasters this program doesn't apply; rather, there is another arm over here. In all honesty, if foot and mouth hit Canada, $1.1 billion wouldn't come close, because not only would the cattlemen be involved and shut off, the pork producers would be involved and shut off, and that wouldn't even--

    Mr. Rick Borotsik: Mr. Saunders, $1.1 billion isn't enough for the BSE situation either.

    Thank you very much for your comments. I appreciate them.

    The Chair: Thank you, Mr. Borotsik.

    I want to insert a question. There's a reason, I believe, which is pretty much understood in the beef industry, whether it's dairy or beef—both being the same in this case—that the packing houses have not been forthright in coming forward. Or have they ever indicated that they could pay no more than that much money for the cows? We know what cows were worth prior to May 20. There are some really serious questions about their suggesting that cows are only worth $200 today in the marketplace. The hide's worth $85. I can't for one moment believe that a good cow is only worth $200 in what the packing houses can render from that cow.

    I think if these people would come clean and tell the industry and Canadians what has happened since May 20, there'd be some understanding and some cooperation from farmers releasing those animals into the marketplace. But there's that belief that someone is profiteering greatly at this moment at the expense of farmers, and also at the expense of consumers. That's an issue that has not been addressed. Until we address that issue, we're going to have some real serious problems in terms of farmers bringing animals to market, and I want to see that being done.

    I just want to ask you this quickly: because the dairy industry has worked a long time in developing genetics, what are you doing to continue to make sure we don't lose that? I understand that embryos can't be exported, but we can export semen. Is that correct?

    Mr. Bruce Saunders: Yes, we can export semen.

    The Chair: But not the embryos?

    Mr. Bruce Saunders: I'm given to understand that embryos are moving as well.

    The Chair: Are they?

    Mr. Bruce Saunders: With some country exceptions.

    The Chair: So you're still working on that, because we want to make sure that we have the base industry there once this thing is resolved.

    The second aspect is the issue of veal meat. We know that veal comes primarily from the dairy industry; the male animals and the bull calves are mostly vealed out. What is being done to add value in that industry? Are we doing something about that at the moment? Because I think there are a lot of opportunities there, since no live animals can go. It's under the 30 months, I realize, and some of that is perhaps boxed and sent out. Is any effort being made to increase our market share there?

º  (1640)  

    Mr. Bruce Saunders: I don't know what the veal associations are doing. The fact that they're less than 36 months means that the boxed beef from them is moving, and I know one of the major veal companies is actually moving boxed beef across. Grobers is moving some.

    I can only speak of what I see at my end. When I sold bob calves in mid-July, they were down as low as $20 to $30. They're now back up into the $130 to $150 range. So something must be happening to mean there's a market.

    The Chair: We'll move to Mr. Duplain. Do you have some questions?

[Translation]

    Mr. Claude Duplain (Portneuf, Lib.): I want to thank you for coming here today. Your testimony is proving to be most interesting. I also have a few questions for you about one subject that I hesitate to get into. The opposition has tried to get you to admit certain things that are somewhat difficult to admit. With respect to supply management, I hope that the situation is clear in your mind. Ministers have steadfastly maintained that supply management is here to stay and that they would work hard with everyone to keep it. Therefore, when you claim that supply management is on the table, I think you're exaggerating a little. I'll leave it at that.

    Recently, the Minister of Agriculture and Agri-food told me something that I found quite reassuring. He noted that Canadian farmers had developed a truly remarkable agriculture and beef industry in Canada and that they had accomplished this feat by working with government. He maintained that producers and governments needed to continue working together to find a solution to the mad cow disease crisis and that he was well aware of the gravity of the situation.

    In terms of finding solutions, I have a first question for you: do you feel that the government, the department and the minister are really attuned to your concerns? To my mind, that's an important question.

[English]

    Mr. Bruce Saunders: Yes, I think the fact that the resources are being put into it indicate that the minister and the government are hearing the problem. I have no expectations that the government has the ability to wave a wand and open the border. I'm fully cognizant of the fact that it will be at the discretion of the United States and Japan. Along that line, we have to be very thankful that the United States has already gone beyond what any country has ever done, in that they have received beef from a country that has BSE. They are the first country--and we are--for that ever to happen to. So there has been movement.

    Together with Canada, the United States has gone to the OIE and sought to change the standards and what the delay periods have to be when you have a positive case, if it's one versus many. Hopefully that's positive.

    So the steps are being taken. We can always hope for more, and I guess we're always anxious for something to happen, because it is our livelihood, but in the same process recognizing that in many cases it's out of our hands.

[Translation]

    Mr. Claude Duplain: We all agree that more needs to be done. It's a matter of deciding on the right approach to take. It's easy to say that more money is needed, but all departments and sectors for that matter could use more money. We know that, but it's not always an affordable option.

    As you mentioned, the United States re-opened the border after 100 days. That's extraordinary because the situation was a first. The minister and the other provinces contributed a total of $520 million to resolve the problem. A total of $600 million will be distributed shortly. Future protocols are being drafted for exports to Japan and Mexico.

    Cash advances are also currently available right now under the APF and I would like to discuss this subject some more with you. Earlier, you seemed to imply that the APF was off-limits to you. I know that cash advances are currently available because the minister made it clear that if the provinces signed the APF or endorse it in principle, he was prepared to advance them some funds. Even if program details aren't yet finalized when the signing takes place, he is prepared to allocate 40 per cent of the funds earmarked for producers right away. That is what he said. However, you seem to be implying that the funds would not be available and I'd like to hear some specific numbers, given that the aim of the APF is also to help producers across the country, whether small, medium-sized, or large, to deal with possible emergencies or crises. As I understand it, these cash advances are available to all producers.

    Why do you claim otherwise, when the APF is in fact intended to assist producers in the event of a crisis? Given the tremendous losses they are facing, everyone agrees that producers are indeed in a crisis situation.

º  (1645)  

[English]

    Mr. Bruce Saunders: I think it goes back to the question I was asked as to whether dairy would have the opportunity of taking part in this, and my answer was no. It relates to the fact that we are supply management. So 80%, and for some farms 90%, of our income is based on supply management, based on a product that isn't affected by this.

    My comment was that the dollars would not be available, or a dairy farmer would not trigger the payment--not that the dollars weren't available to other producers, but dairy would not trigger a payment. That was my only intervention on the dollars.

    The Chair: Your time has expired, Mr. Duplain.

    We will move to Mr. Proctor.

    Mr. Dick Proctor: I just want to follow up on something I think Mr. Saunders said in his opening remarks.

    I think you were talking about the over-integration of the meat packing industry and the fact that we have lost local abattoirs. I would agree with that, but I'm wondering whether your notion that we should have more local abattoirs is just wishful thinking, or is it possible? Maybe you could just tell us what has happened in your own county over your lifetime, what you've seen in terms of where animals used to go, culled cattle, and where they go now.

    Mr. Bruce Saunders: The culled cows, for instance, were never really slaughtered locally, i.e., in my own county. There were always slaughter facilities for farmers with an animal they wanted to consume themselves and that type of thing. Some of those are even gone because of changing national inspection standards.

    I'll give a couple of examples.

    Right now we have a plant in Ontario, the MGI plant. The word is they're attempting to get it open. That's been the word for two months. I don't know what the delay is, but it would help if it were on the ground and running.

    Mr. Dick Proctor: Excuse me, but is this a plant that used to exist, so that it's just a question of refurbishing the plant and getting it up and running?

    Mr. Bruce Saunders: Yes, that plant was a regular slaughterer of culled cows and ceased to do the business. I understand from a press release I read that in Manitoba there is, I believe, a pork facility that is trying to be remodelled to take cows. It will take a couple of months to get online.

    The point I was simply making is that if there's any way to expedite that process, let's try to expedite it to make it happen.

    Mr. Dick Proctor: That was the only question I had.

    The Chair: I will move, then, to Mr. Casson for a short comment. We want to allow Mr. Saunders the last word. At five o'clock maybe you can be excused.

    Mr. Rick Casson: I think if the market were there and there was a dollar in it, these packing plants would start popping up and be opened up pretty darn quickly. Has there been any consideration by the Dairy Farmers of Canada, in order to offset the losses due to the culled animals and the younger animals, of asking for an increase in the price of milk?

º  (1650)  

    Mr. Bruce Saunders: That argument has not been made, either to any provincial agency, such as those for our fluid milks, or to the federal agency, the Canadian Dairy Commission, at this time.

    I would not sit here and say it won't be an argument we make if this continues, but at this time we haven't made that argument.

    Mr. Rick Casson: I think one of the things that's happened in the beef industry in particular is there has been quite an awakening as to what happens to the beef once it gets to the slaughter facility—where it goes; who is using Canadian beef; who is not. I think that's been a really important educational factor in all of this, and the support of the Canadian public is truly impressive. Some of the people.... One of my constituents went all over this country with truckloads of hamburger. He sold tons and tons of hamburger for a buck a pound, and he didn't lose a dollar doing it. I think he was trying to impress on consumers that there are some price things that could happen here, especially at the retail level, that would help.

    Have you looked at any markets for your culled animals? Are you starting to think that way—that as a dairy industry you have these animals that need to go somewhere if you are to protect yourselves, and that you need to be exploring some of these avenues as an industry?

    Mr. Bruce Saunders: As an industry we haven't yet, but I think as this prolongs, that has to be someplace you go.

    The concern I think we all need to have is that we have sister commodities. Just as there is talk about the beef industry, there's a risk that if you drop the price of beef too much, then other commodities that we have could end up suffering. You always have to consider that as you move forward.

    I think in dairy we've been criticized that we weren't very fast off the mark seeking help on this issue or even being very proactive on the BSE issue, partly because.... I was at a meeting in Bruce County and explained it this way: what I'm dealing with is the cull side of my industry; for the beef guy, it is his livelihood. So I will take a second seat to that guy as he's making his presentation. All I want to do is just let everyone know we're here as well, but in no way do I want to take anything away from the severity of the impact this is having on the beef industry and on my friends—I just mentioned that I am from Grey County near Bruce—which is big time, and on people I know.

    Mr. Rick Casson: Me too.

    Mr. Bruce Saunders: Yes, I bet.

    The Chair: Mr. Duplain had one short question.

[Translation]

    Mr. Claude Duplain: The witnesses have some very interesting things to say, Mr. Chairman.

    I would have another question about the APF, but I'll move on to another subject. I'm curious about current US beef imports and what happens to these imports versus possible uses for culled cows.

    Have you examined this situation with a view to devising some kind of plan and recommending a solution to the government? How can we reduce our surplus of beef from culled cows, in terms of our beef exports, and ground beef supplies? I'm looking into something, but I haven't quite finished yet. Have you looked into this at all?

[English]

    Mr. Bruce Saunders: Mr. Chair, we have not, but I think this is the second or third time that question has been asked. I think it would be appropriate if we spent some time on exactly that. If we're concerned that this is an issue, then maybe we should be trying to find some solutions along those lines. At this time I haven't, but we will.

    The Chair: Thank you, Mr. Duplain.

    Mr. McCormick had indicated a short question, but if there isn't another one, that will be the last one.

    Mr. Larry McCormick: Well, if Bruce has a moment, I'd like to put this on the record, on his comments about recognizing the feed ban that took place. We are accused of not opening the border. Well, it wasn't us who closed the border.

    I just want your comments, if you can, on how we can take this to the United States and make sure they're aware of how this feed ban will affect the animals of more than 30 months, following the opening of the border for those less than 30 months.

    Thank you, Mr. Chair.

    The Chair: That is the last question and answer.

    Mr. Bruce Saunders: Mr. Chair, along those lines, I think this is all about negotiation with the U.S.--what the terms are, what the conditions are, what they'll allow. But I think the point we're trying to make here is if we're making the discussion, why not bring onto the table the 1998 feed ban, which immediately means you've increased the number of animals that have the potential to go?

    In the dairy industry, all our animals are registered and tagged, so it would be easy to know the age of the animal. It's the same with beef, I think, to a degree, although not as great. That would increase the numbers. Also, it's not a rolling 30 months, so that nothing changes for three years; each year you'd have another crop of animals that would be allowed to be sent across the border.

    That was the reason I was putting that forward.

    The Chair: Do you have any final words, Mr. Bouchard?

    Mr. Réjean Bouchard (Assistant Director, Policy and Dairy Production, Dairy Farmers of Canada): No.

    The Chair: I want to thank you on behalf of the committee.

    This is an ongoing saga. This is not going to end this month or next month; it's ongoing. And I think you understand that we understand--while it's limited sometimes. We know the border that's closed is not the Canadian border. We are working with those parties. Everything that's been said here today has probably been said many times before, but we need to say it a few more times, and we will continue to say it.

    Thank you very much for presenting today.

    I would ask my committee members to remain for just a moment. We want to go in camera for just a few moments, and then we will go.

    I'd ask the witnesses to leave, and then we'll continue. We'll take a short intermission.

    [Proceedings continue in camera]