:
Ladies and gentlemen, we will begin our meeting.
We want to continue with the theme we've been on for much too long, but we have players we haven't heard from before, and a few we've heard from a number of times, and we want to hear from some of those this morning. We want to begin the meeting and then proceed to the questioning of our witnesses.
First on our list of witnesses this morning we have Brian O'Connor, executive director, Gencor Foods Inc. It's his first time here. We're looking forward to your presentation. We also have Mark Ishoy, general manger, Gencor Foods Inc.
We have Michel Dessureault, chairman, and Gib Drury, member of the board of directors of the Quebec beef producers' federation--my French isn't good enough to try it in French. We welcome you here this morning.
From the Canadian Cattlemen's Association, no stranger to this House, we have Stan Eby, a good friend and a resident of my riding, hence my keen interest in the beef industry, and he's a good friend of Larry's as well.
Brad Wildeman is not here, is he?
:
Thank you very much. It's a pleasure to be here.
I'm going to start with a little bit of what got us into the food business. We're a producer-owned organization. Then Mark Ishoy, our general manager, is going to talk more specifically about some of the important issues that relate to the industry and our place in it as we look forward.
I'm not sure if you all have the notes, but basically we're in the livestock genetics business. We're producer-owned and we represent about 6,500 beef and dairy producers in central, western, and northern Ontario. We're proud to say that we have a long history of excellence in service, reliable products, and also financial success as a producer-run group.
This is a little bit out of our knitting, the meat packing business, but when we look to our corporate objectives, which were set some years ago, there was a proviso to provide other services, products, and facilities to improve agricultural practices, products, and production. Basically, with the crisis that hit us with the discovery of the single animal with BSE, it caused us to really have a hard look at what we could do to try to make things better. In so doing, our board of directors and senior staff did a thorough job of researching the meat packing industry.
As you are aware, there was no cull cow processing capacity in Ontario at the time, so our challenge was even greater than in some other jurisdictions. In the past, Ontario had exported all the cull cows that it had to the United States or to the plant in Quebec. After some of that thorough market review, we felt it important that the province have a federally inspected abattoir that could process up to 1,500 culls per week.
We looked at a number of options, we spent a good deal of time looking at the business case for each of them, and basically at meetings last November and December we made the decision that we would get involved in the industry and we would work to develop a producer-owned and -directed plant.
It's important for me to say--and Mark is going to touch on it more in a minute--that it was absolutely essential to us that the policy of the federal government to suspend the supplemental imports was very consequential in us making the decision to go forward. If you think back to that November-December time period, there were lots of risks, lots of unknowns of what could or may happen or may not happen. I can tell you categorically that this was a very significant move on the government's part and remains so today. It helped our directors move forward.
We hired an experienced staff. Mark has led packing plants in the past and has been an executive member of the Canadian Meat Council. So we have a good staff that will manage us in this challenging business.
The only other thing I'd like to say to conclude before I turn it over to Mark is that the financial assistance we have received from both levels of government has been invaluable--the Ontario government through their mature animal abattoir fund, and the federal government, Agriculture and Agri-Food Canada, through the CanAdapt program. Both were important in helping us get started.
I'll turn it over to Mark.
I have three things I'm going to touch on today, one being the Canadian Food Inspection Agency, which we've dealt with a lot in the past few months as we got the plant up and running, because it was not a federal establishment when we started the process.
Second is our policy on supplementary quota, and I'd like to go back over some of the history to remind everybody why we need to keep it in place. I'd like to then touch a little bit on how regulations and policies in this country really need to track very closely to the U.S. To say they're the same is not accurate, but certainly close because of the trading that's gone on over the years.
I've worked with CFIA for a number of years and have found them to be an integral part of the success of our international trade efforts. They have been very helpful over the years in reaching out to other countries to show them what our policies are, what our hygiene specs are, and they have actually helped open markets for Canadian plants. I know the minister was on a tour about 10 days ago with one of my counterparts from the CMC executive, and they've had success in the far east. We are a halal-certified slaughter plant at the moment, and we are working quite hard to get back into the Indonesian market where some of our offals can go from the cattle. So we're working very hard with CFIA on that.
The approval to become a registered establishment number is a long and difficult process. I might liken it, to some degree, to getting a building permit from the city at times. All these things take longer than anybody really would want them to, and I think there are ways the system could improve. I think one of the things I would put forth is that when we're trying to get blueprint approval, the iterations often go back and forth, and it's blueprints and letters going back and forth between the region, and it also comes to Ottawa in the end for more discussion. From our perspective, that process could be speeded up if there was a way to sit down with all the parties to work towards a solution that would work for everybody.
I think everybody in the meat packing industry recognizes the importance of food safety, and we're all driving to that objective. So I think streamlining the process would be helpful. I think there are some initiatives underway at the moment to at least evaluate it, and we look forward to having input on that. When you're into a crisis like we were, and my mandate was to get the plant open as quickly as possible, quickly is never quickly enough, so we found that a bit of a challenge.
The other thing we point out as a comment is that it's really important that the standard within the CFIA is consistent across the country. I'm not suggesting it isn't, but I just want to reinforce the fact that it really is important to everybody in industry because it's a competitiveness issue.
I will now move on and talk a little about the supplementary quotas. I was on the TRQ committee back in 1997, I think it was. At that point in time Minister Goodale was the chair. There was a large amount of disconnect within the industry, I would say, at that point in time because the processors could get all their meat from offshore that they needed, the cattlemen could send cattle to the States, so the packer was left in the middle, and if he could sell his meat in the States at a competitive price or sell it at the equivalent of the U.S. market in Canada, then the business would proceed. But the Canadian packer became disadvantaged, and I would say we exported a lot of our slaughter industry out of this country south of the border because the packer here could not compete with all the cheap offshore meat that was coming into this country.
Market discovery is always a difficult and challenging topic for anybody to have discussions on. Anybody who's been around the industry for a while will understand the challenges of the market discovery.
As a packer, I'm fully supportive of our WTO commitments and have been for a long time, but as packers I don't think we're convinced that country-specific allocations, which were in fact negotiated sometime in the 1990s--I'm not a historian on it, but maybe country-specific allocations are not as friendly to everybody as they should be. I know Australia has the vast majority of the allocation at the moment, and that certainly doesn't make some processors happy.
But the actual number itself is an important number, because if we look at how much meat comes in after that, if it's discounted to what the Canadian market price is, and you can listen to my friends in the processing industry say, well, it's a different quality or it's a different.... I think over the years we've come to recognize that specifically in the grinding meats there is no difference in the quality. There are always packer-to-packer differences, the same as there are packer-to-packer differences in these countries the meat comes from. But basically a 90% visual lean boneless beef in Canada, produced in Canada, is the same. So they will go into the same production.
Some of the cuts have different functional uses in the marketplace, but at the end of the day different processing techniques will often make the equivalent product. So it's a matter of learning how to work with some of the over-30-month cuts as opposed to replacing them with offshore.
We're not opposed to meat coming in above the quota. We don't like it, but if the duty percentage is put at a high enough rate and people feel compelled to use it, then they can pay that amount of money if it's that important. What we have found in the past, and if we look south of the border, once the duties kick in, everybody basically buys U.S. meat. They don't worry about the ability to substitute at that point in time.
I can't stress enough that this industry is driven not by dollars but by pennies. There are millions of dollars of trade in this industry, but historical margins have been dealt with in pennies, and if you're uncompetitive by a couple of pennies in your selling price, you lose that business. So if the meat comes in somewhat discounted, as a packer we would lose that business to the offshore meat. So it's truly important that the TRQ is upheld.
The third point I want to make is that regulations and policies need to be similar to the States. There are things like SRMs--specified risk material--out there today. How that is dealt with in the rendering industry over time.... If our policy is significantly different from the policy in the U.S., it has every chance to disadvantage or advantage the Canadian packer. If it puts us at a disadvantage and the borders open again, it allows the cattle to go south because the Canadian packer can't pay as much money for those cattle. The cattle will be processed in a slightly different manner. If they can generate more revenue as a packer, it puts me behind.
If you look at the U.S. import policy, a similar amount comes into the U.S. Our policy is at about 76,000 tonnes, give or take a small amount, and the U.S. policy I think is slightly under 700,000 tonnes. So it fits into that. Their market is ten times, their population is ten times, etc. In the U.S., once they trigger that amount, any meat that comes into that country is tariffed at 30% or 32%, but it may be as high as 35%.
So if the processors down there in the processing industry, which is a step beyond the packer, want to use that imported meat, they build it into their cost structure at the beginning of the year. If somebody was going to buy 20 loads of imported meat and they knew at the end of the year they were going to buy a load or two, they would know that really the cost of that meat throughout the year, over their 20 loads...they should budget for 3% higher because at the end of the year they are going to pay a significant penalty for bringing in that meat.
That is the way it operates in the U.S. There have been years where that level has triggered...and then the import has stopped, meat goes into bond, and it's brought out in the following year for use at the price that it is.
What has happened over the years in Canada...I think two years ago about 135,000 or 140,000 tonnes were allowed into this country, which is 50,000 to 60,000 tonnes over our WTO commitment. That meat all came into this country discounted to what the Canadian meat price was. It hurt the Canadian packer and it drove people out of business over time. I can't stress the TRQ enough. That's where we need to be.
Thank you for your attention.
:
Mr. Chairman, members of the committee, it is with great pleasure that I bring you a message from 20,000 Quebec cattle producers.
Let me begin by saying that Quebec's producers appreciate the commitment by the new Canadian Minister of Agriculture and his government to redouble efforts to accelerate reopening of borders to Canadian beef and cattle.
They also hail the government's willingness to intervene to increase the country's slaughter capacity, and the series of measures planned to develop new export markets. However, Quebec's livestock producers are extremely disappointed by the transition measures announced to assist them.
Before discussing with you the problem of slaughter capacity in Quebec, I do not wish to miss this opportunity to explain why we are disappointed by the assistance announced, which in our opinion is inadequate and in no way suited to the needs of Quebec producers.
I need not remind you that in the new national strategy there is absolutely no direct assistance to compensate for plummeting cattle prices, nor is there any interest-free loan program, two crucial measures that were eagerly awaited by Quebec producers.
And yet, the need on the farm is desperate. In Quebec alone, we estimate that producers need over $141 million, but, according to the announced transition measures, Quebec is slated to receive only between $15 and 20 million, which represents less than 15% of the needs of its producers. At this point in time, nothing has been announced in Quebec.
For the past 17 months, the prices for different categories of cattle have in no way reflected the product's value. In Quebec, producers have so far, from May 2003 to October 2004, incurred losses in the order of $265 million. Even if we take into account the various forms of government assistance available, producers have lost $113 million.
Producers still have significant losses to absorb, as can be seen on the table provided, showing the prices for different product categories in October 2004. In Quebec, cull cows were selling for an average of 19¢ a pound, as opposed to 58¢ a pound, which is the price on the US reference market or the price they used to fetch. Slaughter steers are $1.29 a pound; male dairy calves are $1.41 a pound, compared to $2.61 a pound; female dairy calves are 64¢ a pound, compared to $4.68 a pound; and stockers are 99¢ a pound.
The Fédération would like to draw to your attention two elements in the strategy that in no way respond to the needs of Quebec cattle producers: the Cattle Set-Aside Program for stockers, set at $8.5 million, and slaughter steers, set at $5.8 million.
One gets the feeling that these programs were tailored for Canadian provinces, more specifically Alberta. The set-aside programs as they appear in the new strategy are not really applicable to Quebec, in particular because of our collectively managed programs.
For these two production sectors, the Fédération would like a preset provincial allocation and flexibility in the administration of the program, so that it can be managed collectively in Quebec within our existing production support programs.
A provincial allocation would thus also have to be provided for in the slaughter steer sector. Nothing provides for that in this most recent program.
As cor cull animals, a product category, that appears to have been forgotten in the last program, the assistance available is clearly inadequate to achieve its stated goals. Since Quebec has a significant number of cull cows and the crisis seems likely to drag on for a long time in this sector, the Minister's strategy must be revised.
For Quebec's producers, the solution lies in setting a Canadian floor price for cull cows. We believe that such a measure should also be implemented for slaughter steers. Because of the border closure, meat from culled cows is currently being sold in its entirety on the Canadian market. We thank the Canadian industry for purchasing this meat.
According to our analysis, setting a floor price for cull cows has become inevitable because, even taking into account the projected increases in slaughter capacity in Canada, it is plain that by 2007, even if there is a significant increase in slaughter capacity, there will still be more than 300,000 cull cows, non fed animals, that it will be impossible to slaughter because there will be no slaughterhouses for them.
Therefore, this surplus situation in the Canadian market, which is the issue, will persist well beyond 2007. This is a Canadian reality.
Until such time as a Canadian floor price is ordered, we call upon the federal government to extend, as a transition measure, the BSE3 program, with payment of $320 per cow, calculated on the basis of a realistic annual cull of 25% for the dairy sector and 12% for the beef sector. In our opinion, this program still represents the best way of rapidly restoring liquidity to dairy farms.
As for slaughter capacity in Canada, our reading of the current situation is that the BSE crisis spotlighted two major weaknesses that make our sector extremely vulnerable and are holding back its development. These are dependency on exports of livestock and beef, and concentration in the slaughter sector.
In Canada, the dependency on exporting is about 20% for slaughter steers and 40% for cull cows. So obviously there is a problem of slaughter under capacity. As for concentration in the slaughter sector, we need only recall that four major companies slaughter almost 80% of production.
This situation is worse in the cull cow sector, where two big companies, one being in Quebec, slaughter 90% of cull cows. The table on page 5 gives you some figures.
With regard to steers, 75% of Quebec steers are slaughtered outside the province, whereas 90% of cull cattle are slaughtered in Quebec. In terms of the need to increase slaughter capacity, it is clear that with a surplus of 300,000 cull cows in 2007, there is a pressing need in this area. For slaughter capacity to increase significantly, a number of new slaughter houses will have to be opened in Canada.
The Quebec Cattle Producers Federation feels that the amount allocated to support the various slaughter houses across the country, that is $66 million, is clearly insufficient, especially considering that the federal government's approach is to provide this assistance as a loan lost reserve. We do not think that this approach will provide the help that is needed and attract new people.
In order to provide for increased market competition and higher prices for producers, it is important not only to increase slaughter capacity, but also to seek new players in the marketplace, particularly producers' organizations that want to become involved in the slaughter sector, and provide them with financial support. The impact of new players in the marketplace will help to boost competition in the industry and re-establish relations so that they are closer to those in a structured and efficient market.
Producers' organizations can play a leadership role in this regard. I would like to take this opportunity to read to you an excerpt from the report of the Standing Committee on Agriculture and Agri-food:
...create the best possible environment for farmers that will enable them to move up the value chain and retain a larger share of the profits...
We feel that federal assistance to producers' organizations interested in investing new slaughter and processing plants is essential if these goals are to be reached.
We also feel that the five largest slaughter houses currently in the market, that is Lakeside, Cargill, XL Beef, Better Beef and Colbex, have absolutely no need for federal government funding. Your own committee has analyzed the situation. In my opinion, the financial situation of these companies shows that they do not require any assistance. However, the new projects will need help.
We are therefore asking the federal government to grant direct subsidies for new slaughter and processing plants, a much more effective action under the circumstances, and that the assistance be provided only to producers' organizations that decide to invest in a new slaughter and processing plant.
As for new slaughter houses in Quebec, while producers are selling their cattle at a loss, consumers have not, despite the low prices paid to producers, seen any significant drop in prices. Quebec producers want to use a collective approach to increase slaughter capacity. At their annual general meeting last year, they agreed on two types of contributions to assist in setting up slaughterhouses. A $20 contribution for cull cows was agreed on, as was a contribution of $10 for certain slaughter steers.
In conclusion, we feel the assistance available under the new strategy to increase slaughter capacity in Canada is clearly inadequate. Moreover, the form of the proposed assistance, loan loss reserves, is not suited to the circumstances. Assistance to producers who wish to invest in new slaughterhouses is essential. It must be available not only in the form of loan guarantees, but also as a direct subsidy.
Direct government support is essential for these new businesses to be able to confront the keen competition that faces the new players and for them to break even quickly. The government must never lose sight of the fact that we are in a crisis situation and that, in order to be effective, actions must be swift and carefully targetted. The government must therefore improve its strategy and reposition the Canadian livestock industry.
Until adequate measures are taken, it will be impossible to measure the extent of the disaster caused by the BSE crisis on cattle farms in Quebec and Canada, and consequently on the other industries both upstream and downstream.
Thank you, Mr. Chairman.
:
Thank you, Mr. Chairman. On behalf of the Canadian Cattlemen's Association, we appreciate the opportunity to address the committee again. We look forward to working with the new committee and all the new members on it.
It's been a few months since we've met. Our main objective is still to get the U.S. border open to live cattle. We've used every opportunity and every means available to try to make this happen. However, it seems to be caught in a regulatory rule-making process in the United States. It seems it's going nowhere until after the U.S. election. We've had comments from the U.S. that it will move after the election and we're poised to lobby on that basis.
I'd like to give you a quick review of where we see things from the point of view of the Canadian Cattlemen's Association. As has been stated, the cattle industry has been in a struggle for survival since May 20, 2003. Initial market paralysis caused marketing to cease and processing levels to drop by 60% in the first three weeks. In August 2003 we got boxed beef moving to the U.S. and Mexico from cattle under 30 months. We felt once we got that moving we'd see normalization of trade. Along came the BSE case in the U.S., and the R-CALF challenge in April set everything back, and we're all aware of that. It appears to be the cumbersome nature of the U.S. regulatory process--3,300 comments on the rule--and the additional court injunctions have caused a lot of delays and cynicism about how long the process will actually take.
The Canadian Cattlemen's Association developed a strategy to reposition the Canadian beef industry. This report was unanimously approved by our board of directors in August. On September 10 the federal minister, Andy Mitchell, announced a program to help us reposition the industry. It made some sizeable funds available to work through a number of initiatives.
Resumption in trade in live cattle in the U.S. is clearly the top priority. It would have the most immediate positive impact on both short-term capacity and price outlook. At the same time, increasing sustainable processing capacity in Canada is another top priority to address the possibility of a delayed border opening and to clearly reduce our dependence on live cattle exports in the years ahead.
In 2002, prior to the discovery of BSE, Canada exported approximately 1.6 million head of live cattle. Most exported were destined for slaughter in the U.S.; however, without the ability to get these cattle to the U.S., there's simply not enough processing capacity in Canada to meet the demands. In 2003 we were not only able to maintain consumer confidence but we actually increased that, and we certainly appreciate the loyalty of consumers in this country. This has been unprecedented. In addition, access to the U.S. and Mexico for beef from cattle under 30 months has resulted in sales of Canadian beef to these two countries rebounding and they are now near pre-BSE levels. The result of these two events has been that we have markets for all the beef that we're able to process.
This difference between demand for beef and supply of live cattle is causing the distressed price for our cattle producers. Because of this, CCA advocated the expansion of the processing capacity through the opening of new plants and the expansion of current processing facilities to be given a high priority in our overall plan. The federal government announced on September 10 a commitment to do this through a loan loss reserve program. We feel there are still some changes to be made to that. We understand there were changes made as late as late yesterday to that. I'm not aware of the details, but clearly our Minister of Agriculture wants to make the program work.
In addition to the funds being made available, the federal government has also committed funds to expedite inspection processes and further augment CFIA resources, a very important point in the Gencor presentation also. Even prior to the federal announcement, the processing sector was responding with plans to increase capacity. At the beginning of this month, for the first time since 1978, weekly slaughter at Canada's federally and provincially inspected packing plants exceeded 80,000 head, which is a dramatic increase from where we had been at the depths of the BSE level at about 25,000 to 28,000 head.
By the first half of 2005 capacity is expected to be approximately 86,000 head, increasing to 93,000 head by the end of 2005. That's on a weekly basis. By the second half of 2006, Canadian slaughter capacity is expected to be at 98,000 head per week, an increase of over 20% from current levels.
During this timeframe our domestic capacity will allow us to process the entire annual production and reduce previous carryover of cattle. Our processors and distributors are now fully confident that we can market all the beef from all classes of cattle that we need to process as we move ahead. The Beef Information Centre has taken an aggressive move on hiring an individual to work on the manufacturing meat issue and an overall program domestically and in the U.S. to promote Canadian beef sales.
However, this takes time, and therein lies the dilemma. For our current processing capacity levels we're forecasting a backup of cattle of approximately 480,000 head that would normally be processed. This consists of 166,000 head of fed cattle and 314,000 surplus cows and bulls.
To address some of the concerns, CCA, along with the federal minister, has put in place some set-aside programs in order to improve the stability for our producers until available capacity matches the number of animals being marketed. The strategy determined the need for a program to match animals being marketed with the capacity available.
Since August there has been ongoing discussion between industry, the federal government, and provincial governments in developing workable, effective programs. The success of these programs is ultimately determined by an improvement in the price of cattle to producers. The first component of fed cattle set-aside objectives is to slow the inventory of fed cattle from the 2003 crop for immediate slaughter, thereby strengthening prices paid by the packers, and to provide confidence in the feeding industry to continue placing animals on feedlots this fall.
We've now completed the second week of the fed cattle set-aside program. The program is being offered in Alberta, Saskatchewan, Manitoba, and Ontario. In the first week there were over 2,000 head enrolled. They've decided to discontinue making the numbers public, but we've definitely seen an increase in slaughtered cattle prices in the order of up to $3.75 a hundred in western Canada.
The second component is designed to slow the movement of the 2004 calves into the feedlots until the 2003 calves have been processed. We're trying to work with a 30-month deadline on things, so it's a matter of trying to match the right cattle to the right processing capacity.
In addition, it was important that we strengthen cashflow to the cow-calf sector and assure continued viability of this sector coming into the fall.
Feeder cattle programs are now being offered in B.C., Alberta, Saskatchewan, Manitoba, and Ontario. The set-aside program is to try to extract as much money as we can out of the marketplace.
BSE surveillance is another major topic. CFIA just told us this morning--and I have the numbers here--that they're on target to meet the numbers that were set out earlier this year. That's on a regional basis across Canada, so we're quite pleased that that portion is moving ahead successfully.
Differences within sectors of the industry and across the country create a challenge in delivering effective programs. I believe we've heard that rather clearly in the last few minutes. However, we believe it is of the utmost importance that flexibility is built into these programs. CCA is taking the responsibility and a leadership role in trying to develop set-aside programs that will maximize the returns from the marketplace. It's interesting that since the program was proposed, the market has improved. Getting the maximum amount from the marketplace also reduces the draw from the CAIS program.
It hasn't been easy for the last year and a half. There are a lot of critics. We even have a few Monday morning quarterbacks on how things should happen. However, we've had provincial producer association support in the actions and also the cooperation of the federal government. We've had good dialogue with them. Sometimes it's frustrating. Everybody's a bit frustrated with this, and we try to keep focused on how we're going to work through this effectively.
As I indicated, we have not left, and will not leave, any stone unturned. We're in constant contact with our counterparts in the U.S., and we've also been in constant contact with lending agencies to ensure that they are doing their part and not putting overdue stress on producers. We continue to work with other industry groups, including the Canadian Meat Council, Agriculture Canada, CFIA, and our American counterparts.
We believe we must have equivalency with the U.S. when it comes to dealing with rules, especially for the specified risk material. There will be a meeting this afternoon with U.S. people involved in that very issue.
CCA is also embarking on an aggressive advocacy campaign starting next week in Washington. This campaign is being coordinated with Alberta Beef Producers, the Canadian Meat Council, and Agriculture Canada, and it will include Canadian embassy officials in Washington.
In closing, I want to be clear that we, as cattle producers, cannot sit by and see our industry downgraded further. We must start seeing some movement soon in the rule-making process. If there's a lack of movement, CCA will have to seriously start looking at alternate actions and working with the federal government on potential NAFTA or WTO challenges.
Thank you, Mr. Chairman. I ask for questions.
:
Yes, just a couple of supplementary comments.
I think really what we tried to do in this program is to give something both to the feedlot operators, who are the ultimate purchasers of those animals, and secondly, to give a program to cow-calf producers to control the inventory.
There is no question that if we don't accomplish our goal of increased slaughter capacity and if the border doesn't open, we have an issue, but I think if you look at the numbers that are out there, you realize there is a significant amount of capacity already underway. The numbers show clearly that even in the absence of some of the new entrants who are still trying to build--although we're encouraging that, we think that's good for Canada and for our industry--quite frankly, with the existing capacity that's been announced and underway now we'll slaughter all the cattle that are produced in Canada, we think, by early January 2006.
I just came from a meeting. I've spoken with all these people who are in construction right now. All these projects are on stream as far as dates are concerned. So we're going to see some of that, and until we do that, we simply won't be able to get the value to producers that we want.
We understand that there's a disconnect, but I think we've given two programs that help those two significant sectors, and the reality is that the numbers are there. Prior to the announcement of the set-aside programs, feeder calves were trading for somewhere in the low 80-cent range. Cattle are a dollar a pound now. That was one of the objectives we stated: we'd like to see calves at a dollar. We've achieved that. We said we wanted to see finished cattle prices trading somewhere in the 80-cent range. That's where they are. Can we sustain it? I don't know.
:
Thank you, Mr. Chairman.
My question is for Mr. Dessureault. I would like you to tell us about cull cows, for instance those in the dairy sector, and slaughter steers. You want the federal government to establish a Canadian floor price for slaughter steers. What do you think that floor price should be? Do these types of floor prices exist in other countries, like the United States? What are the respective roles of the various levels of government, for instance the role of the Government of Quebec as opposed to that of the federal government?
Ottawa and Quebec are holding discussions to find solutions for Quebec's cattle producers. What do you think of these discussions, and what are your hopes and fears?
The president of the Syndicat des producteurs laitiers du Saguenay—Lac-Saint-Jean, Mr. Michel Potvin, has proposed that smaller slaughterhouses be built, as was the case in the 1960s. Would producers agree with this type of project, and do you think that the larger slaughterhouses may want to kill this idea?
Cull cow producers sold their stock in Canada and mainly to the United States before the mad cow crisis. Beef producers also provide thousands of heads of cattle. Class B slaughterhouses, like the one in Saint-Ambroise in the Saguenay—Lac-Saint-Jean area, cannot sell their meat as readily as class A slaughterhouses. There has not been a class A slaughterhouse in the Saguenay—Lac-Saint-Jean area since 1983. Producers cannot market their product anymore. The minister has talked about building new facilities. Do you believe that building new class A regional slaughterhouses would solve the problem which has been ongoing in the last 18 months? I would also like to know what you think of the idea of mobile slaughterhouses, their advantages and disadvantages.
Mr. Dessureault, can you estimate how much Alberta will receive under the 5th BSE strategy and how much Quebec will get?
According to your estimates, $100 million still have not been spent under the 4th BSE program, [Editor's Note: Inaudible] to the transitional support program for the industry, a federal program of $680 million. How do you think the federal government could spend this money and help solve the problem which has been ongoing in Quebec for the last 18 months?
:
I would like to address the previous question which dealt with CAIS, the Canadian Agricultural Income Stabilization Program. The program could be compared to a nice car which the federal government bought in 2002, but which is still sitting on four blocks in the driveway: there is no gas in the tank.
Just imagine, the Canadian Agricultural Income Stabilization Program was created on May 20, 2003 and no money has yet been paid out directly to producers. Seven new Canadian programs were created to help producers: BSE 1 to BSE 5 and all the other transition programs. It's just not possible that people still think that this program is the solution, for all of Canada, to a serious crisis like the one which we are currently experiencing in the beef industry. It just can't be. That's all I had to say on that matter.
As for the floor price, in the past, Canadian cull cow producers received a price which was in the same range as the American one. Today, the American price is about 60¢ a pound. There was a differential which more or less reflected the cost of transportation. As producers, we would like to access that market again, but we are aware of the fact that there is an embargo and that there are additional costs associated with slaughterhouses.
It's important to think of having a floor price. What should it be? Two-third of that price? I don't know. In Quebec, there is a law governing the selling of these products. Because there has been no decision by the Régie des marchés agricoles et alimentaires giving producers a degree of latitude to set the market price, it still has not been done. When the buyer arrives on the scene, he will realize that we have a regional market and not a Canadian one. However, if the authority came from the Canadian government, we would have a much better chance of setting the price, at least in Quebec and in Canada.
It would also help the Canadian government save money. This meat was bought by Quebec consumers over the last few months. But who profited? Not consumers, but probably—you can surely guess—the meat packers.
As for regional slaughterhouses, I believe that the position of the Union des producteurs agricoles and the Quebec Cattle Producers Federation is that the meat sold should be inspected. In that regard, it is difficult today for regional slaughterhouses to access the market, given that a huge distribution network already exists. Therefore, we prefer having large, slightly more supraregionale facilities which all producers can use, at a lesser cost, rather than having smaller slaughterhouses.
Mobile slaughterhouses are also referred to as emergency slaughterhouses. If a producer has an injured animal on his farm, the animal has to be put down and rendered. Sometimes the producer can make money for is own operation or he can use it for his own consumption. So there may be a certain degree of interest for this plan.
I won't come back on the 5th BSE program. It's been said often enough in Quebec that this most recent program is not appropriate for Canada as a whole. The program was designed with one province in mind. In fact, as we speak, there has been no announcement made in Quebec so far.
How can anyone think that a set-aside program will have any impact when everyone knows that at the international level, discussions have revolved around animals aged 20 months or 21 months to be slaughtered in 2006. There's a disconnect somewhere. But whatever the case may be, the fact remains that we just can't announce the set-aside program. That is why, following the implementation of BSE 3 and BSE 4, money was left over which had not found its way to producers. Perhaps the assessment was too broad for the amounts which had been set aside.
When I mentioned the price of $320 per cull cow, I had the 3rd BSE program in mind. If the market cannot offer a minimum price, the program should be extended for as long as the border remains closed. The money is there, it has been announced. Nearly $200 million have not been spent. So instead of announcing new measures, let's start by spending what is already there. This would greatly help Canadian beef producers.
:
Thank you, Mr. Chair, and thank you, gentlemen, for coming.
I do want to make a point, Mr. Chair, in relation to what Mr. Ritz and Mr. Anderson said. One of the things I'm finding in the country is that we're getting several different stories no matter what the federal government tries to do.
To David's point that the minister came back empty-handed from Japan, that's not correct. In fact, I would ask Stan or Brad to further their comment that while the minister was there, and because of the work of the CFIA prior to the minister being there, the Japanese have said they will treat this product as a North American product.
Is that not correct?
That would put Canada in, I think, an extremely advantageous position as compared to the U.S. because of our traceability and where we're at in terms of identification.
All I'm saying, Mr. Chair, is that I don't think it's helpful for the industry out there to be misinformed. I know how difficult it has been for the CCA to be supportive of the government on many of these measures. It's been difficult. But if we're going to move ahead, then we have to try to at least be factual in getting the information out to producers, and I don't believe Mr. Ritz and Mr. Anderson have been.
My question is to the CCA. What specifically did the Japanese say to the Government of Canada relative to North American product?
:
I too would like to thank the witnesses for appearing before the committee today.
Mr. Dessureault, I understand from what you said that you would like greater flexibility as regards to programs, but based on a fair share. I would like you to tell us in writing what you mean by greater flexibility, how you would like to see that implemented, and what you mean by a fair share and what we could do in that regard. I would like you to send these comments in writing to the committee or, just to me if the committee is not interested in receiving them.
If I understood correctly, you say in your presentation that assistance for slaughtering animals should be provided by the producers. I am far from being an expert on the crisis, but I want to learn as much as possible as quickly as possible. Since we have huge surpluses, animals must be slaughtered quickly. The figures we got last week from Agriculture Canada showed that we have reached 90% of the production figures before May 2003, and imports have dropped by 68%.
In order to meet the demand quickly, would it not be advisable to give more preference to existing slaughterhouses, without eliminating the option of having some of the slaughtering done in the community?
You also say you want the assistance to be in the form of subsidies, rather than loans. I am wondering how the Americans would react, because they are very touchy about subsidies. The situation with the hog section is a case in point. In my opinion, we should be cautious. We might consider opting for interest-free loans, which would be preferable, to avoid a boycott by the Americans.
:
First, with respect to assistance for existing slaughterhouses, I think they have demonstrated that increasing their slaughter capacity could compromise their supply. In my opinion, once producers own their own slaughterhouses, there will be a new solidarity which will motivate them to deliver their products to the slaughterhouse. That is how it works in Quebec. They remain in the market and ensure that it is properly supplied.
The Americans don't need this pretext to attack us. The crisis in the cattle industry has shown that the price of certain categories of product, including veal, was higher during an embargo. The Americans are preparing to levy anti-dumping duties on Canadian veal producers. We are preparing for that. It looks like the same thing could happen in the cattle sector.
In my opinion, regardless what steps we take to slaughter our animals, we can sell all of our cull cow meat on the Canadian market. Should we do what we did in the past, namely have a different, American-style production system for the Americans? As far as I am concerned, I think the crisis has taught us a good lesson. We must make distinctions within the market.
For example, the markets want us to be able to identify cattle from their birth until their death. We are doing that in Quebec, but at the moment, this information stops at the slaughterhouse, because the marketplace simply does not want to pay the cost involved. We're not talking here about benefiting from this practice, but simply about paying its cost. There is room in certain markets other than the United States for Canadian beef. It is possible that the product may be different, but producers from Quebec and Canada are prepared to go forward with this.
If we were to produce only for the Americans, we would ultimately be asking the type of questions you are asking here. We must therefore make some distinctions. With slaughterhouses, and with a good identification system, we could differentiate our products better.