Agriculture Committee on Nov. 23rd, 2006

[Clare Schlegel]

May I ask our executive director, Martin, to answer that part of the question?

[Martin Rice, Executive Director, Canadian Pork Council]

That chart shows a trend where in both cases the export revenue and the total company revenue are based on 1990 being equal to 100.

We have seen a significant deterioration in our domestic market in the last four or five years, and quite frankly, we don't quite know why we've seen the significant.... Well, we do know that in 2003, when BSE broke out, there was a tremendous rallying of Canadian consumers behind the beef industry. But of course that tended to dissipate after the market was opened again for under 30-month-old beef cattle.

But for 2004-05, we frankly are a little shocked by how it has fallen off. That's what this really reflects, the decline in Canadian consumption of pork. There's been some growth—

[Wayne Easter, Liberal, Malpeque, PE]

Are you saying it's domestic more than it's the combination of the two?

[Martin Rice]

The line that's fallen off is almost totally due to the domestic market falling off, yes.

[Clare Schlegel]

Let me take a stab at the second question, which has to do with why the U.S. production is increasing while Canadian production is not. I think it's simple. One thing is that 10 yen buys more pork in the United States today than it buys in Canada. It's simply a math game, and when the buyer and seller are getting together, the buyer is choosing to buy over there.

The second component of it is that the American production system can afford to buy Canadian weaner pigs and then finish them. While the U.S. exports are growing to somewhere around 14% or 15% now, I think Canada is supplying somewhere in the neighbourhood of 8% or 9% of those pigs as young animals, which are then going to the U.S., being fed cheaper United States corn, and then being processed in U.S. plants and sold around the world. They need to say thank you to Canada for some of that success.

The underlying factors that are of concern to us are these competitiveness issues that we've been addressing throughout the supply chain, and we need a response.

The third item is that animal health input products are a big concern. Canada scored the lowest in the industrialized world. That's a concern. It's a balancing act between protecting the health of Canadians—the role of Health Canada, which is the approval agency, through the veterinary drugs directorate—and finding ways to expedite the process.

But when Australia can do it in less than 200 days, with a small market and fewer people—faster than we can.... And the health of Australians is important as well, as is the health of Americans.

So if you're interested in having someone in, our office could certainly help.

I think you should be aware that the livestock industry in Canada is now getting together as a livestock industry and is trying to speak with one voice to you as government, and to others. This is a critical area, along with animal health disease prevention—keeping the diseases out. That's absolutely critical, and we believe there are some adjustments that can be made.

We think it's time, in this world of specialization and capitalization, that industry priorities and government priorities need to be aligned. We're also addressing the minister and others with some suggestions in that area.

[The Chair, Conservative, Gerry Ritz]

Thank you, Mr. Easter.

Does anyone else have comments on those?

Okay, I'll move on to Mr. Bezan. Take five minutes, please.

[James Bezan, Conservative, Selkirk—Interlake, MB]

Thank you, Mr. Chair.

I want to thank all of you for coming in to make your presentations today.

Going back to this competition with the United States, what we're seeing happening right now is that because of the increase in the biofuels—and you guys mentioned this—with the very aggressive expansion in ethanol in the U.S., corn prices are starting to move up significantly.

Is that going to change the dynamics with the competition, and especially the ability of the U.S. hog farmer to buy up Canadian weaner pigs? I'm from Manitoba, and we're shipping thousands of weaners over the border every month.

[Clare Schlegel]

I can take a quick stab, and others may want to, too. The reality of the North American marketplace is that we're an integrated market. We happen to have a 49th parallel and a border, and that causes us problems periodically.

But in the grain trade and in the hog trade, frankly, something called arbitrage happens. If prices get out of line, product—grain—simply moves from one region to another. The amount of pricing differential that can happen is only equivalent to the cost to truck something from one area to another.

So where the operation is most efficient is where your prices are set across North America; then it's based, or arbitraged, off that. It's just as simple as that.

What we would expect to see with ethanol, and what you've seen, is that grain prices in the U.S. have moved up, and they're moving up in Canada. The problem for our grains and oilseeds farmers, and we state it very clearly, is that we need an efficient, effective, profitable grains and oilseeds industry in Canada for us to survive. The currency reality is affecting them as well as affecting us.

[James Bezan, Conservative, Selkirk—Interlake, MB]

There is the talk about restructuring. Being from Manitoba, I think the double shift in Brandon with Maple Leaf is welcome. I'm not sure what you're going to do in Winnipeg. You're going to end the slaughter, but there's still going to be value-added, I'm assuming, done out of the Winnipeg facility. And Olymel has announced a new plant in Winnipeg as well.

Concerning the recent regulatory announcements by the Manitoba provincial government in relation to a moratorium on hog operations until they have a full chance to do their environmental review, which could take a year or longer, is that going to have an impact on the restructuring announcements in the new plant in Winnipeg by Olymel and the restructuring of the Maple Leaf facilities?

[Paul Beauchamp]

That won't have any impact.

[Rory McAlpine]

No. Maple Leaf is proceeding with its plans. We've been an environmental leader and feel we can adapt.

If there's one area of concern, it is perhaps that the moratorium or the pause that has been announced is open ended. It doesn't seem to have a fixed end point, which is a source of uncertainty, but we will participate in the environmental review process that has been announced and continue with our own expansion plans.

[James Bezan, Conservative, Selkirk—Interlake, MB]

One of the final comments I have is on the circovirus. What type of management can you do on farms to control the disease--vaccination, herd health programs?

I support what you're saying, that we do need to do a lot more on research. I think that is a role that government can play. I've always heard that the CAIS program doesn't work for farmers, but it seemed to have been working for the hog industry, and now we're seeing that it's not working for the hog industry either. So what can we do, from the farm program standpoint, to be more effective in dealing with the overall industry, including the hog industry?

[Lise Grenier-Audet]

That can work for a specialized single-commodity hog farm. In the case of a multiple-commodity farm, that is to say one with two or more types of production, as in the case you referred to a little earlier, or in the case of a farm that only has family labour, it won't work.

What can we do on the farm to eradicate circovirus? A year ago in Quebec, a committee of veterinarians and representatives of the ministry of agriculture, fisheries and food was formed to gain a better understanding and to better manage this disease, even across Canada.

As I mentioned a little earlier, a pilot vaccine was developed last spring with the approval of the Canadian Food Inspection Agency, to vaccinate the herds. There has been a decline in the incidence of the disease. Furthermore, our internal governance, that is to say our way of working in our buildings, has changed. Currently, the disease that affected the first herds is subsiding, and everything's falling back into place. Since the disease did not hit all the herds at the same time — it broke out in some in 2004 — it's taken time for the veterinarians to really realize what caused the outbreak of the disease. We had to wait one year for procedures to be taken and put in place. Some things have been corrected, but it's taken nearly a year to achieve good results. The vaccine has achieved one part of the progress, and work methods the other. It's gradual because not everybody was affected at the same time. The vaccines aren't available for everyone. Even if a number of producers request the vaccine, some have to wait since veterinarians only have a limited number of doses.

[Clare Schlegel]

May I make one quick comment here?

[The Chair, Conservative, Gerry Ritz]

Sure.

[Clare Schlegel]

We support CAIS, but we do support a renovation to CAIS. I don't think you should hear, from our perspective, that CAIS is bad and we want it thrown out, but we do think there are some changes that can happen.

Secondly, circovirus is simply another indicator that the animal world, including people, is moving from the bacterial age to a viral age, and it's because of our high-health herds that we're exposed to things like that. It's calling for renewal in veterinary medicine, a new way of doing things, a quicker response vaccine, and so on. There's hope at the end of this tunnel, both in Quebec and in Ontario. There are tools now available to us that weren't before, and we want to say thank you to the CFIA for working with us to try to find those.

[The Chair, Conservative, Gerry Ritz]

Thank you.

We'll have Mr. Hubbard for five minutes, please.

[Charles Hubbard, Liberal, Miramichi, NB]

Thank you, Mr. Chair. I probably won't take the full five.

It's interesting to hear our problems today. I was watching a TV production not too long ago about the hog producers in Nova Scotia. They were meeting, I think, just recently, with their minister to see what their future might be.

Historically with hogs, economists have described it as a cobweb industry--a cobweb theory--in terms of how hogs are produced and what the industry looks like. Maybe it's already been answered. But in terms of that concept of getting bigger and bigger, we reach a point where the cobweb falls. Are we at an optimum level of production in this country in terms of what we can sustain in domestic and export production? Is the cobweb too big at the present time, or is it at a place where it can still be supported in the sun to be a viable industry?

[Clare Schlegel]

Who wants to wade their feet into this one? I'll get myself into trouble first.

There are opportunities for producers of all sizes. If you look around the world, the Danes export 90% of their production. Canada exports 50% or 60%, so we're getting up there. It's really dependent on our ability to compete--our regulatory framework and all those competitive factors that allow an industry to be successful--and then on the factor of the world markets. Heaven forbid that we would be hit with an animal disease outbreak. It's absolutely critical that we're proactive and do our work to prepare for that. In conjunction with government, we're working on that. Compared to five years ago, we're quite a ways along. There's opportunity to at least maintain and maybe even increase. But depending on what happens from a competitive perspective, we will go into decline.

[Charles Hubbard, Liberal, Miramichi, NB]

With respect to your concerns about disease, is it because of a narrow genetic base that you are worried, or is it simply across a broad spectrum of all genetics? Are there genetic factors that you're breeding too fine in terms of maybe what the poultry industry is doing with their concerns?

[Don Davidson]

I think one of the big areas of concern that Clare alluded to is foreign animal disease. That would be devastating for our industry. We're 60% export oriented, and basically, all your export markets would be cut off for an extended period of time. It would be England all over again. That was the disaster that Clare was talking about. The other part, about genetics and high herd health and hogs being more susceptible perhaps to new diseases, is something that I would suggest all countries are faced with.

[Charles Hubbard, Liberal, Miramichi, NB]

Mr. Chair, I have just a brief observation.

When you go to most restaurants in this country, after breakfast you have great difficulty buying anything that's pork related. Half the menu is poultry.

Have you ever looked at this in terms of how well the commercial restaurant and food groups in Canada are supporting the pork industry? I see a quick response to that.

[Lise Grenier-Audet]

For some years now in Quebec, there has been a promotional budget in which producers have invested in cooperation with the slaughtering structures. People were appointed to work on developing pork products for restaurants, hotels and even hospitals, and so on. Progress has been made there, and pork products are increasingly being served in the restaurant chains such as Saint-Hubert and Scores in Quebec.

The situation is improving. This is a long-term effort because this is a meat that is difficult to prepare. If it isn't properly prepared, it becomes tough and we can be penalized. But the processing plants have found ways to cook the meat better so that it is tender on the plate.

[The Chair, Conservative, Gerry Ritz]

Mr. Rice has a point on your last question, I think, Charlie.

[Martin Rice]

Only to underline some of what's already been said.

We still have an excellent situation here for producing pigs and pork in Canada. At the genetic end of things, we still have a measured advantage over the United States in terms of productivity of our sows; it's 10% to 20% above.

Where we have been challenged in the last few years is in keeping the pigs in Canada, because of huge crops that are heavily subsidized in the U.S. This has made it increasingly difficult for our grains industry to keep producing grain and to stay in an export grain position. But the ethanol thing is changing things. It will be very interesting to watch, because there are some areas of the United States that have already moved into a grain deficit position. The ethanol production needs the grain, so they're bringing grain into parts of South Dakota. If Iowa went that way, we would definitely see a levelling of that grain cost playing field.

I think what has happened here that's pushed us into such a critical situation is that the dollar has reversed itself. It has risen in three years to the level it took 15 years to go down to. That situation is quite incredible, on top of some of the problems the processors have borne. But certainly in the production end of things we do have a lot of things going for us, including animal health.