Agriculture Committee on June 1st, 2006

[Carol Nelder-Corvari]

If you're talking about accusations of dumped or subsidized imports, the Dairy Farmers of Canada would take that complaint to the Canada Border Services Agency, with their documentation and allegations of dumping or subsidization. That's how the process would begin.

[The Chair, Conservative, Gerry Ritz]

Thank you, Mr. Boshcoff.

Mr. Bellavance, for five minutes, please.

[André Bellavance, Bloc, Richmond—Arthabaska, QC]

You said that the United States did not have tariff quotas, but we know that they define milk protein concentrates under tariff line 04.04 at a concentration of 90%.

Earlier on there was an issue we wanted to discuss, but we ran short of time. Canada could pass legislation—Ms. Nelder-Corvari said that the existing legislation would have to be amended—redefining tariff line 04.04 so that it comprises milk protein concentrates up to 90% concentration. This can be done. This is another option that other countries have used and Canada can use.

[Graham Barr]

It certainly is possible, and we've never said that it's not possible. All we're doing is pointing out the possible implications of doing it and explaining the process.

One of the possible implications is that it would be quite dismissive of the recent CITT ruling, which specifically said that a product with a concentration of 87.5% belonged in chapter 35, as opposed to chapter 4, and that was upheld by the Federal Court, as you know. Furthermore, taking such an action could very easily be challenged by our trading partners, for example New Zealand. Again, it is possible; we're merely pointing out what the implications could be of taking such action.

[André Bellavance, Bloc, Richmond—Arthabaska, QC]

It can be done, but it requires political will. The government could do it. It only has to go ahead and do it, and the change would apply.

[Graham Barr]

It certainly is possible to take that action. There are implications, which we've explained.

[Claude DeBellefeuille, Bloc, Beauharnois—Salaberry, QC]

Good morning.

In Quebec, we are very concerned about maintaining the supply management system, because some 50% of Canada's industrial milk comes from Quebec. In my riding, there are 90 milk producers. Recently, a dairy farm was closed for three reasons: weakening of the import system, quota reductions already in place and expected, and the excessive cost of replacing the reduced quotas.

We have spent a lot of time on discussing the use of section 28, but let's look at the issue differently. If we do nothing, if we do not use section 28 or if we do not amend the regulations, how do you see the medium-term future for dairy farmers in Quebec and Canada? I suppose you have done some analysis. The profits of processors are rising, and dairy farmers are finding themselves in an increasingly difficult situation. There is an imbalance there. What measures can the department take to improve the situation?

[Graham Barr]

Thank you for the question.

In a moment I'll turn it over to my colleague, Richard Tudor Price, to address your more specific question, but in general, yes, you are right. There are significant challenges facing the dairy industry, both dairy producers and dairy processors.

As you know, in the middle of April, Minister Strahl invited the leaders of both the dairy producer organization and the dairy processor organization to form a working group to talk about those issues, because it's pretty clear that although government has a role, the process needs to start with the producers and the processors working together. We're very pleased that that process has begun and are hopeful that it can lead to options and possible solutions for many of the issues you have raised.

To turn more specifically now to your question about any analysis that we've undertaken, I'll turn to my colleague, Richard, from Agriculture and Agri-Food Canada.

[Richard Tudor Price]

Thank you very much, Mr. Chairman.

As far as the honourable member's question with regard to the stability of the dairy industry is concerned, I think it's fair to say that since the end of the Uruguay Round, there has been growth in the industrial sector of the dairy industry. To some extent, that has rolled back in the last two years, but the dairy sector has been characterized by considerable stability. Obviously the concern is with anything that would undermine that stability, but I think the indicators we look at suggest that at the present time the situation in dairy is fairly stable.

There are some specific problems in terms of the excess quantities of skim milk powder that are available and that are putting a strain on the system, but I would say the overall picture is one of stability. At the same time, there is also consolidation going on in terms of the number of producers and processors, and that I think is reflected in the comments the member made.

[The Chair, Conservative, Gerry Ritz]

Following up on Madame's point—I'm sorry, your time has elapsed, but we'll get back to you again—what has the value of quota done during that same timeframe? Have you studied that?

[Richard Tudor Price]

It's not an indicator that we consider on a regular basis, but we do monitor those changes, and quota values since the end of the Uruguay Round have increased.

[The Chair, Conservative, Gerry Ritz]

Thank you.

Mr. Devolin, for five minutes.

[Barry Devolin, Conservative, Haliburton—Kawartha Lakes—Brock, ON]

Thanks.

I'd like to follow up on that same line of questioning.

My riding is in central east Ontario, the former Victoria County, now Kawartha Lakes. I was speaking yesterday with a dairy farmer who also sits on the Ontario board. He told me that in my riding there are about 70 dairy producers and that in the past month, four of them decided to pack it in. He had spoken to them, and it wasn't my sense that they had made a business decision in a stable market, but a decision under duress, and that people had lost hope and were leaving the industry.

So I go back to the question I asked really quickly at the end of the last round, that I feel as though we're hearing two very different stories, one from you here today that dairy is a relatively stable industry and that things are generally okay, other than for some manageable issues. Yet I hear an entirely different story when I'm in my riding and I talk to dairy farmers, including some who have been in the business for 30 or 40 years, who are saying that the combination of the long-term threat from the WTO talks and the impact of changes to MPCs and their growth, and where they see that going, is making them feel very pessimistic about the future.

So when we heard from the Dairy Farmers recently, their point was that:

Unrestricted protein imports could increase non-fat solids surpluses beyond 100 million kilograms. This is more than the system can bear and will lead to the collapse of the domestic price structure for non-fat solids, putting a very quick end to supply management in Canadian dairy production.

To me, that falls under the category of crying wolf. I guess often when you cry wolf there is no wolf there, but sometimes you cry wolf because there actually is a wolf there.

So my question is, how is it that the Dairy Farmers of Canada and the Dairy Farmers of Ontario are, in your opinion, so far off the mark in terms of their very real fears about the near future?

[Graham Barr]

First of all, I don't know that we've said anything that implies that we think they're so far off the mark. I'd said in response to Madam DeBellefeuille's question that there are difficult challenges facing the industry, just as there are difficult challenges facing the grains and oilseed industry or other industries within the agriculture sector.

Again, that's why we're very pleased to start a discussion among processors and producers--and have hopes in the dairy working group--to look at ways of coming up with solutions to those important issues.

Richard has something to add.

[Richard Tudor Price]

I think it's worth pointing out that I was talking about the current situation. I wasn't purporting to forecast out.

Also, as you would see from a riding perspective, there is an ongoing consolidation taking place in dairy. There are fewer dairy producers. They tend to be larger. They tend to have more productive animals. In fact, if you look at national statistics you'll see that the number of dairy farmers has fallen by about one-third since the end of the Uruguay Round. There has been a similar consolidation in the number of processing plants. Although the volumes are very similar overall, the output and the processing are taking place on fewer premises, with fewer people involved.

[Barry Devolin, Conservative, Haliburton—Kawartha Lakes—Brock, ON]

I'm not sure if this issue is appropriate to raise, as it's not about MPCs specifically, but many dairy farmers in my area for years also sold cattle, and exported cattle out of the country. That was another income stream for them. Of course, in the aftermath of BSE and the border closure, they've lost that secondary business they were engaged in. That's put on additional pressure.

So it's the combination of things--two, three, four things--that is causing some dairy farmers to say, “I'm not going to hang around until my equity is gone, I'm going to sell out now.”

I've only been here for two years, but my sense is that the degree of despair in the industry is significantly greater now than it was a couple of years ago. I just hope the officials recognize that and act on that basis.

[The Chair, Conservative, Gerry Ritz]

Any redirect on that?

Just to follow up on Mr. Devolin's question, how current is the data that you ladies and gentlemen are working with? This is 2006. Where are your numbers coming from, and what studies? How current is it?

[Richard Tudor Price]

This would be current data, Mr. Chair.

[The Chair, Conservative, Gerry Ritz]

Thank you.

Mr. Steckle, five minutes, please.

[Paul Steckle, Liberal, Huron—Bruce, ON]

Thank you very much for appearing here this morning. I want to direct my questioning basically to the CFIA at the outset.

As a committee, we have studied in the past year the whole issue of product and consistency--how we standardize product, what is allowed. We talked about Bill C-27, and within Bill C-27 found a reasoning argument to put forward a recommendation that there be truth in advertising.

I'm wondering about the resolve in terms of some of the problems farmers see when I hear Mr. Price talking about stability in the dairy industry. I think you would find some argument from the dairy sector as to whether there is real stability. As Mr. Devolin said this morning, there is less stability in the dairy industry today than there has been for a long time.

You're telling us we really can't look at either area of article 28. Perhaps we ought to look at what is happening, and at what we're not doing, here in Canada. If I understand correctly, the dairy regulations in both the Canada Agricultural Products Act, CAPA, and the Food and Drugs Act do not allow for the use of milk protein concentrates in the making of standardized dairy products. For many years now, the Canadian Food Inspection Agency, which is responsible for enforcement of the dairy regulations of both CAPA and FDA, is aware that the Canadian dairy processing industry is using milk protein concentrates in the fabrication of standardized dairy products. The agency has not taken steps to stop the illegal use of thousands of tonnes of milk protein concentrate in standardized cheeses and other dairy products.

Is it normal that a government enforcement agency fails to fulfill its mandate while knowingly allowing the use of an illegal ingredient in standardized dairy products?

[The Chair, Conservative, Gerry Ritz]

Mr. Orriss.

[Greg Orriss]

Thank you for the question.

You're correct. Dairy products are regulated in Canada under federal legislation, the Food and Drugs Act and regulations, and under the dairy product regulations. Where you're incorrect is that the dairy product regulations do allow the use of milk protein concentrates in the formulation of some standardized dairy products.

There is a conflict to some extent between the requirements in the food and drug regulations and those found in the dairy product regulations, but it is our understanding that one of the principles for the interpretation of statutes is that current regulations take precedence over earlier regulations. And since the dairy product regulations are more current with respect to compositional standards, CFIA has used those regulations allowing the use of milk protein concentrate.

[Paul Steckle, Liberal, Huron—Bruce, ON]

Do you think that's a fair direction for us to proceed? If we can't get what we want in one way, we can get it another way, but it seems that the processors and the further processors always seem to get their way. The farmer feels left out of it; he's always at the point where he's taking the wholesale price for his product, and he has no recourse to finding a market price that's satisfactory.

We talked earlier about standardization. The name “processed cheese” is standardized, yet this was one of the concerns we had when we brought in the dairy terms.

The consumers are expecting that certain products are made, in this case, with cheese. The current situation is allowing the use of a qualifier product with a standardized name to name the food, while the food is not produced according to a process that is in the regulations, therefore misleading the consumers.

The role of CFIA is to stop this kind of practice, and I guess this takes us back to what we tried to do last year. The CFIA, I don't think, was very complimentary of our view that we should be going forward with that. I'm not sure that all parties at the table were, but we did as a committee agree to move forward under Bill C-27.

Would you be in agreement to seeing Bill C-27 come back in the current form it left this committee a year ago?

[Greg Orriss]

Thank you for the question.

As we all know, Bill C-27 died on the order paper. CFIA was actually looking with considerable optimism towards Bill C-27 moving forward, in that the intent of Bill C-27 was to enhance, modernize, and consolidate the CFIA's enforcement and inspection authorities in the areas of food safety, animal health, plant protection, and food security.

As you know, the decision to reintroduce or table the legislation lies with our minister.

With respect to your question regarding the concerns around the proposed wording of the dairy terms provisions included in Bill C-27, yes, we did have some concerns.

The CFIA regulates all foods, including dairy products and milk products, and our responsibility, as I mentioned earlier, is to protect public health and to protect consumers from the perspective of deception or misleading labelling claims. To that end, we have moved forward on providing guidance through policy with respect to highlighted ingredients and flavours, in the absence of Bill C-27 moving forward. The highlighted ingredient policy was established after extensive consultation with stakeholders, including the Dairy Farmers of Canada, other industry associations, as well as consumer associations. And we did in fact complete consumer surveys, because this issue is a matter that involves a balanced review of perspectives from all stakeholders.

We have developed a clear policy for highlighted ingredients and flavours, which goes a long way to addressing some of the issues that were raised by the Dairy Farmers of Canada, in terms of the proposed wording of dairy terms that were included in the provisions under Bill C-27.

Thank you.

[The Chair, Conservative, Gerry Ritz]

Thank you, Mr. Orriss.

Madam DeBellefeuille, five minutes, please.