Agriculture Committee on May 17th, 2007

[Jacques Gourde, Conservative, Lotbinière—Chutes-de-la-Chaudière, QC]

It would seem the market share is increasing. Does that eat away at a market share which would naturally have increased and been positive for producers? Have producers been left with the same quota while others vie for an increased share of the market?

[Serge Lefebvre]

It is worrisome to see the number of eggs increase from year to year. Canadian egg producers are well equipped to meet Canadian needs. Consumer requirements are well known.However, if the situation continues to deteriorate, the quota share that was to be given back to Canadian producers may be cut, possibly resulting in costs to producers and Canadian consumers.

[Jacques Gourde, Conservative, Lotbinière—Chutes-de-la-Chaudière, QC]

Is the percentage of the Canadian quota allocated to Quebec producers calculated on a proportional basis? Do they enjoy any type of advantage?

[Serge Lefebvre]

When it comes to Quebec producers, it is based on a historical distribution. Currently, Quebec accounts for 17.6% of overall production in Canada. The Canadian Egg Marketing Agency uses a mechanism to allocate quotas among the provinces.

[Jacques Gourde, Conservative, Lotbinière—Chutes-de-la-Chaudière, QC]

Do you have a solution to propose to help us determine the point of origin of these eggs?

[Serge Lefebvre]

We would like our access to information requests to be heard, understood and granted. In 2006, the Canadian agency informed us that 100 egg import permits had been granted. However, it couldn't tell us anything more. One hundred import permits represent a very large quantity of eggs, because generally speaking, one shipment of eggs contains approximately 1,400 boxes each containing 15 dozen eggs.

[The Chair, Conservative, James Bezan]

Thank you very much.

Just as a clarification, are these eggs coming in as table eggs to be on the grocery store shelves, like at the Loblaws and Costcos of the world, or are they coming in to go into further processing?

[Serge Lefebvre]

Generally, eggs in the shell imported into Canada are for consumption purposes. So, they may end up in grocery stores like Costco, Loblaws, Provigo and Métro, but they may also be destined for processing. The problem for us is that these eggs, under the current system in Canada, have to be bought back, because they are referred to as an industrial product. Costs in the order of $5 million to $6 millions in 2006 have to be added to our operating costs in Canada. That is a significant figure.

[The Chair, Conservative, James Bezan]

Thank you very much.

Mr. Angus, glad to have you back at committee.

[Charlie Angus, NDP, Timmins—James Bay, ON]

With these egg imports that are coming in from the U.S., they can still compete with paying the over-quota tariff and coming into our markets. Is this low price that's in the U.S. for their eggs the low end of their cycle, or is this a result of a long-term distortion in price because of a subsidy?

[Laurent Souligny]

I think that what happened last year and the year before was the low American prices, and with the low American prices and the appreciation of the dollar, there was enough room there for them to import eggs, pay the over-quota tariff, and still make money on them.

[Charlie Angus, NDP, Timmins—James Bay, ON]

I guess then I have two questions for our egg producers.

Number one, if we're at the low end of a cycle, are you looking at the special agricultural safeguard as a short-term measure to deal with a blip in a cycle that might start to transform back to a normal cycle later on? That would be my first question.

My second question would be this. You have a sense of an orderly production schedule and you're going to have to create a certain amount of product and then you're going to have to suddenly compete with 10%, 15%, 20% coming in at a price that's very low. What distortion is that to your share of the market and what cost is impacted on your operations?

[Laurent Souligny]

To your first question, I think we need to make this SSG, special safeguard, operational. Last year we had our first experience with more eggs coming into Canada, and I don't think we have to wait until we get a crisis to make it operational, because I don't think you can make this SSG operational overnight. What we're asking is to make it operational so when they're needed, we can use them without waiting a year or two before it's operational.

As far as how it could affect the industry, say, if the prices of eggs had stayed the way they were in the U.S.--right now the price is a little higher--and the dollar the way it is going up today, it could've been bad for the egg industry. At the end of the day, whenever you have one of your pillars that is a challenge, all the other pillars suffer, because if there are thousands of dozens of eggs that come into Canada, it means that for us who operate under supply management, we would have to reduce our production.

I think that the tariffs are there to protect our system. That's what we're asking the government to do, to make those SSGs operational so that when they're needed, we can have that recourse there in a short period of time. This is what we're looking for.

[Charlie Angus, NDP, Timmins—James Bay, ON]

Thank you.

Just quickly, before my five minutes runs out, in terms of the article 28 challenge on the 13% rule, are these creative products coming in as finished products, or are they being brought in to be augmented in a processing system that our Canadian operations will say we'll take breasts from here, or wherever? Because if they're coming in as finished products, my question is has there been a loss of your historic market share? Has there been an increase in overall market penetration? Because these are new products and people want to get new products and they come from anywhere. What effect does it have on your actual operations? Are you losing numbers because of it?

[Urs Kressibucher]

Let me segregate that into two parts. There are the imports of finished products coming in from the States, mostly, at this point. They're coming in as finished non-ICL products. There's also a large base of Canadian manufacturers of non-ICL products.

Because these Canadian manufacturers conform to a 13% rule, which is a ludicrous part of the aspect of this argument, they're entitled to receive special supplementary imports to manufacture those products, regardless of how much competition exists. They may have no competition in the Canadian marketplace for that product, but they're still entitled to the special supplementaries based on a 13% rule. So that's the nuance we have.

In order to supply those manufacturers with special supplementaries, we have to increase our commitment. Our commitment to the TRQ has gone beyond 7.5% up to 8.4%. I think Preston Manning used to say “the root cause”--the root cause of the problem here is the 13% rule. In order to solve this problem, we have to address the 13% rule.

[Charlie Angus, NDP, Timmins—James Bay, ON]

Thank you.

[The Chair, Conservative, James Bezan]

Thank you.

Mr. Steckle.

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

Very quickly, I have a lot of questions, and I think most of us are going to probably go away with more questions than answers today. And I'm not suggesting you can't answer the questions, but I guess one of the questions would be that you seem to know that there's product, whether it be chicken processed product in a finished form or otherwise, or eggs coming in here. You know they're coming in here. You don't know where they're coming in, who's bringing them in, but how do you know how much is coming in? You seem to know that it's gone from 7.8% or something to 8.4%, or wherever it's gone. How do you know that?

[Serge Lefebvre]

The data we have comes from Agriculture and Agri-Food Canada. Two or three months after the products are imported, the data is forwarded to us, but only the data on actual quantities imported. We know how many eggs come into the country, just as we know about all of the other products entering Canada, but we do not receive any information whatsoever on the companies importing these eggs.

We know, on the one hand, how many eggs enter the country under the Free Trade Agreement— in other words 5% of the total— and, on the other hand, the number entering under the tariffs. If someone was willing to tell us, we could also know how many eggs are shipped as a result of additional permits.

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

Are these the ones who traditionally hold the import permits, or are these other people? You can't identify? Even with freedom of information, that information is not available to you, as an organization, who have given great credence to your industry in terms of managing your industry? You can't know that?

The government has, in their agreement in a round of 10 to 12 years ago, agreed to the 13% rule. Is that a reciprocal agreement that we have with the Americans, or does this apply to Canadians only?

[The Chair, Conservative, James Bezan]

Urs.

[Urs Kressibucher]

It applies to Canadian manufacturers.

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

Canadian manufacturers only.

[Urs Kressibucher]

The 13% rule is a Canadian rule.

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

Are you hopeful at all that you could see the diminishing of 87% of product down to 20%? Are you in any way hopeful that it might happen?