Evidence of meeting #41 for Agriculture and Agri-Food in the 41st Parliament, 1st Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was that's.

A recording is available from Parliament.

On the agenda

MPs speaking

Also speaking

  • Rory McAlpine  Vice-President, Government and Industry Relations, Maple Leaf Foods Inc.
  • Brian A. Read  Vice-President, Government and Industry Relations, XL Foods Inc.

3:40 p.m.

Conservative

The Chair Larry Miller

We're in session.

Mr. McAlpine, Mr. Read, we talked briefly before. We just had some business we had to deal with, so thanks for being patient.

With no further ado, we'll turn it over to you, Mr. McAlpine, for 10 minutes or fewer, please.

3:40 p.m.

Rory McAlpine Vice-President, Government and Industry Relations, Maple Leaf Foods Inc.

Thank you, Mr. Chairman, for this opportunity to contribute to your study of the food supply chain in Canada. I'm pleased to offer a perspective from Maple Leaf Foods, particularly as it relates to the pork sector.

In November 2006 I appeared before your committee to talk about challenges facing the Canadian pork industry and identified six big concerns: animal disease pressure, particularly PRRS; declining relative productivity in efficiency, particularly managing the higher feed and energy costs; insufficient scale of Canadian processing plants; the competitive threat of pork industries in emerging countries; international market access barriers and trade risks such as country-of-origin labelling in the United States; and finally, and most of all, adjusting to a strong Canadian dollar.

Looking back five and a half years later, it's hard to avoid the conclusion that these six issues have shaken the Canadian industry to its core, but in fact there were at least three more challenges that no one anticipated in 2006: the financial crisis and global recession of 2007-09; the 2008 listeriosis tragedy, which was linked to our company's products; and finally, the so-called swine flu outbreak of 2009. In the last couple of years I could also mention growing health, animal welfare, and environmental concerns that have been linked to our industry's products and continuing evidence of declining per capita consumption of pork in Canada.

These events, of course, caused multi-year losses for producers, the exit of hundreds of experienced producers from the industry, record debt levels, processors facing overcapacity and margin pressure, loss of domestic and international market share, and millions of dollars spent on government support programs.

For Maple Leaf Foods, a radical transformation of our business model to meet these challenges had begun when I spoke to you in 2006. The imperative to complete it has only grown. Between 2010 and 2014 we'll be spending $560 million in strategic capital across our protein and bakery operations to reduce costs, boost productivity, and drive market value. We're doing this largely on Canadian soil, securing Canadian jobs, and helping to ensure the Canadian pork industry and our value-chain partners can again profit and grow as market conditions improve.

Our industry must now think and act differently since the favourable cost structure we enjoyed in the 1990s and the early 2000s is unlikely to return. The product quality, pricing, and reputational advantages we long enjoyed in both domestic and international markets can no longer be taken as given. We have to embrace product and process innovation, investments in scale, operational efficiencies, food safety leadership, and market development with purposeful strategies and coordinated efforts.

This brings me to the important question of how governments can help, bearing in mind that despite herd consolidation, the Canadian pork industry still slaughtered over 21 million animals last year, generated $5.1 billion in sales, and set a new export record of $3.2 billion.

Let me again go back to 2006 when I presented the following five recommendations, and if you'll allow me, I'll just comment briefly on the progress, the shortcomings, and new priorities to be considered in each area.

The first recommendation I gave then was to move forward on smart regulations and improve federal-provincial coordination. I can say progress here has been very positive. In the aftermath of the listeriosis crisis and the report of Sheila Weatherill, a great deal of positive changes occurred in food safety policy, programs, resources, regulatory approvals, enforcement, and governance.

We particularly commend the government on the recently tabled and long-overdue amendments to the Food and Drugs Act to speed up regulatory approvals, and also the anticipated consolidation and strengthening of food safety and inspection legislation under CFIA. Those were the CFIA initiatives on regulatory and inspection modernization, enhancements to import licensing and inspection, some very good changes recently proposed to the meat inspection regulations, and an ambitious agenda under the border action plan between Canada and the U.S.

We could still do much better on federal-provincial coordination in food safety, animal health, environmental standards, and other areas, but we do now have a national farmed animal health and welfare strategy, and I see hope for a similar food safety strategy based on efforts begun earlier this year.

The second recommendation I delivered then was to enhance trade through bilateral agreements and better infrastructure. While we wait to see deals concluded, the scope and ambition of the government's current bilateral trade agenda and the services of the Market Access Secretariat also deserve praise.

In addition to the above-mentioned commitment to Canada-U.S. regulatory cooperation, free trade deals with high-value markets like the EU and Japan would bring enormous opportunity to the Canadian agrifood sector. Getting into the trans-Pacific partnership is also extremely important, especially if Japan is admitted.

I must, however, mention specifically the need to conclude an agreement with South Korea. As just one company, we had $75 million in pork exports to Korea last year, and these are in immediate jeopardy because we now face a tariff disadvantage relative to our U.S., European, and Chilean competitors. Total Canadian agrifood exports to Korea were over $1 billion last year, and it's all at risk.

The third recommendation, five and a half years ago, was to improve labour market flexibility and foreign worker recruitment. In the past few years, we—our workforce, our union partners, and the communities in which we operate—have enjoyed considerable benefit from the temporary foreign worker program and the provincial nominee programs. Since we commenced recruitment of foreign nationals in 2002, we've employed 2,194 skilled or semi-skilled workers and 154 skilled workers, with a retention rate of about 60%.

Many aspects of program administration by the federal departments and coordination with the provincial departments of labour and immigration have improved. Efforts to accelerate labour market opinions and restore two-year approvals are appreciated. However, two years is still too short, especially given the new and higher English language threshold that has been established to gain permanent residency. This new threshold has already compromised our recruitment of lower-skilled workers and threatens the success of the program in communities such as Brandon, Manitoba.

Also on the labour front, I do again have to point to fragmentation across the provinces when it comes to employment standards, pension regulations, and so on, and the frequently threatened labour disruptions to rail and port services. Speaking about rail, though, we do welcome the government's response to the rail service review and look forward to the promised legislation.

The fourth recommendation was that we support more science and innovation in animal disease prevention in Canada. Here, our assessment is somewhat mixed.

We appreciate federal funding for science and innovation under Growing Forward, including the swine science cluster, the Swine Health Board, and other bodies, but we see an erosion of publicly funded agrifood research in Canada, an underfunding of meat and livestock compared to the crop sector, and unfortunate changes that were made to the SR and ED program in Budget 2012. We certainly hope support for science will be strengthened under Growing Forward 2 and that we maintain the continuity of the clusters.

I would also remind the committee that the $23 billion Canadian livestock, poultry, and meat industry faces the constant threat of a major foreign animal disease outbreak. We've made progress in Canada in terms of improved traceability, on-farm biosecurity, east-west disease zoning, and coordination of surveillance and laboratory testing, but we still lack a comprehensive national foreign animal disease response and recovery strategy.

In terms of animal welfare, we're finally updating the national codes of practice for animal care, but we still have a fragmented, outdated approach to animal welfare and standards across the country.

Finally, the fifth recommendation was for stable and effective farm support programming. Well, the Growing Forward framework, which began in 2008, introduced the suite of cost-shared programs that we know of today. In fact, if you check, there are 187 Growing Forward programs on the agriculture website—a lot of programs.

We've had ad hoc programs to help the hog sector downsize and adjust to harsh market conditions, various AgriFlexibility programs dedicated to animal slaughter, traceability, and food processing innovation, and new provincial programs, such as the risk management program in Ontario.

As a major pork processor, Maple Leaf values national, whole-farm programs that provide income stability and investor confidence in hog production. We do not welcome commodity-specific provincial programs that expose the industry to trade risk and create distortions in interprovincial trade and investment.

In Growing Forward 2, we hope that strong commodity prices will allow a rebalancing in favour of more support for science innovation, food safety, animal health, international trade, and environmental protection. We particularly believe that a program should be developed to help offset the capital cost of converting sow barns from gestation stalls to open housing—and I hope you ask me why I think this is important and how it could be done.

In summary, recent years have brought adversity to Maple Leaf Foods, especially in its pork business, but we've weathered the storm and accomplished much on our path to becoming a globally admired meat, meals, and bakery company. With the help of government policy supporting a strong business climate, our future in Canada and globally is promising.

I look forward to your questions.

Thank you.

3:50 p.m.

Conservative

The Chair Larry Miller

Thanks very much, Rory.

Mr. Read, you have 10 minutes.

3:50 p.m.

Brian A. Read Vice-President, Government and Industry Relations, XL Foods Inc.

Thank you.

Larry, I'd like to thank you as the chair, and the agriculture committee, for allowing me to speak to you. I always find this a humbling experience. I appreciate your concern. I sincerely believe that's why we're here.

There's another thing I have to mention. Last week we had an unfortunate event where we had to bury a long-time soldier of the meat and livestock industry in Canada. He was a great 4-H member and supporter. Larry Campbell left us, and we'd like to mention that. We wish his family all the best in the future.

3:50 p.m.

Conservative

The Chair Larry Miller

Thank you for mentioning that, Brian, I wasn't aware of that.

3:50 p.m.

Vice-President, Government and Industry Relations, XL Foods Inc.

Brian A. Read

We just felt it was the right place to do it. Thank you, Mr. Chair, for that privilege.

The other thing we would like to start out with is congratulations to the Minister of Agriculture for all the money he's spent travelling the world, being away from his family, to assist us with market access. We'd like that on the record. We would also like to thank Fred Gorrel and his secretariat team on trade. He now has horses under him, with a bunch of talent that the Canadian system does have. Market access is important.

With respect to imports and exports, the beef industry tracks that. XL Foods tracks that very well. We have major concerns. We are now no longer a net exporter to the United States. We are a net importer from the United States. It happened last year, for the first time in my short meat career. It seems as if American beef coming into Canada is going to do even better this year.

We would also like to thank the efforts of CFIA. We see a very transparent working relationship with them that has developed over the last 10 years in the beef industry, since BSE. We have confidence in each other. We believe that we are a world leader, and we support them in their initiatives.

We are concerned about some fuzzy words currently being used. One is “validation”, which of course is “outcome-based”. They kind of make the industry a little bit nervous. We'll work towards getting the framework around those phrases, so that we have a better understanding and these plants can continue to operate efficiently and protect our consumers.

On labelling, we have some concerns in the beef sector about labelling, such as the “natural” claim in Canada versus the United States. You can walk into a Walmart and buy “natural” ground beef. We are assured that the product does not enter Canada, but we know the livestock does leave Canada to fill the needs of those labels.

On the U.S. dropping the ethanol subsidization, we kind of see that working both ways. We feel it will help the feed grain situation in North America over the next three to five years. If corn did hit $10 a bushel, maybe chicken breasts would be equivalent to strip loin, so it might not be too bad for the protein sector.

That's tongue in cheek. That could be misled by Rory. Sorry Rory.

On traceability, we have traceability in livestock, and we're working on making that more efficient, as Rory alluded to. We understand that this cannot be government supported forever. We're not sure why not. But we have to make this efficient, and the current system is not. We are looking at using a bill of lading. Zoning is critical. There are probably better ways of doing it through a more efficient bill of lading and what they call premises ID.

In the beef sector, we're implementing the beef information exchange system, the BIXS. We're interested to see what the uptake from the producers is going to be. It will be there for them to use. I think we are putting the electronics in place as we speak. That will give them the yield and carcass information they've been looking for. We look forward to that uptake as well.

The SRM road map is critical. This is coming to the support of the beef round table, which does wonderful work. It has since 2003, and we thank the government for implementing these round tables. We find that this has allowed the further processors and the processors of beef and veal in this country to understand each other's businesses a little better so that they know that we're not always ripping them off. We try to buy the livestock as cheaply as possible, and we try to sell the meat for the most money we can get for it. That's business. We try to stay in business to make money.

The SRM, though, is a little disappointing. The round table supported it 100%. It was supported by the beef round table, which is a national, federal organization. And it was deemed not necessary. That is in the packing industry's face every morning when we go to buy over-30-month livestock in this country. We look forward to working with CFIA to get a road map to get us out of this box we're in as soon as possible.

I look forward to questions from there.

We have a beef infrastructure in this country that is struggling. It has rationalized itself. There may be room for more. I don't want to mention anything, but there may be room for more infrastructure and rationalization in the beef packing industry. Maybe it's okay. Maybe we will just slaughter them in the United States. That might be all right. Time will tell. But we are going to do everything in our power, because at XL, we have a lot of investment in this country, to maintain our plants in this country.

So we ask you to keep us as efficient and as effective as possible. That would be on the regulatory side. That's where the SRM policy fits in.

Food safety is of the utmost concern to all people in the meat industry. We should understand that. At no point will we take a risk with food safety. The customer is of the utmost importance to us, because that's who does keep us in business.

On “product of Canada”, we've fixed the livestock side of things, but if you did want to marshal a load for China, for example, we would have to segregate possibly 10 steers out of an operation that's doing 4,200 a day. You'd sooner cut them down. The cost is horrendous. So we just need to find our way through that. That's system recognition when we talk to foreign countries, because we can sign a deal, but if it doesn't accompany what we're doing and we have to go through different measures, it adds costs—and I believe that's for all protein in this country.

Because Rory did mention the FTA with Korea, I don't want to spend any time on it. I think we all understand that.

We look forward to a possible strong FTA with Japan.

I'll leave it there, Mr. Chair. I'm sure there aren't many questions. I think I answered them all the way through.

Thank you.

3:55 p.m.

Conservative

The Chair Larry Miller

Thanks very much, Brian.

Ms. Raynault.

3:55 p.m.

NDP

Francine Raynault Joliette, QC

Thank you, Mr. Chair.

Thank you for accepting our invitation.

I have seen some documents where I read that 40% of cattle, calves, cows and so on, is in Alberta. Does such a concentration of animals in a single province not present risks? Could a disease break out and devastate the herds, for example?

4 p.m.

Conservative

The Chair Larry Miller

Mr. Read, are you okay to answer?

4 p.m.

Vice-President, Government and Industry Relations, XL Foods Inc.

Brian A. Read

I understand the question.

I'm sorry, but I didn't know if you had finished asking.... Is that the question?

4 p.m.

NDP

Francine Raynault Joliette, QC

Yes.

4 p.m.

Vice-President, Government and Industry Relations, XL Foods Inc.

Brian A. Read

In the fat cattle, it's probably closer to 70% of the livestock that lives in Alberta. It just happens to be where the land is.

I don't know how you put livestock on property in eastern Canada, where an acre is selling for $10,000. I'm not sure how you would feed cattle on that property.

4 p.m.

NDP

Francine Raynault Joliette, QC

I was asking the question just from the standpoint of food safety.

We also know that 974,000 hogs have been sent to packing plants in the United States. Do the Americans keep that pork or do they send it back to us when it is packed? When you buy a piece of pork, you really have no idea whether the meat is Canadian or American, or even Canadian meat that has become American.

4 p.m.

Vice-President, Government and Industry Relations, Maple Leaf Foods Inc.

Rory McAlpine

Well, certainly, Canada imports a large volume of pork, an increasing volume of pork, from the United States. At the same time, we have traditionally exported a large volume of feeder pigs and weanlings for feeding that in turn could be processed and become pork that then is shipped into Canada—that's for sure.

What has occurred in the recent past is that mandatory country-of-origin labelling in the United States has reduced the export of live hogs to the United States. So there are fewer live animals, but of course we are importing an increasing volume of pork. For imports, the one issue that concerns us on this is actually frequent cases of non-compliance on labelling for both imported beef and imported pork at retail in Canada. That's just one point I wanted to mention.

4 p.m.

NDP

Francine Raynault Joliette, QC

The Organic Trade Association has indicated that it is difficult to link in with supply chains. What is preventing the creation of those links with supply chains for organic red meat? Could the government do anything to help in this area?