Agriculture Committee on May 14th, 2012

[Ben Lobb, Conservative, Huron—Bruce, ON]

Sorry, you're saying science has proven this, or you're hoping science leads in this direction?

[Rory McAlpine]

I'm not saying either. I'm saying whatever route we take needs to be based on science, and there are many different views about the scientific merits of different housing systems. You have to understand the cycle of a sow. There are several stages of production in sows.

[Ben Lobb, Conservative, Huron—Bruce, ON]

Why would Maple Leaf Foods, which is a large Canadian corporation, make a commitment to go without sow pens in 2017, to eliminate this practice without science clearly indicating one way or the other? Is this strictly to bow to the activists?

[Rory McAlpine]

No, there is science, and we're looking at it. We have some current science that would argue there is a benefit. In other cases, in other studies, it has been somewhat unclear. Again, there are multiple systems, and we are working with the University of Manitoba to make sure that as we convert we're moving to the systems that will be in the best interests.

[Ben Lobb, Conservative, Huron—Bruce, ON]

I'm from Ontario, Huron County, and Huron is a very large producer of pork, as well as Perth, which is the county east of where I live. Would you say this initiative is going to put a terrible strain on the finances of pork producers in Ontario, and quite frankly, from coast to coast? Many producers look at this with great skepticism, that you're making a commitment not based on science. When the pork industry is just getting off its back to go to this, it looks to me as if it's a corporation trying to consolidate and get rid of the small- to medium-sized producers.

Am I way off base here? It seems that is exactly what's taking place here.

[Rory McAlpine]

The move that Maple Leaf Foods made in announcing this in 2007, our commitment over 10 years to get to that position, was very much driven by all our U.S. competitors. Smithfield Foods came out of the gate first, but this is all driven by what's happening at the consumer and the retailer level.

If you look now at Wendy's, McDonald's, Chipotle, Compass Group, they're all announcing they won't procure from any other system.

[Ben Lobb, Conservative, Huron—Bruce, ON]

That's fair enough. I know the debt-to-equity levels of the pork producers in Huron, Perth, Bruce—you can go up and down—are in precarious situations even today, even two years after the downturn. Who's going to pay for that? Obviously, the government isn't going to pay for something that isn't scientifically proven, that's driven by retailers.

[Rory McAlpine]

There are two things. The first point to note on the issue of science...I don't want to say there is not every good reason to be moving in this direction from a scientific animal welfare point of view. The other key issue is that the current code of practice for care of pigs in Canada is about to be released in its updated version, and it will undoubtedly set a new goal for conversion to open housing systems in Canada. The industry is right at the table developing those new requirements and standards and outcomes over time.

The second point is exactly why I said I believe there needs to be a program. This is a huge cost, particularly for smaller producers, and there is a very logical public policy reason why some government assistance to get us there would be very helpful and move it to a point where we can make it almost a competitive advantage for the Canadian industry.

[The Chair, Conservative, Larry Miller]

Thank you very much.

Mr. Allen, you have five minutes.

[Malcolm Allen, NDP, Welland, ON]

Thank you, Mr. Chair.

Thank you both for being here.

Rory and Ben, you've just gone through this whole issue about animal welfare.

Brian, I think you said earlier that the push is coming from consumers about what they buy and what they don't buy. Based on that, it seems that this integrated chain we have—value chain or whatever—is a hodgepodge of who wants what.

Rory just listed a whole crew of big buyers—McDonald's, Chipotle—that are not only asking for certain types of meat, but saying they want it raised a certain way. We've heard this from others. This isn't new. If that indeed is the case, should we be looking at an integrated system that says, “Here's a standard”?

My friends across the way and farmers in general may not like that the bar is pretty high when it comes to animal welfare, in the sense that it's different and expensive. I'm not debating the issue of the science, the non-science, and all the rest of it. At the end of the day, if you can't sell them because of the way you raised them, they're of no value to you, let alone the value you'd want to get out of them.

Where should we be in this policy piece? Are you fine with a system that's supposedly integrated but now becomes this mishmash of who wants what from where and why? Where would you prefer to see this go?

[Rory McAlpine]

Well, it's a complicated issue. The consumer market becomes increasingly fragmented. A typical grocery store in Canada today has 50,000 food items. We talked about organic. We talked about all these channels. I believe market forces will continually drive us in new directions on this.

At the same time, our challenge as a country is that we're facing cost pressures. With a dollar at par, our challenge in some of these commodity areas is to compete with insufficient scale, insufficient technology, higher labour costs, and so on.

On the point Brian is making about growing imports and growing risks to the infrastructure of our industry in Canada, this is absolutely real. Maple Leaf competes in some major commodity areas. The only path to success in this has been to scale up and invest over half a billion dollars over four years. I don't think that needs to crowd out other opportunities, and there's going to be lots of space for small and medium-sized players, but rationalization is bound to occur. More imports are bound to occur. It's a tough business out there.

There's no simple answer. I don't believe we should be mandating an outcome here. I believe a national food strategy makes some sense, so we can have a proper dialogue and understand where resources need to be spent. But to think we're going to somehow design a master plan for food production and supply chains in Canada seems a bit extreme to me.

[Malcolm Allen, NDP, Welland, ON]

I wasn't so much talking about the supply chain, but when it comes to policy around this sense of animal welfare, do we set a bar that everyone kind of accepts? Otherwise, at the moment the bars are like this. For certain groups you want to supply, the bar is here. For other groups that are looking for supply from you, the bar might be there. So you end up having double standards.

Let me go to Brian. There's a chart in some of the documents we have that shows in the red meat sector, specifically beef, a downward trend over the last number of years. You said you may need to have more rationalization in the herd across the country. We may actually see a day when we're slaughtering more in the States—live animals from up here being slaughtered down there.

Where do you see that slaughtered animal ending up? Would it be in an export market or back to us? Do we become the raw resource? We have the animal, perhaps because the land is cheaper—and I agree with you, by the way, that in eastern Canada, at $10,000 an acre, forget it. There's no sense roaming a cow around land that's $10,000 an acre.

If you had a crystal ball and were looking forward 10 years, where would you see this heading?

[Brian A. Read]

People say you should do a business plan in one, two, five, 10. In the meat business, in the beef business, and I think for red meat in general, five years is a lifetime. It's big money. There are big investments. We're proud of what we do. If we're unable to make the regulatory system equivalent with that in the United States, and maintain that equivalency, then we'll disadvantage the packing industry in Canada and it will go south. The livestock will be processed in the United States and the meat will come back up here.

We Canadians like our beef. Consumption of beef in Canada has actually gone up over the last 10 years, but that's for ground beef. We appreciate everybody who eats beef—don't get me wrong—but we will always eat steak in this country. We'd like to be able to think we're going to produce it here. This room has a responsibility to make sure that we are equivalent, whether it be in food safety or animal welfare. We also feel that if government interferes in our marketing strategies or the consumer strategy, whatever it is, it's for the short term. We believe that a market should find itself. The minute government gets behind it and forces something somewhere, it doesn't last. We believe in markets finding themselves. For example, I talked about hormone-free beef and beef raised without antibiotics. Whoever thought that this would even be considered? But it is happening, and the market is finding itself. It's not you; it's not me. We're making it available, and the consumers are the drivers of it. That's when we know we have sustainability. There's a spirit to move things forward.

The other thing we have currently, and we congratulate everybody for the reference, in the cow-calf operation in this country, for the first time—and, Mr. Chair, you and anybody else who's in this business can attest to this—is some spirit. We have some excitement back there, and I think it's a good thing. We're not challenging those gains at all, but it's making it hard to maintain an infrastructure in the country. That's what it is.

We have record prices for lean meat. That's not new to anybody. Those prices will continue to go up, but at what point will we get resistance? That's the multi-million-dollar question.

I don't know if I answered your question, but that's a tough question. There's no black and white there. From my standpoint, I'm going to work hard to maintain a beef industry in this country, and that's why I take great privilege in being here.

[The Chair, Conservative, Larry Miller]

Thank you very much.

Mr. Payne, you have five minutes.

[LaVar Payne, Conservative, Medicine Hat, AB]

Thank you, Chair.

I thank the witnesses for coming, in particular Brian. XL Foods has a meat production facility in our riding. I had the privilege of actually going to that facility, and I was truly amazed at how the process was working and at the number of employees there. So hats off to XL. I know they did talk a bit about the issues around the costs and so on. I have a bit of an understanding, not enough I'm sure, because I'm not a cow guy.

[Brian A. Read]

You're close.

[LaVar Payne, Conservative, Medicine Hat, AB]

There are a couple of areas I wanted to talk about. I think, Brian and Rory, you both talked about market access and the TPP. I'm just wondering, based on your knowledge generally and with regard to marketability, how much access to that market would be worth to Canada.

[Brian A. Read]

Do you want to start with the pork?

[Rory McAlpine]

I'm not sure I can guess that, but obviously Asia is the growth market of the future. In the pork business, Japan is our top market, or at least in terms of value and profitability it's extremely important.

As much as anything, what would concern us would be if Japan got in and Canada didn't, because then they might secure a free trade agreement that would give U.S. pork better access into Japan and we would be facing exactly what we now face in Korea. We already have free trade with the United States. We already have free trade with Mexico. Some of those smaller emerging countries or Southeast Asian countries absolutely have good potential. Vietnam, for example, has started to import more and more, in pork anyway. So we would love to have easier access into those markets. But the critical one is maintaining a level playing field for access to Japan. That's the key.

[Brian A. Read]

I can't quantify it in dollars, but I would say that if we got an FTA with Japan, we'd see the disappearance of our middles, which is our critical one. That would be a big market for us, probably about 20% of their marketplace. We moved that bar from 21 months to 30 months and under, which they're working through their science, and it's being reviewed as we speak. So we expect that outcome before year-end.

Our compliments to all of you and the minister. And if you could pass on our thanks on those efforts, we'd appreciate it. They must continue.

We feel we would see a disappearance of about 20% of our strips and ribs, which would end up in Japan. As far as the FTA with Korea goes, I think we all know that story. If we don't have one within the next eight months—and that's actually retroactive for two or three years, right, Rory? It has to be a retroactive FTA or that deal's moot, and I think we all know that.

[LaVar Payne, Conservative, Medicine Hat, AB]

Okay.

Having been at the facility, I know a bit about the population in Brooks and the workers you have there, and I know they come from all over the world. Are there any issues around hiring? Particularly, is there anything in the temporary foreign worker area?

[Brian A. Read]

Rory touched on the two-year issue. The Brooks plant employs about 2,900, and we're proud to say that only 35% of them are foreign workers; the rest are all domestic people.

Part of the issue ends up being that two-year program. It takes you three months to make an employee efficient, and then you'd like to be able to maintain them. In Alberta they have the privilege of applying over the two years. You hope you keep them in the country so that your training costs are at least captured.

We brought some people up from Mexico recently, so it's working. It's a challenge.

We also have to compete, as you know, with the oil and so on, and the high costs in Alberta, but we seem to be able to do that.

Again, Canada has a different corporate tax structure, and that works through all right, and we really appreciate that. That makes it work.

[LaVar Payne, Conservative, Medicine Hat, AB]

Do you have any comments, Rory?

[Rory McAlpine]

The one thing I would add specific to Alberta is that these programs work based on a harmonized approach between the federal program and the provincial nominee programs. We actually find quite a difference between Alberta versus Manitoba.

Under the provincial program in Alberta, there is less willingness to see permanent residency granted to lower-skilled workers, who are the majority of the folks we would employ in our Edmonton poultry plant or our Lethbridge pork plant, whereas in Manitoba they have been much more open to lower-skilled workers. We invest a tremendous amount in their settlement, in their language education, and, as Brian said, we want them to get settled. It works as a great partnership in Manitoba.

We would frankly like to see a little more of a similar approach in Alberta, particularly, as Brian said, as the labour competition in the market in Alberta is fierce and our ability to retain workers is very difficult.

[LaVar Payne, Conservative, Medicine Hat, AB]

I know the minister just recently announced a 10-day advanced process for temporary foreign workers, particularly if there is a good track record. I'm assuming that might be beneficial to both your organizations.