Agriculture Committee on May 16th, 2012

[Francine Raynault, NDP, Joliette, QC]

Your mission is stated in your document. In the second sentence, you say that, when people live better, they live longer and happier. They are in better shape to look for work and to maintain their health level for improved living.

You work in organics. The development of the organic industry meets a clear consumer demand. In the age of free trade, should this demand be sufficient indication of an industry trend? When you were developing your organic company, did you feel that the government provided you with support that was proportional to the demand for organic products? Did the government provide you with assistance when you were starting your business?

[Mike Beretta]

Thanks for the question.

That's a tough one for me to answer just because I'm not particularly one to go out looking for assistance—and many farmers are probably in a similar boat—so we've never really gone out to look for assistance. My proposal here has been more to mention and to bring to light the challenges that we have for organic and natural meat within Canada. At this point, even the concept of exporting is foreign because we don't have enough supply here to even meet our present needs. I think the challenges now are to get Canadian retailers excited, interested, and willing to celebrate the fact that there are alternative meats out there, such as organic and natural.

I think what needs to happen is for the government to step up and assist people like us trying to build Canadian supply chains. Once they're robust and sustainable, then we could maybe look at moving them into an export. But right now it's all about building a supply chain for Canada alone.

Does that answer your question?

[Francine Raynault, NDP, Joliette, QC]

Yes, that answers my question.

[The Vice-Chair (Mr. Malcolm Allen), Conservative, Larry Miller]

Mr. Lobb, you have the floor.

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

Thanks, Mr. Chair. My first question is for Mr. Clarke.

Mr. Clarke, could you tell us approximately what the price of liquid fats were, say, three years ago?

[Graham Clarke]

Commodity prices go up and down substantially, so three years ago.... Well, you know, they can be quite unstable, but they were still in a fairly high range. I would estimate, I don't know for sure, but probably around $900 a tonne. It has gone up recently to around $1,200, so there has been a substantial increase. But, as I say, the commodity prices—

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

For quite a length of time it was in the $500 and $600 a tonne range, and even lower than that if you head back into 2008 and 2009. I think everybody in the industry would agree that it serves a tremendous purpose to feedmills. If you look at the poultry industry alone, it provides fat in the diet to put the gain on chickens. Do you see a risk with the increased price in fats caused by biodiesel policy and demand for biodiesel?

[Graham Clarke]

I would say the bigger risk is the huge demand in Asia for animal fats. Recently a company in Singapore has been buying up fat in huge quantities worldwide. They were at meetings with the North American rendering associations, lobbying all the companies. So the rendering industry looks at the margins, and they look for sources of income where they get the highest price. Clearly they have a responsibility to the domestic industry to provide material for domestic animal feed and so on, but clearly there's a huge worldwide demand for tallow, animal fats, and I would suggest that's probably a much bigger risk than biodiesel.

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

Fair enough. I don't think anybody is going to argue with that. If you look at companies that process liquid fat and get it into a condition where they can sell it to an Asian market or into a feedmill or wherever they're going to sell it, you're talking about processors that have had decades worth of relationships with feedmills that are now not dealing with feedmills because of the increased price and putting the feedmills out on a limb.

What can we do to help out here, to get ahead of this before it gets away? Obviously at the end of the day this is going to increase the price of food on consumers' tables.

[Graham Clarke]

It's a global problem because the increase in consumption in Asian countries, for example, or in central South America where the middle-income groups are becoming more dependent on a meat diet, you're seeing this demand for both protein meals and fat going up. As I say, the global demand for soap in China, believe it or not, is huge. Proctor & Gamble and so on are buying up the stocks. I don't know what the solution is, quite frankly, but it certainly is a problem.

The supply simply cannot meet the demand right now, and these materials are going to the highest bidder. I would point out of course that the higher prices for the rendered material get fed back through the production chain on the value chain. So theoretically producers all the way down the value chain in Canada benefit from higher prices in by-products because those increased prices get fed down to a certain extent. As for where these products will go in the future, it's very hard to say, but there's a huge demand globally and a lot of competition.

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

I don't think anybody would argue with that either. I guess at the end of the day someone does have to pay for the extreme increase in the price.

Mr. Beretta, I just want to be clear, whom do you send your finished cattle to for processing?

[Mike Beretta]

We use two federal facilities in Toronto.

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

The reality with the organic market today is the ability to meet consumer demand and to try to convince traditional farmers that it's financially advantageous and worth their time to switch over. At the end of the day, what's the financial advantage to switch from traditional to organic?

[Mike Beretta]

It's what you just said, as well as convincing the retailer to pay for the true value of that meat. So we're working on two things in conjunction. If the retailer were aware and willing to share in the added costs of growing, I think he'd be looking at somewhere between 20% and 30% more. That's the rule of thumb.

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

What's the price per pound today for a fat cattle beast that's finished organically?

[Mike Beretta]

We're looking at about $3.00 or $3.05 a pound on the hanging weight, and a commodity animal would be around $2.05 to $2.10, depending on premiums, etc. In that regard it's a substantial increased cost.

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

Obviously, convincing someone to grow it is one challenge. Convincing somebody else to pay for it is another challenge.

What about getting it on grocery store shelves? What kind of battle have you had to take on to get your Beretta products on grocery store shelves?

[Mike Beretta]

Lately we've been dealing more with bigger companies, so it has been all about learning about scale and learning how to play something like this on this scale. The challenges primarily tend to be, getting back to my earlier notes, about pricing and about the comparison with the U.S. The larger retailers that are used to buying throughout North America base their pricing on models and formulas that are USDA driven. We're facing this constant battle of trying to direct them back to the cost of production, saying that this is what it costs, and this is what we think is a fair premium for it.

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

If you don't want to answer this you don't have to. Do you have to pay for shelf space at a grocery store?

[Mike Beretta]

No, we've never had to.

[The Chair, Conservative, Larry Miller]

Thank you very much.

We'll go to Ms. Brosseau, for five minutes.

[Ruth Ellen Brosseau, NDP, Berthier—Maskinongé, QC]

I'd like to thank you all for being here.

Mr. Clarke, I had a few questions about the rendering aspect. I'm just really interested. I tried to find a website. You don't have a website, do you?

[Graham Clarke]

No, the CRA doesn't. The website you would go to is the National Renderers Association—nationalrenderers.org—in the U.S. Each individual company has a very comprehensive website. West Coast Reduction, Rothsay, and Sanimax all have websites with a lot of information.

[Ruth Ellen Brosseau, NDP, Berthier—Maskinongé, QC]

What three companies do you represent?

[Graham Clarke]

The CRA has three members. Sanimax is based in Quebec City, where they have big plants, and has its head office in Montreal. Rothsay, which is part of Maple Leaf Foods, has its head office in Guelph and its main plant in Dundas, Ontario. West Coast Reduction is in Vancouver. That's where their head office is. They have plants in Nanaimo, Calgary, Edmonton, Lethbridge, Saskatoon, and so on.