Evidence of meeting #3 for Agriculture and Agri-Food in the 41st Parliament, 2nd Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was products.
A recording is available from Parliament.
4:05 p.m.
Director, Government and International Relations, Canadian Cattlemen's Association
That would be high quality as well.
4:05 p.m.
Liberal
Mark Eyking Liberal Sydney—Victoria, NS
What's the difference between the third one and the fourth one? What's high grade and what's high quality?
4:05 p.m.
Director, Government and International Relations, Canadian Cattlemen's Association
The third one is available only for Canada and the U.S. and currently has a 20% duty. The fourth one, which is 48,200 tonnes, is basically the same quality specification, but it's open to any country that can meet that quality specification, and it's duty-free already.
4:05 p.m.
Liberal
Mark Eyking Liberal Sydney—Victoria, NS
I've been on trade committees and foreign affairs committees, so I know that when you go to Europe, the farmers can be pretty feisty over there. They don't really like other products coming in on their plate. I'm curious, John, about your conversations with the beef producers in France or Ireland or wherever. How welcoming are they going to be, in letting T-bone steaks be on the plates of people in Paris? I've seen them dumping stuff, and they can get pretty wild.
I'm curious, John, about their welcoming our Canadian beef.
4:05 p.m.
Director, Government and International Relations, Canadian Cattlemen's Association
I think you've hit on the reason.
We felt it was necessary to go and see them because they have been, let's say, feisty. They have made noise about the potential Europe–Mercosur agreement. They're very concerned about Brazil, a low-cost producer, shipping a lot of product into Europe. We wanted to go over and make sure they understood that we were not Brazil, so that they understood how many cattle we had.
We went to France for the first time and they thought we had 36 million head of cattle. They realized they must have confused the human population with the cattle population. Once they realized how many cattle we have, and we talked to them about our prices, our cost of production, they were fairly comfortable.
They showed us studies they've used in their arguments against Brazil, about their various costs of production and the cost of production in Brazil. If you're talking about us, you'd throw in a few other factors like; what does it do to our cost of production when it's minus 25 degrees five or six months of the year, what does that do to our waterlines, to our infrastructure? There are other things we have to contend with. Also, take into account that if we're going to do the growth promoting hormone-free production for most cattle, it means two winters instead of one. They started to do the math. For the most part, they said some obligatory things to their ministers; that they didn't want to see more product, but I don't think they put up the same opposition that they could have and were capable of.
4:05 p.m.
Liberal
Mark Eyking Liberal Sydney—Victoria, NS
That takes me to Mr. Laws.
Let's assume they agree that the GMOs are not going to be a problem and that our animal husbandry and our antibiotics are up to where they expect it, and let's assume that, on the farm side, we've got it all figured out and the Europeans are happy.
Now, let's go to the processing side, because right now all these cattle going to the United States are live cattle. Let's hope that in an ideal world, the cattle that are not shipped to the United States will be going to Europe. They all have to be done up in boxes, pre-cut, and the whole thing. You talked about this CETA meat program that you're looking at. Can you give me more details on that program? What do you really want? The Europeans are going to come over and inspect the plant, so maybe they're going to expect something totally different from what we're doing now.
Can you talk to me a bit about what they expect from this government, to step up to the plate with money to help you guys?
4:05 p.m.
Executive Director, Canadian Meat Council
We think it would be a really good idea to set that program in place to take advantage of this agreement, but also to provide an incentive for these facilities to do that very thing. In some way, some of them will need that incentive to do it. It depends on the facility. Some will be ready to meet the requirements with very few changes; others will require more changes.
We think it would be a good idea, as well, to get a specialist from the Canadian Food Inspection Agency to go around to help the facilities know exactly what they need to do to comply with the EU requirements. That would be a good thing.
We heard recently that the Rancher's Beef facility north of Calgary that was closed is going to reopen under new ownership, Harmony Beef. They've announced publicly that they plan to target that market, I believe with a capacity of 800 animals per day going through the facility.
There are other smaller facilities in Canada, in Toronto and Quebec. The two major veal producers in Quebec could ship product as well under this agreement.
So it's perhaps having a cost-shared program, as is normally the case, to help them get ready. There might be some capital aspect to it. There might be a systems aspect to it.
4:10 p.m.
Conservative
4:10 p.m.
Conservative
Bob Zimmer Conservative Prince George—Peace River, BC
Thank you for coming back to committee. We've seen you before, but thanks for coming back. It's been a good week for us—a good month—with what we've announced.
Kathleen, I have a question on what you referred to in your numbers. I want you to dig down in the numbers, but I want you to restate the significance of how big this really is for us. You referred to $1.5 billion. Could you categorize that and maybe speak to those numbers a bit?
4:10 p.m.
Executive Director, Canadian Agri-Food Trade Alliance
I'll go through again where we think the gains are going to be, and maybe put it in context for you compared to some of our other export markets. The way we derived the number was that each of the major sectors that CAFTA represents took a look at what was in the deal for them. They did their own fairly substantive and in-depth analysis of what that would mean.
For beef, we're expecting this to be $600 million in additional beef exports. It will be $400 million in additional pork. It will be $100 million in sugar-containing products, for example, chocolates, confectionery products, baked goods. It will be $100 million in additional exports of grains and oilseeds, so grains and canola. And we're estimating it will be about $300 million for other further processed products, fruits and vegetables, and a variety of other things.
To give you some context, in my testimony I said this is one of the few billion-dollar markets in the world. Canada exports about $42 billion in agriculture and food products per year. Less than half of that actually goes to the United States. About one half goes down to the States, which is fairly low for any industry that you might look at.
Of all of the other markets that we ship to, our next biggest is only about $5 billion. That would be China right now, largely because we're shipping so much canola there. With these additional exports to the EU, that would now become a $4-billion market for us. That makes it our third, and depending on how shipments go to China in any given year, possibly our second-biggest export market. This is really substantial.
In Korea, we were exporting about $1 billion a year, and we lost almost all of that when the U.S. deal came in. This more than makes up for the exports that we used to send to Korea. It may be a different basket of goods, but it certainly is going to catapult the EU into a really high status in terms of our export importance.
4:10 p.m.
Conservative
Bob Zimmer Conservative Prince George—Peace River, BC
Thank you, Kathleen.
You were very specific in your numbers, but, John and James, how does this relate...? I have cattle producers in my riding, and they want to know the numbers sometimes. How is it specifically going to affect some of those folks?
James, you referred to one of the facilities in Calgary that's going to be reopened. What impact on the ground is this thing going to have for farmers? How many more heads of cattle are going to go through? Could you give us some numbers there as well?
4:10 p.m.
Director, Government and International Relations, Canadian Cattlemen's Association
In coming up with what it was going to take to fill that quota, we figured about half a million head of cattle would have to be produced according to the EU protocol.
How we came up with that is that we asked some of the companies that are already shipping to Europe—well, the one company—as well as some of the companies that are anticipating shipping to Europe. They figure about 100 kilograms per animal makes sense to go to Europe. One of the things we always talk about is that you have to be able to send each piece of the animal to the market that's going to pay the most for it. For Europe, that's about 100 kilograms out of the animal.
I mentioned that we figured about $11 per kilogram for Europe. Our next best market right now in terms of value is Japan, where we're getting about $6 per kilogram. Just to do a very simple calculation, that's an extra $500 a head on that. Of course, there is an additional cost to raise those animals, but we think that's about a 20% additional cost, so already you have taken care of that. Then of course, you're still going to market the rest of that animal to the places where you'll get more money for it. There is a good market within Canada for that hormone-free product. It's a niche market in Canada, but it's a high-value market. We're seeing other countries that are putting some trade restrictions on those products as well. That seems to be the trade restriction that's building.
So I think we're positioned to be able to market all those pieces fairly well.
4:15 p.m.
Conservative
4:15 p.m.
Executive Director, Canadian Meat Council
Just to add that we shouldn't forget the pork side. There's a lot of pork produced in Canada, and the Europeans value the hams a lot more than we do or could get in other markets. That's a premium market for ham. That will help boost the overall prices that packers can pay to farmers, and that helps everybody.
Selling the product to the highest market is great. Even if you don't always sell to a certain market, the more markets that are open raise demand and that really does help to raise prices.
4:15 p.m.
Conservative
4:15 p.m.
Conservative
The Chair Conservative Bev Shipley
Your time's up. Maybe we'll come back.
Mr. Atamanenko, please, for five minutes.
4:15 p.m.
NDP
Alex Atamanenko NDP British Columbia Southern Interior, BC
I see our chair is right on that clock.
Thanks again for coming, folks.
Kathleen, you probably can guess the question I'm going to ask, but I think it's an important one. It deals with GMOs.
There's a different attitude toward GMOs in Europe than in Canada. Many countries don't tolerate these crops or products, yet we're talking about $100 million in grain and oilseeds, and $100 million in sugar...potential exports.
How are we going to get around that? Is our canola sector going to be able to get into the market even when we know Europe does not tolerate GMO canola, or is it possible to get a market in the processing for biofuels?
Can you explain that a little bit?
4:15 p.m.
Executive Director, Canadian Agri-Food Trade Alliance
Just to clarify, the EU does in fact approve GMO traits, biotech traits. There are a number of concerns that Canada and other countries have with respect to trying to export to the EU. One has to do with their approval process. On paper they do approve or welcome biotech traits, but it's a very long approval process and it doesn't always follow the script, if you will.
One of the things the Canadian government worked on quite closely with the European Commission was to gain commitments that both the commission and Canada would work together to try to ensure that the approval processes for biotech trades were efficient and really honour the processes that both governments have in place.
In terms of what happens when you can get the product into the market, we have a number of challenges. One is that EU consumers just seem to be uninterested in consuming products that are derived from biotech products. We buy canola oil at the grocery store that comes from Canadian canola. Most likely it is made from or blended with product that was genetically modified. We don't see the consumer market in Europe as a viable commercial market for our products.
There is, though, quite a bit of opportunity to export canola oil to the EU for their biofuels industry. Under the CETA right now there's a 3% tariff on oils, canola oil, and that will go to zero right away, so that's where we see probably about $90 million in potential.
There are also concerns with a low-level presence, as you know. Because grains and oilseed products are shipped in bulk around the world, even though containers are cleaned, if you have a very small—like one in 10,000—particle of a biotech product mixed in with, let's say, a corn shipment, it becomes a problem. Again, the European Commission has agreed to work with Canada to try to find ways to alleviate the tensions around low-level presence.
4:15 p.m.
NDP
4:15 p.m.
Executive Director, Canadian Agri-Food Trade Alliance
Absolutely, and it can shut markets down, as you know.
4:15 p.m.
NDP
4:20 p.m.
NDP
Alex Atamanenko NDP British Columbia Southern Interior, BC
Jim, you talked about the amount in tonnes we were going to be able to ship over to Europe, and I think you mentioned that the Europeans will have unlimited access to Canada for beef and pork. Did I hear that right? Are they currently exporting, and will they be able to export as much as they want to Canada?
4:20 p.m.
Executive Director, Canadian Meat Council
The whole world currently has access to Canada for pork; we have 0% tariff on pork for everybody. That`s the situation we have going into the negotiation already, with unlimited access. Several of our members would say that wasn't fair, and I agreed that it wasn't fair but that's the way it is and that's what we have to work with. Of course, in return we wanted as large.... Europeans consume a lot of pork, so even though some people would say we have a large access, which we do, it still represents a very small percentage of their overall consumption.