Agriculture Committee on Nov. 23rd, 2006

[Lise Grenier-Audet, Vice-President, Fédération des producteurs de porcs du Québec]

I'd like to add something to what Mr. Schlegel said.

With regard to production, to be more competitive with U.S. businesses, for example, Quebec producers don't see themselves operating a herd the size of those in the United States. The moratorium has been lifted, but it's still impossible to establish production structures similar to those of the Americans on sites of the same size.

We know that a large breeding operation generates economies. Here, when the herd consists of 250 to 300 finishing sows, that's a maximum. However, that already raises a public outcry. We can never set up sites with 5,000 or 3,000 sows in the same place in Quebec. People would be up in arms. In those conditions, production costs are higher. You have to be aware of that and you have to be aware of the limits placed on producers.

[The Chair, Conservative, Gerry Ritz]

Thank you.

Mr. Bellavance, please, for seven minutes.

[André Bellavance, Bloc, Richmond—Arthabaska, QC]

Thank you, Mr. Chair.

Thank you very much for your testimony. Obviously, we unfortunately won't be able to resolve the crisis that has been hitting the pork sector in the past few years in two hours. As a member of the committee, I nevertheless thought it was important that we address this issue because the federal government has to shoulder its responsibilities. We all have our responsibilities with regard to the crisis, including you. You moreover mentioned that in your testimony.

The committee has a responsibility, the federal government as well, but perhaps not for resolving the entire crisis alone. Thank you, Ms. Grenier-Audet, for providing a document in which you propose very concrete solutions to certain problems. I would call them short-term solutions, as regards CAIS, the Canadian Agricultural Income Stabilization Program, and long-term solutions, as regards the new Agricultural Policy Framework. The government will be conducting further consultations. So we don't yet know what the new agricultural policy framework will contain, but you're proposing promising solutions.

When you say, regarding CAIS, that you would like to go back to the 2004, 2005 and 2006 participation years so that the issues are reviewed again, have you had discussions on that point with government people, or is that an idea that the members of your federation and you raised before talks were held on the subject?

[Lise Grenier-Audet]

There have been no talks with the government on this subject. We brought the matter up with provincial representatives, but we were told to go to the federal level, since that's a federal responsibility.

We know that, under the CAIS program, as you mentioned earlier, a person who manages two or more types of production is penalized. There's also the fact that, in Quebec, most farms are family farms and that, in that case, the program sets certain restrictions. For example, a salary paid to a member of the producer's family is not recognized or eligible, as a result of which we can't use family labour. As we nevertheless have to feed ourselves, we pay ourselves a salary, even though we're a small business, which immediately results in a loss under the program.

That's what I was referring to.

[André Bellavance, Bloc, Richmond—Arthabaska, QC]

We haven't received the exact details on what the program will be, but, for a long time, even when the Liberals were in power, there was talk about creating a specific disaster program within CAIS to respond to chance cases such as the mad cow crisis or for all kinds of cases that may arise.

In your industry, did you have any indication following the meeting recently held with the federal minister and the provincial agriculture ministers in Calgary, regarding the creation of this disaster program in which you might perhaps take part? Do you have any hopes with regard to that? Have you received any information on the subject?

[Lise Grenier-Audet]

I personally haven't received any. Perhaps the Canadian Pork Council has. The Canadian Pork Council represents us at the federal level.

Perhaps Mr. Schlegel has a little more information?

[Clare Schlegel]

There are two aspects that might be appropriate here. One would be the call for production insurance for livestock. That, potentially, could help in response to animal disease situations. The other one is that there's been a debate about whether the margin in CAIS could be adjusted for years when a producer has faced serious disease problems. As I understand it—and that's what I was asking Catherine about—that formal request has not specifically gone into government. It's certainly an idea that Quebec has been thinking about.

[André Bellavance, Bloc, Richmond—Arthabaska, QC]

Coming back to you, Ms. Grenier-Audit. You would like a livestock production insurance program to be established and the CAIS program to be reviewed.

Would these solutions enable the industry to get back on track in the short term, or would that merely be a band-aid solution?

[Lise Grenier-Audet]

We don't think that will solve the problems in the short term because the expression “short term” would mean yesterday. I'm going to be frank with you: it would have to be within a year, ideally, but we have to go about it intensively. If things are done too suddenly, that might not be enough, once again. If we acquire a work instrument, let's be sure it's accessible and that it works.

[André Bellavance, Bloc, Richmond—Arthabaska, QC]

Turning to the industry members, perhaps Mr. Beauchamp can answer my question. I had occasion to visit your slaughterhouse in Saint-Esprit. Princeville is very close to my riding. I don't know the story in Saint-Esprit, but I recently read that another shift was going to be added in Princeville, at least, to make it possible to increase production. Ms. Grenier-Audet and you talked about productivity, but you don't seem to be on the same wave length as regards the possibility of increasing production. If we compare our competitiveness with that of the United States, we're currently experiencing problems, but, at the same time, producers tell us they don't know if they can meet demand.

How do you see that? We're told there are problems, but, at the same time, plants aren't being opened, others are being closed, while shifts are added at other places. That seems to be working a little better. I'm trying to understand.

[Paul Beauchamp]

You have to get a clear understanding of the problem and perhaps divide Canada somewhat into regions.

Western Canada is a region where pork production doesn't go back 30 years. The expansion resulted from the cancellation of the Crow's Nest western grain transportation program. We then witnessed the emergence of this production, despite the lesser constraints, particularly with regard to the environment.

I believe Ms. Grenier-Audet alluded to this problem, which now enables producers or producer groups to invest in the farrowing of up to 6,000 sows. That's the case in Manitoba, Saskatchewan, and there are a few projects in Alberta. So it's possible to develop production in western Canada.

In eastern Canada, there's the environmental constraint. I doubt that, despite that constraint, production is falling like a diminishing asset. We may have reached a peak of 7.5 million, because we'll be producing maybe 6.5 million hogs this year. However, there may still be growth potential. So production could well be more stable in the east and, depending on market conditions, will be growing from central Canada to the west. That's our approximate assessment of the potential.

As regards facilities, here's what we've tried to do. We have facilities where our labour costs and productivity are not optimal in Olymel's own pool. In the past few years now, we've tried, through the recent merger with the Brochu Group, to increase volume at the facilities that we're modernizing in order to raise our productivity.

What was sought in Princeville, the facility you referred to, was a plant. It used to operate in conditions that prevented it from being competitive. We managed to renegotiate conditions leading us to believe it would have a future, despite the difficult situation. We restarted the first shift. We were going to start up the second shift, but that required closures at other facilities, and thus our rationalization. However, we were prevented by an arbitrator's decision.

Now we're considering something bigger than just Princeville. We see that, in one case last year, we lost nearly $55 million in eastern Canada. Our owners decided that that model couldn't continue much longer, that we had to take major action that, in some cases, might mean facility closures in addition to those previously announced.

We retained the services of Lucien Bouchard, who is well known here in Ottawa, to help us negotiate with our partners and to explore new avenues, to negotiate new working conditions with our employees, and to examine competitiveness relative to the Americans in the medium and long terms. We managed to do that in some facilities. We're still negotiating with one big plant.

Then there's the production component. We have to see if there isn't a way to redefine a new marketing model in Quebec to help us cope with this new situation. With the government authorities in Quebec, we looked at whether it was possible to introduce a program or a way of looking at things because we can't go on anymore with 11 plants and production of 6.5 million hogs. That doesn't make sense.

If we manage to change things on other fronts, we're convinced we'll be able to put in place in Quebec something that will give us a view of the future, but that will be based on a model that will be different from the current model.

If we can't gain that perspective, we too may announce major closures that could have an impact on production.

That's why, earlier in my remarks, I told the federal government that we'll probably need its help. You've provided help in other sectors, and you've already considered ways of doing so. Couldn't the pork industry be given help now to get through this difficult period and to restructure, as everyone here around the table would like?

[The Chair, Conservative, Gerry Ritz]

Thank you, Mr. Bellavance.

Mr. Gourde, for seven minutes, please.

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

Good afternoon. My first question is for the Fédération des producteurs de porcs du Québec. One subject troubles me. We talked about the didease caused by circovirus. We talked a little bit about the scope of the problem.

Do you have any statistics on the number of hogs that have died on farms in Quebec? It was said that 450 farms had losses of more than 20 percent. Can that be easily proven?

[Lise Grenier-Audet]

Yes, it's easy to prove, since Quebec veterinarians and the Financière agricole du Québec conducted surveys last year. On the premises of the farms themselves, 270,000 hogs died. They didn't make it to the slaughtering stage. In addition, an equal, if not greater number of hogs made it to slaughter, but their weight was much lower than it would have normally been, which resulted in a significant shortfall on the production side.

As I've already mentioned, the shortfall was greater than the 60,000 figure that was mentioned earlier. The lighter hogs were sold, in some cases, for half or a quarter of their normal value. In that respect, the CAIS program was deficient.

We know that approved pilot vaccines are now available. However, we don't know whether they'll have an effect on the herds. So we're asking the government to continue the use of Intervet vaccines, which have also been used as pilot vaccines. They aren't approved for the moment, but they work. We're asking the government to ensure that we can continue using Intervet vaccines until we know to what extent the new vaccines work.

We're also asking for investment in amber programs, as the countries we're competing with are doing. We're exporters; so it's important that our ground rules be the same as those of those countries.

We're also asking that part of the research programs conducted in agriculture focus on pork production and that research funding be allocated to it based on production size.

As Jean-Guy Vincent and Clare Schlegel said earlier, it's important that drugs be approved as quickly as in the other countries. Otherwise, we're not competitive; we're not enforcing the same ground rules as our competitors.

Lastly, we want to tell you that, if working committees were formed to assist the government in getting a clearer view, Quebec would be prepared to make a contribution and to provide information on production. That's what we know best. We'll also be available to attend meetings on the medium- and long-term future of production.

Whatever the case may be, what is essential today is that the cash go into the pockets of producers whose herds are affected by the disease and who have received no financial assistance from CAIS.

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

I'd like to ask one final question on circovirus. What is the loss percentage that a farm can absorb, on average, without going into financial difficulty?

[Lise Grenier-Audet]

In Quebec, the Financière agricole is responsible for loans to producers and for agricultural income stabilization insurance. The procedure is similar to that elsewhere in the country. On average, the percentage remains around three or four percent. Last year, it reached eight percent. For a producer who isn't covered, five percent is already enormous.

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

Are you able to assess what each percentage point in addition to that five percent represents per year in terms of financial losses? Let's take the example of a herd of 5,000 hogs.

[Lise Grenier-Audet]

Every one percentage point of herd losses equals $1.25.

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

You're talking about all the businesses's hogs?

[Lise Grenier-Audet]

If, in a given year, I have 5,000 hogs, I multiply $1.25 by one percentage point of mortality.

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

I'm going to put my next question to the Olymel group.

Olymel, as we know, is a young business. However, the slaughtering sector in Quebec as a whole has been in existence, in an organized way, for about 30 years. Have we really gotten to the point where there are now too many small slaughterhouses? Is trying to concentrate everything in the same place and to eliminate all other slaughterhouses really a solution? You say you have a labour problem. However, it seems to me that there'll be too much available labour if we close all these slaughterhouses. Can you give me an explanation on this point? I don't understand.

[Paul Beauchamp]

Having regard to the size of production, it is our view, I believe, that Quebec should acquire infrastructure enabling its pork industry to be as competitive as that of the rest of Canada and North America. I believe we agree that 11 facilities in Quebec is too many. However, even if we created a committee, we wouldn't agree on which facilities should be chosen.

At Olymel, we've tried operating with our slaughtering volume, but we've come up against difficulties. They had nothing to do with what we wanted, the government or anything else. In accordance with an arbitrary decision, we're therefore proceeding with a restructuring.

In our opinion, the problem is also that we're dealing with a lack of competitiveness related to the size of the facilities. We can avoid dealing with this problem now, but it will catch up to us. We run the risk of adopting solutions that will become inappropriate over the medium and long terms. The infrastructure and its size generate economies, which small facilities are unable to achieve, being scattered here and there over the province, often even outside production areas. We're not claiming that the only solution is to have one big slaughterhouse in Quebec. We're saying that, if Quebec doesn't establish competitive structures, it will be caught by the competition.

We're already in that situation. We can see it from our own comparative analysis with the Red Deer people. The Maple Leaf people are doing their own analysis because they've decided to refocus on value-added at a single facility where slaughtering volume will be increased to 90,000 hogs a week.

So that means that, within the industry in Quebec, we're seeing that we need to acquire competitive infrastructure. That doesn't necessarily have to be done next week or next year, but we have to find a way to get there. That's why we're consulting each other and working with the representatives of the federation and the UPA. We have to think of a way in which, together, we could develop a model for partnership, perhaps even risk-sharing. That could involve closing certain smaller facilities. I know that's never nice to hear for someone who represents a region. Nevertheless, if we don't do it, the market will force us to do it, one after the other.

I think we have a problem in Quebec and that we have to address it. We especially shouldn't hide under a blanket.

[The Chair, Conservative, Gerry Ritz]

Thank you, Mr. Gourde.

Mr. Atamanenko, you have seven minutes, please.

[Alex Atamanenko, NDP, British Columbia Southern Interior, BC]

Thank you for being with us. It was very interesting to listen to what you had to say.

Obviously, everyone agrees that there is a crisis in your sector. I'm going to put my first question to the producers, as well as to Ms. Grenier-Audet.

There is a health crisis, and it seems to me from what I've read here that, if we didn't have to wait 200 days for the approval to come through, the situation would improve. Is that correct?

[Clare Schlegel]

That's correct.