Agriculture Committee on Nov. 23rd, 2006

[The Chair, Conservative, Gerry Ritz]

That's good. Thank you, Mr. Rice.

Thank you, Charlie.

There is one point before we move on. There was some discussion about disease control. Is the Canadian pork industry in favour of zoning? That has been brought up at other meetings by different commodity groups. Are you in favour of the zoning type of model?

[Clare Schlegel]

Very much so. And we agreed earlier this week to contribute $50,000 towards the West Hawk Lake initiative. Absolutely. It's unbelievable that a country like ours hasn't achieved that prior to this.

[The Chair, Conservative, Gerry Ritz]

Thank you.

Monsieur Roy.

[Jean-Yves Roy, Bloc, Haute-Gaspésie—La Mitis—Matane—Matapédia, QC]

Thank you, Mr. Chair.

My question is for Mr. Beauchamp and Mr. McAlpine.

Mr. Beauchamp, when you say we're not competitive with the Americans because our slaughterhouses are too small and the Canadian dollar has virtually reached parity with the U.S. dollar, I have trouble understanding that.

In a normal market, the Canadian dollar could be equal to the U.S. dollar, and we should still be competitive, that is to say that the Americans wouldn't have an advantage and we wouldn't either.

Apart from the fact that our slaughterhouses may be smaller and that our dollar has virtually reached parity with the U.S. dollar, why wouldn't we be competitive with them in international markets? Is it because of the price paid to producers? Why are the Americans our competitors for other reasons than the fact that our slaughterhouses are too small and the dollar is at parity?

[Paul Beauchamp]

The issue of competitiveness factors is a vast one. Roughly 15 years ago, our dollar was worth 85¢ and the pork industry was doing well.

I took care to mention that, when our currency was at only 68¢, we neglected productivity issues. That additional advantage enabled us to exploit those major competitiveness factors, in both the processing and production sectors.

During that time, we witnessed major changes in the United States. They started producing high-quality meat. Before, they produced kilos, which was convenient for them. They converted vegetable protein into animal protein, and they took off. The Americans are increasingly producing pork year-round, a phenomenon that we see in Quebec and Canada. There's been a change in attitude in the United States. The quality of their pork has improved, which makes us a little less competitive, despite the fact that we've always had — and still have — a very good product. Whatever the case may be, the gap between us and our competitors has shrunk.

U.S. producers have used a more productive model, one with much larger units. By that, I don't mean that we're not productive. Western Canada can operate differently from eastern Canada, which has highly understandable environmental constraints. Eastern producers have developed much heavier hogs than ours, between 97 and 101 kg per carcass. Last year, in Quebec, the weight was 86 kg. We've made certain changes, which has brought that weight up to 92 kg. To give you an idea, one kilogram of difference in a carcass is equivalent to a 50¢ loss of productivity for the slaughterhouse. That's an extremely important factor.

Another competitivenes factor is the size of facilities. A 10,000-hog operation can't achieve the same economies of scale as a 90,000-hog operation.

In Canada, even though our labour costs are competitive, our collective agreements are generally tougher than those in the Untied States. I'm not talking about the illegal workers who run the U.S. plants, which is not the case here in Canada.

As a result of this set of factors, we don't operate within the same parameters. The difficulty isn't so much the level of competition that we can't reach; it's moving from a 68¢ to a 93¢ dollar. The value is currently between 87¢ and 88¢. What will the dollar be worth next year? Some predict it will be 92¢, while others predict it will fall to 84¢. At 85¢, we'd already be breathing more easily.

The industry was required to move faster than it could, which knocked it off balance. We can reach the level of competitiveness of the Americans. Even though we maintained the status quo for too long, we can get there. We have to give ourselves the time to review our operating methods together.

In some regions of Canada, production is mature and the size of production operations is smaller. We'll have to show some imagination for producers and processors to work in close cooperation and more efficiently than they are now. They could become partners and try to create value-added.

If a given farm has needs that generate additional costs, they won't be interested in responding if they aren't compensated accordingly. The issue of cost sharing isn't clear. We have to establish partnerships in which we should share risks. We believe that's possible. We suggested the idea to producers in Manitoba, which resulted in a new partnership.

Currently, producers in western Alberta are examining the matter with us, and we've begun talks. In Quebec, we'll see where that leads.

We think we can bring the production and processing functions closer together in order to create value in Canada.

[The Chair, Conservative, Gerry Ritz]

Thank you, Monsieur Roy.

You have two minutes, Mr. Miller.

[Larry Miller, Conservative, Bruce—Grey—Owen Sound, ON]

Just going back, Mr. McAlpine, Mr. Ritz asked you a question earlier about CAIS: whether Maple Leaf was going to get any money out of there this year. You never answered it. It's just a yes or no question. Did they or did they not receive money through the CAIS program?

[Rory McAlpine]

Yes.

[Larry Miller, Conservative, Bruce—Grey—Owen Sound, ON]

Okay. Mr. Beauchamp, would your company...? I don't know whether you own hogs or not.

[Paul Beauchamp]

No.

[Larry Miller, Conservative, Bruce—Grey—Owen Sound, ON]

You don't.

I guess my next point on that route is that CAIS programs—it's the CAIS program that's there now, but any government program—are put in place by governments to protect the producer.

This again is a yes or no question. Do you believe that companies like Maple Leaf, Saskatchewan Wheat Pool, or I'll use Cargill in the beef industry.... Do you think companies like yours should be eligible for those government programs, when they're designed to protect basically the producer, the guy who gets the dirty stuff on his boots?

[Rory McAlpine]

Well, I think the point is that these are revenue challenges to the producer, and depending on the ownership model, some of those producers have, by far, the majority stake in the profitability of the enterprise and suffer the majority of the loss when the markets fall. So the question of ownership is not really relevant, in our view.

[Larry Miller, Conservative, Bruce—Grey—Owen Sound, ON]

Okay. I will carry on from there.

What percentage of your daily kill or weekly kill, as I'll call it, is either self-owned by the company or contracted out, which in essence is the same? Have you any idea what the percentage is?

[Don Davidson]

I think it's somewhere around 20% to 22%.

[Larry Miller, Conservative, Bruce—Grey—Owen Sound, ON]

Mr. Schlegel, you mentioned earlier some of the problems with the industry in approval of drugs and what have you, and there are some examples. I think it's in your report--1,200 days here, 200 in the U.S., and 300 in Australia.

Are there examples where you can show that the extra time it takes here in Canada, which I think is excessive, to actually prove a drug to be not good just because we take longer to do it...? What I'm trying to get at here is whether there is any justification for why it takes PMRA so much longer here.

[Clare Schlegel]

I could reverse it, if that's helpful to answer.

There certainly are examples where we don't have access to tools--and we call these tools in our tool box--where we're disadvantaged in relation to our competition.

The other situation that has to be addressed, and addressed immediately, particularly when we're in crises, is that it's the opposite to human drugs, as I understand it. Human medicine products are less expensive in Canada than in the U.S. On the livestock side, it's just the reverse.

So we're currently looking at what they've done in PMRA. We have a cross-commodity group taking a look at it, trying to figure out what we could do, what we could promote. The veterinary drugs directorate has said, for ten years already, we're going to get better, we can make adjustments--but, ladies and gentlemen, it's not happening fast enough.

[Larry Miller, Conservative, Bruce—Grey—Owen Sound, ON]

Have you any specific suggestions or advice to the government to try to urge PMRA...any specific changes?

[Clare Schlegel]

Can we get back to you?

[The Chair, Conservative, Gerry Ritz]

Yes, absolutely, Clare, by all means. You can send it in by letter.

[Clare Schlegel]

We're actively working, and I'm not sure we have the solutions per se right now, but I think in tandem with the government the solutions can be found.

I think you may have to weigh in from an agriculture perspective, because it's this question of human health versus industry welfare, and it's not an easy one for a government to answer. There's a balancing act here, and you have to know that food safety and human health is a primary concern for us. That's also a concern, so we don't want to sacrifice there, but on the other hand, we don't want our industry sacrificed either.

[The Chair, Conservative, Gerry Ritz]

The continuation of the harmonization of the North American model...if you have it on everything else except for veterinary products, you still have a major problem.

Thank you, Mr. Miller. We've actually run out of time.

Ladies and gentlemen, thank you so much for your presentations today. There will be a report going forward to the minister from this. We're trying to be a bit proactive on the pork cycle and get ahead of things, but of course this is government and it doesn't always happen.

This meeting will suspend as we shift to in camera. So I'll have everyone leave who's not going to be here for the in camera session. Thank you again.

[Proceedings continue in camera]

[Public proceedings resume]

[The Chair, Conservative, Gerry Ritz]

We're back in session.

Mr. Easter, you have the floor.

[Wayne Easter, Liberal, Malpeque, PE]

On the motion, Mr. Chair, basically it's a recommendation to the minister.

Until October 31 the Minister of Agriculture originally expressed no intention of allowing any plebiscite among western grain farmers, as provided for under the act. On October 31, the minister relented, to a degree, by informing the committee that he was pleased to announce that there will be a plebiscite on barley that will be held in the new year.

The purpose of this recommendation is to expand on that concession by the minister to include wheat in the plebiscite announced by the minister. As well, at that time the minister said, and I quote:

...we'll announce the exact questions to be on the ballot. Until then, I welcome the input of farmers and this committee and others on what those should be.

--meaning what the question should be. I believe, Mr. Chair, that this motion certainly is within the purview of this committee. Even in the letter that you provided me by the chair of the law and government division of the Library of Parliament, in their paper, “Notes on Some Issues Related to the Canadian Wheat Board”, dated November 7, 2006, it stated:

Framing the question that must be put to a vote under section 47.1 may be interpreted to be part of the voting process. It, therefore, could be argued that the Minister has the right to draft the question or questions to be put to a vote under this section 47.1. In this regard, the Minister can seek advice, or be provided with advice, from a variety of sources.

I know you wanted to rule this out of order. Given that the minister himself had said that he would welcome input from farmers, this committee, and others, and also given the argument by the Library of Parliament paper itself, I think it's appropriate that we provide this advice to the minister via a report to the House. The questions that are raised in here are in fact the proposals that came from the farm community itself on what it would like to see in the ballot question.

[The Chair, Conservative, Gerry Ritz]

Is there any discussion on the motion? Are you tabling the motion? You did table it before.

[Wayne Easter, Liberal, Malpeque, PE]

Yes, but I said I would reconsider.