Good morning, ladies and gentlemen, members of the committee.
As Vice-President of the Fédération des producteurs de porcs du Québec, I would like to thank the members of the Standing Committee on Agriculture and Agri-Food for this invitation.
In view of the economic importance of pork production in Quebec and the extent of the current crisis, you'll understand why the federation readily accepted your invitation. We will take advantage of this forum to provide as accurate a picture as possible of the situation in the pork industry and at the time try to offer some potential solutions to this problematic situation for pork producers.
Our presentation will be divided into two parts. The first will concern the health crisis in the hog sector, and the second the structural crisis of the hog industry in Quebec.
The first part is the health crisis. Since 2004, Quebec hog producers have seen an unprecedented increase in the hog mortality rate, which has virtually doubled. This increase is attributable in large part to the disease caused by circovirus, which unexpectedly broke out in 2005 and killed 270,000 animals.
An investigation conducted by the Association des vétérinaires en industrie animale showed that nearly one out of two herds was affected by this disease in 2004 and 2005. The extent of the impact can obviously vary from one business to another, but the study provides alarming findings: 450 farms have mortality rates of 20 percent or more.
To illustrate the problem, let's take the example of a family farm with 250 feeder hogs. This mortality rate, that is to say 20 percent, represents 648 fewer hogs that will go to market every year. Since a producer invests $94 per dead animal, that family business will lose $61,000 in a single year. In this situation, the very survival of the business is at stake. Very often, a producer has no choice but to borrow in order to avoid bankruptcy for his business. He has to go into considerable debt.
When such a major crisis arises, government support becomes essential, and government programs made available to producers must be effective. Unfortunately, this is not the case of the CAIS program. We are in a position to observe that this program is not suited to the present health problem. The federal government's CAIS program covers declining margins. It is effective for some farm businesses, but totally ineffective, and especially unfair, for others, particularly for diversified businesses involved in livestock production.
This deficiency may be explained by the fact that there is no livestock production insurance program. For example, a farm business that has more than one commodity is at a disadvantage compared to a single-commodity farm business in terms of compensation following a disaster.
Let's take the example of a farm that markets hogs and grain and that sees the hog mortality rate increase significantly due to circovirus. If the price of grain increases during the same period in relation to historical prices, the CAIS compensation to which this farm could be entitled is reduced, because the gains realized through grain production offset the losses realized in hog production. Conversely, a hog farm faced with a disease of the same magnitude but which does not grow grain would receive higher compensation from the CAIS.
The federation would like the government to restore equity between businesses, by avoiding interference between the various programs. To do this, the federation requests, in the short term, that all cases involving hog operations which were the victims of a disaster during the 2004, 2005 and 2006 participation years, those cases be reprocessed by isolating the eligible revenues and expenditures related to hog production to calculate the CAIS compensation.
In addition to seeking such a case review, the federation is of the view that the federal government should learn lessons from this crisis and shoulder its responsibilities by developing a livestock mortality insurance program adapted to the situation of hog producers. Work is currently being done by an advisory committee at the federal level, but the federation wishes to emphasize that the only definition of insurable disease accepted by that committee is not adapted to the hog sector.
This proposal specifies that losses resulting from diseases which the insured knew were present before the contract took effect are not covered. Although logical from a strict insurance perspective, this condition makes it difficult for the hog sector to obtain access to the insurance program because hog production is characterized by the presence of certain pathogens in serological tests of a large majority of herds, but without any clinical signs.
Health status is controlled by a series of biosafety measures, and several years may pass before the herd suffers significant losses. Several farms thus have herds that are in good health even though they are said to be positive for certain pathogens. The current herd health crisis is a good example. Circovirus was already present in herds before clinical signs appeared and the epidemic began to spread. Consequently, the federation hopes that the federal government will require that the provinces apply a livestock production insurance program that reflects the special conditions of the hog sector, so that diseases present in the herd but controlled by the producer's good herd management practices are covered when appropriate biosafety measures are applied.
Now I'm going to talk about the structural crisis. While the health crisis is decimating our herds, the Quebec hog industry is experiencing a structural problem. Olymel, which is the main player in the hog slaughtering and processing sector in Quebec, is experiencing difficulties similar to those of Maple Leaf, which recently announced a restructuring plan that will necessarily have a major impact on hog production in Canada. For these two strongly export-oriented companies, the rise of the Canadian dollar and intensified competition in the international market for convenience pork products weigh heavily on corporate margins.
In addition, the sector relies on too many small and under-mechanized slaughter plants. To stay competitive, Quebec slaughterhouses will have to have the same attention as the federal government gave the cattle sector when it funded various initiatives designed to solve problems which were exposed during a BSE case in May 2003. Consequently, it is our view that the processing sector must be supported by the federal government, based on strategies for repositioning the industry with the aid of specific funding to reduce slaughtering costs and create value-added products.
In conclusion, on behalf of the Fédération des producteurs de porcs du Québec, I want to thank the members of the Standing Committee on Agriculture and Agri-Food once again for this invitation. We hope that it will be able to draw the necessary conclusions. The Quebec and Canadian hog industry is experiencing tough times and must be supported by the federal government so that it can regain the vigour and vitality that have made its reputation for many years.
Thank you.