Thank you, Mr. Chair.
Good morning ladies and gentlemen members of the committee. First of all, I'd like to thank you, on behalf of Olymel, for this opportunity to present our views on the crisis — because there is a crisis — currently raging in the pork industry. It isn't being experienced in the same way in the production and processing fields. It may be latent in some regions of Canada, but that doesn't prevent the fact that there is currently a crisis.
First of all, I'd like to introduce Olymel in a few words. The corporation may not be well known here, around this table. Olymel is a young company, founded in 1992, and is the result of numerous mergers, acquisitions and partnerships. It is owned by three shareholders: the Coopérative fédérée du Québec, an organization belonging to Quebec producers and holding 60 percent of the shares; the Brochu Group, in the agricultural sector, and the Société générale de financement du Québec, a Quebec Crown corporation.
Olymel and Maple Leaf are currently vying for the title of leader in the pork and poultry slaughtering, processing and distribution sectors. Olymel's pork operations represent approximately 80 percent of our sales, which total more than $2.5 billion. Olymel is a major player in Quebec. In all, we operate 22 businesses in Canada, mainly in Quebec, but also in Ontario and Alberta.
Olymel exports nearly 50 percent of its pork around the world. We have offices in Tokyo, Seoul and Sydney. We have an international presence and, in that capacity, play a major role in moving Canadian pork production, whether it be in the east or west of the country.
Olymel has been much in the news in recent weeks, indeed in recent months, regarding the restructuring program it set up early this year. We aren't the only ones in this situation. My colleagues from Maple Leaf will no doubt tell you about the announcements they've recently made. One thing is certain: it appears that both of us view the current crisis in the same way. Both seem to want to make major changes to our processing structures. Both feel that, if appropriate action is not taken, the impact on production in Canada could be significant.
Our industry has been struck by various problems. I could say that some of them don't stem from either our industry or Canada. The fact that our currency has appreciated so much and so quickly over the past three years has caused a very serious shortfall at Olymel. Depending how you interpret the exchange rate this morning, that figure stands somewhere between $85 and $100 million.
The fact that our dollar was at 68¢ caused a lack of reaction to productivity issues. That situation effectively concealed our weaknesses in that area. We have to recognize that fact and accept our responsibility for it. However, it must also be recognized that no business or industry, whether on the farm or in the processing sector, could have reacted as quickly to counter the changes in the exchange rate that we've just experienced.
Moreover, the Americans are both our main market and, internationally, our main competitor. However, their exports have increased significantly in recent years. A number of international markets that we consider somewhat as our natural markets — let's take Japan, for example — have seen the Americans enter aggressively. Their devalued dollar has made them even more competitive. Our margins have therefore been tightened. The meshing on international markets, although the markets still exist, has tightened as well.
In addition, the exchange rate has had a harmful effect, in that our American competitors are now increasingly aggressive in our own market.
We thought that, since we exported 50 percent of our production, the Canadian market was ours; that's now a thing of the past.
From 2001 to 2005, the Americans doubled their exports to Canada. That growth has exceeded 30 or 40 percent this year. In other words, the Americans now consider Canada an integral part of their pork market.
Our competitors, who in the early 1980s were still our U.S. competitors and operated small plants without too much concern for the quality of meat delivered, have changed their way of doing things. They now operate global plants that have a slaughtering capacity in the order of 90,000 hogs a week. Currently, the Red Deer plant alone has the necessary potential to slaughter as many hogs starting tomorrow. The Maple Leaf plant in Brandon also has that potential, although with a slight delay; that plant has announced that it will be starting a second shift.
In Canada, the average number of hogs slaughtered per facility is 13,000, whereas it's 85,000 in the United States. No plant in Canada is that size. This loss of competitiveness is having major consequences for our industry.
That leads me to the differences that can exist between the east and the west. In addition to structural problems, the west is also facing labour problems. In November of last year, Olymel started up its second shift and had to stop it in April for lack of employees. We've previously had more than 1,800 workers, but that figure is now 1,300. The labour issue has become more important than the exchange rate and hog availability.
I invite you to consider measures to support our manufacturing sector and other sectors experiencing the same situation in western Canada. For example, we could adopt slightly more “liberal” measures to facilitate access to foreign labour. The term of permits granted by the federal government is 12 months; we invite it to extend that term to 24 months.
We have to stabilize the manufacturing sector in the west, particularly the pork processing sector. A withdrawal from that sector would have incredible consequences upstream. Imagine if Olymel withdrew from western Canada as a result of Maple Leaf's announcements that it's withdrawing from Saskatchewan. That's one possible scenario. We won't be able to operate that plant for lack of labour.
Apart from the economic situation for which we're asking you to intervene and support the industry, it must be kept in mind that, without labour to operate our facilities, there won't be any processing in Canada or, if there is, it will be extremely difficult. It's not only the agricultural sector that's threatened; it's all manufacturing sectors in western Canada. It's threatened to such a degree that one wonders whether the traditional manufacturing sectors have a future in western Canada.
In Quebec in particular, the industry is experiencing other structural problems, which are distinctly more fragmented. Eleven slaughterhouses deliver an average of 130,000 hogs. In the U.S. model, one and a half slaughterhouses would be necessary to deliver the same number.
The federation has asked you to support measures to rationalize the processing sector as you've done for other agricultural production sectors, beef in particular. When that sector needed support for both its production and processing operations, the government agreed to help it.
We're asking you to help us so that we can get through the present crisis and restructure.
I'd like to draw your attention to another argument that is definitely gaining ground in Canada, the one concerning the risks that hog farms represent for the environment. As you know, a moratorium was called in Quebec in 2002 and subsequently lifted, but its effects remain. A moratorium has been declared on production in Manitoba. One may think that there might be other moratoria in other provinces.
While being extremely respectful of the environment, we hope — and that's what I heard from other people earlier — that scientific evidence is clearly established before we can reduce or limit production operations. The consequences of hasty decisions for the future of production and processing are really major.
Mr. Chair, I'll be available to answer your questions. I would like to summarize my remarks by saying that the hog breeding sector needs your help, as you have offered it to other sectors, the beef sector in particular, to support investment, rationalize the industry and permit risk-sharing. Producers could partner with processing businesses to develop a new way of addressing the industry's future.
I would also like to ask you, with regard to the labour problems, to take action to make foreign labour accessible to us, if only in the short term, in order to address the specific situation affecting western Canada.
Thank you, Mr. Chair.