Agriculture Committee on Feb. 28th, 2007

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

My question is essentially for everyone, that is, the representatives of the provinces. We heard from the industry, we heard from people from the provinces, we heard from the department. One of the other concerns I heard was from the producers. These people know that a certain amount of money was allocated by the federal government. The provinces are also going to kick in some money. At the end of the day, considering all the changes that this is going to require, all the changes that will be made, will the producers not have to foot part of the bill?

Do we have some idea of the total cost of all these changes? We can look at Europe, which began before us, as an example. Do we seem to be heading in the same direction? I raise the question, for anyone to answer.

[Dr. Brian Evans]

Thank you for the question.

I guess my perspective on that, honourable member, is that, as have you--and I'm sure most other members around the table--I've heard, over the last four years now, the pain of individual producers, with what this has done to them and what it continues to do to them. The one message I hear repeatedly from the producers, whether it's in the barns at exhibitions, in county meetings, or in provincial meetings, is that they need to be sure that when they buy and feed their animals, the system is protecting them, because when the system fails, the pain is felt by the individual producer. That has been a very clear message and a very clear motivation from day one in managing this circumstance.

While we acknowledge that there may be trickle costs in the short term, we are working diligently to create alternate markets, as has been referenced here. We believe the designation of Canada internationally, by the World Organization for Animal Health, as a controlled BSE country opens up new markets to us. It expands existing markets to us and maintains domestic confidence that what we're doing is the right thing. It also allows us the opportunity to pursue other uses of SRM material, to create an international standard that would allow for trade in feeds from which SRM has been removed from production, to put value back into the carcass.

Others can speak to the research that's being done in other areas to find alternate use for the material. Again, some of those will not be immediate, but we believe, as has been said, that the longer-term market recovery and the longer-term interests in the industry's economic recovery will be accelerated by this.

Others may have a view as well, honourable chair.

[The Chair, Conservative, James Bezan]

Let's keep it quick, because Mr. Bellavance's time is up.

[John Donner]

Thank you for the question and the comment.

Certainly we understand the urgency on the part of industry to have clarity on the expectations and the funding provisions. That's one reason we need to get out an announcement as early as possible, to give some time.

Certainly there is a cost share to the capital facilities, but right now we're not addressing the operating facilities. Everything Dr. Evans says is correct about the general advantage to the industry. That can be small solace to the individual producer or individual plant faced with those additional expenditures.

We do have some issues, in terms of the cost impact, as my colleagues from other provinces have said. At least in some of our provincial facilities, we are trying to offset some of that by addressing some of the tipping and transportation fees and some of the other fees that are associated. However, generally, there is, and should be, a concern about the cost impact. That being said, the advantages of moving ahead are obvious.

[The Chair, Conservative, James Bezan]

I just want to draw to everyone's attention that we have been joined by David Horner and Stan Schellenberger.

We've already made our opening comments, but if you want to make some brief opening comments, then we can kick it off. We've already started our questioning round.

Mr. Schellenberger.

[Stan Schellenberger, President, Ranchers Meat Inc.]

Thank you, Mr. Chairman. I'm sorry we're a bit late. Our messages were a bit at cross-purposes.

I am a producer, and we represent a producer-owned packing plant in Alberta. Our packing plant started as a result of the issue of BSE. The price for our cattle diminished dramatically, and of course, out of tragedy often things happen. Farmers came together to try to build their own facility.

We continue to face that struggle as we build this plant. The issue of the SRM came to the forefront and we believe we heard about it early in September. Funding has still not come forward.

In our plant, we intend to build, to start in September. So we probably can meet these deadlines as far as the segregation and separation of SRM in our plant are concerned, but I know others I've talked to in Alberta will have difficulty because we still don't have the forms, we still don't have the ability to apply for funds. This is an expensive operation. If you are in production, you almost have to shut down to put in the conveyers and the mechanisms to actually segregate and separate this SRM material.

I will get back to the question. From a producer perspective, the big issue that we see is this. If you do not have your own rendering facilities as a packing plant--and only the two large American companies in Alberta have that facility--you are captive to one rendering facility in western Canada, and they have set a price for that SRM of 8¢ to 10¢ a pound. For our plant, which is an OTM plant, where we process mature cows and bulls, we would have in the neighbourhood of 700 pounds of waste material from an animal. About 35% to 40% of that may be considered SRM material, and that's continuing to change as time goes forward.

So you start calculating the price per animal from that, and that could be anywhere from $30 to $50 per animal. And you know what happens when there's a cost like that; it tends to be borne by the producer. The wholesale price of meat doesn't adjust according to those additional costs. So the plant has additional costs--the small plants, particularly. The large ones will as well, because they have to deal with SRM material. In my opinion, unless we move away from rendering and landfilling, incineration, or alkaline hydrolysis, which are three of the four that have been submitted, small plants like ours will have a very difficult time competing and existing.

If you look at the new plants that have tried to start in Canada, small federally inspected plants, they are all at risk right now. They are all going back to their shareholders for additional money. In our case, we're trying to find the ability to compete with the large plants that control so much of both the slaughter capacity and the sale of fresh meat into the retail industry.

So we really believe, in a competitive sense, we have to go with the other technology, the thermal hydrolysis. The difficulty in not getting funding or the capability of showcasing this technology pushes it back so many months that we get into this dilemma of time before we can actually get a plant up and running in order to process SRM material in this way.

If you use thermal hydrolysis, you have a revenue stream at the end. You take waste material and make revenue out of it. It becomes a certified organic fertilizer. If you put it into a biogas facility, you can get methane and produce electricity. The waste heat from the electricity can be, in our case, used to heat the water in our packing plant--we produce our own electricity--or we can use waste heat to heat buildings, dry wood, whatever happens to be in our area.

In our view, we ought to be moving as quickly as we can. And this is Canadian technology. These patents are Canadian. We need to move quickly to showcase this technology and to get our packing plants to use it.

In Alberta, the Bouvry Exports facility at Fort McLeod and Cargill Inc. were talking about doing this, but they want to see one operating. That's where these federal-provincial dollars could be very, very helpful, but you need a champion. You need somebody to say we should do this.

I am carrying on a little bit too long, but I am passionate about this because I hate wasting things. I think we have good technology. We ought to be moving quickly to put it into play. This could be showcased to the world. The OIE has told us that if we build this facility, they will certify it for all 148 countries. And hey can come and see how to do this, instead of incineration, which is just a costly waste.

Thank you, Mr. Chair.

[The Chair, Conservative, James Bezan]

Thank you, Mr. Schellenberger.

Mr. Horner.

[David Horner, President, Alberta Bio-Refining Technologies Ltd.]

I won't have very much else to add to what Stan says, except that we have the opportunity to showcase Canadian technology on an issue that has been on the world's mind for the last five years.

We have the means and the ability to showcase how to handle BSE material, SRM material, in a positive way. We can show how a packing plant can go from being a negative producer to being a positive producer by producing a new value-added product and how to handle animal waste material, SRM material.

I think that's exciting, and I think Canada can be the lead in this around the world.

That is my statement.

[The Chair, Conservative, James Bezan]

Thank you, Mr. Horner.

We'll go back into our questioning. Mr. Miller, you're up for seven minutes.

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

Thank you very much, Mr. Chair, and thanks to everyone here for coming today. I've only got seven minutes; I wish I had 30. There are a lot of questions here.

I am a beef producer myself, and I totally support this ban. I think it's long overdue, but I do have some concerns. I'll ask some questions and get the answers.

Mr. Evans, some of the first ones that come to mind are these. We've been at this for over three years, and I appreciate the work involved, but as a farmer, as a politician, I'm getting worried. We keep talking about the July 12 date, and of course that's the date when everything's got to be done, but another date that hasn't come up here today is two months from today, May 1. My understanding is that for bagged feed and what have you, we've pretty well got to have this ban in place and working by that date to make sure that feed is used up. I'd like some comment on that.

Another comment that I'd like you to touch on, and I believe it was made in either Saskatchewan or Manitoba.... I find it hard to fathom why they're getting so close and still going on, but they made the comment that here we are in the dying days of negotiations and they don't even know the number of dollars in place. It seems to me when you're negotiating with someone, surely the costs, the allocation of funds, might come up.

I am not sure which one of the gentlemen raised that, so I'd like some discussion on that.

Mr. Preston or Mr. Brooks, you said you may have to store some of the SRMs and what have you until everything is in place, and I can understand that, but to keep this stuff segregated, how much capacity do you have? Do you think you have enough? I'd like a few comments on that, because you don't want to be looking to build storage at the last minute.

Going back to the last comments on technology by Mr. Schellenberger and Mr. Horner, I get the opinion you feel maybe both levels of government should be covering all that cost. I'd like some comments on how you do it.

The small plant issue comes into this. You made the comment, Mr. Schellenberger, about the plants and the producer having to bear the cost of this. Usually, it's the producer who bears the cost, but in this case, small plant versus big one, my fear is that the small ones aren't going to be able to afford to get rid of it in the same manner. So I'd like some comments on that.

I know it's a lot of questions, but I'd like to hear the answers.

[The Chair, Conservative, James Bezan]

I hope everyone has taken notes. There are four minutes left, so let's be quick and to the point.

Mr. Brooks first.

[Harvey Brooks]

The transition period we're talking about is not so much a matter of storage, but that while the plants are in transition, while they're cleaning out the system and finishing construction, everything out of the plant will be considered an SRM and will go to the renderer as an SRM. Therefore they will have additional costs relative to when they are finally fully functional with the segregation and storage system that meets the needs of the renderer, so they will forgo the income stream of meat and bonemeal that is non-SRM in nature.

[Dr. Brian Evans]

On the economic issue of allocation, Allan may want to make reference to his allocation in Manitoba. I know Sue could speak to the allocations on a province-by-province basis so there is clarity around what those numbers are.

[Susie Miller]

I believe Mr. Brooks indicated that they didn't understand how the allocations were done, not that they didn't know their allocations. However, if it is of interest to this committee, we can submit the exact allocations by province in writing. That was known as soon as the new government committed to the $80 million and those allocations were provided to each of the provinces.

[The Chair, Conservative, James Bezan]

Dr. Preston.

[Dr. Allan Preston]

For clarification, as soon as those dollars were officially noted, Manitoba was notified as to our level of contribution of $10.3 million. There was no problem in knowing what the dollar value coming to the province was.

[The Chair, Conservative, James Bezan]

Mr. Donner.

[John Donner]

On the issue of technology, about 36% of what we have to allocate will be going to technologies that, as Mr. Schellenberger has said, add value and create competition for the SRM to try to address the issue of creating value instead of cost to producers.

[The Chair, Conservative, James Bezan]

Mr. Schellenberger.

[Stan Schellenberger]

If we were at 800 head a day and all of the material was considered SRM, the cost would be in the range of $9 million to $10 million for a small plant. When you're in a very competitive business, that can be the difference between succeeding and not succeeding. If we can change that $9 million cost to $1 million or $2 million, we can eventually have a profit on the other side. In a small plant that is only making a few million dollars of profit, you can see the risk we have in ameliorating the SRM material. Generally, as a large plant--and we have to compete in that--we can push that back to the producer to some extent, but we have to compete for cattle. So some of that cost will have to be taken up by the small plants for a period of time until prices settle down.

As producers, we want to get the price of cattle up to where we think it should be or where it was. We're pretty close to that in the prairies right now, but that moves up and down quite quickly as costs change and the wholesale price of meat doesn't.

We're not of the view that government has to fund the total amount of a plant. As we're getting new technology in place, the engineering, and the plant set up, if we want to showcase the technology, we feel this is a chance for Canada to assist this technology in Alberta to shine, not only in Canada but around the world. In order to do that properly, you need to build a plant that's not strictly just commercial, and that's what we're talking about in having some assistance from the funds. We've been talking to our people in Alberta about that. But we really need some additional help from Canada to showcase this technology.

As far as being competitive, we believe this is the only technology that can make small plants competitive and not have the costs passed on to the producer. That's the key point in focusing on this technology, versus the others that deal with SRM material.

[The Chair, Conservative, James Bezan]

You're out of time, Ms. Miller, but I do want a clarification. We were talking about the money, costs, and the dollars coming from the federal and provincial governments. All these agreements have been negotiated, but a lot of them still aren't signed. We have plants that want to go ahead and make their investments because we are quickly approaching our deadline. We have new technology out there that people want to start proceeding with.

If they proceed before the agreements are inked, are they going to be eligible for any of this funding? We want to get some commitment from the provinces and the federal government on that right now.

[Susie Miller]

From a federal government perspective, we have the capacity to contribute anything after December 14, 2006. For any provincial contributions, they can count on their 40% share after December 2004. However, how it works in each province is up to each province. That capacity is built in, but whether or not they'll use it is dependent on them.

[The Chair, Conservative, James Bezan]

Does anybody else want to jump in on this, or does that explain it?

Mr. Hauer.

[Gerald Hauer, Assistant Chief to the Provincial Veterinarian, Department of Agriculture and Agri-Food, Government of Alberta]

We've communicated to the industry verbally that we intend to be retroactive to July 12, 2006.

With the way the agreements are set up, we will be allowed to go back that far with our provincial money. So we've communicated to the industry, especially on what we call immediate needs for July 12, and said, go ahead and start building. As long as it's eligible for funding, it will still be eligible, even though you started before the agreement was signed.

So we've communicated that.

[The Chair, Conservative, James Bezan]

Mr. Brooks.