Agriculture Committee on Jan. 31st, 2008

[Dennis Laycraft, Executive Vice-President, Canadian Cattlemen's Association]

I want to make it clear that as we talk really about the entire industry, we're equally concerned about our packing and processing industry. We're at serious risk right now of seeing further erosion. We learned back in 2003 that you never want to be as dependent on foreign processing as we were at the time. We've seen losses in every sector in our industry over the last four or five months.

That said, whatever we do in the short term, we don't want to interfere with our ability as an industry to compete into the future as well. We believe there's a strong future. We're seeing world demand for high-quality beef continue to grow. In every market we've gotten back into we've actually exceeded pre-BSE sales, with the exception of Japan, where the conditions are so tight that we just simply can't provide enough supply. It isn't that there isn't enough demand; it's the restrictions that are interfering with that.

We need to see the regulatory issues that we've identified. More credit isn't going to solve the problems of the industry. It allows us time to adjust while these other things take place, but if we don't address all of those other competitive recommendations we've made, we're delaying the inevitable. So we want to make it clear that it isn't just avoiding countervail, it's tackling these other issues.

When we were dealing with the 67-cent dollar, those things were more or less obscured by our low currency, but as we start to compete with the par dollar, every one of those factors just sticks out. It's going to take a whole range of things to be addressed for our two industries really to move forward and get back to where we feel we are competing. For the last four months we've been exporting feeder cattle at a record level. That's set a floor for cow-calf producers, but we're now facing country of origin labelling requirements in the U.S., which are going to put different requirements on that.

That said, we are still going to export close to 40% of our production. As long as we do, a countervail will put us at risk.

[The Chair, Conservative, James Bezan]

Thank you. Your time has expired.

There were some comments about the size of the industry and whether we need to be reducing the size. I'm a cow-calf producer. I firmly believe that we have too many cattle out there, especially post-BSE. The herds are bigger than they've ever been, historically. Personally, I feel that we probably need to take a million cows out of the inventory.

I see that the hog industry is responding to the market. They are liquidating. We are seeing that adjustment happening in the hog industry. But it's not happening in the cattle industry. Do you have any idea why it's not and why the market signals haven't triggered a sell-off?

I know there are some increased numbers. John and I were talking about that earlier. There is an increase in the cow kill, yet a lot of cows in my area that should be going for kill are actually being bought up at record low prices to increase herds in other areas of the province.

[Brad Wildeman]

I don't know that. I would argue that we're going to see a significant downsizing in the industry, from what we hear in my part of the country.

Part of the reason it hasn't occurred yet is simply a matter of slaughter capacity--just getting them into the system and getting them through. There's lots of feed out there. People are hoping to, for example, get them exported to the U.S. once this feeder cattle run is over.

There's clearly going to be a downsizing. And we don't think that's wrong, by the way. We think market signals should dictate what producers do about this.

What's happened in this case is that it happened so quickly that we simply couldn't have that kind of response.

[The Chair, Conservative, James Bezan]

Thank you.

I want to thank everybody for coming in on short notice to testify. We appreciate your heartfelt testimony. This is an issue that is huge across Canada in rural areas. We'll ask the committee to deliberate on what they heard today and decide how to move forward. It doesn't sound as though there are a lot of changes from the original recommendations the committee made, so it's just a matter of timing.

I'm going to suspend. I'm going to ask that the witnesses clear away so that our next set of witnesses can come to the table.

[The Chair, Conservative, James Bezan]

I call the meeting back to order.

I welcome officials from the Department of Agriculture. There are no strangers here; I think everybody's been here many times.

We have Andrew Marsland, who's the assistant deputy minister of the strategic policy branch; Krista Mountjoy, the assistant deputy minister from the market and industry services branch; and Nada Semaan, who is the assistant deputy minister for farm financial programs. Bill Hewett is here, who's an executive director in the program policy directorate in the Canadian Food Inspection Agency, and Danny Foster, who's director general of business risk management program development, farm financial programs branch.

Welcome. You were all here to hear the testimony we just wrapped up with CCA and CPC.

Krista, I understand you're going to lead off with your presentation. Please keep it under 10 minutes.

[Krista Mountjoy, Assistant Deputy Minister, Market and Industry Services Branch, Department of Agriculture and Agri-Food]

Thank you, Mr. Chair.

We certainly appreciate the opportunity to meet with you this morning to discuss the serious situation the Canadian livestock sector is facing at this time.

As you know, a number of factors have come to bear that are putting major financial pressure on our producers.

Governments and industry are very engaged on this issue. When they met in November, federal-provincial-territorial ministers agreed to develop a joint industry-government action plan to address these challenges and to support the long-term profitability of the sector.

Coming out of a follow-up discussion on December 13, ministers announced the first stage in a national action plan to help Canada's livestock producers.

Through the new suite of business risk management programs, ministers agreed to accelerate access to payments under AgriStability through targeted advance payments and interim payments, to expedite the delivery of the $600 million in federal funding to Kickstart AgriInvest accounts, and to make available an additional $1 billion in loans to livestock producers across Canada through improvements to the advance payments program.

Governments are currently working with administering producer organizations to ensure that these loans are available as needed. Targeted advance payments have already been triggered for hog producers in Alberta, Saskatchewan, Manitoba, Quebec, New Brunswick, and Nova Scotia. Interim payments are available for those who are not eligible for a targeted advance payment.

As you are no doubt aware, an error occurred in the TAP letters that went out to Saskatchewan producers earlier this month. The department sincerely regrets this error. We know producers are under a great deal of stress right now, and this error could not have come at a worse time. We have taken steps to ensure this never happens again.

That said, we also know that timely access to produce program payments is critical for producers at this time. Fast-tracking delivery of payments through existing programs remains our goal. To this end, we are currently working with the provinces to fast-track 2008 AgriStability TAP payments, 2008 interim payments, and 2007 final payments. AgriInvest Kickstart payments have been deposited into producers' accounts.

AgriStability, the new margin-based income stabilization program for large income losses, includes many improvements requested by the livestock sector, such as broader eligibility criteria for negative margin coverage, the targeted advance payment mechanism to respond to disaster situations, and a better method of valuing inventories. These changes are helping to ensure the program is more responsive to losses in the sector.

In fact, from late 2007 through to 2008, nearly $1.5 billion in cash payments is expected to flow to livestock producers through existing and new programs. There is also up to $1 billion in additional amounts available to the livestock sector through enhancements to the advance payments program.

We fully recognize that competitiveness is key to the survival of our pork and beef industries. Under the action plan, ministers have committed to work with industry to improve Canada's export market position to enhance competitiveness and profitability by modernizing and streamlining regulations.

The Government of Canada is working closely with the beef and pork value chain round tables to address the issue of increased global competition and development of export trade. Everyone at the table agrees on the vital importance of improving market access to key red meat markets; these include Mexico, South Korea, and Japan. Just last week, for instance, Minister Ritz was in Mexico, pursuing normalization of livestock and beef trade with Mexico.

To summarize, Mr. Chair, we're working closely with provinces and industry to respond to the pressures facing our livestock producers, both through program acceleration and enhancements and through action internationally to improve industry's competitiveness.

We're certainly very appreciative of this opportunity to share ideas and chart the best way forward for beef and pork producers.

Thank you. Merci.

[The Chair, Conservative, James Bezan]

Are there no other comments from other witnesses?

With that, again, we're going to stick with the five-minute rounds, and we'll kick it off with you, Mr. Steckle.

[Paul Steckle, Liberal, Huron—Bruce, ON]

Thank you very much for appearing this morning. I realize it was short notice, but the issue we're addressing this morning is not new. I'm sure that all of us know the issue quite well.

We keep hearing that programs are being delivered upon, and yet I hear from real farmers who are coming to me to talk about what is happening at the farm gate. Just recently there was a case of a husband and wife team. They both applied and got $400,000 from the advance payments program. That's $800,000. They were anticipating $700,000 back from CAIS, although I think CAIS is a redundant program--at least I was told that this government had gotten rid of CAIS, but we keep referring to CAIS time and time again, so I'm not sure where that is. In any event, the $700,000 isn't forthcoming, and now they're in a conundrum. What do they do?

I guess the question they have is why we have one program pay and then have another one grab it back. What that $800,000 did was pay off short-term debt--the veterinarians, the feed bills. Some of the short-term local suppliers were able to be compensated because of this money. Now, all of a sudden, there's a shortfall, because they lost their bank credit.

We have to do something more substantial than that. Either government is committed.... I'm not sure whether the resistance is coming from the department or whether it's coming from the minister or whether it's coming from government in general. I don't mean this as a partisan statement, because I've been part of government as well. I just feel that we have not, in Canada, grasped the idea that food production is really important, because food is so accessible from many parts of the world.

I don't want to exhaust my questioning this morning on statements, but basically I think it's time we started grasping the notion that producing food in Canada is important. Unless we take it very seriously, unless we can deliver very quickly on farm programming and on making those commitments--in the next few days--so that something is bankable in the long term.... Because this short-term, three-month thing is no good. This industry isn't going to turn around in three months. We have to have something more substantial than that. Unless we can do that, some of these guys are going to turn the key, as Mr. Schlegel said a few moments ago.

I think it's time we started moving on, because in the beef industry alone we've added certain costs that were not there two years ago. There are the SRMs and animal identification and age verification. Those are all costs for the common good, but they are being passed down to the farm gate. Again, the farm gate is paying for it. I think that has to stop.

Let's get real, let's be honest, and let's call it the way it is. Unless we make a serious commitment, we're not ready to deal with this, and we might as well say we'll close the books on agriculture in this country. I know that's an awful statement, and I never thought I'd have to make that statement, but I think it has to be made, because consumers are not our problem. Consumers want to buy Canadian product. While identification of that needs to be more clearly defined, we know that Canadian consumers have not been our adversaries. They have been on our side.

Let's get the job done. We find ways to do other things--war, all these things. We find money to buy heavy-lift equipment in the military, no questions asked, but food is very far down the list. I'm afraid that's not where our priorities should be.

I'm going to leave it up to you to respond. I don't think you can respond in the short time we have, but I want that on the record.

[The Chair, Conservative, James Bezan]

There's a minute and a half left. You must have talked a lot.

Go ahead, Ms. Semaan.

[Nada Semaan, Assistant Deputy Minister, Farm Financial Programs Branch, Department of Agriculture and Agri-Food]

I can start with your question about CAIS or AgriStability. Probably part of your questions arise because when we are talking about what is going out to the industry in the short term in the form of payments through existing programs, for the 2006 year it is still under the CAIS program, but for the 2007 program year the AgriStability program kicks in. So because we're in the middle of two and we're doing, for example, 2007 interims, those are on the AgriStability program, whereas the 2006 final payments are on the CAIS program. They are both margin-based programs.

I'm not going to go over the entire consultation process, because you've heard that before, but we are working with producers in terms of how we would replace CAIS. A number of producers have said--and you heard today as well--that margin-based programming does work for them, so they were very reluctant to move away from the margin-based programming as part of the suite. However, there were a number of things they didn't like about it, things such as the inventory evaluation, P1 and P2, and negative margin. They even talked about some areas of structural change. Those are all being implemented in AgriStability, as well as a lot of administrative tools that they asked us to put into place so that we can keep responsiveness but still be able to deal with a more bankable, predictable program. So that is where the difference between AgriStability and CAIS is.

We are very committed to improving the speed at which we deliver. We're here to talk about the livestock sectors. We did put a priority on livestock payments for 2006 producers, especially in the hog sector. We also put out, as my colleague Krista told you, targeted advancements in a number of jurisdictions. As an example, while we talk about how much has gone out, as one example, the target advance payment represents about 60% of the final payment for 2007.

For hog producers in Manitoba, there are about 500 producers that were eligible for about $51 million in Manitoba just in 60% of the advances. To date, 302 producers have actually taken over $35 million on advance, and that's about an average of $117,500 per producer. So that is what we're trying to do with an existing program.

If you'd like me to, I can speak about what we're doing in the future.

[The Chair, Conservative, James Bezan]

Thank you. The time has expired.

Monsieur Bellavance.

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

After listening to the witnesses' testimony a few minutes ago, I was hoping to get another surprise visit from Minister Ritz. He dropped in on us unexpectedly for a few minutes before Christmas. Not that I am not happy to see you.

You heard the testimony presented, but no doubt you have also read the committee's unanimous report on the crisis in the livestock industry. This morning, during comments and questions, the Conservative members of this committee spoke at length about the looming crisis in the area of countervailing duty should the government opt to go with certain measures. I remind you that the report tabled by the committee was unanimous. Concerns of this nature had not been raised at the time. Even if they had been, the government members would still have signed the report. I would like to hear your views on the subject.

[The Chair, Conservative, James Bezan]

Mr. Storseth.

[Brian Storseth, Conservative, Westlock—St. Paul, AB]

A point of order.

It should be noted that this is not factually accurate. The Conservative member was asking the industry in regard to the industry's desire to have countervailable as the number one threat.

[The Chair, Conservative, James Bezan]

I agree.

The floor is yours, Mr. Bellavance.

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

What exactly do you agree with?

[The Chair, Conservative, James Bezan]

I agree with the point of order that Mr. Storseth raised. The question he raised was whether or not the countervail was the number one issue the industry faced. It wasn't that countervail was a concern because there's nothing in the report that was countervailable.

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

Concerns about certain countervailing measures were raised this morning. No doubt you have familiarized yourself with the committee's report. In your opinion, do any or all of the six committee recommendations to provide aid to the beef and hog industries call for measures that would result in countervailing duty being levied against us in the course of our trade with other countries?

[The Chair, Conservative, James Bezan]

Ms. Mountjoy.

[Krista Mountjoy]

Thank you for the question, Mr. Chair.

I think it's important to look at what could constitute a countervail measure. I think in that context, and in looking at the WTO agreement on subsidies and countervailing measures, one first has to ask the question as to whether implicit within that there is a subsidy that is realized that is providing a benefit to the sector. Then you ask the question as to whether the benefit is specific to elements or parts of the sector, whether it's limited in law or a generally available program that's limited in use, and there are various criteria that are used to determine whether or not the benefit is specific.

I should also mention that a third element could be the determination as to whether certain sectors are disproportionately benefiting from a particular program.

In general, these are the questions and criteria that are used by various countries and industries in determining whether or not a situation exists where a countervail measure or action could be taken.

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

I appreciate having someone explain the meaning of countervailing duty to me, but I already know what it means, besides which, I do not have a lot of time.

Are you worried that a countervailing duty may be levied against Canada if one or more of the report's recommendations are implemented? In your opinion, is there one recommendation in particular that could get us into hot water internationally?

[Krista Mountjoy]

We're looking at the aspect of recommendation one that relates to cashflow in the form of interest-free loans and whether or not the provision of interest-free loans would constitute some interest with respect to possible countervail.

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

I recall quite clearly that in committee and in the House, people laughed at me on several occasions—which doesn't bother me—when I talked about invoking Article 28. It was in conjunction with discussions about milk protein concentrate imports. People said that would potentially be catastrophic. I was roundly criticized at the time. So, it's funny to see the government ultimately decide to invoke this article.

Are you in fact worried, or do you feel certain that by bringing in measures of this nature, we run the risk of this happening? Despite the sword of Damocles hanging over our heads, the government decided to invoke Article 28 and I think it did the right thing.

[The Chair, Conservative, James Bezan]

Does anybody want to tackle that? We have just a few seconds left.

Madam Mountjoy.

[Krista Mountjoy]

In response to your question, I would simply say at this point that we are continuing the work of looking at the recommendations in that context.

When you look at particular situations, these recommendations, others, you look at a continuum of risk, and determination really is critical as to where on that continuum of risk any particular action or approach or initiative or program may fall. We're at the point of working our way through that evaluation, and we'll be able to respond in more depth on that point to the committee.