I'm the very last one.
I'll go through it as quickly as I can. Thank you very much, and thanks for inviting us to speak to you this afternoon.
I work for the Canadian Meat Council. We are Canada's most important agrifood sector, with sales of approximately $20.3 billion and about 67,000 employees in total.
The Canadian meat processing sector is feeling the pressure of severe competitive disadvantages. Many have labelled the events of the last six months as the perfect storm. The challenges have been enormous. Four Canadian Meat Council members have filed for bankruptcy in the last six months. The Canadian dollar, as you all know, has risen from a low of 65ยข to over $1 in just three years, and it has risen by 21% since the beginning of the year. High oil prices, over $98 a barrel, have raised energy and plastic packaging costs. Feed grains, the foundation of our livestock industry, have reached historic price levels. There are a lot more U.S. meat and food products showing up on our grocery store shelves.
In our diverse trade-dependent and regionally vital livestock and meat industry, the loss of liquidity, profitability, and investor confidence has been swift and profound, at all levels. For those few publicly traded meat processors, the huge drop in their share price over the past six months tells the story.
Canadian meat processing companies have announced major restructuring plans, including cancelling construction projects. They are rethinking their business plans and taking action through consolidations, sales, closures, and attempting to maximize plant throughput by double shifting, to spread out their overhead costs.
At the same time, labour shortages and retention have become major issues for our meat processing sector. Competing for labour has become especially difficult in western Canada, where meat processors cannot afford the wages offered by the booming oil and construction sectors. It has also resulted in much lower plant capacity utilization and annual employee turnover rates of 95% in some plants.
Recent trade disputes over hog feed ingredients and their maximum residue limits have added to the export risks and highlight the need for immediate adoption of international standards by all companies.
Meat processing is serious business. As we have seen with the E. coli recalls this past summer, the misfortunes of one company can have devastating effects on the entire industry. We witnessed that most recently, on November 9, when the USDA's food safety inspection services had a very onerous test and hold inspection of Canadian products at the U.S. border. Luckily, they lifted the hold process. However, the consequences of these new measures will be profound. Some have recently estimated that the added cost of the additional E. coli testing throughout Canada and the United States will add another $50 million a year for that testing parameter.
As you all know, after BSE hit, the beef industry responded by expanding capacity to some 110,000 animals per week, from 70,000 animals per week. Recently, information from Agriculture Canada indicated that kills have fallen to less than 60,000 per week.
In July 2007, Canada's enhanced ruminant feed ban regulations came into effect, and it put tremendous cost on the industry. We estimate that this new regulation is costing the industry an additional $23 million per year, which is much higher than originally estimated by government officials.
We know our industry needs to grow its scale and improve productivity, because the world has changed. The time has come for immediate action to help the industry survive this incredible series of events.
In terms of tax recommendations, we are very grateful for the Government of Canada's recent accelerated capital cost allowance for manufacturing machinery and equipment that was announced in Budget 2007. We believe this particular measure should be extended beyond 2008. In many cases, it takes more than two years to get equipment and processes in place, and the time is too short.
We can certainly do more. We encourage Canada and the provinces to immediately lower the total corporate tax rate to 24%, to compete globally and to track and retain inward investment. We applaud Minister Flaherty's mini-budget package, which was passed a few weeks ago, that promised to start reducing corporate taxes. We need to move quickly. The Bank of Canada should reduce its short-term interest rates by at least 25 basis points to slow the rate of the dollar's climb. Canada should also expand the tax credit refunds for research and development to allow larger corporations the same tax benefits available to smaller Canadian corporations.
In terms of business risk management, Agriculture Canada programs are currently restricted to primary producers. The Government of Canada could be investing in many programs that would benefit the entire meat and livestock sector. For instance, a project called the West Hawk Lake zoning initiative would divide the country into two zones with the Manitoba-Ontario budget, and we are currently being asked, just from the meat sector's standpoint, to fund $100,000 a year for the next five years. Another example is the National Farm Animal Care Council, an important organization that benefits the entire livestock sector. They recently lost their $80,000 annual financial support from government. These are just two examples of green box category programs that would benefit the entire sector.
At the same time, we cautioned the government to watch the countervail risk associated with government programs such as ASRA in Quebec and the $165 million recent announcement by Alberta in their farm recovery program. We know, for example, the growing volume of live swine exports to the United States has caught the attention of the U.S. industry and a new anti-dumping and countervailing duty petition is possible.
Canada's programs, which assist primary producers with interest-free loans, should be expanded to include meat processors to allow them to make capital environmental upgrades. Canadian meat processing plants will need to invest more in scale and automation to maintain their competitive position, but the payback will not come quickly. The current absence of profits makes such capital investment decisions very difficult.
From the environmental perspective, Canadian meat plants are facing tougher provincial water quality standards in many provinces such as Manitoba and Quebec and are being required to make huge investments in waste water treatment that their U.S. counterparts do not face.
The government could also help with respect to training costs. The ability to attract and retain labour in a very tight labour market requires meat processors to invest heavily in training programs at all skill levels. In many cases, companies are being required to provide English as a second language courses for temporary foreign workers and new Canadians, whom they employ in large numbers.
Under regulatory and trade, our beef processors need immediate relief with an emergency two-year $50 million bridge fund for the disposal and storage of ruminant specified risk material. Unfortunately, the current program, cost-shared with the provinces, funds capital but not the ongoing disposal costs, and we believe it should.
Canada's federally inspected meat processing industry is the most regulated of all food processing sectors. It's estimated that federally inspected meat processors collectively pay over $20 million per year in fees--fees such as inspection services, export certificates, label approvals, etc. This constitutes a major disadvantage to Canadian processors. These fees come on top of growing staffing costs to deliver programs like asset-based inspection, which downloads more responsibilities to the packers themselves. This is in sharp contrast to American processors and Canadian provincially inspected processors, who are not subject to these same additional costs. To create a level field internationally, the fees should be removed immediately. However, we thank the committee for recently passing a motion asking the agency to review the fees it charges industry. We appreciate that.
Regulatory amendments and modernization initiatives in such areas as dietary health claims, fortification standards, allergens, method of production claims, ingredient approvals, label approvals, etc., have been stalled for years. We specifically request that the federal government expedite the approval processes for the use of lactates in both cooked and uncooked meats in a timely manner. The government also needs to accelerate the application to allow the use of irradiation of meat and other food safety options for processors. Some of it is Canadian technology not permitted for use in Canada, but our American colleagues to the south are using our technology.
The Canadian Food Inspection Agency should also allocate more resources to review and enforce the regulatory compliance of imports, especially since Canadian manufacturers are burdened with strict label approvals and compliance. Imports to the United States of single-ingredient meat products and some processed products are growing quickly, with few significant regulatory barriers or enforcement action by the CFIA. We all know that U.S. mandatory country-of-origin labelling is coming in 2008.
Lastly, provinces and territories should eliminate all interprovincial barriers to trade, especially those that restrict movement of workers.
Thank you. We look forward to your questions.