Agriculture Committee on May 26th, 2009

[Richard Doyle]

Producers over the country are investing over $100 million in promotion. That includes school meal programs, nutrition programs, advertising, and marketing. Those tend to be generic. A lot of advertising is also carried out on a joint basis. We will invite brands to join us as well. There's a huge investment on the part of the producers with regard to growing the market. The cheese market is a growing market. There are varieties. I know when I started there were about 80 varieties of cheese in this country. Now we have close to 500 different varieties of cheese. It's a good market. It's continued consumption.

We've lost a great deal in butter, but butter is coming back. The fat concern is going down a bit, and the trans fats and all of this that has taken place has put butter as a more natural product. Therefore, consumers are coming back to butter consumption. We've seen an increase that we haven't seen for many years. We're quite pleased to see that our market is dynamic.

The thing about the price variation in all this, if you look at the chart with the U.S. price of the producers, is that you don't see that at the retail level. Can you imagine having this kind of variation for a product that consumers buy every week so that it triples all of a sudden in one week or in two months and is sold at a third of the price two months later? That doesn't happen. What you see is that when the price drops, the retail price stabilizes; it doesn't drop. In Europe, the farmers have had a 50% loss in returns. You haven't seen a drop of 50% in the retail price of dairy products in the EU. You haven't seen that. What happens is that when the price goes back up, the retailer goes back up at that point. You have a bit of a scaling system when the farmers' price goes up and down like a yo-yo.

[Bev Shipley, Conservative, Lambton—Kent—Middlesex, ON]

I have some other questions, but you've actually touched on a couple of things I wanted to ask about. So I appreciate that.

I want to go to the pork producers and Mr. Preugschas.

There are fewer hogs. There are fewer farms, which means, I guess, fewer hogs. Your ask is $30 a hog. Remember BSE. Money went out. The farmers never ended up getting it, because the marketplace ate it up. If that were to come, how would you protect against that?

[Jurgen Preugschas]

I think that's a very good question, and that's why we were very careful in how we made our ask. Number one, it's based on 2008 marketings. It's not for marketings for this year. Second, it goes directly to producers. It does not go to processors or anywhere else. It goes directly to producers based on 2008 marketings, and it leaves the regular marketings, as we are now, in place. Most of our marketings are formulated from the U.S. anyway, so it isn't going to affect the pricing at that point.

[Bev Shipley, Conservative, Lambton—Kent—Middlesex, ON]

I'm not convinced that will work, because you're liable to get a challenge. Without a doubt, you'll get a challenge. You're saying you will take that on.

The other part of it is that in the marketplace, regardless of what happens or where it goes, we see that in all sorts of instances--and I'll just go back to Mr. Doyle, because he actually has it on a sheet here--there's no change. When the price drops, there's no change to the marketplace. The marketplace can eat up that $30 a hog in an instant.

I think the most important part is our markets. You've talked about that. How do we get those markets back? How do we build the confidence back in? The minister actually now is going back over. We'll be talking, and he has been.

Most of these countries have now opened up. The question now is what we can do to ensure their confidence. It's like the whole economy and the confidence of the people to purchase.

In Mexico I'm not so sure that the market is going up or is going to come back in a hurry, because they've got such a big issue.

There are two things. One is getting those markets too, because we need those markets for a product like yours, since we've got to get rid of the whole animal. I'm always cautious about getting the $30 and then finding someday that it's just evaporated. The next day, where did it go?

I had a neighbour who was in on the weekend. They are great hog farmers and they were making money until this happened. They know the exact cost of production. It's a large family farm. We've got a blip right now, and producers and industry need to work together. I'm glad to hear they've had those discussions with our minister.

Can I go to Mark in terms of a question? I'll be honest with you. You raised something that I think just eats everyone on this committee, quite honestly, and that is the regulations on how we get harmonization on products that are coming into this country. You were saying that--whoops, sorry; I'm on the wrong one. You're the turkeys. You're a turkey.

How are you accomplishing your domestic market? I think of turkeys as Christmas, Easter, and Thanksgiving. That's a traditional time. You're growing your domestic market. How do you grow in that particular market based on the seasonality of turkeys, which I would think is how a consumer sees it?

[Mark Davies]

If we could get you to stop thinking that way, that would be step one.

It's a fair question. The very short answer, because I know you have other questions to ask, would be--

[Bev Shipley, Conservative, Lambton—Kent—Middlesex, ON]

You can talk as long as you want.

[Mark Davies]

I'll just do the very simple black-and-white answer. Our market is divided up into basically the traditional--the whole bird, as we term it--and what we call the further processors. Our growth has seen significant increases in the further processors. There's been demand for further processed deli meats. We're big at the deli counter and that sort of non-traditional area.

If you really think hard, you'll think of turkey sausage and turkey bacon. I was told by the president of one of the larger processors that the largest-selling bacon in North America is their bacon, and it's turkey bacon. That's a stellar example. It's basically the further process industry that's been driving our growth. Our whole-bird sales grow with population.

[The Chair, Conservative, Larry Miller]

Thanks very much.

I'll move to Mr. Valeriote for five minutes.

[Frank Valeriote, Liberal, Guelph, ON]

Mr. Boyd, I know you're regulated through supply management, but our concern is about competitiveness.

I'm always concerned about abuses of dominant positions, whether by the processors and distributors on the one end or by those who control the cost of farm inputs on this end. While you're probably less susceptible to dominant positions on processing and distributing, although you can tell me otherwise, you may be vulnerable on the input cost. Can you tell me if dominant positions of those suppliers exist in your industry to any extent?

[Phil Boyd, Executive Director, Turkey Farmers of Canada]

Thank you, Mr. Chair, to Mr. Valeriote.

On the shipping end of the farm gate, the marketing boards provide a producer voice. A price is negotiated; it gives producers that collective strength in the marketplace on what they're shipping. That having been said, the pressure from a relatively concentrated retail sector to the buyers of live turkey or to the further processors of turkey meat products does filter back, and market signals get transmitted to the farm level as well.

On the input side, the things that our chair mentioned in terms of ethanol policy, the driving up of feed costs, and all those kinds of things obviously affected our producers in the same way they affected other livestock producers represented here today and earlier.

However, supply management does also breed an entrepreneurial spirit, I must say. There's perhaps a lot of misunderstanding about that. Numbers of our producers will band together on the input side, and because they're organized through their marketing board system, it becomes relatively straightforward for them to accomplish that, so even in that structure there is some power at the input side as well. I don't know that we're as susceptible as maybe some of the other sectors, but I can't say that for sure. However, that's a general sense of what can happen.

[Frank Valeriote, Liberal, Guelph, ON]

Thank you.

Mr. Preugschas, I know you probably have to reach for your defibrillator any time anybody mentions supply management, so I'll avoid that question.

I want to talk to you about AgriFlex and the non-business risk and business risk programs. I'm wondering to what degree you can rely on either of those programs in this time of difficulty, what the shortcomings are, and how they might be fixed to help you. I understand a lot of it is based on the review of previous years in the calculations that are made. Is that one area that could be fixed? If so, can you tell us how to fix it?

[Jurgen Preugschas]

That's a very good question, but I am going to defer it to Stephen because he's the chair of our safety net committee and is very involved in that.

[Stephen Moffett]

That's a really good question. I want to make it very clear right at the outset that we think the AgriStability program is excellent. It has evolved over several years since the 1990s and has helped producers through times when prices went up and down. That's what it's meant to do.

What it's not meant to do is deal with a long-term decline in margins. We saw that when we had the grains and oilseeds program a few years ago. The CASE program at that time didn't work any longer because they had no margins left. I think we see that situation developing now. We've been in this downturn long enough that the CASE program is not going to help our producers in the 2009 situation. That's accepted. It wasn't meant to do that; it was meant to deal with fluctuations. We're in a downturn now that has lasted longer than it should have, and it's now further complicated by COOL and H1N1.

To go a little further, it's an excellent program, but there are a lot of things we would like to see changed. Our industry tends to have a lot of larger producers, so the caps on some of these existing programs have always been an issue for us. We see a very large percentage of our industry not protected by the existing programs because they get capped out. It's a real issue for us, because large producers tend to contract with small producers. So it affects many people, even though sometimes governments look at these programs and say they don't want one big cheque going to one big producer. It impacts a large percentage of our industry.

Those are probably our concerns.

[The Chair, Conservative, Larry Miller]

Your time has expired, Mr. Valeriote.

I'd like to thank our witnesses for coming here today, for making the trek down and being part of our competitiveness review.

We remind the members to whom it applies that we have a subcommittee meeting here immediately afterwards.

The meeting is adjourned until Thursday.