Agriculture Committee on June 18th, 2009

[The Chair, Conservative, Larry Miller]

Thank you very much.

Now we'll move to Mr. Richards, for five minutes.

[Blake Richards, Conservative, Wild Rose, AB]

I'd like to talk about a couple of issues. One, of course, is one of the issues we've all been wanting to talk about, not just today but for quite a while now, and that's COOL, which is an acronym for something that isn't very cool.

But I'd like to start with something I think is tied to that, which is the work our government has been doing to open up market access for our farmers to other markets. The reason I say I think that's tied is, certainly, I believe we need to reduce our dependency on one particular market. Things like COOL, things like BSE, show us why that might be. In our work during this session, we've had a steady stream of farmers, farm groups, and other experts coming through who are telling us they're very supportive of our government's work in terms of opening up market access to ensure we have other markets and especially large markets. Of course, we've done a lot of good work in that area and we're continuing to work hard at that. It's a big focus of our government.

I'm wanting to get a sense from the three Canadians here whether you would agree with those efforts we've made, the focus our government has put on that, and maybe tell us a little bit why or why not.

[Brian Nilsson]

Do you want me to start?

[Brian Read]

Minister Ritz was at our last beef round table, and we complimented him on making his global tours and so on, so we do appreciate all those efforts. It does return to us.

The issue we have--and again, we'll come back to it--is that market access is great, but we still have one major competitor. It happens to be our major customer, but it also is a major competitor, and if we're not equivalent in our regulations--equivalent is the right word--you open up a market. It's pretty hard to compete with our major competitor, and that's the dilemma we're getting into as we speak.

I believe this herd will rebound and I think there's a future in this business, but we need somebody to go up that flagpole in a hurry. That's my comment, and I do appreciate all the efforts.

[Blake Richards, Conservative, Wild Rose, AB]

Thank you.

Do any of you other gentlemen have a comment on that?

[Brian Nilsson]

Just quickly, there has been a tremendous amount of work done on reopening markets after BSE, and the government has been very strong on that. The new trade secretariat has been a response to a call by the industry to do that, and we hope it will be a successful step to try to open more markets.

Again, it's getting to be less of an issue. As our herd has contracted, the domestic market plays more of a role in price discovery in this country. But the export market is the part of the marketplace that brings extra value for the parts of the market that are not really saleable here.

[James M. Laws]

Just to add to that, we're very pleased that the government has hired Fred Gorrell to head up that agriculture market access secretariat. We worked with Fred down in Washington while he was there for the last three years, or whatever. He has been back for about a year now. He's a very good fellow, and we're really pleased he got that position.

[Blake Richards, Conservative, Wild Rose, AB]

Great, I appreciate that.

Now, of course, I want to give a chance to our American friend here as well, because I want to talk a bit about COOL and some of its effects.

Certainly, I want to let you know as well that we do understand that you are our best friend and biggest trading partner, and we want it to stay that way. But I wanted to talk a little bit about some of the effects—and maybe I'll get a comment from both the Canadian perspective and American perspective—that you've seen in your operations and profits, and then, of course, on some of the prices received by producers for their livestock under the COOL regime.

I'm just trying to get a comparison here. Maybe you could give me a bit of a quick synopsis of the effects it has had on your operations on both sides of the border.

[J. Patrick Boyle]

Thank you very much.

I've been struck by some of the comments by certain producers in Canada that it's costing them x dollars a head, whereas you get feedback from some of the COOL proponents in Washington that it's not the case. As usually turns out to be the case, I think the truth is somewhere in the middle.

There are a lot of variables that go into price discovery, particularly imported livestock price discovery. The exchange rates are one we've talked about. Another is freight costs, depending upon the distance you bring livestock in from a foreign country. There are also quality and yield, which apply to all cattle and hogs we process in the United States, regardless of origin.

But post-COOL, there are other variables that come into play, including the segregation costs we referred to, and any diminution or devaluation in the wholesale price of that commodity, depending upon its origin.

Retailers want one consistent label; they don't want to manage multiple-origin labels in their retail grocery stores. That's because most of the beef and a fair amount of fresh pork today is still shipped to them in primals and subprimals. It's cut and traded and wrapped in the backroom, and if they're not getting one consistent U.S.-labelled product day after day, then they have to start segregating it as well. They have to start managing their inventory, just as we have to manage it at the packing level.

So there have been instances where large packers have decided they're going to use only U.S. beef in their premium product lines, because they can get a good return from their retail customers, not just because of the quality of the product but also because of the uniformity of the label, the ease with which they can manage their retail meat case. To the extent that is not particularly attractive to a product that's labelled “Product of U.S. and Canada” or “Product of the U.S. and Mexico” from a retailer's perspective, there is a diminution in the wholesale value.

So all of those normal historical variables and the two post-COOL variables go into the value of the livestock that we purchase.

I'm not an economist, but economics 101 will suggest that there would be some downward pressure on the livestock price related to imported animals, because of those two added variables.

[The Chair, Conservative, Larry Miller]

Thanks, gentlemen.

Just as a follow-up, you've heard a bit of discussion about our visit to Washington. We have been hearing, as committee members—and not just from some of our own industry people, but certainly from some people in the U.S.—that there's displeasure in the United States with COOL among a lot of people in the industry, and the slaughter industry, with the exception of the odd group, such as R-CALF and what have you.

Could any or all of you comment on that? Are you hearing those same comments? I know, Mr. Nilsson, you were saying that COOL has had an effect, but it's maybe not as bad as it could be, if I interpreted you correctly.

But are all of you, or any of you, hearing the same types of comments we're hearing?

[J. Patrick Boyle]

On behalf of the packers I represent in the United States, I will say they are dissatisfied with the regulation; they're opposed to the mandate. They invested a lot of resources, through their own companies' efforts as well as through the American Meat Institute, to try to oppose and then eventually delay for many years the implementation of the mandate. But at the end of the day, if you want to run your business you have to comply with the regulations, and that has been the focus for the last 12 or 18 months, trying to comply in a way that's most cost-effective for your operation and being consistent with what's required of you.

[The Chair, Conservative, Larry Miller]

Okay, thank you.

Mr. Read.

[Brian Read]

Just to follow up with Mr. Boyle, I believe that if our country were running at capacity and our herd were normalized--and we're into that rebuild, hopefully--this issue might be bigger than it is today. It's because we're running at such a low volume today that we're not really feeling it. In Ontario we have country-of-origin labelling at the retail counters, but that doesn't stop them from bringing the product up, which they do. They bring it up and they label it accordingly: “Product of U.S.”, or “Product of Canada”. In the United States the major retailers are saying, as Mr. Boyle alluded to, that they want just one label.

So I believe that if we were going full tilt we might be here telling a little different story. But we're kind of rationalizing our packing industry as we speak, letting people go and making us more efficient, etc. I'm not sure it wouldn't be a bigger issue if we were normalized. So I support the effort of this government on its challenges.

Mr. Chair, if we can move along quickly...and I think Mr. Easter brought up the timeline and how long this could take. Somehow we should get it on the fast track, because as I alluded to, I believe we're in the bottom of our supply and we're on our way back up, so we have to prepare for that growth again.

[The Chair, Conservative, Larry Miller]

To follow up on my question, Mr. Boyle, you pointed out that the slaughter facilities you represent, or the packing industry, are showing their displeasure with it. Are you hearing the same thing coming out of the grassroots producers as a whole? Can you comment on that at all?

[J. Patrick Boyle]

Not yet, although I suspect it might be somewhat inevitable to the extent that they are not going to realize the price premium in the marketplace, at least not at the magnitude they had hoped for. Ninety per cent of the beef we market in the United States is U.S.-origin beef. It's hard to develop a premium price point for what is basically a commodity. The converse is happening. There is a downward pressure on the non-U.S.-only sourced raw materials. But there is not the premium they had hoped to receive, and that at some point may prompt them to revisit and perhaps express buyer's remorse.

[The Chair, Conservative, Larry Miller]

Mr. Nilsson, you're also a producer. Are you hearing anything from your producing counterparts in the U.S. in terms of this?

[Brian Nilsson]

I think Patrick touched on it. There is a real feeling that there hasn't been a premium. That's what they anticipated would happen, and I think there is a great deal of disappointment in how that has turned out. I think there's even a disappointment in the sense that the actual discount that is happening in Canada isn't as severe as they wanted. Again, their initiative is to block us from being in that marketplace, so we have to always remember what the end game is that they would believe appropriate.

I believe that in the long term we will actually move to a position where some of the Canadian product will develop recognition as a premium product. It's interesting that Patrick says they're 90% and we're 10%. They're forcing us to identify that 10%. We've always been Canadian meat. The meat from our plant in Alberta was labelled every day. There has always been a country of origin in the sense that it was Canadian meat. It didn't have to be labelled at the counter. But as that consumer sees Canadian product in certain retail sectors, maybe we will develop that brand that we keep talking about.

[The Chair, Conservative, Larry Miller]

Thank you very much, gentlemen. It has been great having you here.

We're out of time, but thanks again for coming at short notice. We wish you all well in the business. We'll probably see you back here at some point.

[Mark Eyking, Liberal, Sydney—Victoria, NS]

Mr. Chair, I have a point of order.

[The Chair, Conservative, Larry Miller]

On a point of order, Mr. Eyking.

[Mark Eyking, Liberal, Sydney—Victoria, NS]

Mr. Chair, 60 years ago on this weekend a noisy boy was born in a potato patch in P.E.I. Now, it's not easy, Mr. Chair, to turn 60, but our member has done it in style. I think, for the record, we should congratulate the member for Malpeque on turning 60.

[Some hon. members]

Oh, oh!

[The Chair, Conservative, Larry Miller]

He'll be collecting that little brown envelope now.

[Some hon. members]

Oh, oh!

[The Chair, Conservative, Larry Miller]

Before we adjourn, this is our last meeting, and I would like to thank all of the committee members and the staff, of course, for your indulgence. We have had a lot of work. As I mentioned earlier, we tabled our subcommittee report, which a number of us were on, and that part is done. There's an old saying that a farmer's work is never done; well, the agriculture committee's work is never done either.

Thanks for your indulgence--for most of the time--and I hope everybody has a good summer.

The meeting is adjourned.