Evidence of meeting #28 for Agriculture and Agri-Food in the 40th Parliament, 2nd Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was cattle.

A recording is available from Parliament.

On the agenda

MPs speaking

Also speaking

J. Patrick Boyle  President and Chief Executive Officer, American Meat Institute
Brian Nilsson  Chief Executive Officer, XL Foods Inc.
Brian Read  General Manager for Colbex-Levinoff, Canadian Meat Council
James M. Laws  Executive Director, Canadian Meat Council

11:10 a.m.

Conservative

The Chair Conservative Larry Miller

I call this meeting to order.

Before I ask our witnesses to present, just for the committee's information, I tabled the report that came out of our Subcommittee on Food Safety about an hour ago in the House.

I'd like to thank our witnesses today from the American Meat Institute, XL Foods Incorporated, and the Canadian Meat Council for coming before us at fairly short notice. We do appreciate that. If I could ask each one of you to do your presentation in 10 minutes or less, then we'll get to questions.

We're going to start off with Mr. Boyle for 10 minutes.

11:10 a.m.

Conservative

Brian Storseth Conservative Westlock—St. Paul, AB

I have a point of order, Mr. Chair, on what you brought up about presenting the report to the House.

Obviously a vociferous debate went on while I wasn't here. I understand the loyal opposition really wanted advance copies of the report. I found it very disappointing to see the report in the media yesterday before you ever had an opportunity to present it. I know that's something that undermines Parliament and parliamentarians. I'm not accusing anybody here of doing it, but it is something that is becoming a habit in this Parliament. We've seen it also in the culture and heritage committee. I just hope we no longer see these things happen.

11:10 a.m.

Conservative

The Chair Conservative Larry Miller

Order, please.

Thank you. It is the second report in recent times that has happened like that. It is unacceptable.

Mr. Bellavance.

11:10 a.m.

Bloc

André Bellavance Bloc Richmond—Arthabaska, QC

I do not want to delay the testimony of people who have traveled here to hear something else, but I do agree with Brian on this issue. I too find it regrettable that information was leaked, particularly since here, at the Standing Committee on Agriculture and Agri-Food, we have, generally speaking, had trust. Everyone has his or her political agenda, his or her issues to promote. We sometimes demonstrate partisanship, but that is understandable, all politicians do that. I found it unfortunate to read about this in the Globe and Mail. I even had some fears. I wondered how the chair was going to react. I absolutely wanted the report to be tabled. However, when there is a leak, you are always a little bit worried about how things will unfold.

I must say that after this article appeared, I received some telephone calls from reporters who asked me for my comments, which I refused to make because, as far as I am concerned, there is an embargo on the report until it is tabled. I would simply like to point out that this morning, in the Gazette of Montreal, Minister Ritz himself commented on what came out in the newspapers. He said that he was against the main recommendation, which was to hold a public enquiry, etc. I am just a backbencher and I refused to provide any comments to the reporters because I felt that, despite the fact that there were leaks, it was not my role to make additional comments because this work had been done in camera. However, this morning, people are quoting the minister's comments on one of the recommendations. I find this deplorable on either side.

11:10 a.m.

Conservative

The Chair Conservative Larry Miller

Just to clarify with regard to me as chair, we discussed this in the House of Commons yesterday, Mr. Bellavance, you and I and another member. I was very disappointed that it came out as far as the comments by the minister this morning. I have no idea that he did or didn't, and I haven't seen that article.

Mr. Easter, and then we're going to move on.

11:10 a.m.

Liberal

Wayne Easter Liberal Malpeque, PE

Just along the same lines, Mr. Chair. I don't know how we deal with it, but it is becoming a common practice around here that before a report is tabled, parts of it end up out there. We're discouraged by that as well. I don't normally defend the minister. I don't know whether he was referring to the leaked report or to the report itself, but if he was referring to the article in The Globe and Mail, the minister wouldn't have much choice but to.... Although I entirely disagree with what he said, I do think he had the right to defend himself based on a leak that's out there, and so it is a problem.

11:15 a.m.

Conservative

The Chair Conservative Larry Miller

Okay. Thanks very much.

Mr. Shipley.

11:15 a.m.

Conservative

Bev Shipley Conservative Lambton—Kent—Middlesex, ON

I'm curious about what André has mentioned. I also got a call. I don't know how many others did. I did not phone them back until after the report was released. I didn't talk to them because they weren't there then.

But just for that same issue, a big reason why the other day at this committee we did not want to have a draft report of the competition put out prematurely.... We all have good intentions, but we know things sometimes happen outside of what we absolutely want. At any rate, I find it disappointing and pretty frustrating to have that out early.

11:15 a.m.

Conservative

The Chair Conservative Larry Miller

There is just one thing I'll add. I have been contacted, but all I basically gave--and it wasn't reported because it wasn't dramatic enough for the media--was the status of the report. I obviously couldn't speak to it, and I didn't.

Anyway, we'll move on from this. It's very clear that everyone is pretty disappointed with what happened, and hopefully it won't happen again.

Mr. Boyle, go ahead, for 10 minutes or less, please.

11:15 a.m.

J. Patrick Boyle President and Chief Executive Officer, American Meat Institute

Thank you very much, Mr. Chairman.

Good morning to you and to the members of the committee. I greatly appreciate the invitation to appear before you here today.

My name is Patrick Boyle. I am president and CEO of the American Meat Institute, which is based in Washington, D.C., and which was created by the U.S. meat packing industry in 1906.

AMI's 200 general members include some of the best-known meat and poultry food manufacturers in the United States, Canada, and Mexico. Collectively, our U.S. members produce more than 95% of the beef, pork, lamb, and veal in the United States, and nearly 75% of our nation's turkey products.

In many respects, AMI is a North American meat association. Our members include industry leaders in Canada, such as Maple Leaf Foods, Cargill, and XL Beef. In fact, the next witness, Mr. Nilsson, is an AMI director and serves on our executive committee. Similarly, Mexico's largest meat processor, Sigma Alimentos, is an AMI member as well. Since the inception of the North America Free Trade Agreement, companies in these three countries have used comparative competitive advantages to create a very efficient integrated North American livestock and meat market.

AMI membership is a reflection of these economic integrations, and we obviously support and encourage free trade within North America. Conversely, we strongly oppose any measure that would threaten or dampen that free trade. Mandatory country-of-origin labelling, the subject of today's hearing, is clearly such a measure that would dampen and disrupt that free trade. In short, from our perspective, COOL effectively exempts the livestock and meat industry from the proven economic benefits and opportunities provided to all three of our economies under NAFTA.

AMI's involvement in and opposition to COOL goes back more than 10 years since this dubious idea's inception in the mid-1990s. AMI opposed mandatory COOL legislation when it was first introduced and rejected, and continued to oppose it while it was being debated during the 2002 Farm Bill in the United States Congress. We were joined in opposition by major U.S. livestock groups such as the National Cattlemen's Beef Association, the National Pork Producers Council, and their Canadian counterparts. And I also do wish to note that through the entire COOL debate, the Canadian government was also resolute in opposing this mandate.

Our collective opposition was founded on the recognition that mandatory COOL was a thinly veiled non-tariff trade barrier that would discourage livestock imports into the United States, deny Canadian and Mexican livestock producers an effective return on their investments, and add unnecessary cost to the U.S. meat packing industry and the products that we market, without providing any tangible benefit to retail grocers or to American consumers.

As you know, COOL was included in the 2002 Farm Bill; however, we were successful in inserting an implementation delay of two years. Again in 2004, as the effective date approached, we achieved another two-year reprieve. Similarly in 2006, Congress again delayed implementation until 2008. However, as the members of this committee know, elections have consequences, and in 2006 when the Democratic Party achieved a majority in the House of Representatives, along with a majority in the Senate, the proponents of COOL gained an upper hand, and further delays of this mandate became politically non-viable.

At that time it became necessary for AMI to shift its focus and resources away from advocating repeal of COOL to helping draft the most favourable legislative compromise possible under the circumstances and influencing a workable final regulation from the Department of Agriculture.

That mandatory COOL is costly and burdensome is without dispute. Indeed, in the preamble to the final rule published just last January, the USDA reiterated the conclusions about the benefits of the rule it had put forth five years ago in the initial proposal and again last September when it published an interim final rule.

Specifically, the USDA stated that the expected benefits from implementation of this rule were difficult to quantify, and USDA's earlier conclusion, that the economic benefits will be small, remains unchanged. On the other hand, USDA cost estimates were fairly specific. For example, USDA's first-year implementation cost estimates alone are nearly $300 million for the U.S. pork industry, and $1.25 billion for the U.S. beef industry. Moreover, USDA estimated a loss in productivity, after a 10-year period, in excess of $210 million.

Moreover, these numbers are particularly noteworthy when one considers that they are being incurred during a time of economic challenges throughout North America and the rest of the world. These cost estimates do not include the adverse economic impact of COOL on livestock producers in Canada and Mexico.

Looking ahead, I have a few observations. USDA Secretary Vilsack has expressed dissatisfaction with the final rule that he inherited from the Bush administration. He has asked industry to voluntarily comply with his views on additional labelling information and include that origin information on certain processed products.

In my response to Secretary Vilsack, I indicated that there is little evidence that industry is going to incorporate his preferences voluntarily. Instead, AMI has advised our members to comply with the final rule, not with individual preferences. If the USDA wishes to pursue changes in COOL, it would need to do so through the notice and comment rule-making process. At this point in time, I do not believe the USDA has made a decision on that matter.

Regarding the role of and the interest in Congress related to COOL, I believe they are currently in a COOL oversight mode, with little interest or enthusiasm to revisit or revise the statutory mandate. COOL proponents in Congress wish to monitor compliance through the remainder of this year before they even consider taking up the issue again.

I have a final observation concerning the WTO. AMI understands the rationale for Canada and Mexico to challenge COOL at the WTO. In fact, throughout the COOL debate AMI repeatedly told Congress that COOL violates the U.S. government's commitments under the WTO and that Canada and Mexico would likely challenge it with a good chance of success. To the extent that AMI can be of assistance to your government in this dispute settlement process, we are happy to try to do so.

Mr. Chairman, thank you for the time. I look forward to answering any questions you and your colleagues may have.

11:20 a.m.

Conservative

The Chair Conservative Larry Miller

Thanks, Mr. Boyle, for staying well under the time and for a good presentation.

I'll now move to Mr. Nilsson from XL Foods.

11:20 a.m.

Brian Nilsson Chief Executive Officer, XL Foods Inc.

Thank you, Mr. Chairman, and committee members.

I wish to apologize at the start, I am not the eloquent speaker that Patrick is. I always feel embarrassed whenever I have to talk right after him.

My name is Brian Nilsson and I am co-CEO, with my brother Lee, of XL Foods. We are a private family-owned beef and livestock company. We have processing facilities in Calgary; Brooks, Alberta; Moose Jaw, Saskatchewan; Omaha, Nebraska; and Napa, Idaho. We operate on both sides of the border.

It's a pleasure to speak about COOL and competitiveness in the Canadian and North American meat sector. I'm going to touch on a few key points and then I look forward to answering your questions as they come forward.

In our company we believe we have the ability to run world-class facilities and that we can compete with anyone. Our purchase of Lakeside kind of reiterated our thoughts that there should be no shame in being a Canadian company and that we can run things as well as anyone.

In our mature cow processing plants, one of the issues we are currently facing from a competitiveness standpoint is the enhanced feed ban in the SRM rules. That puts an unintended cost on our facilities and has placed a burden on us. We've had to temporarily close our Moose Jaw plant until the fall because of it.

We feel that the effects of COOL have not been as pronounced in Canada as was initially feared. However, it's not that there aren't any effects. On the pork side of the business, we very much see some.

We believe that right now in western Canada we are seeing increased competition in that marketplace because of our purchase of the Lakeside Farm Industries. The U.S. packers are more aggressively trying to buy cattle in western Canada. The truth of the matter is that as Canadians, we are basically trying to deny them any ability to buy. We have to always weigh that thought process. Any discount that the U.S. packers want to put on our producers will be weighed on their ability to buy those same cattle because they can put a discount on.

I look to the fact that since our purchase of Lakeside, we've seen a decrease in cattle exports to the United States. I would not attribute that decrease to any effect of COOL but to our being able to get our operating costs lower and being more aggressive in the marketplace. Much to Patrick's members' chagrin, I would like to say that our goal is that we wouldn't have to ship any cattle to the United States, so we could process them all here.

That's a brief summary of what we are and what we believe.

I look forward to your questions.

11:25 a.m.

Conservative

The Chair Conservative Larry Miller

Thank you very much.

We now move to Mr. Jim Laws and Mr. Brian Read from the Canadian Meat Council.

11:25 a.m.

Brian Read General Manager for Colbex-Levinoff, Canadian Meat Council

I'll start. As well, let me talk OTM from Levinoff-Colbex as well, Mr. Chair.

Just to follow up, Patrick is an outstanding speaker, Brian is...good, and now you're getting the worst. But it will improve, it will improve—

11:25 a.m.

Some hon. members

Oh, oh!

11:25 a.m.

General Manager for Colbex-Levinoff, Canadian Meat Council

Brian Read

I guarantee you it will improve as we move on to Jim.

I appreciate this. I always find this a humbling experience to be in front of such a talented group.

This issue of competitiveness is really chronic in our meat industry today. Anybody who's involved directly in this packing industry will have to agree with that. One is the SRM, and I come back to where two or three years ago this committee—I know some of them are in this room—recommended that the packers have to look at that policy. I was a supporter of that policy, but we might not be able to afford this luxury. As I said, we've seen some drastic moves, and there are other drastic moves in the meat industry threatening, believe me.

Capacity: we have capacity in this country. We were asked by this committee a couple of years ago to increase capacity. We did that willingly. There was money in the business, and we reinvested. We can compete globally. The quality that we're producing today is much superior to that prior to 2003. We made good product in 2003. We've invested in interventions, food safety initiatives, better chilling capacities, etc., so we can compete globally. But we are a little bit hooked on policy--a little bit; it's a major issue.

The other thing we're going to ask of this room is that we also impose random E. coli testing on imported beef into this country. We currently do that when we export, so we're asking for the same scenario on imported. With that again, I can go on and on, but I'd like to leave it for questions for this group, and I'll move my time to Jim.

Maybe I'm leaving you too much time.

11:25 a.m.

James M. Laws Executive Director, Canadian Meat Council

My name is Jim Laws, and I'm an executive director of the Canadian Meat Council. I'm very fortunate that both Brian Nilsson and Brian Read are here with me today, both past presidents of the Canadian Meat Council and both running real beef operations in Canada.

As you know, we're the most important of the food sectors in Canada, employing some 67,000 people. And I too won't speak for long either, to make sure you have lots of time for questions.

We did also recently appear before your red meat sector committee, and we also appeared recently before the Subcommittee on Food Safety, and the House of Commons international trade committee. We've given you our recommendations on several issues, and we are sure that you'd rather we not repeat those to you today, such as removal of inspection fees, assistance for the high cost of compliance with the enhanced feed ban, and the need for enhanced slaughterhouse competitiveness, and not necessarily capacity. It is also understood that following your committee's recent visit to Washington and your meetings with different industry groups, you have further questions specifically related to the mandatory U.S. country-of-origin labelling regulations.

In 2008, we did work closely with the Government of Canada and we did fully support its submission to the Government of the United States on their interim final rule on mandatory country-of-origin labelling. The Canadian Meat Council did host a very successful one-day seminar in Toronto on September 10, 2008, where the American Meat Institute's vice-president of regulatory affairs and general counsel, Mark Dopp, was the main presenter. Fortunately for us, many of our members' meat products are sold to the hotel and food service market and to further processors of meat segments that are exempt from mandatorily declaring the country of origin on the labels.

Of course, late in 2008, we did fully support the Government of Canada's official notification to the WTO of its concern for this U.S. rule, and of course the recent letter by U.S. Secretary Vilsack to the U.S. industry asking them to voluntarily comply with his own version of the rule, which is stricter than the published actual final rule. It does concern us, and for that reason we did also recently support the Government of Canada in putting the United States on notice that it plans to reactivate its complaint at the WTO.

With that, we welcome your questions this morning.

11:30 a.m.

Conservative

The Chair Conservative Larry Miller

Thank you very much, gentlemen.

Mr. Valeriote, for seven minutes.

June 18th, 2009 / 11:30 a.m.

Liberal

Frank Valeriote Liberal Guelph, ON

Thank you very much for attending today on short notice.

Each of you qualified your remarks by comparing yourself to the others who were about to speak or spoke before you.

The questions I ask will probably be the lightest, given that I'm, along with Mr. Hoback, the newest member to the committee with the least experience in agriculture. So just think about the following questions that will proceed from mine after I ask, and it is about COOL.

Mr. Nilsson, I should tell you that Mr. Shipley, Mr. Miller, and I had an opportunity to meet with Collin Peterson, who is the chair of the House Committee on Agriculture, when we were in Washington. We raised the issue of a reduction of $100 a head for the purchase of Canadian cattle. And the reason for this that's been given to Canadian cattlemen is the application of the COOL rules and the need to segregate cattle.

I can tell you clearly, unless Mr. Shipley or Mr. Miller had a different perception, that Congressman Peterson said that we were being basically hoodwinked, that it was an excuse to drive down the cost of cattle. And frankly, at this point, unless you have some overwhelming evidence to the contrary, we're inclined to believe that.

Having said that, however, you will have an opportunity to explain. My question is, isn't it true that U.S. packers already segregate animals of different ages for specific markets, and so how is segregating Canadian and U.S. animals different from segregating animals of different ages? And we want to know what specific changes to the lines of production U.S. packers have to do in order to segregate Canadian livestock that would cause a reduction of $100 a head in cattle in the price.

That's the easy question. The others will ask more difficult ones.

11:30 a.m.

Conservative

Pierre Lemieux Conservative Glengarry—Prescott—Russell, ON

That's a good question.

11:30 a.m.

Liberal

Wayne Easter Liberal Malpeque, PE

You're getting recognition from Pierre. That's unreal.

11:30 a.m.

Conservative

The Chair Conservative Larry Miller

Go ahead, Mr. Nilsson.

11:30 a.m.

Chief Executive Officer, XL Foods Inc.

Brian Nilsson

I'll start by giving a mild example. I was just at a cattle conference on Monday and was one of the speakers. One of the other speakers was a well-known analyst. She used to work for CanFax, which is the price-recording mechanism we have in Canada. She presented a report and gave projected prices for cattle in Canada.

I found it very interesting, because she showed that if we were relying on the export market to the U.S. packers to establish our price today--the discount you talked about--our market would have to be $75 a head lower than it currently is. She said that right now the Canadian packers are well above export level on their cattle, and that's why we're not seeing a lot of cattle being exported. The cattle that are currently going have been under contract for many months. The cash cattle are not going. So I would say that this discount isn't to the level you would forward.

Since our purchase of Lakeside, we have been very aggressive in bringing the level of processing up in that plant. We believe it's best for the Canadian industry that we process these animals here, ship the meat into the United States, and service our domestic marketplace. If you wish, they are a witness you could call to clarify some of this.

I think there was a concern, when country-of-origin labelling initially came in, that U.S. packers would be able to discount the cattle in Canada, and that the Canadian industry would have an ability to do that. It just isn't the case. We're going through a natural reduction in the herd in the cattle industry right now. The truth is that we will probably get to a level where we have hardly enough cattle to satisfy our own industry, and no extra to export.

I'll lightly touch on the segregation in the U.S., if it's okay, and draw on my experience, because we do have some Canadian plants. I think there are two parts to segregation. This is a rigid segregation, in a sense, but the biggest thing that came out of segregation that people aren't necessarily talking about is that the U.S. packers started to segregate Canadian cattle because of the COOL legislation. They found they weren't receiving the same value for their meat, because they could not export part of that meat to Korea. In Canada we do not have an ability to export to Korea, and the U.S. packers then identified a lack of revenue from the Canadian cattle. So sometimes we will confuse part of this discount that's attributed to segregation to not having the revenue.

This is the same problem we currently have in Canada with our fed cattle. We don't have access to the Korean market, and we've lived with this $25 a head for many years. I think this was the first time the U.S. plants truly were able to identify that. The balance of it is in their segregation cost. There are efficiencies in plants. Like building a car or anything, it's all based on continuous flow, and every time you have to change that flow there's a big cost. So I think that's part of it.

We have seen some retailers in the States that have preferential programs, but that's not a major issue with this.

11:35 a.m.

Liberal

Frank Valeriote Liberal Guelph, ON

I'll let the others around the committee pursue the issue of COOL further, but I have another question not related to COOL.

We've had a number of cattle producers come before the committee over the last couple of months. Some have complained about the captive market that has been created by companies like yours. You have your own feedlots you can rely on, which impacts negatively on the price normal producers get for their cattle.

I'm kind of inclined to say that maybe we need some regulations on what you can do as far as having your own feedlots goes, since they impact negatively on the price per head. I'd like you to give me a compelling reason why we shouldn't do that, given the impact it's having on cattle producers.

11:40 a.m.

Chief Executive Officer, XL Foods Inc.

Brian Nilsson

My first thought is that if we actually had that type of legislation and saw its impact, we would find the impact to be extremely negative to the cattle producers. One of the things we learned very early on was that this industry is based on capital and the amount of money in it, and when you remove capital you lower prices. It's our personal belief that there would be a very negative effect from that. Some producer groups maybe have not considered that.

On a personal level, my grandfather immigrated here in 1930. My father fed cattle. We've been in the business the whole time. He was a very small cattle feeder. My brother and I started out driving three-ton trucks and feeding 500 cattle when we were 16 years old.

Our system allows you to grow and develop. I struggle tremendously when I'm in the media or when people say I have a big company. I like to think of Star Wars, where they're in the ship being chased by a huge fish that's going to swallow their sub, and suddenly another fish chews that one up. There's always a bigger fish, and in my life I've learned that. There's always someone bigger and always someone smaller. Our goal has been to do the best we can for our customers, and we have been rewarded by having the size of company we have.