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.
12:35 p.m.
General Manager for Colbex-Levinoff, Canadian Meat Council
It's all that's available that would meet this specific.... Is there a demand? There is, but you need the supply to meet it.
That's the key.
12:35 p.m.
Liberal
Mark Eyking Liberal Sydney—Victoria, NS
So the key would be for the producers in that region and that plant to have a certain continuous supply of that type of product. Could they get a premium price for it?
12:35 p.m.
General Manager for Colbex-Levinoff, Canadian Meat Council
You'd have to do some studies on it. I'd be guessing. I would say yes, but that's just off the cuff. Again, supply is critical.
12:35 p.m.
Executive Director, Canadian Meat Council
No, not specifically. But from what I recall, didn't the production out of that plant maybe represent about 16% of the total Atlantic consumption? I would think they should be able to do a really good marketing campaign and succeed, but again, that's just my personal comment.
12:35 p.m.
Chief Executive Officer, XL Foods Inc.
The very first packing plant we bought processed 130 cattle a day. Currently we process 5,000 a day here in Canada. The hardest part for us to learn was that we couldn't compete with the bigger plants. The cost structure from a small plant is so much higher that they have to develop a very targeted niche to be able to survive.
So I think there's a multitude of issues that would have to be looked at. In all honesty, for the livestock producers, they probably see better returns to ship their cattle to the U.S., or from that district, and that should be their prerogative. They shouldn't have to only sell locally. You have to weigh all these consequences when you try to decide whether a facility will work or won't work.
The cost of running a small facility is really tough. I know when we were in that small facility, we looked at the big guys and we thought, how could this be? How can they be running Saturday and I'm not making money? Yet when we moved into XL at 1,000 a day, I started to see that. They were profitable and we were not.
12:35 p.m.
Conservative
12:35 p.m.
Conservative
Randy Hoback Conservative Prince Albert, SK
Thank you, Chair.
Gentlemen, again thank you for coming down. I'll be fairly quick in my questions here.
One comment I want to get on the record is that it was really interesting being down in Washington and I really commend members of this committee--Mr. Bellavance, Mr. Easter, and Mr. Lemieux--on how they did such a good job defending Canada and how they stood up for our producers and how we worked as a team in actually addressing our concerns and issues.
Mr. Boyle, I'd like you to confirm the impact on U.S. feedlots by not having Canadian cattle. Do you have any insight on the number of volume of cattle heading down to the feedlots and whether their feedlots are full or not?
12:40 p.m.
President and Chief Executive Officer, American Meat Institute
We've spent a lot of time talking about decreased value or not a decrease in value, but there certainly has been a decrease in volume, particularly from Canadian hog imports, both the feeder pigs and direct for slaughter. There has been a significant decrease in Mexican feeder cattle coming into the Texas feedlots and I think, to a somewhat lesser extent, a decrease in Canadian feeder cattle coming into our northern tier feedlots.
12:40 p.m.
Conservative
Randy Hoback Conservative Prince Albert, SK
Again, that would have an impact on the packers and the amount of cattle they're getting from the feedlots. Is that correct?
12:40 p.m.
President and Chief Executive Officer, American Meat Institute
Yes, it would. As Brian has mentioned on a number of occasions today, the Canadian herd is at a relatively low level, and so too is the U.S. herd. We've been running at 95 million to 100 million, going back over decades. We're at about 90 million right now. There is going to be increased competition for a stable, if not dwindling amount of cattle in the United States. We've all seen that movie before, when packing capacity competes for a smaller amount of livestock. The producers do enter into that part of the cycle, and the packers have trouble making margins.
12:40 p.m.
Conservative
Randy Hoback Conservative Prince Albert, SK
But is there not a threat that the protein will come from offshore, non-North American protein?
12:40 p.m.
President and Chief Executive Officer, American Meat Institute
Yes, absolutely.
12:40 p.m.
Conservative
Randy Hoback Conservative Prince Albert, SK
Isn't that a threat to the packers, that they'll shut right down? They'll say they can't compete, and instead of North American beef and hogs, we'll see Argentinian, Brazilian, Australian...?
12:40 p.m.
President and Chief Executive Officer, American Meat Institute
You're absolutely right. Historically, prior to BSE, the U.S. was the largest beef exporter in the world. Canada was still struggling to recover from that incident six years ago. But conversely, we've historically been the largest beef importer as well. We're a large pork exporter and a large pork importer.
That's why the members that I have the honour of representing at AMI allow me to expound upon my own personal free trade philosophy, because it's their business philosophy as well.
12:40 p.m.
Conservative
Randy Hoback Conservative Prince Albert, SK
Mr. Nilsson, there are all sorts of questions in Saskatchewan, and I come from Saskatchewan. I think it's a good chance for you to get some answers on the record here.
Why did you shut down Moose Jaw?
12:40 p.m.
Chief Executive Officer, XL Foods Inc.
For the most part, the SRM policy was probably the major issue. That's about a $30 burden right now. I wish to say that our intention is to open the plant in the fall. We did the layoff with a recall notice to the workers for September.
Normally what would happen is that we would go into a loss position through the summer and we would push out those American packers that are buying the cattle in Manitoba and parts of Saskatchewan, and we would sustain a loss. The problem this year with the SRM policy that we're having to live with is that the loss was so huge we had to make this decision. I wish to say that was the hardest decision my brother and I have ever made. That is simply not our way. We are people who believe that you go in and you run better than everyone else.
12:40 p.m.
Conservative
Randy Hoback Conservative Prince Albert, SK
One of the other concerns that have been raised around this committee is packer-owned cattle, that somehow you've got the ability to bring in your packer-owned cattle and manipulate the price. I'm curious, what percentage of the animals you slaughter do you own?
12:40 p.m.
Chief Executive Officer, XL Foods Inc.
This would be a number that I think would probably shock everyone; it ends up being about 12% of our total production. It varies, maybe between 6% and 14%, depending on the time of year and things like that.
To be quite honest with you, over the last five years and with the turmoil of BSE, I would just as soon not own any some days, because we have probably sustained losses greater than anyone in this industry. But we firmly believe in two things. First, we believe we have to be part of that industry. We're not only a key part of, as I said, the capital that is in there for the producers to sell their cattle to; they need buyers. I think sometimes some of the people who talk about captive supply really want to see that the packers aren't there, because they want one fewer bidder on the producers' cattle. I do not believe that. I want to see the packers in there. I see the consequence of the packer capital being in the industry.
As I said, a plant is a huge machine, and you'd need some.... In Lakeside we start in the morning with maybe 200. We're going to do 4,000 cattle that day, and the first 200 come from our feedlot; and that's because they come across the road, they're dependable, and they're going to be there when we start that plant. If I'm hauling them 100 miles and there's a snowstorm and that plant doesn't start up at that time, I lose $50,000.
So a lot of it is to try to be competitive.
12:45 p.m.
Conservative
Randy Hoback Conservative Prince Albert, SK
Yes, it relates to what I'm saying.
You own a lot of auction markets also, but you buy cattle from other auction markets, is that true?
