Agriculture Committee on June 18th, 2009

[J. Patrick Boyle]

As Brian Read said, we do have equivalent systems. They're not identical, but our governments recognize them as equivalent for purposes of facilitating trade. Both the Canadian Meat Council and the American Meat Institute are very strong proponents of harmonizing the systems more precisely so they become more identical.

For example, Mr. Read mentioned E. coli testing on imported products. FSIS conducts those kinds of tests at the border. From our point of view, FSIS should be in a position to acknowledge the results of CFIA conducted in the plants because that's more efficient. Conversely, that should be the application to U.S. exports as well.

[France Bonsant, Bloc, Compton—Stanstead, QC]

Do you wish to speak, Mr. Nilsson?

[Brian Nilsson]

I was just going to say that I think what you are seeing is that there is a debate between the two countries on the organic recognition standard. I think that is more of an entrepreneurial...or how would you call it, Patrick? One saying they have an organic standard and you don't. I think that's more from the corporate company recognition standard than the actual inspection systems. The inspection systems are very harmonized.

[France Bonsant, Bloc, Compton—Stanstead, QC]

In my riding, nearly 60% of the people are farmers. I went into politics in 2004. I am not a farmer by training, but I have seen my friends just about commit suicide because of the mad cow disease and everything that occurred. So I said to myself that if I could do something, I would.

I am familiar with Quebec's regulations and I have learned a great deal about agriculture. I put on my boots and bluejeans and I went and saw what was going on. I wondered why, during the days of the mad cow disease crisis, everybody in Canada was being penalized. From what I could see, mad cow disease does not float on the water in Prince Edward Island or in Newfoundland and Labrador—or our Quebec requirements...

Why are you saying that the food safety is similar when in fact it is not? It is probably more stringent in Quebec than elsewhere. I find this difficult to understand. I have seen Californian carrots with salmonella. So I am very afraid of beef with added hormones winding up here when in fact this does not exist in Quebec.

If you can convince me of the opposite, I am all ears.

[The Chair, Conservative, Larry Miller]

Do you have a question, Ms. Bonsant?

[France Bonsant, Bloc, Compton—Stanstead, QC]

In the United States, do the food safety inspectors and veterinarians work for the government or for a private corporation?

[Brian Read]

I'll have to apologize for the three of us sitting here. Jim of course is the executive director of the Canadian Meat Council, but we do meet nationally with CFIA. We meet in Alberta, Quebec, and Ontario. We're looking to achieve harmonization across the country. I'm one of those believers that our food safety system we have in Canada is a world leader.

[The Chair, Conservative, Larry Miller]

Thank you very much.

Ms. Bonsant, as a farmer from Ontario, I take a little bit of exception to your saying that food inspection in Quebec is more stringent than it is in other parts of the country. I think that it's very equal. Federal inspection obviously is the same right across the country, but I know that Ontario and quite possibly Quebec certainly rank very close to the federal inspection as well.

[Brian Storseth, Conservative, Westlock—St. Paul, AB]

You're always leaving Alberta out.

[The Chair, Conservative, Larry Miller]

No, I'm not. I'm not leaving Alberta out.

We now go to Mr. Shipley, for five minutes.

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

Thank you.

Thank you, witnesses, for being here. I particularly thank Mr. Boyle for coming over and being part of our study of the competitiveness of Canadian agriculture.

Mr. Boyle, Mr. Nilsson talked about the groups in terms of the impact that they've had on the COOL legislation that came forward to be more restrictive. Could you be a little more descriptive on who those groups were, please?

It's for the record. We likely have an idea, but it's for the record. In Canada some others were involved during the BSE period with a particular group. I myself was not, but I was wondering if you might identify them to help us out, please.

[J. Patrick Boyle]

Three groups are the leading proponents of COOL in the United States. One would be a group called R-CALF. A second group is the U.S. Cattlemen's Association. The third is a national group, the National Farmers Union.

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

Okay.

I think it also reflects the impact to Canadians, and I've listened to Mr. Nilsson, but is COOL seen to be the largest impediment or barrier towards viability in the United States, in terms of profit for the industry?

[J. Patrick Boyle]

It has certainly imposed an enormous cost on the industry, and I outlined that in my opening remarks, but frankly speaking, those costs are absorbed. They're dispersed. The market responds.

In the packing sector, in the middle, we try to operate on margins, at some times more successfully and profitably than at others. We're a margin maker, so when those costs are dispersed, some of them are absorbed in our operations and some are reflected in lower prices for livestock. To an extent, we have the leverage, rarely, of higher prices in wholesale beef and wholesale pork products.

It's an enormous impact. It's a cost that we don't think has any benefit and that should not have been imposed, but it has been absorbed within the system.

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

I don't know if it's the same in the United States as it is here, but usually the majority of that absorption ends up down at the primary producer, because it can't go any further down the line. Is it the same scenario?

[J. Patrick Boyle]

I did make reference to the difficult leverage in dealing with large retailers in the United States when it comes to pricing.

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

Mr. Nilsson, I appreciate your comments. I also come from an agriculture background. You're someone who has gone through from the beginning and you know what it's like to start out young, work hard, work up through the system, and be successful. I think it's a tribute not only to you but to your family and your country. I learned that earlier, actually, with some business not too far from us in my riding. It's always interesting to know the background.

You talked about being able to be competitive because of your efficiencies. You've bought out Lakeside and you've been able to compete. A major factor in your competitiveness may be internal efficiencies in terms of technology, but is continuous flow of livestock, a product going through your lines, one of the main things that makes you competitive?

I'll ask the same to Mr. Read.

[Brian Nilsson]

I could point out that in our purchase of Lakeside, one of the things that helped was that we knocked the administration costs at the corporate office in the United States by about 80%, because I don't really think I'm worth that much, so we don't charge that much to our plant. We did that to start with.

In terms of the supply chain, we try to work really hard with our own production and with producer alliance groups. The Canada Gold Beef initiative is a producer alliance in Alberta, and we process their cattle for them. Having those producer alliances is a big part of it. Those types of supply chains are very much part of making a plant efficient.

We spend a lot of time trying to make sure we have an efficient plant, because we understand that it's how efficient the plant is that determines how much we can pay for the livestock, and that's what keeps them from going to the United States.

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

I have a quick question before I run out. You can both answer. When you talk about the reduction of the herd, the number of cattle, is that going to allow you to still be sustainable and viable as an industry, in terms of the processing?

[Brian Nilsson]

At this point, if it sounds like we have a mission that we believe the livestock need to stay here, it's to sustain our industry. That is part of what we're trying to do. We're trying to make sure, because there is a danger that our industry contracts to a level where we then lose packing capacity in Canada, so we'd lose it and it would never come back. As a Canadian company, the thing we absolutely wouldn't want to see...and that was part of our decision to purchase Lakeside; we were concerned that the facility might close. I can tell you that then all of a sudden the cattle do go the United States, and they ship the meat back here. It would be a travesty, as Canadians, to think that we would have to have a meat production system in the United States.

SRM has been an issue for us in the mature cows. That's one of the things that have pushed hard on us, because we can't compete on that particular thing. The rest I very much like to believe I can be competitive in. There will be enough cattle that we can run our industry on.

[The Chair, Conservative, Larry Miller]

Thank you very much.

Mr. Eyking.

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

Thank you, Mr. Chair.

Thank you to the witnesses for coming here today.

I don't know if any of you are familiar with the situation with the beef industry in Atlantic Canada. It's not a big industry when you compare it to the one in western North America, but it's very important. We have one killing plant. It's a small one. It's very modern, but it's small. Most of our producers are under 100 head. They're grass-fed, and they don't use antibiotics, and they don't use hormones. But the situation is that there are only a couple of chain stores in Atlantic Canada, and they purchase through you people, I guess, on a national purchasing program and things like that.

I have two questions, because you guys know the industry and where it's going and how it's evolving.

My first question is probably to the two Brians. Is there a way for that industry to survive? Could your companies sell a different type of product in a niche market? I know people will debate that all beef is the same, but could you sell it to certain stores or restaurants as that type of beef that's free-range, grass-fed, and hormone-free? Could that be in your product line? Would that be a way of that industry surviving?

[Brian Read]

One of the issues you have is supply. You spend a lot of money on marketing a specific, and when you do get it into a major chain, you won't have enough meat to satisfy it. All of a sudden, you're going to fall short. You only fall short one week, and they'll delist it. This is the risk of that.

It's a niche market. You need to find a variety store type of environment. If you go to the majors, you need to meet their demands, for the cost of not meeting them is something we don't want to talk about. That's the downside to it. It's to grow it and spend money on marketing and then not have the supply to sustain it. We've seen that. We looked at hormone-free at the Colbex plant. I think if you go through the criteria of hormone-free and organic under that term, I think we're up to about three head a week that would qualify. We can't do much with it.

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

Is the demand not there for a consumer going into a store or a restaurant in Vancouver? Is there a niche there that could be filled for more than three head a day or a week?

[Brian Read]

That's all that's available from a supply standpoint.