Agriculture Committee on Nov. 3rd, 2009

[The Vice-Chair, Liberal, Mark Eyking]

Thank you very much. That wraps up Mr. Easter's time.

We will now go back to the Conservatives. We have Mr. Hoback.

[Randy Hoback, Conservative, Prince Albert, SK]

Thank you, Chair.

Gentlemen, thank you for coming out today.

This has been enlightening. Actually, when I sat down at this meeting, I wasn't going to ask any questions, but you sparked a few interests here.

One of the questions I have is on the $31.70. Let's say that we're going to pay you $31.70. It's a done deal. Would that open up some plants, Mr. Read?

[Brian Read]

Well, I'm not sure it's going to open them, but it'll maintain them. It will give us opportunities. That's what it'll do. It will stop us from reducing. If you put a business model together.... I appreciate all the federal funding, the $9 million or $10 million. Don't take that the wrong way. I think those plants needed efficiency improvements, and we compliment you for that. But plant efficiency and SRM rules are two different things. Regulation is what is hammering us now. As an operator in western Canada, that is what we wake up to every morning. That's the only thing.

Will it open more? Right now we've lost capacity in this country. God willing, we can bring it back up. We've gone from 99,000 down to 60,000, and we're starving for 60,000. Fat cattle dropped off in the last couple of weeks and cows picked up. We still can't get over that level of 60,000 to 70,000 a week. We were as high as 90,000. So to get back would be fun, but at least it would give us the opportunity to start going back. That's my point.

[Randy Hoback, Conservative, Prince Albert, SK]

How about you guys in Quebec? Would that have any impact in Quebec? Would we see some plants opened there?

[Philip Cola]

Just to put things in perspective, we were running in the last year at about 65% of our capacity. Going along with what Brian is saying, if we could just get back to where we were before that, that would be a big thing too. We have that excess capacity right now available to us, and we'd really like to fill our plants up right now.

[Brian Read]

I just want to add that maybe we'll talk a little bit off-line. It just dawned on me what you were talking about.

Yes, that's a positive thing.

[Philip Cola]

When things were on a level playing field, we were able to start importing cows from the U.S. We're right on the border of Vermont and New York State. So hopefully, yes, I'd love to build another plant and kill that much more and take some of the cows from the U.S.

[Randy Hoback, Conservative, Prince Albert, SK]

I'm looking back at 2007, when this came in. There have been some structural changes in the industry besides SRM. The change in the dollar would have a huge impact on your operations. I think you'd all agree with that.

When I'm hearing that you're at 65% to 70% capacity, that also concerns me, because that tells me that you're not running at an efficient capacity level.

I also get concerned when you, Mr. Pellerin, say that this industry is going to die and we're going to lose our factories. Yet the factories we have are running at only 60% to 70% capacity. It looks to me as if there are all sorts of things going on here besides SRM that could be impacting the industry.

[Philip Cola]

Not really. I think that is one of the results. The SRM is a result of us going down to that 65% capacity. It's not that the animals were not there. It's that we needed that extra money to bring us up to speed. If you can't run your plant at capacity, the $31 would sure help bring us to increase our slaughter capacities and bring us into a more efficient zone.

[Laurent Pellerin]

A COOL system in the U.S.... Talk with western farmers. They very often have a premium to deliver in the U.S., because they're charged. The cost of that beef in the U.S. is a little bit lower. Sometimes it's not a pile of money—$5 or $10 per head. It sometimes may move the farmer to deliver in the U.S. We have $30 here. We have $6 or $7 on the finished beef. Sometimes it's only the premium that the U.S. packer can afford that we cannot support here. So some volume here is moving to the U.S., there's no doubt about that.

[Brian Read]

You brought up the American dollar. We've been through turbulence with the currency in the past. We compliment our country's efforts on maintaining its own status and understanding the devastation it has to the total manufacturing in this country, not just the meatheads. So I think we've been through that turbulence in the past.

I think the other thing you have to look at is that in 2003, we expected to have the lowest live cattle inventory in the country. BSE probably delayed that. We're seeing it now, and this is always cyclical. So I do believe that if the ducks line up for us, the markets, etc., we'll see this herd come back again. When the border opened, there was a ton of calves, and it was economics. There was 1.6 million that crossed the border. We're seeing that now; we'll see that into the spring. In talking to the country—and you talk to them more than I do—there seems to be some enthusiasm at the farm gate as well. Don't quote me on that, but I get that sense, and maybe I'm wrong, but I think we're in that cycle.

[Randy Hoback, Conservative, Prince Albert, SK]

I think you're right, Brian. When I talk to the younger farmers, it's very age-dependent. If you're 55, 60, you're getting out of the industry; you're retiring. You've seen your better days as a farmer. You have lots of experience, but you might have seen better days as a farmer. But if you're 25 or 30, there's a youth there looking at buying breeding stock very inexpensively, at getting into the industry, and is excited about it.

I want to keep encouraging them. That's why I don't want to see messages saying this industry is going to collapse, because it's not going to collapse. It's going to have all sorts of struggles and pains and structures, but it's not going to collapse. I don't think we should be spreading those rumours that it's going to collapse. That's not true. There will be a beef industry. Farmers find a way to make it work. They always have and they always will. But you know that.

[The Vice-Chair, Liberal, Mark Eyking]

You have half a minute, but Mr. Dessureault wanted—

[Michel Dessureault]

I would like to make a few comments on the rate of effectiveness or work of companies.

In eastern Canada there is only one large slaughterhouse left, the Levinoff-Colbex slaughterhouse. Last year 94% of the cull cows in Quebec were slaughtered there, along with a large percentage of those from the maritime provinces and approximately 50% of those from Ontario. There is no significant cull cow abattoir left in Ontario.

You must understand that the American buyer is very present in eastern Canada. He is taking over the cull cattle. The additional $31.70 he has has allowed him to come here and compete with us. We must rectify this situation. To do this through regulations is the best possible solution. We know this. However, in the meantime, can the Canadian government support the industry, so that we can maintain jobs? Our young people want to stay on our farms.

You will recall that at the beginning of the BSE crisis the outcry was first heard from the dairy producers. The value of a cull cow in Canada is the net profit at the end of the year. When there is no more leeway in that regard the entire dairy industry will fall apart, because of the collateral effect. So, it is important to consider the slaughtering of cull cows in Canada from a broad, overall perspective; we have to consider the reality in the western and eastern parts of the country and try to collectively find a way to improve the situation.

[The Vice-Chair, Liberal, Mark Eyking]

Thank you very much.

We're going to have one more questioner. We're going to go to Mr. Richards for seven minutes.

[Blake Richards, Conservative, Wild Rose, AB]

Thank you.

I appreciate you all being here today.

I would like to pose a couple of quick questions on the $31.70 payment. I think you've made yourselves very clear as to what you're looking for here in the short term. I do have some questions that I'd like to get to, if we have an opportunity, on the long-term stuff. They've been brought up on the periphery a little bit today, but really haven't been addressed to my satisfaction, as far as long-term solutions are concerned.

First of all, on this payment, you've mentioned that about $25 million is roughly what we'd be looking at there. I know certainly my colleagues on the other side have said, “Only $25 million?” I guess I would look at the $43 million that's still missing from the previous Liberal government and think, if we could somehow get to the bottom of what they've done with that, there would be $25 million, and we'd have $18 million to spare, for crying out loud. That would sure be nice. Anyway, to that point, I'll address it to whoever would like to answer.

I know, Mr. Read, probably you would have an answer, I'm sure. On this $25 million, how many companies would we be talking about that going to? How many companies would that benefit?

[Brian Read]

Again, you have to understand that we're the federal system. We represent the federal packers at this particular meeting. But we are also very sensitive to the ma and pa corner butcher stores. We would expect it to affect all of us--the total cow slaughter in this country.

We understand the need for the ma and pa stores, the provincial or whatever. If a cow goes down, all of a sudden somebody can eat it. Home use--maybe that's the right word to use.

So we would expect it to satisfy the entire need for OTM product in this country.

[Blake Richards, Conservative, Wild Rose, AB]

Could you give me any idea as to how many slaughterhouses and how many packers we'd be talking about here? Are we talking about most of this going to a few major companies, or are we talking...?

[Michel Dessureault]

In Quebec, 94% of cows were slaughtered at the main abattoir in Levinoff-Colbex, and the other 6% in smaller slaughterhouses in Quebec. There are approximately 20 such small slaughterhouses in Quebec. In other Canadian provinces there are some cull cow slaughterhouses under regional or Canadian inspection. In Canada, there are two major companies and 50 or so smaller size businessees that slaughter cull animals.

[Blake Richards, Conservative, Wild Rose, AB]

In terms of those smaller companies, you said that was only about 6% of...?

[Michel Dessureault]

Au Québec.

[Blake Richards, Conservative, Wild Rose, AB]

Of Quebec. Okay.

Mr. Read, I think you had more--

[Brian Read]

Sorry, one of my colleagues just caught me up on that.

It would affect about a thousand plants across the country. There are about 500 in the province of Ontario. It's a big number in Ontario.

[Blake Richards, Conservative, Wild Rose, AB]

But are those numbers similar to what we see in Quebec, where it's only a small portion? They mentioned 6% in Quebec with the smaller companies.

Is that the kind of number we're talking about across the country?

[Brian Read]

The total slaughter in provincial and non-inspected facilities is currently about 12% a year in this country.