Agriculture Committee on Nov. 3rd, 2009

[Laurent Pellerin]

I would say immediately. As I said before, and I think others mentioned, this problem has been there for years. If at the beginning we had the same idea that Mr. Read mentioned, that we would have everybody paying so it will improve our market, it would have improved the Canadian reputation for our product. But exactly the opposite has happened. We are losing the Canadian identification of our beef, because they are moving to the U.S. to be killed and processed there, and we are losing one part of our reputation on the world market.

[Wayne Easter, Liberal, Malpeque, PE]

We're losing slaughter capacity, among other things. I understand that, Laurent. But if we were to decide as a committee to write a letter to the minister, or put a motion to the House or some such thing, the $31.70 per head should be effective when? Are you saying go back five years? Are you saying the first of this year? Are you saying the first of this month?

[Michel Dessureault]

Ideally, this would be retroactive to the date that the regulations came into effect. However, I think that we need to be reasonable. The regulations were implemented in July 2007. Damage to the industry began in July 2007.

Ideally, this would be the solution. In our discussions with people from the Department of Agriculture and the Office of the Minister of Agriculture, we have been talking about implementing this as of the date that the government's budget was tabled, April 1, 2009.

Is that right, Mr. Wildeman?

[Wayne Easter, Liberal, Malpeque, PE]

This is just one area where we're non-competitive in terms of policy, the SRM removal.

On the renderers' costs, Brian, I think you said the bills flow back to the packer. That's true. I agree with you. But then they take another step from there. They flow back to the primary producers. The primary producer picks up these costs. In terms of the renderers' costs that also get backed down, do you have any idea what those might be on an individual basis? If we're going to talk about competitiveness.... And I agree with you that we're competitive, but the problem is we're not competitive from a policy approach.

In what other areas do we need to be requesting assistance or better policy from the government?

[The Vice-Chair, Liberal, Mark Eyking]

Wayne, that will be your last question, but I think Brian had something quick to add before we go to the renderers.

[Brian Read]

Sorry, Mr. Easter. What I wanted to say there is that we're looking for immediate.... You do have to keep in mind the final rule out of the U.S. We needed to understand what was going to happen, still anticipating their feed policy. We've finally seen the feed policy. So we're talking immediately for the $31.70.

[The Vice-Chair, Liberal, Mark Eyking]

And the renderers?

[André Couture]

I'll try to quickly explain.

The situation is that we have some material that we process in the regular rendering process, but we've had to build two plants instead of one under the same roof, so the high-risk material goes into a new line and the product that comes out.... Our role is, as it were, as a service industry, and we try to have low costs and to bring value, but the problem with the protein that comes out of the SRM is that it needs to be destroyed, so it has negative value. As long as this regulation is in place, that's how we're going to service our customers.

We operate plants in the U.S. also, and there it would be the same cost if it were the same regulation, but it's a very different regulation. The volumes per head required to be removed are extremely low compared to the Canadian numbers, and the way they have to remove it is very different also. It also affects the deadstock collection where it is possible in the U.S. to continue to collect deadstock and remove certain parts that are, let's say, easily removed, as opposed to parts on the Canadian list, which cannot be removed effectively from a dead animal.

And yes, we are a service industry. We create value by adding value to the finished product, but as long as our customers require us to remove certain parts and those parts need to be destroyed and there's massive investment.... Our company, for example, has invested $15 million just to have a separate line, and right now we're looking at investing $8 million into something that would, let's say, create value, but in fact it would simply diminish the cost of disposing of the protein to get closer to a zero cost basis.

[The Vice-Chair, Liberal, Mark Eyking]

Thank you very much.

We'll go to Madame Bonsant.

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

Thank you, Mr. Chairman.

I'm a bit confused. Are the specified risk material, or the SRMs, with respect to domestic animals treated differently from those pertaining to animals that had mad cow disease, even though I do not believe that there were any cases in Quebec? Were these cattle buried or incinerated? What do you do with SRM residue?

[André Couture]

The dead ruminants are considered to be high-risk material. They have no value anymore. In our case, that represents approximately one third of the volume of risk material. Indeed, just over half of the risk material comes from plants such as Levinoff-Colbex. Some of the raw material continues to have value and another part, perhaps half or a little under half, will be processed elsewhere, with the dead ruminants, in order to eliminate these proteins from the food chain.

I must also mention that the fat does have value, but its value is a little bit lower than that of normal animal fat.

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

I would like to know if the farmer is also responsible for an animal that is struck by a car. Let us suppose that somebody hits one of your cows and the cow is there. What do you do with a dead animal? Does it represent a danger? Do you have to bury or incinerate it or do something else? Right now a lot of people are mistaking cows for deer, and the farmers have a problem. Do they receive a subsidy? Are they reimbursed for highway accidents?

[André Couture]

There are dead stock pick-up services in every province, not only for ruminants but also for hogs and chickens. There is, therefore, a pick-up service. The animals are picked up, but we are talking about thousands of tons of dead stock per week. A company such as ours, for example, has 50,000 pick-up points. So there is indeed a service, and the farmer is responsible for having the animals picked up and disposed of legally. Every province has its own regulations, requiring rendering or burial in a hygienic fashion and in compliance with environmental standards.

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

I see the numbers. You say that the government estimated slaughtering in 2008 at $9 million. The bill is now $35 million. As you already stated, Mr. Pellerin and Mr. Read, how can one be competitive when the government itself doesn't know how to count?

[Brian Read]

I'd love to throw this one back to the responsibility of the government, but the industry did supply the numbers, along with government. As I alluded to in my opening statements, they were underestimated because we didn't have the true outlying cost beyond the walls. I'll leave it there.

To answer the rest of your question, my issue is that we can't be competitive with the rest of the world with product that is over 30 months.

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

The price is $31.70 per head. What should the price be, approximately, in order for you to be competitive with other countries? We know that there's beef coming from Brazil, Mexico, everywhere, and that these areas do not have the same food safety standards that Canada has. What should the price be without it being too costly for you?

[Brian Read]

Our major competitor is the United States of America. We need equivalency with that country in order to be able to trade effectively; otherwise, we get out of the beef business. We're asking the government from our urgent need on this subject. That's our competitor and that's who we look at. We buy a lot of meat from the United States, and they are also our major customer.

Don't forget, though, that from an agriculture standpoint it's unique in the sense that we do have balanced trade, but in the beef sector, for OTM product, we cannot compete with this regulation. You're absolutely right.

We look at their food safety systems as equivalent to ours. We may want to debate that, but in this forum we'll say we're equivalent, so we're asking for equivalency with the United States on the rule. If we can't, as we mentioned in our opening comments, to keep our OIE status, we can't be equivalent on this, so the only way we can become equivalent is to have some intervention in place of the $31.70 per head paid to the packer.

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

I'd like to come back to country of origin labelling, better known by the acronym COOL. If I have understood correctly, this system has not been very advantageous for Canada. Do you have any numbers indicating how much you lost once the country of origin labelling required by the States was implemented?

[Brad Wildeman]

We're working with exporters and people who purchase cattle, and we're putting that case together. It is being developed along with the Government of Canada, but we're asking that until such time as we can actually present it, we'd like to keep it confidential, because obviously a very significant part of the case is the amount of damage this has caused. Initially, it was estimated to be in the $85 to $100 range, back when it first came; a number of changes back and forth have affected that somewhat. Again, we're hoping to make the actual numbers we're compiling along with other researchers part of our legal case. We're trying not to help the opposition.

[The Vice-Chair, Liberal, Mark Eyking]

Thank you.

Go ahead.

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

Can he finish his answer?

[Laurent Pellerin]

Everyone in Canada agrees that harm was done. There is such a degree of consensus between the beef and pork sector representatives and government representatives that the Canadian government decided to ask the WTO to investigate the COOL issue. In Canada there's a general consensus that COOL is harmful.

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

Thank you very much.

[The Vice-Chair, Liberal, Mark Eyking]

Thank you.

I'll now go to the NDP. Mr. Atamanenko.

[Alex Atamanenko, NDP, British Columbia Southern Interior, BC]

Bonjour. Merci d'être venu.

I'm just going to throw out some thoughts I have in mind. I'd like to finish by asking specifically, as of today, if we had an action plan and we left this meeting today, what should be in this action plan to make this industry profitable. That's why you're here; that's why we're here. I think we're all on the same page. We just have to decide how we're going to do this.

It's my understanding that 20 years ago cattle producers made twice as much as they do today. Yet we've tripled our exports and we've opened more markets. The answer seems to be, by this government and I suspect other governments, that we need to open up more markets and that will help us. Yet we see that a market that has been opened has been basically shut down to us in the United States. It's my contention that we seem to be at the mercy of trade agreements. There always seem to be obstacles, even though we signed an agreement, and the current one is COOL. We had BSE before. We've had various tariffs slapped on us by the Americans. I've been doing this trip across Canada looking, talking, and listening to what people are saying about food security. Many are saying that maybe we should take agriculture out of trade agreements, that it's not helping our producers. I'll never forget one poor producer who came and said, “Help us compete against foreign governments.” We need a level playing field.

I agree with Laurent. I don't think COOL is going to back off. We're challenging them. We may get an agreement, a positive answer, but it will take time. In the meantime, our producers are suffering. We have to assume that. If there's not going to be a change, what do we do? The patriotic instinct in me says, buy Canadian and you shut the border down. That's probably not realistic. But is it realistic, for example, to prohibit U.S. beef if, as our policy paper says here, SRM has been prohibited here in Canada since July 2007 in all livestock feed, pet food, and fertilizer? The U.S. policy is not as strict, containing a shorter SRM list and allowing the use of SRM fertilizer, which gives American processors a competitive advantage.

Is it not realistic, then, to think of saying, if we believe this is a safety factor in Canada because of our high standards, how can we then allow meat to come into our country that is processed and doesn't meet these standards? If that's the case, should we be doing something to slow down or stop that? This goes for other parts of the agriculture industry, too. Those are ideas that I've been thinking about a lot, even before this meeting.

My question specifically is this. In addition to the $31.70 per head, which would help lower the playing field, what specifically should the government be doing, as we leave, if we could do that after this meeting?

Anybody, please.