Agriculture Committee on Nov. 3rd, 2009

[Brian Read]

I'll start, and then I'll turn it over to the world wizard.

I took note of your comments. Keep in mind, when we talk about $31.70 we're talking SRMs from animal feed, not human food. We have an equivalent food policy between Canada and the United States, so you have no just cause, other than if you wanted to close the border politically. The difference is OTM animals, and that's where we disconnect.

The other argument you may get, just to catch you up, is we do have 16 cases in this country; they have two. On the rest, I'll let the floor shoot me because we want to shovel and shut up. We've been there already. That's the science behind it. We want to maintain our status--we've committed to that--for all the good of Canada, but we still end up with this issue.

I don't want to cloud the issue with other issues other than this one.

COOL is a concern. We do support the government of the day in its legal challenges.

With that, I'll turn it over to the world wizard.

[Brad Wildeman]

Thanks, Brian.

First of all, I think it would be hours of conversation about what would make this industry competitive. I've been here many times talking about a number of those things, outside of this issue. But I have some comments on this.

First, we're asking for $31.70 today. I could name a plant that's been shut down in every province, right from one end of this country to the other, because of this cost differential. So we're working to fix this. But in the meantime, if we don't do that, then we're simply going to continue.... And we'll never get competitive. This is not about rationalizing a packing industry to the size of the herd, because quite frankly, it's slower and smaller than that already. We could wipe out this packing sector and we still wouldn't have satisfied the problem, because the U.S. could simply gobble up our one-seventh of its herd size. They could simply process them all.

You may remember BSE when we were at this committee before. We talked about the crisis in the beef cattle industry because of BSE; it was because we didn't have enough slaughter capacity in Canada. And here we are driving our industry back the same way. So we need this immediately.

But there are a number of steps, and I think all of us on this panel agree.... One of the recommendations is to set up a review committee to constantly look at this. There are a number of milestones, and if we achieve them, we could reduce this number substantially.

I'll give you a few quick ones.

One is the ability to be able to export ruminant meat and bone meal again. Prior to the SRM prohibition order, we could export meat and bone meal around the world. Ironically, when this prohibition came in we were producing the safest meat and bone meal in our history, and we were prohibited from selling any of it because that was part of the order. There's one significant thing. As you remember from the conversation we had, this stuff is worth $400 a tonne, potentially.

Secondly, we need to establish tallow exports, another very significant ability to be able to sell these products and add value, reducing that cost.

Thirdly, one of the problems we have is that when we wrote the regulations we put all these specifications inside. So it takes regulatory reform. As new science comes along that says we can reduce the volume and the financial cost.... Every time we find that, we'll have to go back for regulatory reform. It simply takes too long. So we need to get that in place so that as science becomes available, and as we reduce our risk.... Remember, we're almost 30 months into the full comprehensive feed ban. There is some potential to reduce the volumes, because of new science.

These are just a few examples of how we could get that from $31.70 closer to zero. But the problem is that these things, again, take months and years. We don't have months and years. As I said, potentially we might be in a situation where we wouldn't have an over-30-months federally inspected plant west of Brooks, Alberta. I think that lays it out.

So I think there are some milestones. There are a lot of other competitive issues, besides. But thanks for that.

I'll have to excuse myself, Mr. Chairman. Thanks.

[The Vice-Chair, Liberal, Mark Eyking]

Thank you very much for those comments.

That wraps up the time for Mr. Atamanenko.

We're going to go now to the Conservatives, and I think we have Mr. Lemieux on first.

[Pierre Lemieux, Conservative, Glengarry—Prescott—Russell, ON]

Thank you very much, Chair.

First of all, I'd like to thank our witnesses for being here. This is an important issue.

One thing I would like to draw attention to is that although we're talking about SRM, really we're talking about the competitiveness of our livestock sector. I want to underscore that we're trying to take the initiative as a government to help the livestock sector at many different levels. For example, one of the ones that has been in the news recently is the $50 million to help our slaughterhouses here in Canada. There was an announcement made in Winnipeg earlier this week, and of course our friends at Colbex are also benefiting from this. We got $500 million through AgriFlex for innovation and marketing.

One thing important to note is that one thing adding to the competitiveness of our livestock sector is the opening of foreign markets. Minister Ritz has been very successful in opening foreign markets--for example, Hong Kong, Jordan, Saudi Arabia. He is going to visit China in the near future and has visited Russia just recently. All of this helps our beef industry.

One thing about SRM is that we have to be careful not to take it out of context. There was a lot of discussion and consultation with industry before the SRM regulations were put into effect. One of the driving forces behind it was the BSE crisis that we had in Canada. The world basically was shutting its borders to Canadian beef. Canada had to prove that it was taking BSE seriously, and I don't mean just with words but with real actions and programs, and more importantly with processes that would show other countries that we were taking BSE seriously. This was part of that solution, part of showing the world that we take this matter seriously. Measures such as this, although I understand there are concerns, have helped open the borders that I just mentioned. They look to Canada and say that we are taking this seriously, that we have made progress, that they like the processes we have in place. I think that initiatives such as this have helped, and they're paying dividends now.

Mr. Wildeman mentioned just before he left that one of the things that would be helpful is that there be a committee, so that the government is studying this matter and looking into it to find solutions. There is a committee. It has been together now for six to eight weeks and is doing consultation. It's in its initial stages. Of course, we want the committee to work as quickly as possible, but the aim of the committee is to fully understand what you're telling the committee today, and other factors as well, and to look for solutions.

I just want to let the committee and Canadians know that there is a committee that has been put together to work on this.

The other thing I want to mention, and this is backtracking a little bit, is that my understanding is that when industry was consulted about SRM, they in fact supported much of what is in the regulations today. I understand that the consequences may not have been understood well at the time, but I want to make the point that it was a collaborative effort and that it was to help open foreign borders, which of course is very beneficial to our livestock sector.

Talking about opening borders and the impact it has had, I'd like to ask Mr. Dessureault of Levinoff-Colbex about how international markets are helping his company.

[Philip Cola, Manager, Levinoff-Colbex, Fédération des producteurs de bovins du Québec]

If I may, I will answer.

On a relative basis—because we have to look at ourselves in comparison with the U.S., since that's really where we're seeing the major difference and where we're getting the competitive pressures—as far as we're concerned, we don't see anything that has taken place whereby we have even marginally benefited from this. Yes, some markets have been opened, but then the U.S. as well is open to all these markets. On a relative, comparative basis, there is nothing that has been done that has made us in any way more competitive over the last little while.

[The Vice-Chair, Liberal, Mark Eyking]

I think Mr. Read wanted to comment.

[Michel Dessureault]

I would like to add a few words to Mr. Lemieux's comments.

I have been participating in Canadian round table discussions for a few years now.

The issue of SRM regulations was raised during a round table on beef. The industry agreed to opening the borders. It's very important that borders be opened. There were conditions to that. The first was that regulations be harmonized with our main client, the United States.

For a few years now, the United States has been stating its intention to get there but nothing has been done. We have been incapable of obtaining regulation harmonization, with the result that the meat-packing industry is being destroyed, in eastern Canada at least.

I believe that the industry has responded positively. The Canadian government has made considerable progress with the assistance program for segregating SRMs in slaughterhouses, and we thank them for that.

Mr. Couture mentioned that the industry had received significant amounts, in part for assisting the segregation. Mr. Couture himself received assistance for his own business. However, in the end, the actual costs at the slaughterhouse have remained the same. Mr. Couture said it himself, this is a service business. The meat-packing industry in Canada is dealing with costs of $31.70 per head, which represents millions of dollars per year for a business like Levinoff-Colbex.

If we do not find a short-term solution, businesses will have disappeared before we've had a chance to see the results of the Canadian government's announcement to assist slaughterhouses with a business development plan. Years can go by between the announcement of a program and its implementation. Meanwhile, if the government was capable of establishing the assistance program being called for by industry and if it could have discussions with the governments in question—the United States in particular—in order to harmonize regulations, I think that in the not-to-far future the Canadian industry could benefit, along with the Canadian government, and find permanent solutions.

That is what we are asking for today and it's urgent. The current situation in the east is very serious. One hundred per cent of the costs for SRMs on the farm is covered by the producers. Furthermore, all the industry costs are taken on by the industry.

I would also like to take the opportunity to congratulate the rendering industry for its efforts in obtaining maximum value for products that can be marketed. However, with respect to the others, the slaughtering industry has full responsibility and it is no longer capable of taking that on. It does not have that capacity and this is an urgent matter.

[The Vice-Chair, Liberal, Mark Eyking]

We're running out of time.

Mr. Read, just make a short comment.

[Brian Read]

Mr. Lemieux, I want to respond to your comments about industry supporting the regulation. I'm one of those people, because I thought it was the right thing to do for this country.

As far as OTM product and market access in this country are concerned, we certainly appreciate the secretariat under Fred Gorrell. We think it's going to be a tremendous thing going down the road. We appreciate all the efforts by the minister. But OTM markets, even so much as for tallow to China, have not opened with this regulation, so I'm not sure where you get your numbers from, sir.

[The Vice-Chair, Liberal, Mark Eyking]

Thank you very much, Mr. Read.

Your time is up, Mr. Lemieux.

We're going to go for the second round, and it's for five minutes.

We're going to go back to the Liberals, to Mr. Valeriote.

[Frank Valeriote, Liberal, Guelph, ON]

I have two questions. One is of Mr. Clarke and the other of Mr. Pellerin. They're probably a little more exploratory than probative, as all the other questions are.

I come from Guelph, where there's Cargill and there's the University of Guelph. I prefer to look at solutions other than simply throwing money at something right away, to be candid. I see this either as a short-term problem, in which case $25 million or so might solve it, or a long-term problem. Right now, from what I've heard, I think it is going to be a longer-term problem. You know the saying that you can't solve today's problems with the same level of thinking that it took to create the problems in the first place. I'd like to think that maybe we can go beyond this level of thinking.

My question to Mr. Clarke is this. I'm not sure about this, but given the costs that are incurred right within the plant versus the cost of shipping the SRMs further away—to Rothsay, or wherever—is it not possible to build a cogeneration plant whereby all this material could be put into a co-generation plant, could produce electricity, produce fertilizer from the product that's left over, produce heat to heat the plant itself, as well as Cargill, if it's located beside Cargill, and spend the money in a little more creative way in solving the problem than just continually throwing money at it?

I'm not suggesting that's not the solution, but can't we look beyond just putting money at this, Mr. Clarke?

[Graham Clarke]

In answer to your question, during the negotiations on and the investigation into the logistics of SRM disposal, and before the rules were even finalized, a large amount of work did go into regional workshops in each province to look at alternative sources and disposal issues, in the realization that logistics are a major factor in disposing of SRM.

Cogeneration was certainly explored. I will turn it over to André in a minute because he will give you the actual numbers. But the $80 million, plus the provincial money that was given out to the provinces, was for those kinds of opportunities. It was up to the provinces to determine whether those kinds of operations such as incineration, cogeneration, and even combinations with the biosolid issue and so on, would work.

I don't know precisely what the Ontario provincial government, in consultation with their industry, has come up with. But as far as I can determine, they will have looked at that, and if they have not done anything along those lines, it would probably be because it's not considered cost-effective.

[Frank Valeriote, Liberal, Guelph, ON]

So we don't know, really, if they've looked at it. That might be something that the committee Mr. Lemieux speaks of would be able to look at.

[Graham Clarke]

Sure, but maybe Mr. Couture could tell you about the kinds of costs involved in something like that.

[Frank Valeriote, Liberal, Guelph, ON]

I do have another question, but go ahead. It's just that I want to get to Mr. Pellerin.

[André Couture]

First of all, I've been going to Europe for maybe 35 years and I've probably visited 40 different rendering plants there. They have been taking care of SRM, in the case of England, for 20 years, and in the case of the rest of Europe, for 10 years. I would say that just about 100% of the slaughterhouse by-products and dead animals go to the rendering process first. Then the cogeneration you're talking about is a type of further process, let's say, with the solids, the meat and bone meal, which consist of 20% of the incoming raw material.

When I mention that our company has an $8 million project, it is a project to do cogeneration, and we would be using the steam in our rendering plant in order to diminish the costs we have to pay. As I said prior to this, those costs are passed back to send the product to a landfill. In Europe, they are going to cement plants, and some renderers also do incineration.

[Frank Valeriote, Liberal, Guelph, ON]

Okay. My next question is for Mr. Pellerin. The reason I asked you the question and that I prefer not to spend the money is that I fear seeing an economic action plan sign on every cow out there should you get that $25 million from this government, just so you know my concern. I say that in jest, but....

[Voices]

Oh, oh!

[Frank Valeriote, Liberal, Guelph, ON]

Mr. Pellerin, with respect to the science involved, Mr. Lemieux spoke of a committee that's receiving reports, I suppose, and reviewing the situation. I want to know two things.

First, maybe I'm wrong, but I can't imagine that the Americans are prepared to go to the lowest level of science and place at risk their own industry by accepting low safety standards and high risk. It's just not something I can conceive of. I'm wondering if you can talk to me about the actual science associated with these SRMs. Why is it that we have a higher level and they have a lower level?

[The Vice-Chair, Liberal, Mark Eyking]

I'm sorry, but you'll have to be quick. Your time is getting low.

[Laurent Pellerin]

First, I'm not a scientist. I'm a farmer and I'm proud to be a farmer. It's very difficult for me to argue against the U.S. or the Canadian formula that is applied, but there is a big difference in comparing what the U.S. is doing and what we are doing here, that's for sure.

[Frank Valeriote, Liberal, Guelph, ON]

It sounds as though Michel may have the answer.

Excuse me, but do you have the answer?

[Michel Dessureault]

Yes. A few years ago, a study was published in the United States. It showed that the political choices made in Canada with respect to SRMs cost 10 times the amount that they did in the United States, which made different choices.

Having a long list, as we call it in the industry, in order to remove SRMs, specified risk material, costs 10 times as much as in Canada as it does in the United States. That is why the Americans said in this study that they are not prepared to harmonize their regulations. The study was circulated in Canada. Mr. Cola saw it and could submit a copy to you. Clearly, the numbers do exist.

[The Vice-Chair, Liberal, Mark Eyking]

Thank you very much.

We're going to have to go back to the Conservatives now for questioning. We have Mr. Shipley up next.

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

Thank you, Mr. Chair, and thank you, witnesses.

Mr. Cola, you're the manager of Levinoff-Colbex? I just want to be clear; I just want to make sure I heard you right. You mentioned when you jumped in that there's nothing that has been done to help you be competitive.