Agriculture Committee on Nov. 5th, 2009

[The Chair, Conservative, Larry Miller]

I think at this point we can call the meeting to order. The photographer will still be at work for a couple of minutes; maybe he's finished.

Before we go to our witnesses, Mr. Hoback, I'll go to you.

[Randy Hoback, Conservative, Prince Albert, SK]

Thank you, Mr. Chair.

I've talked to members of the opposition about this. In the Western Producer of October 29 you'll see a notice of removal of sidings from the list of available sidings. They've added more sidings onto the list that they had previously given us. I find it really interesting that this was seven days after they'd met us here at committee.

I want to highlight the fact that the sidings they're talking about removing or putting on notice are Beamer, Alberta; Burbank, Alberta; Claysmore, Alberta; Egremont, Alberta; Ryley, Alberta; Buchanan, Saskatchewan; Flaxcombe, Saskatchewan; Kindersley, Saskatchewan; Leney, Saskatchewan; Sturgis, Saskatchewan; Makaroff, Manitoba; Roblin, Manitoba; and St. Lazare, Manitoba. These sidings will be removed no earlier than 60 days from the date of this notice, which would be January 1.

I'll have the committee clerk photocopy this and distribute it. I'll table it here today.

[The Chair, Conservative, Larry Miller]

Are you suggesting any further action other than that, Mr. Hoback?

[Randy Hoback, Conservative, Prince Albert, SK]

I'd be open for suggestions, but I find it very frustrating. We had them here in front of the committee, and then we see this show up a week later. I'm not sure what the appropriate action would be, except maybe to get an explanation from CN on what they said at committee versus what's presented here today.

[The Chair, Conservative, Larry Miller]

Are you suggesting a letter from the chair to them, basically?

[Randy Hoback, Conservative, Prince Albert, SK]

If that's appropriate and if the opposition members agree, I have no problem with that.

[Wayne Easter, Liberal, Malpeque, PE]

Mr. Chair, we don't want to take time from this meeting, because we have to deal with a crisis, but I wonder if we could get together and get a letter from the chair.

This is unacceptable. While they were here, they tried to keep from us the fact that they're making a 20% return on capital under the revenue cap, and this notice treats Parliament with disrespect. CN and the railways are going to have to be reined in. I would say we have to find some way. You could draft a letter, and Frank said he'd be willing to put a motion in the House, but we need to get something out really quickly to make the point that this is unacceptable.

[The Chair, Conservative, Larry Miller]

On hearing the comment and, I think, getting general approval for some response, I believe we could have a letter ready for late morning or noon tomorrow. It would be e-mailed out to all your offices, maybe with a deadline for a response back from your offices by three o'clock. If everything is fine, we could go ahead and send it out. Is that acceptable to everybody?

[Some hon. members]

Agreed.

[The Chair, Conservative, Larry Miller]

Mr. Shipley, I'm sorry, you had your hand up.

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

Mr. Chair, I don't want to hold things up, but I'm wondering about November 17, which is the first Tuesday after we come back from the Remembrance Day break. We have a number of motions in front of us. When I look at the schedule, I'm wondering if on that day we could take the first hour to deal with motions and try to get some of them off the table. I know André has some, and so do I and Wayne. I'm just looking for what the committee thinks, that's all.

If you look at the number of witnesses, we could likely deal with them in the last hour. That would give us an hour to deal with business.

[The Chair, Conservative, Larry Miller]

Do you mean the last hour, or the first hour?

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

I'm thinking that we could do this in the first hour.

[The Chair, Conservative, Larry Miller]

It would be the first hour. Okay.

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

Then we will have the witnesses come in for the last hour.

[The Chair, Conservative, Larry Miller]

Mr. Eyking, as we were coming in, you mentioned something to me about Tuesday's business.

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

Let's try to pick one day, and if we want to, we can get all the motions done on Tuesday, whether we do it first or at the end. Maybe it should be at the front end. Witnesses aren't waiting here, and we could do it right off the bat.

If so, we'd have to run a little later on Tuesday. Maybe we can run to 6 p.m. if we have to and if the witnesses need it, but we'll get the business done right away on Tuesday. We could do that every week. Some have to leave on Thursday, and that way it's not a big issue. Let's clean it up.

[The Chair, Conservative, Larry Miller]

We'll have the clerk make those invitations accordingly.

I'm sorry to have kept our witnesses waiting. I understand that one of our witnesses had a plane delay, so we'll leave him until the end. We'll start with Seaside Farms and....

I'm sorry; go ahead, Mr. Bellavance.

[André Bellavance, Bloc, Richmond—Arthabaska, QC]

I would like to come back to what Bev and Mark were talking about earlier. I simply want to be certain about one thing. As Mark said, if we spend some time on motions on November 17, we would still need to hear from witnesses on this matter. If the motions do not give rise to too much debate, we could dispense with them in less than one hour.

[The Chair, Conservative, Larry Miller]

That's a good suggestion. What I've actually just said to the clerk is that we're going to ask the witnesses to come here 45 minutes into the meeting, and if we can get to them in that time, that's great. If we have consensus here to cut it off at 45 minutes, so be it. I think that if we come here to deal with the motions, I don't see that as an issue.

[André Bellavance, Bloc, Richmond—Arthabaska, QC]

That's fine.

[The Chair, Conservative, Larry Miller]

With no further ado, we'll go to Ms. Matheson-Wolters from Seaside Farms. Welcome.

Again, thank you very much to all of you for coming here today. We appreciate it.

[Leza Matheson-Wolters, Producer, Seaside Farms]

Good afternoon. I'm a bit nervous, so I'll try to stay on track with my notes here.

I'd like to thank you first for inviting me to the table today for this serious issue. I'm proud to be in our nation's capital just a few short days before we honour our veterans who have served and continue to serve our country. So it was quite a walk up the lane today, knowing that next week you will honour them. So thank you. The timing was perfect for me.

Because I only have 10 minutes to share my story, I would welcome any questions regarding possible solutions and comments during the question period.

My name is Leza Matheson-Wolters. My husband, Ilke, and I own and operate a hog farm on Prince Edward Island, and we have two children. My husband is a Dutch immigrant who has farmed his entire life. He emigrated with his family to Canada at the age of 15. We have been married 23 years, since the age of 19. We've worked extremely hard over those years and we're very proud of what we do.

After we got married, we went to work for a hog farmer. His dad was a dairy farmer who had been given an opportunity to work in rural P.E.I. on a hog farm, and we took that opportunity at age 19. Meanwhile, I attended university and obtained my Bachelor of Arts in psychology and political science, and then my social work degree when I moved to Dalhousie. After I finished university in 1995, we bought the house next to the hog operation where he was employed.

In 2002, we purchased the 500-sow, farrow-to-finish multiplier breeder operation. It was a huge undertaking. Our years of dedication had paid off. We worked our way from having nothing at age 19 to being educated and successful business owners. Then in 2005, it was discovered that our animals had contracted disease, PRRS and pneumonia. It was devastating. We could not believe that all our hard work had been ended by disease. We had lost our multiplier breeder status and the associated market, and our cost of production went through the roof from purchasing antibiotics and other medication, and from decreased litters and the number of days it took to go to market.

We knew we had to do something to decrease our costs, produce a healthier meat for consumption, and set ourselves up in a niche market—because the prices weren't great then either. In 2007, we partnered with Dr. Daniel Hurnik from UPEI. He's a renowned veterinarian in animal health at the vet college in Prince Edward Island. Together we pioneered a disease eradication program, an innovative program in which we attempted to eliminate our major diseases—just the two of them—while maintaining the genetic value of our herd, which we were well known for in our community. In other words, we didn't want to sell our breeding stock or our sows, because they were our livelihood and we were very proud of the genetics we had.

It took months of very long, hard hours, researching, writing, and coming up with strict schedules with Dr. Hurnik. We were very proud of the farm community; they really rallied behind us. They gave us free barns, and we moved. It was a whole schedule, a European model, that we had pioneered in Prince Edward Island. In 2006, we were the first farm to successfully complete this process, and today we still have disease-free animals. That was quite a feat for us.

We operate an extremely efficient and fiscally, socially, and environmentally responsible farm. We produce a high-quality, safe product. We treat our staff with dignity, giving them a fair wage for their work. We have an alternative source of energy to cut our fuel costs. My husband works for little or no wages, every day, 15 hours a day.

Two summers ago, we knew that prices were poor and that we couldn't even afford to eat. We were feeding the nation with good, safe, genetic food, but we had no income in our own family or household. So we decided to go to the bank and remortgage our house and buy a local restaurant. We would supply good local meat through a buy-local campaign, which we engaged in two summers ago. We bought the restaurant. I now employ 30 people and run the restaurant four months a year. It is successful, and we're quite proud of that. Our local community is quite proud of it too, and they're very much behind us.

However, as I am before you today, I am losing everything I've worked for. We are not fairly compensated for our product; we have suffered for years from prices well below our cost of production, for no fault of our own. To feed fellow Canadians, we are competing with countries that do not share the same rules and regulations. We are a highly regulated business. With labour laws, safety standards, health standards, environmental standards, social standards, high energy costs, no feed subsidies, and low prices, we are in a disadvantaged position.

So the question today, as I sit before you, is how does my farm survive? If my cost of sending a pig to market is $1.55—which is the mean cost of production, or COP—and I'm receiving 95¢ a kilo, can I make it? No, I can't. I can't do it.

So where do I turn and where do I go from here? We need farm priority—and I stress, farm priority—federal programming that meets the needs of farmers. We're not looking willy-nilly for a handout. Currently, we have the HILLRP program, the hog industry loan loss reserve program, and the HFTP, the hog farm transition program. Neither of these programs will help, or save, the existence of my farm. The HILLRP program lends $85 per hog. I would first need to find a bank that would agree to consolidate my loans for a term of 60 months or less; but it would be at a higher interest rate than I have now, with the stipulation that I would pay off my APP first. But with our size of operation, it would mean that I'd first have to find a bank that would agree to this, then I would have to take a higher interest rate and pay off my APP, and then I wouldn't have any money left over. Therefore, the program is of no use to my operation. The result is that it will make things worse, not better, for me.

Some might argue that we could apply for more APP if we took the HILLRP. Well, I can't do that either, because APP is not for those in severe economic hardship, and I would have to get the bank to sign off on a first-priority agreement—the same bank that just consolidated my loans—and that's just not going to happen.

Or, because I can't participate in those two programs, I still have the HFTP program. With this program, I would need to realize enough money to clean out my barns and be able to meet the minimum payments, loan demands, and expenses, and then repopulate my herd in three years. All the hard work my husband and I have done to keep our disease-free genetics would be lost, as my herd would be slaughtered. I understand this process is to decrease the number of hogs in the marketplace by approximately 6.5 million hogs. Supply and demand, I get it.

Well, Atlantic Canada has never contributed to the oversupply in Canada—and for argument's sake, if we had contributed to oversupply, we have already significantly decreased our supply since. On P.E.I., we have gone from approximately 203 producers to 30 producers currently—over 200 producers to 30—and approximately 15% of those producers represent 90% of production. Our production has decreased by 50% now, so we are not contributing to the oversupply in Canada.

We have met the mandate of the HFTP program without the program. We have transitioned. What the hog transition program will do for us is to become an HFEP, a hog farm exit program. We need a phase-two approach in Atlantic Canada. If we decrease our production in Atlantic Canada, we will run the risk of losing our closest plant. On P.E.I., our plant has in fact closed, and now we ship off-island.

It will also jeopardize the existence of farming on Prince Edward Island. Agriculture on P.E.I. is approximately 11.7% of our GDP. Atlantic Canada is unique; it is not in the same position as the rest of the country. A one-size-fits-all approach is not going to help us. These programs will not help my farm survive; they will shut me down. I need help.

It is very difficult to explain the emotional side of this. For me personally, the HFTP is not as I mentioned, a transition program, but a program that will put me out of business. Everything my husband and I have worked for will be slaughtered and lost. The bid process, which my husband and I looked into and participate in, feels like playing Russian roulette. I am holding a gun to my head and I have to decide whether or not I'm going to pull the trigger, but I have no idea how many bullets are in the barrel or what the bullets are even worth. It's a bid process. It's inhumane. So if I pull the trigger, will I be successful? This is how the bid process has made me feel.

Folks, each one of you was successful when you went door to door asking for the nod to govern our country in the best interests of Canadians. You were the chosen few; you were elected. You were elected to represent us, and with that representation came the privilege of making decisions affecting me as a Canadian and hog farmers. Your responsibility is to make decisions that affect the health and prosperity of Canadians. As I sit before you today, a hard-working, successful hog farmer, I ask for your support. I am trying to save my livelihood, my farm, my house, my agricultural community, everything we have worked for. I am tired, tired of wondering if this will be the last year my kids will spend in their home.

Thank you for your time.

[The Chair, Conservative, Larry Miller]

Thank you very much.

We'll now move to Canada Pork International.

We have Mr. Asnong and Mr. Pomerleau, for 10 minutes or less, please.

[Edouard Asnong, President, Canada Pork International]

Thank you.

Canada Pork International is the export market development agency of the Canadian Pork Industry. Established in 1991, it is a joint initiative of the Canadian Pork Council and of the Canadian Meat Council. Our organization deals primarily with market access issues, the promotion of Canadian pork abroad, providing market intelligence as well as working on other significant export-related issues.

For the first eight months in 2009, total Canadian pork exports amounted to 690,593 tonnes, down by 4.7% when compared to the same period in 2008. However, their value reached $1.75 billion, up by 4% when compared to 2008.

I believe all of you have a copy of the export figures for each country. The two most affected markets have been China, whose H1N1 measures taken against us have had a significant impact, and Russia who has delisted most of our plants that were eligible to export their product, owing to very strict and unjustified regulations. Aside from China, the H1N1 virus has not had to date a lasting effect on consumption in our export markets.

However, the ongoing economic crisis is a contributing factor in the decrease or stagnation of our sales to several major markets. U.S. pork exports are also down by more than 12% over last year. Combined with lower Canadian exports, it means there is more pork to be sold in North America, thereby compounding the current crisis. It should also be noted that Canadian pork production is currently up by 4%.

The $17 million allocated over four years by the Government of Canada through the International Pork Marketing Fund is a very timely initiative that supports our efforts to maintain and improve our position on foreign markets. We have undertaken consultations to finalize the related Strategic Plan that will be submitted to the Minister of Agriculture and Agri-Food Canada and the Minister responsible for the Canadian Wheat Board in early 2010. We can already foresee very good opportunities on export markets in the medium to long term, provided we successfully differentiate our products from our main competitors, especially the Americans, and more importantly, if we can resolve a good many market access issues that work against us.

We expect that Prime Minister Harper's visit to China in December will result in the lifting of H1N1 restrictions, especially since the Chinese have already announced that they would lift restrictions against the United States. Furthermore, we are counting on the Prime Minister's visit to South Korea to see the free trade agreement between our two countries finalized.

South Korea is a major market for us with significant potential for additional sales of value added products. Given the lack of an FTA, coupled with the fact that the Americans and Europeans have concluded one with South Korea, this means that our industry will be completely shut out of this market within two years. However, we do not support finalizing an agreement at any cost, as current Korean offers regarding Canadian pork are unacceptable. We expect that Canadian negotiators will be able to get Korea to offer us access conditions that are more or less identical to those given to our competitors.

It is also our hope that the two chambers will quickly ratify the Free Trade Agreement with Colombia in order for our industry to respond to the demand for our products, which is very strong following a successful visit by Colombian buyers to Canada.

The negotiations with the European Union are of particular interest to our industry. One of our plants recently became EU-approved and initial shipments have made us realize that the potential of this market is much greater than we had anticipated. Improved access to this large and lucrative market would allow us to sell a wide range of cuts and to add value to the whole carcass, which would benefit both packers and producers.

In conclusion, maintaining and improving our access to foreign markets, especially to larger markets, will be key to the long-term sustainability of the pork industry, as it should remain a major exporter.

Thank you.

[The Chair, Conservative, Larry Miller]

Thank you very much.

We'll now move to the Canadian Pork Council. We have Mr. Moffett and Mr. Preugschas here.

Jurgen, I understand your plane was late, but thanks for joining us.

Please present for 10 minutes or less.

[Jurgen Preugschas, President, Canadian Pork Council]

Thank you very much, Larry. I appreciate the opportunity. It was actually a train, not a plane, and it wasn't late. It's just that the schedule was very tight. I do appreciate your putting us at the end of the schedule so I could make the presentation.

You do have PowerPoint slides in front of you. I want to go very quickly through that, particularly the first few pages, just to set the stage a little bit. As I've presented to this committee in the past, you are well aware of some of the shocks our industry has experienced over the last three to five years. For example, there's been the circovirus, the currency fluctuations, the feed costs, the recession, and the U.S. COOL regulations, and then, of course, there is the latest challenge of the H1N1 virus. That has had an absolutely devastating impact on our industry.

If we look back at where the hog industry has gone over the past 20 years, it has actually been a true success story up until the last three. Over the years, we've had increased sow productivity and tremendous export growth, as you've just heard; at one point, we were the largest exporter in the world, and now we're in third or fourth spot. So the export market is still a big part of our industry and probably accounts for some 40,000 jobs in Canada—just the export part alone.

But today the situation is vastly different. We are experiencing the worst economic returns ever in the hog industry. We've also had some market declines. Domestic consumption is at best levels, but is starting to drop a little bit from imports of a lot of cheap U.S. pork being dumped into our market. That's affecting us. In fact, 25% of our consumption right now is U.S. pork being brought cheaply into this country. On top of that, our market of live hogs into the U.S. has been eroded due to the implementation of COOL. So one thing piles on top of the other.

But having said that, our international opportunities have been maintained, as you've just heard from Edouard. Our exports have actually stayed level, whereas the U.S. exports have dropped some 30% year to year. So that does speak well for the product that we produce and how we are recognized around the world.

The next slide shows you where the prices have gone over the past number of years. The blue line there shows you how low we are. These are Ontario prices, but prices are the same across Canada. You heard from Leza that getting $95 or $100 when it costs you $150 or $160 to produce just plainly doesn't cut it.

So we are an industry in transition. We did take a look at where we feel our industry should be. So we put a five-year plan in place and targeted where our industry would be comfortable being—and not losing too many of the jobs so desperately needed in this time of economic recession, when we really don't want to lose a lot more jobs. We have recognized that live hog exports are going to go down; we expect them to go down to about some four million hogs, from the ten million where we were. We expect our exports to stay roughly where they are, at about one million metric tonnes. As for our domestic disappearance, right now only 75% of consumption in Canada is from our own production. We would like that to go back up to about 88% to 90%, or an increase of about 150,000 tonnes in Canadian pork eaten in Canada rather than U.S. pork. This would give us a domestic slaughter of about 21.5 million animals from where we are today, and total production of about 25.5 million hogs.

On the international trade front—and I'll go over this very quickly, because you just had a very good report—the pork trade is going to remain critical for our industry, and certainly government can play a very big role in that to give us that market access. We represent some 20% of the world trade in pork meat, so we're a significant player on that side of the market. So it is absolutely vital to retain export market access, and we certainly have always been pushing for a conclusion to the Doha round of the WTO, but I think most of us have to admit that doesn't look very promising these days.

We do believe that our government needs to concentrate on bilateral agreements, in light of the fact that the WTO is stalled. We have a country like Chile, for example, which is much smaller than we are. They have the most bilateral agreements of any country in the world. Why can't we do that? We need to do that. It is part of the government's responsibility and job to go out there to see to it that we have market access by working with countries such as Chile, which has really helped its access around the world—which we don't have.

A message I do want to leave with you is that we're happy about the deals signed, like the trade agreement with Colombia and the work on a Canada-EU trade agreement—which is critical—and the agreement with Korea has to be pushed ahead and signed, but there are many more. The agreements like the one with Jordan aren't really going to make much of a difference, so we do need to reach ones that have some value to us.

Moving on from that, as you know, we came to the government last spring to talk about how we can transition through this, and in 2008 we got the advance payment program and the cull breeding swine program, which were helpful, but certainly with the continued difficulties, they didn't solve everything. But in 2009 we have the hog industry loan loss reserve program, the hog farm transition program, and the international pork marketing fund. Those are things that we, in a way, asked for, albeit a little bit differently, but those are what the government decided to come out with, together in negotiations with us. And we feel there is some value in each of these programs.

So I want to go very quickly through the key elements of the hog farm transition program.

It is not a buy-out, but a program to assist producers to transition out. It's operating through a tendering process, and so you do a bid process. In fact, we had our first bid session yesterday, which went quite successfully and worked well, and the next one is going to be on the 18th. We feel that it's not an answer to everyone, absolutely, but it is helpful to some producers who plan to transition out.

Then the hog industry loan loss reserve program, unfortunately, has taken three months until we finally now have the banks signing. They still haven't all signed, but I do understand that a number have now signed. The FCC signed on Thursday, and some of the other banks have signed this week, and others will do so today and next week. While that is positive, some of the messaging I'm getting back is a cause for concern, so we do need to stay right on top of that and make sure producers have access to these funds. We may be talking to you again if it isn't working, because it is critical that our producers, in the tight cashflow situations they're in, have the ability to draw these funds to help them out.

In summary, we have a role here. The industry association and the government need to work together and be a little flexible and fluid as we move through in order to make sure these programs work well. Ultimately we accept the fact that the primary responsibility is with our producers. With your assistance, we need to develop a sustainable plan so our industry becomes strong once again into the future.

[The Chair, Conservative, Larry Miller]

Thank you very much, Jurgen.

We will now move to our last presenters. From the Animal Nutrition Association of Canada, we have Mr. Cooper and Ms. Latrémouille, for 10 minutes or less, please.

[Graham Cooper, Executive Director, Animal Nutrition Association of Canada]

Thank you, Mr. Chairman.

Good afternoon, ladies and gentlemen.

The Animal Nutrition Association, ANAC, is the national trade association of the livestock and poultry feed industry. Our membership comprises about 170 members across the country, including feed manufacturers and distributors, suppliers of feed ingredients, and providers of a wide range of services to the industry. Collectively our members account for 90% of commercial feed manufacturing in Canada.

I don't want to burden you with a whole bunch of statistics, but there are a few key ones I want to put in front of you to give you an idea of some of the scope we're dealing with.

Total Canadian feed production averages just under 30 million tonnes a year. It varies from one year to the next, but is generally between 25 million and 30 million tonnes. Commercial production, which is the membership we represent, makes up approximately two-thirds of this total, with a balance of about 10 million tonnes produced by on-farm facilities.

Hog feed represents a major share of overall production--about 40% nationally. However, the national ratio doesn't give the full picture of the potential impact of ongoing contraction of the hog market. In Alberta and Manitoba, hog feed represents over 60% of total production, while in Ontario and Quebec it is closer to 50%.

At the individual mill level, the impact of the hog industry crisis is potentially much more damaging. Depending on the makeup and size of local livestock herds, it is not uncommon for some manufacturers to rely on hog feed for two-thirds or more of their overall production--and we've heard numbers up to 80%. Of course, at the opposite end of the spectrum relative production volumes for hog feed will be much lower for individual facilities, depending on local demand factors.

Feed represents the largest input cost for hog producers, accounting for up to 75% of the total cost of raising an animal. Traditionally much attention has been focused on the prices paid by livestock producers for their feed supplies. But it's actually the cost of feed ingredients--the input cost to feed manufacturers--that is the principal determinant of feed selling prices. Corn, wheat, barley, soy, and the co-products of processing these grains are the main ingredients used to produce hog feed, along with a number of micro-ingredients--vitamins and trace minerals--that add nutritional value to the feed.

While agricultural commodity prices are typically volatile when viewed over the short term, recent annual averages reported by Agriculture and Agri-Food Canada show a generally stable trend. For example, the price of corn rose by about 7% from 2007 to 2008, but it is forecast by AAFC to decline at a similar rate from 2009 to 2010. The price of soy has shown general stability over decline, as is also the case for wheat and barley.

The key point, however, is that no matter what happens with the price of individual commodities, the feed industry continues to operate on extremely tight margins--typically under 15%. Of course, just the cost of production is taken into account here. Therefore, manufacturers have no choice but to pass cost increases on to their customers when they occur. However, producers will also benefit when commodity prices trend downward. It is worth noting that AAFC's forecast of farm input prices estimates a 1% average annual decline in feed prices over the period from 2008 to 2017.

On the impacts of the hog crisis on the feed industry, there is currently a process of rationalization taking place in the feed industry resulting from a shrinking customer base, reduced livestock inventories, and surplus feed manufacturing capacity across the country. Of course, this applies not only to the hog industry, but to livestock in general. Some economically unviable feed mills have already closed, and others will do so in the near future. Acquisitions and mergers, accompanied by the shutdown of redundant or under-producing facilities, are a fact of life in the feed industry.

As I mentioned previously, hog feed production is a major component of our industry's business. At the individual feed mill level, where hog feed accounts for two-thirds or more of total production for many facilities, the consequences of deep reductions in the herd will be acutely felt by feed manufacturers over the near to medium term. However, our industry is well aware that the effects of the recession, a rising Canadian dollar, the imposition of COOL on hog and pork producers, and the fallout from H1N1--often misnamed “swine flu”--have all combined to create an extraordinarily difficult environment for the hog industry.

Recognizing that the prospects for the feed industry rise and fall with the health of its customers, feed manufacturers are working with hog producers to provide the support they can while the market gradually recovers and the hog industry puts its transition plan in place. A large part of the assistance provided by feed mills involves extended credit terms to hog producers.

Although necessary, often to help keep their customers in business, credit practices being seen today are exposing some feed manufacturers to significant losses. ANAC estimates that under current market conditions, the Canadian commercial feed industry is carrying between $550 million and $730 million in accounts receivable from hog producers. Given the variation in hog feed production volumes from one manufacturer to the next, this credit risk is not borne evenly across the country, so the risk of loss or even failure is creating significant concern for feed mills with higher hog feed production rates.

The question arises whether the financial assistance available to qualifying hog producers under the government's hog industry loan loss reserve program, which we've heard spoken of earlier, and the hog farm transition program will be sufficient to protect feed manufacturers, which to a large extent are sharing with their customers the risks facing the hog sector.

The loan loss reserve program in particular seems to be intended to deal with the type of situation described here. In its August 15, 2009, news release, AAFC stated that “producers with sound business plans will be able to access short-term credit for operating costs such as feed and payroll”.

As the government and financial institutions involved in delivering the program begin the process of evaluating applications, ANAC proposes that they consider the impact of their decisions not only on the hog industry, but also on feed manufacturers, which in the majority of cases will be the largest unsecured creditors.

Those are my comments, Mr. Chairman. I'd be happy to answer any questions that I can.

[The Chair, Conservative, Larry Miller]

Thank you very much, Mr. Cooper, for staying under the time.

We now move to questions of seven minutes.

Mr. Easter.

[Wayne Easter, Liberal, Malpeque, PE]

Thank you, Chair; and thank you, everyone, for coming.

I think Leza's words at the beginning spelled out what we already know, that the industry is virtually being destroyed in this country, and the beef industry, who we heard from on Tuesday, isn't far behind. Everything that so many people have worked for is basically going down the tubes.

In November 2007, just two years ago, one of the fellows with the Canadian Pork Council, Curtiss Littlejohn, had this to say when he was here as a witness, and it's in our report of December 2007:

Simply put, prices are collapsing, input costs have increased dramatically, and cash losses are mounting at such astonishing rates that entire communities, including producers and their input suppliers, face financial ruin.

I think Mr. Cooper makes that point. That's where we are. If I were to put it simply, I don't think the hog industry has ever seen a crisis as bad as this, or one that has been so sustained, and never, ever have we had a government do less. Quite honestly, the farm leadership--

[The Chair, Conservative, Larry Miller]

Mr. Lemieux.

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

On a point of order, Mr. Chair, I would encourage our colleagues to not turn this into a partisan attack festival. We had this happen on H1N1. What we are hearing is that the hog sector is in crisis. What everybody wants to hear is that Parliament is working together, not lobbing grenades at one another.

Mr. Chair, I do encourage my colleagues--

[Wayne Easter, Liberal, Malpeque, PE]

On a point of order, Mr. Chair, I hope that's not coming out of my time.

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

--to take a positive approach on this.

[The Chair, Conservative, Larry Miller]

It's not coming out of your time.

[Wayne Easter, Liberal, Malpeque, PE]

Let me re-emphasize the point: never have we seen a government do less. I'll explain why.

I'm also concerned, Jurgen, about the farm leadership being so quiet. You requested $800 million, which I think would have gone much further than the current programs. The current programs could have been in addition to that, but you seem to have backed away from that request.

On these two programs, my concerns are these. On the second program, in which the bid process is in place for people to transition or be out of the industry for three years, it's a process in which people are bidding neighbour against neighbour for who'll get the lowest price and get out of the industry. It's almost inhumane.

I want to talk extensively about the other one, the loan one, or ask you some questions on it. The concern I have there--and this is why I criticize the government--is that the only one gaining on this whole proposal is the government, which gets paid on its APP, while you're left holding more debt. I'm told now that the banks that are coming in are not going to charge prime plus one, but prime plus extensive interest rates, with a government guarantee. That's unacceptable.

In our report in December 2007, we as a total committee made what I think were good recommendations. We asked that the reference margin calculations be changed, we asked that the viability test be eliminated so that the industry could use positive margins, we asked that the annual contribution limit of the AgriInvest program be increased, and we asked that the government look at the whole regulatory regime. That is where our cost structure in Canada, under regulations, is much higher.

Have those recommendations come through from the government in terms of reference margins, viability tests, or annual contributions to the AgriInvest program? Has the government dealt with the regulatory regime, which would make one hell of a difference?

[Jurgen Preugschas]

Well, thank you.

When we initially asked for the $30, which amounted to $800 million, as you're very well aware, we lobbied government and opposition members on it, but it became clear very quickly that we weren't getting any support from any members, whether opposition or government. Also, in our discussions with the Americans, it was very clear that there was going to be an immediate launching of a countervailing action, which ultimately would have meant that the $30 a hog would have probably just been transferred straight from the government taxpayers' coffers into the American taxpayers' coffers. That ultimately was not acceptable to any of us. It wasn't acceptable to opposition, and it wasn't acceptable to government. We also understood that just transferring money to the U.S. maybe wasn't in our best interest either.

We therefore took another look at it, and that's when we came up with a system whereby we could at least get the APP loan paid down as well as getting access to another APP under the emergency situation. That's what we had asked for. The government came up with something different. Initially $1 billion was going to be available to hog producers. Unfortunately--and I'm going to be a little bit critical here, certainly of the banks and maybe to a certain degree of our government as well--they negotiated that down so significantly that now there may only be as little as $620 million available to our producers. That is quite disturbing to us. And the APP comes out of that, so in actual fact, the $312 million that comes out in APP money is replaced, and then if it's only $620 million in total--you are right--it is not enough, and it isn't going to do the job that it needs to do. But the banks negotiated down. They pushed hard, and they got it.

Now the question is, as I stated in my initial presentation, whether or not we're even going to be eligible to get these funds. We've been hearing that banks aren't that excited about lending this money to any of the producers. This started only last week with the FCC, on Thursday. I actually put my application in on Monday because I wanted to find out first-hand whether it even worked. I was told some things. I've been talking to other producers who are being told different stories. That is concerning. We need to ensure that this program works. If it doesn't, it needs to be fixed.

As far as the interest rate goes, we were promised by the minister that we would not be penalized for being hog producers. If we are, we'll be coming back to address that issue.

You're absolutely right, we cannot afford to be penalized 3%, 4%, or 5% because we're hog farmers in trouble.

[The Chair, Conservative, Larry Miller]

Thank you.

Your time has expired, Wayne.

Mr. Bellavance, you have seven minutes.

[André Bellavance, Bloc, Richmond—Arthabaska, QC]

Thank you, Mr. Chair.

There is no need for you to be nervous about testifying before the committee, Ms. Matheson-Wolters. There is no need to be shy. On the contrary, some of the best testimony given to members of the Standing Committee on Agriculture and Agri-food often comes from people who work in the field, from people with first-hand knowledge of the crisis in the sector. People like yourself are in the best position to relate their experiences to us. I very much appreciated your testimony.

At this time, I would like to share with you the comments of a Quebec farmer regarding the crisis in the pork industry. He had this to say:

We should not delude ourselves into thinking that the new federal plan announced a few weeks ago will rescue hog producers. The plan gives them the option of either going into debt even further or abandoning hog farming altogether, with $75 million in outgoing premiums having been set aside for producers across the country! What a dismal outlook for the future... Over the years, the UPA has consistently been critical of the Canadian Agricultural Income Stabilization Program, now called AgriStability, and its failure to intervene effectively after three years of depressed prices, as evidenced today by the current situation in the pork industry.

He concluded his remarks on the following note:

We would not be in this situation if the federal government had listened to our concerns. How many times has the UPA demanded an AgriFlexibility program worthy of the name and with sufficient funding to cover the cost of our income security programs when the need arises?

These comments were made by Mr. Christian Lacasse, a farmer and the President of the Union des producteurs agricoles du Québec.

It's true that the federal government has announced some measures. No doubt you will hear government officials claim that millions of dollars have been spent on trying to resolve the crisis in the pork industry.

What is clear to me from Mr. Lacasse's comments is that we—and by we I mean the opposition parties as well— have long been calling for a genuine AgriFlexibility program that includes an income support component. In the last budget, the minister announced the AgriFlex proposal which is devoid of an income support component.

I would like to hear what you think about Mr. Lacasse's comments and about how useful a real AgriFlex program would be for producers.

[Leza Matheson-Wolters]

Thank you very much.

I appreciate your comments. It is difficult to sit here, because no one wants to air the dirty laundry of their home front for everybody to see. It is not masked behind policy; it's real, and we live it every day. So thank you very much. I appreciate that from the heart.

It's not that the government has not come up with programs or CPC hasn't worked hard on programs. It's not that I think the $5 million AgriFlex initiative isn't worth it. The problem is that in Atlantic Canada we're not big enough producers for this program to work for us. It may benefit farms that have larger sow numbers and production—I'm not sure of the number—but we're too small. That's the problem.

We had a 500-sow operation and were one of the bigger operations in Prince Edward Island. We've gone down to 350. I've already decreased; I'm already efficient enough. What I need is the APP program to be reinstated for those in severe economic hardship, not standard cases. If I get APP, I don't have to get a first priority agreement with the bank even I were participating in the HILLRP program. For the HILLRP program, $85 a hog for a small producer isn't enough. If I were a larger producer and had $1 million and paid my $400 APP off.... I've had $600 to do three years of paying my mortgage, doing my expenses, and what not over those three years. But I can't do that: it wipes me out. It wipes my genetics out. I think that's a big loss to Canadians and to the Canadian hog industry to have my genetics gone, in my opinion.

I think in respect to Jurgen, I'm tired of the Americans holding a stick over us. Guess what: their stick has turned into a cane. They're at war. They're bullying us. We're tired of being bullied. They never want countervail, and I'm tired of hiding behind what I've heard my whole life--that we can't dump money into the feed program because we're scared of a countervailing duty. We need to decrease our costs.

Then, to decrease my COP, as we heard from Mr. Cooper, we need some subsidy for our feeds. And if we don't have subsidies for our feeds, which keep people employed and all the things Mr. Cooper referred to, then we have to have money—taxpayers' dollars—to subsidize us so we can break even.

It's frustrating, because I see the quality of our meat, I see how hard we work, I see our production, and yet we're being asked to slaughter that production for three years. If you guys lost your job today, could you pay your mortgage for three years? Could you feed your family? No, I can't do it.

Under the current program for Atlantic Canada, and specifically for my farm, I can't do it. If I do that program, I exit; I'm done. I will lose my restaurant, because of my personal guarantee. I will lose the home I've had since we were 23. We worked so hard. I got educated. I will lose everything—everything. This program, I beg you, doesn't work for Atlantic Canadian hog farmers. It doesn't work for me. I'm not saying it's a bad program or that it was negotiated poorly, but it just doesn't work for my farm.

[The Chair, Conservative, Larry Miller]

Thank you.

Your time has expired, Mr. Bellavance.

Now we have Mr. Atamanenko for seven minutes.

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

Thank you, Mr. Chair.

Thank you to all of you for being here.

Madam Matheson-Wolters, I have a question for you. You mentioned that your cost of production is $1.55.

[Leza Matheson-Wolters]

Approximately.

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

Is that $1.55 per pound?

[Leza Matheson-Wolters]

It's per kilo.

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

But you only receive 95¢?

[Leza Matheson-Wolters]

On average.

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

If all of a sudden you could get the price you needed to make a half-decent living, how much should you be receiving? What would you need to make a go of it?

[Leza Matheson-Wolters]

By simple math, if my COP is $1.55 and I'm getting 95¢, that's a 60¢ loss.

If I have sow production of 340 sows and the farm yields on average 10—though we yield a little more than 10 because of genetics, but let's say that we yield 10—and the cycle of birth on a hog is 2.3, that math times your loss would give you a break-even point.

I shouldn't say that we're not looking to make money. We'd be happy just to be able pay the bills and not stare at the ceiling at night wondering who we're going to pay tomorrow.

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

How much should you get be getting per kilogram, then?

[Leza Matheson-Wolters]

It should be $1.55.

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

But that's your cost of production, just to break to even.

[Leza Matheson-Wolters]

Yes.

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

You touched upon a point that I've often brought up, and that's the whole trade issue, the countervail and exports. The more I look at all these issues and see how it has hit our cherry producers and others, it seems we always seem to be fighting this. For all its good intentions--the government has programs--governments seem to be operating within this framework that we have to be very careful and step very lightly on trading partners because of countervail and borders being shut down. Yet we see all sorts of programs happening in the United States that are interfering with us. To me that does not seem fair. It seems we have to have some way of going around this.

My question is on the total production. Roughly how much is domestic, how much do we ship to the U.S., and how much do we export to other countries?

[Jurgen Preugschas]

Our total pork production--and let's leave the live pigs out of it for a minute--is 21.5 million hogs, give or take. We're at a little under two million tonnes. Of that, a little over a million tonnes are exported. Of that, 28% goes to the U.S., with the rest going to the rest of the world.

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

So most of the pork, 1.5 million tonnes, is Canadian or domestic, plus a million tonnes are exported?

[Jurgen Preugschas]

I think about 700,000 or 800,000 tonnes are domestic. Then you have a million tonnes exported. Those are really rough numbers.

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

And 28% of that goes to the U.S.

[Jurgen Preugschas]

That's correct.

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

Now, 25% of our consumption in Canada is U.S. pork.

[Jurgen Preugschas]

That's correct.

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

What would happen if we didn't deal with them? If we take it one step further, if we assist our farmers and they slap on countervail, then we could say we don't need their pork and we're not going to send them ours. We can develop those markets and move our domestic industry onto a stronger footing. Is that theoretically possible?

[Jurgen Preugschas]

Alex, I think you've hit on something very important, and it is something government can do tomorrow. One of those things is that, number one, the pork coming in from the U.S. has to meet the same stringent rules and regulations as our pork does in Canada. That could be implemented tomorrow if the government were willing.

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

It's the same with beef.

[Jurgen Preugschas]

The same with beef, absolutely--everybody.

The other thing that could be done that we could implement tomorrow is the same type of charge that Canadian pork pays going into the U.S. for promotion and research. If there were a will by government, they could tomorrow implement exactly the same kind of charge for pork coming into Canada. It's not a huge amount, but it would give us money immediately to assist in promotion and research in this country. Right now we spend more on promotion and research in the U.S. than we do in Canada, because we're forced to pay the levy on our pork and hogs going into the U.S., but because of our Canadian boy scout attitude, we don't charge coming this way. If there is a will by government, that can be implemented tomorrow.

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

It seems it would be logical to do that. I think it's something that would be supported by everybody.

Ultimately, if we do this and the Americans hit back hard, our industry could basically survive by saying that we don't need their pork and we don't have to export to the United States because we are trying to develop more markets and trying to work on our domestic industry. Could we do that?

[Jurgen Preugschas]

It's not quite that simple, because we do have open borders. So if the regulations--whatever they are--are met, the American processor chooses to sell here, and the retailer buys here, we do not advocate closing the border, because it is important to us as well. A lot of our packers, processors, and exporters sell to the U.S., and we don't want to kill them either. It's a little more complex than what you say, but it would certainly lower our dependence on them.

The $17 million promotion fund working through CPI is very valuable to develop some of those other markets. We understand and agree that the less we're dependent on the Americans, the less we have to worry about countervail or the big cane attitude.

[The Chair, Conservative, Larry Miller]

Your time has expired, Mr. Atamanenko.

If you have a closing comment, I will allow it, but there is no time left for questioning.

Mr. Hoback, you have seven minutes.

[Randy Hoback, Conservative, Prince Albert, SK]

Thank you, Mr. Chair.

Thank you all for coming here today to talk about the pork industry.

I'm a farmer myself, and I know your feelings and frustrations in dealing with banks. It was kind of interesting when, in our competition study, we had the banks in here. They basically recommended we get rid of Farm Credit, and they would take care of everybody else. I kind of laugh at that, because in a lot of cases FCC fills the void. These banks, based in Toronto or Calgary, just don't seem to understand that. So you've just confirmed that these banks take care of themselves, for lack of a better word.

I want you to know that I feel for you, and I really commend you for the courage it took to come here. I know it's tough. Nobody ever wants to air their dirty laundry, as you said. But sometimes that needs to happen so we legislators understand the impact. It's nice to have someone from P.E.I. come here to tell us that. It's important.

[Leza Matheson-Wolters]

Thank you.

[Randy Hoback, Conservative, Prince Albert, SK]

I don't care what happened with the Liberal government before, or what has happened in the last three or four years. Maybe we had a bad trade policy, or maybe we should have started bilaterals earlier. We can blame a lot of people for a lot of things, but what can we do as we move forward?

I understand that with the program we have now, some people like it and some don't like it. Some people say it works, and some say it doesn't. That seems to be characteristic of any farm program. You can never seem to get a farm program that fits the bill across the table. Some people fit very well into a program, and some people don't.

But I think all farmers would say they don't want to get their money from the mailbox. They want their money to come out of the market. So how can we get this right so the market goes back to driving our paycheques?

On the avenue of trade, I know the Minister of Agriculture has travelled extensively. In fact, the personal sacrifices he has made in giving up his break weeks and the sacrifices his riding has made because the minister has been gone have been phenomenal. As a committee, we have to recognize that the minister has been out there flogging beef and pork in every corner of the world, whether it's in Russia or whether it's going to be Hong Kong and Japan next week. I hope you guys understand that he's out there doing that.

I also want to point out that he's willing to do more. If we could get some opposition members to pair off with him, I think we could have even more results in opening up some of these markets.

I got a little confused, Jurgen, when you spoke about shutting off the border, in response to Alex's question. What would happen? Realistically, if we shut off the border and said we were not going to deal with the U.S., how may producers would we lose in Canada?

[Jurgen Preugschas]

As I said, I absolutely do not advocate shutting the border. I do advocate treating the Americans the same way as they treat us. So their pork coming in should get the same levy as our pork going into the U.S. Our regulations have to be adhered to, because there are labelling issues and other issues that the Americans do not properly follow. Our regulatory agencies don't follow up on them. That's all we're asking. We do not advocate closing the border.

[Randy Hoback, Conservative, Prince Albert, SK]

So as far as other countries go, whether it's pork coming from the U.S., Europe, or other countries, you expect them to follow the same Canadian rules and regulations as we have to follow. Is that correct?

[Jurgen Preugschas]

We absolutely believe that. We expect to follow the rules of our export markets as well--and we do.

[Randy Hoback, Conservative, Prince Albert, SK]

Edouard, as we look forward, what markets do you see as having the most potential to really make a quick change-around in this industry?

[Edouard Asnong]

I will get Jacques to answer that more precisely. But certainly we have to consolidate our actual markets like Russia. We're out of Russia somehow, because they have some regulations about pathogens that nobody can meet. They are not meeting them either. It's the same thing with China, which we have lost as a market. We cannot export directly--or very little.

That made us go to Hong Kong with a discount. South Korea is signing with other countries. We are far from having an FTA with them. With Colombia, the buyers were here and they want to buy, but they still have to pay those high tariffs until the FTA is signed.

Jacques.

[Jacques Pomerleau, Executive Director, Canada Pork International]

Edouard also mentioned the EU. We were at ANUGA three weeks ago, and the potential for that market is amazing. We expected we would be able to sell legs, or whatever. Now it's chilled pork, very high value-added, and that one is really important for us.

The key joker there is India. That's the one that if we could break the door open.... It's almost a nightmare trying to negotiate with them--even to have a veterinary agreement. But there is a lot of potential and it would be a high-end market.

[Randy Hoback, Conservative, Prince Albert, SK]

How are your associations—the Canadian Pork Council and Canada Pork International--trying to crack open those markets, outside of the government side of it? What kind of money are you spending to get Canadian pork publicized and put into those markets?

[Jacques Pomerleau]

First, when you talk about a free trade agreement or a veterinary agreement, it's the government's responsibility. The industry can promote our products once the door is open, but to open the door is the government's responsibility.

[Randy Hoback, Conservative, Prince Albert, SK]

So a free trade agreement with Colombia would definitely be a positive thing for our pork producers across Canada.

[Jacques Pomerleau]

Oh yes. You should have seen the response we got from the buyers in Colombia. We were there in July. We expected about 25 people and ended up with 75. They met with all the packers and traders from Canada, and we could significantly increase our exports to that country.

[Randy Hoback, Conservative, Prince Albert, SK]

Obviously it wouldn't be live hogs; it would be processed hogs.

[Jacques Pomerleau]

Processed pork.

[Randy Hoback, Conservative, Prince Albert, SK]

Okay. I'll leave it there. I just wanted to see where the trade side of this was going.

[The Chair, Conservative, Larry Miller]

Thanks, Mr. Hoback.

Before we move into the next round, I would like some clarification. Mr. Asnong or Mr. Pomerleau can answer this.

The brief you presented to us has some figures showing that live Canadian exports into the U.S. have gone down. Comparing January to August a year ago and January to August this year, we're up 7.5% on exports into the States. So I presume that these figures take into account both live.... No?

[Jacques Pomerleau]

No.

[The Chair, Conservative, Larry Miller]

That's all I needed to know. I wanted that clarification.

[Jacques Pomerleau]

That's just on pork.

[The Chair, Conservative, Larry Miller]

Thank you very much.

Mr. Eyking, you have five minutes.

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

Thank you, Mr. Chair.

I thank the guests for coming here today.

It's my understanding that the hog price for North America is pretty well set in Chicago, and everything circles around that because the U.S. is such a big producer. You can talk about all the markets you want to find in the world, but the U.S. is also an exporter, so the price of whatever we're going to be selling in the world is probably going to be based on the Chicago price.

I know hog producers in Indiana, fairly large producers, and they have a corn-growing operation, a feed mill, and a finishing operation for the hogs. Somehow, they just put their slip in and say they produce so many tonnes of corn or so many acres of corn, and they get this cheque in the mail. So they sell their corn for less to the feed mills, which give it to their hogs for less. So it translates pretty quickly. I think our agriculture committee found out before that there's somewhere around a dollar a bushel of subsidy going into corn in the U.S. So when you start throwing numbers around to see how important feed costs are for the hog operation, I think they account for about three-quarters. So if you look at $1 a bushel and how that translates to the price of producing a hog down there compared to here, it's pretty staggering. You can do all the math you want.

This is what bothers me. When we're shying away from this $30-a-hog subsidy and down there they're getting a subsidy for corn, which is technically a subsidy on their hogs, why don't we do something different? Why don't we put the subsidy right on the feed? In Atlantic Canada, we used to have the free freight assistance. It sounded good for a while. They encouraged feed operations to have feed mills and all that.

So I don't buy this, that we cannot put some sort of subsidy on our feed to help our producers.

I'd like to have a little more clarification from Mr. Cooper, because my numbers could be off a bit on how that translates.

[Graham Cooper]

Certainly, Mr. Eyking, I think the volumes that you're talking about, the tonnages, are about right. The 75% seems to be a good number, in terms of the proportion of feed to the cost of raising an animal. It obviously varies for different parts of the country and the type of animal you're dealing with whether there's more corn, barley or so on, but when you're talking about the hog industry, corn is the main issue that always comes up.

The point you raise is a good one. The corollary to that is the question of biofuels and ethanol, which, as you know, carry with them significant subsidies as well. So we have companies, producers, integrated companies that are members of our organization, for example, that are competing with the subsidized ethanol plant down the road for their corn. Certainly the kind of situation you're talking about, in terms of providing some sort of support—use the word “subsidy” if you wish—is something our industry would be prepared to look at.

I think what's interesting, though, as I mentioned in my remarks—and I know I threw out a lot of numbers—is that when we're dealing with grains, whether corn, wheat, barley, or protein sources such as soy, the price trends seem to be pretty level now. But the fact is that because prices are depressed at the producer end, it doesn't matter how stable the input prices are if you can't get the market price for the animal.

Those kinds of innovative approaches, Mr. Eyking, are certainly something that our industry would be more than happy to discuss. Certainly we have a partnership with our customers, livestock producers of all the species, and if that's the sort of thing that would work for the hog and the pork industry, then I think it's worth investigating.

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

Chairman, do I get another minute? I have a question for Leza because she's a maritimer. And, of course, we have two maritimers here.

My understanding is that if the hog operations go bust, of course they're going to lose their livelihood and employees as well. But around the Maritimes, where we're such big potato producers, one of the crop rotating crops is barley. What happens if the hog industry goes bust other than someone losing the plant, which would never come back? What happens to the rest of the economies there, the growth economies in the Maritimes, when the hog operations go down? What do they do with their barley, which they need to rotate with the potatoes, for instance?

[Leza Matheson-Wolters]

I won't pretend to be an expert on crop rotation, but I know for our own farm and our own kitchen table, with farm experts in our community, we've talked about this and we've talked about fertilizers and non-organic chemicals in order to hold the moisture and the nutrients in the soil if we don't have the organic product. If we take out our red meat sector of beef and pork and can't spread that on the fields with crop rotation, we'll have to go to a non-organic product that's going increase cost. The moisture is a lot better with the organic product. There's a whole domino rollout effect that will happen if the hog and beef industry aren't there with that product.

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

Mr. Moffett.

[Stephen Moffett, Director and Chair of the Business Risk Management Committee, Canadian Pork Council]

I would love to comment on that, certainly from our point of view. On this whole issue you mentioned around the subsidy on corn in the United States, of course, I feed some pigs down in the United States as well as in the Maritimes, and there are certain things we do to be competitive with what they do down there. But the hardest thing to compete with is the dollar-a-bushel subsidy on corn. Alex mentioned it too. Sometimes we feel a little bit guilty, and I will say we are probably one of the commodities that are very concerned about subsidies and this whole issue about trade access and countervailing duties. On the other hand, it's so frustrating when we complain to the Americans and say, look, it doesn't matter what we do; what's important is what you do, and if you do it wrong, then we'll put a countervailing duty on you. But I would go on to say that I think around this table certainly there's a lot of history of all parties working together to try to fix some of these issues, and that has been alluded to before.

These issues around some of the programs that we have could be fixed, such as the negative margin test that Wayne mentioned, the issue with AgriInvest and trying to do something with our margins, going forward from here. We talked a lot about trying to get our producers through this crisis, and that's our first priority right now, but once we get through this, we have a lot of issues when our producers can't pass the negative margin test, when the CAIS program or the AgriStability program isn't going to be there to help our producers and keep them in business. I will tell you, if we lose all our good producers, there's going to be pretty cheap barley on the Island and a lot of other places. We're going to have to rebuild the railroads on the Prairies to haul all the grain away, because there won't be pigs there to eat it.

[The Chair, Conservative, Larry Miller]

Thank you, Mr. Moffett.

Mr. Lemieux, you have five minutes.

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

Thank you, Chair.

Let me start my comments by recognizing that this is an extremely difficult time for the hog industry, but also for hog farmers, which is what we're hearing today. There's the industry, and then there are the farmers themselves. Certainly I can say that one of the challenges the government has, regardless of which government the country happens to have at the time, is trying to find solutions that will address a problem without necessarily resulting in long-term dependence, because I don't think anyone wants a long-term dependence. What can end up happening, of course, is that the government can inadvertently reinforce a weak business model, and the situation will actually get worse, but it will be hidden by this long-term dependence on government funding.

I'm bringing this up because I wanted to respond to a comment about there not being one solution that fits all. I think that is a valid comment, but I also want to say that the solution we've tried to put forward is multi-faceted. There is the $76 million to enhance the stability of the hog sector. There was $50 million for a cull sow program. Just recently there was the $17 million announced to increase external markets. There's the $75 million for the transition program. What I see is a multi-faceted program that tries to address different segments of the hog sector to help improve things.

I think the other challenge is that the industry knows, for example, that it has to downsize. The industry is somewhat nameless and faceless, in a sense. It's widely understood that the hog industry grew at a rapid rate, and now because of market challenges, it has to contract. It's fine for the industry to know that, but when it comes down to the individual farms and the farmer--and you gave a very good presentation on what this means to you on your farm--that's where the rubber hits the road and that's where the decision can be extremely difficult, even though the reality is that the industry knows the number of hogs has to contract for now.

We had some discussion on international trade and foreign markets. I think that is very important. I do want to come to the Colombia agreement, because I think it's a piece in the puzzle that will open markets, and a bigger market for hog farmers, be it local or international, is better. Particularly, as you said, Jurgen, if it's not dependent on the U.S., it's good. I do want to encourage my colleague from the NDP to help us pass the Colombia free trade agreement, because this is stuck. It's being argued to death, and that simply is not helping our hog farmers. It's not helping our agricultural sector at all. This has been in Parliament now, and it's long overdue that it should pass so it can be implemented.

We've had tremendous success. I do marvel, actually, at Minister Ritz's energy in terms of going abroad to open these markets. So I'd like to see it, and I think you'd like to see the Colombia agreement implemented to the benefit of farmers.

I do want to come to a question, and I'll ask this to Jurgen or to Stephen, either one. There was close collaboration, close work, between the government and CPC in putting this program together. I understand there are always concerns on either side on how we can make this better, but I'd like to know what sorts of positive outcomes you're looking for with the program that was put together for hog farmers and for the hog sector. What kinds of positive things do you hope to see at the end of this?

[Jurgen Preugschas]

Thanks for the question.

On the Colombia agreement, it's critical that it gets approved quickly before the Americans have theirs approved, so we can get quicker access. We do have an opportunity and we should approve the agreement.

In answer to the question, we need access to cash, and the loan loss reserve program should provide that. So we need to ensure that most of our producers are able to get it at reasonable interest rates, not at penalizing ones. That is absolutely critical. And the banks must be relatively generous in assessing what is a viable business unit. Honestly, right now there isn't a single hog farm in Canada that can make the argument that they're viable. That's why it's so critical that the issue of negative margins in the AgriStability program gets solved, so that our producers are actually still eligible for AgriStability. Some of them already aren't, because of the negative margin issue.

Those are the two really key aspects of the program, and they need to be dealt with quickly. We're already three months from when we announced it. Wayne was talking about the inhumanity. It is inhumane for our producers to have gone through the pain and suffering they have for the last three months.

On the hog farm transition program, it's a difficult one because it is about making a decision to leave the industry, and that is emotional for our producers. It's really, really tough. Leza is absolutely right on that; it is emotional. We love our farms, we love our animals, and we're proud of what we've done as farmers. And this is tough, but we hope it will assist them in not losing their total operations and farms. That is what we're hoping will come out of this program.

Do you want to add anything?

[The Chair, Conservative, Larry Miller]

Thank you very much.

We'll now move on to Mr. Bellavance for five minutes.

[André Bellavance, Bloc, Richmond—Arthabaska, QC]

Mr. Asnong and Mr. Pomerleau, I hope you can shed some light on these export figures.

Unfortunately, they were not provided directly by Statistics Canada. Rather, they were taken from a newspaper article. Nevertheless, I would like to compare them to what Statistics Canada officials are saying and to what you said earlier about the decline in exports.

I'm not sure exactly what period the figures refer to, but mention is made of October 1. According to Statistics Canada, as of October 1, hog exports—most of which were comprised of piglets for US livestock production—declined no less than 27% compared to the same period last year. According to your figures—which apply to the first eight months of 2009—exports were down by 4.7% compared to the same period in 2008. There really is quite a discrepancy here.

Could you please enlighten us and give us the correct figures, to help us understand the situation?

[Jacques Pomerleau]

The explanation is quite simple, because we're talking about two different things. You're talking about live hogs, while I am talking about pork.

[André Bellavance, Bloc, Richmond—Arthabaska, QC]

So then, are the Statistics Canada figures correct?

[Jacques Pomerleau]

The ones I gave you are correct.

[André Bellavance, Bloc, Richmond—Arthabaska, QC]

So then, there has been a decline of 27%...

[Jacques Pomerleau]

...in piglet and live animal exports.

[André Bellavance, Bloc, Richmond—Arthabaska, QC]

And what is the reason for the drop in exports? Is it because of the infamous swine flu?

[Jacques Pomerleau]

No, the reason for the decline is the COOL program.

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

The COOL program?

[André Bellavance, Bloc, Richmond—Arthabaska, QC]

Clearly, since the introduction of COOL, exports to the US are down by 27%.

[Jacques Pomerleau]

We're talking about piglets and live hogs. However, in reality, the numbers are higher, because these calculations are for last year, and exports had already begun to drop before then.

[André Bellavance, Bloc, Richmond—Arthabaska, QC]

So then, it's directly tied to this initiative.

Have the financial losses associated with declining exports been evaluated?

[Jacques Pomerleau]

I will ask Mr. Preugschas to answer that question.

[Stephen Moffett]

I'll comment on the issue around COOL, because in my case I do ship weaner pigs down to the States. We actually maintain ownership down there and then sell the pigs to the slaughter plant. We had a four-year contract with the slaughter plant.

When the new administration came in and the new agriculture secretary said, “Thou shall abide by the rules, and in fact we want you to go further than that, or else we'll change the law”, many of the plants just didn't know what to do. So the slaughter plant that I sell to said to us, “Look, you guys, I'm sorry, but we're not sure we can kill your pigs, so you go find somewhere else.” Do you know what that does?

All the people in that region who used to love to buy Canadian hogs because they're better, they're healthier, and have good genetic material, and who could buy them in large quantities and fill barns all in and all out, said, “We just can't risk it. If we buy a load of weaner pigs now and fill the barn, six months down the road we might not have a market for them.” So those producers just say, “Look, sorry, guys, I know you have a long-term contract, but you'd better find somewhere else for your pigs.”

For a while last year, we had guys in Manitoba who couldn't give pigs away for zero dollars, or crazy prizes. So we have producers who've found that they have to go out of business—and it's directly related to COOL, which created so much uncertainty that it destroyed the markets for all of those animals. They just quit buying them. What do the producers do? If you're a hog farmer, it's devastating. Talk about inhumane: people put their life and soul into these farms and they just have to quit. But it's directly related to COOL.

[André Bellavance, Bloc, Richmond—Arthabaska, QC]

We had never seen exports drop that dramatically in such a short period of time prior to the adoption by the US of the country of origin labelling policy. This is the first time that we have been affected so strongly by an initiative taken by one of our economic partners, namely the United States. This had never happened to us before.

[Stephen Moffett]

It's probably the most successful non-trade barrier that we've ever seen.

[Jurgen Preugschas]

We have reported that to you at this table. We've already shown you the drop; now it's just a little longer time. We predicted it and we've reported it. It's devastating some of our producers. Some of them have changed their business model and are finishing their hogs in Canada. The market has changed a little bit and guys are getting a half-decent dollar for the weanlings right now, but they are still getting nowhere near what American pedigreed hogs are fetching.

[André Bellavance, Bloc, Richmond—Arthabaska, QC]

Are you in touch with US producers and can they tell you if their situation has improved at all since the adoption of the US COOL policy? Has any improvement been noted?

[Jurgen Preugschas]

In actual fact, we're in very close contact with the National Pork Producers Council. They never supported COOL and feel that its long-term impact will actually be more negative for the U.S. than Canada. The short-term effect is damaging to some of our producers who had that business model, but the long-term effect is that it's going to reduce the number of slaughterings in the United States and will ultimately result in jobs layoffs of further processing in the U.S.

So the National Pork Producers Council lobbied against it. It was the groups like R-CALF and some of the other extreme right-wing protectionist groups that were successful in bringing this in.

[The Chair, Conservative, Larry Miller]

Thank you. Your time has expired.

Mr. Shipley, for five minutes.

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

Thank you.

Thank you, witnesses, for being here.

Leza, also, I want to thank you for your great presentation. Most of us around this table do farm. From the early eighties when interest rates hit 24%, I know exactly some of the situations you're going through. There are some very tough decisions.

Jurgen, you mentioned earlier in the discussion some of the inequities and some of the things that would help level the field a little bit. Obviously the levy is one, going both ways. But in terms of the availability of products, you also mentioned antibiotics, etc., that can be used on hogs in the United States, which actually then end up sitting on the shelf close by ours in the industry or within supermarkets. Our producers, for various reasons, have been banned, or have not been licensed, or won't get licensed because there's not enough of it, or whatever. That's the concern that we hear time and time again, whether it's the livestock industry, the cropping business, or horticulture. If we had the regulatory and scientific research that could parallel or work with those who are approving the licences in other countries, particularly the United States, since they're our largest competitor....

Do you have any idea what impact it actually has on your industry, not having those regulatory things in place that would be similar for Canadian producers?

[Jurgen Preugschas]

I'm going to respond very briefly and then I want Jacques to respond, but certainly levelling the playing field is absolutely key.

A simple example is Carbadox. We banned it in Canada. We are not allowed to use it anymore. It has never been banned in the U.S. Supposedly it is carcinogenic and that's why it was banned in Canada, but we have absolutely no issue with importing it into Canada and our meat sitting beside theirs and our consumers not being aware that it has been raised under different conditions. That's what I want to comment on here.

Maybe you need to talk a bit more about some of the labelling issues--or I guess that's more for the Canadian Meat Council. The Meat Council has told us many times that labelling is another huge issue, where, for example, Canadian producers must put French and English on all their labels. The Americans don't follow that. They should be required to do that. We have the rule in Canada that we want our consumers to have bilingual labels, but when the Americans export into Canada, we don't make them follow the same rules. I don't think that's right, and neither should our consumers accept that.

There are other labelling issues where they incorrectly label, and CFIA isn't prepared to hold up those shipments. Our products get held up at the border if there's an issue. We should just sometimes, when they do something wrong, absolutely hold it up and send it back. They'll smarten up.

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

It's amazing what a little experience does to correct the situation.

I'm just trying to understand a little bit how we can move forward, Jurgen, and I have other questions for comment.

Back in the early 2000s in my area, we had these loops develop. The dollar was at 65¢. They were building barns faster than they could get contractors for. There were individuals going into the pork business who had never seen a pig before. Then suddenly things started to unravel at the borders. There didn't seem to be a plan B. There did not seem to be a concern.

When I talked with one of the individuals who was running one of these, I said, “What are you going to do the day something happens at the border?” The reply was, “Well, it won't. We have biosecurity, we have the genetics, all those sorts of things.” But here we are.

This is not being critical, but it's a question I've been asked before. I know the industry itself has faced us, because it's made up of individuals such as you and Leza--in fact, all of you are producers. So what can you do to help us moving forward so that we don't get into this again? Those numbers have skyrocketed. They've more than doubled in 10 years. So how do we work through that, going forward?

[Jurgen Preugschas]

I think you've actually hit the problem and the solution we need to have. That was the meeting I was at and why I didn't show up in Ottawa earlier, because I felt that it was so critical that we develop this. What we are working on right now is a comprehensive plan Canada-wide, where we look at our whole value chain structure of how we actually ensure that the producer has some ability to share in the good times and not carry all the risk in the bad times.

It's nothing against our feed industry, but we are expected to cover the losses when things are lost. All our suppliers say they have to raise prices because they need their margin, and I appreciate that, but right now we take all the risks and get very little of the reward. What we're working at is a plan to maybe change the pricing as well, off the U.S. prices, where we have a built-in-Canada meat price rather than the U.S. price

It's not really simple, and this is going to take us some time, but we will be asking government to help us structure this. We don't want subsidies on it. What we want us is just for you to help us develop the plan and let our industry then work that out in an integrated fashion, whereby ultimately the Lezas, the Stephens, and the Jurgens of the world will still be here five years from now producing hogs.

[The Chair, Conservative, Larry Miller]

Thank you. Your time has expired.

Our last questioner is Mr. Valeriote, for five minutes.

[Frank Valeriote, Liberal, Guelph, ON]

Thank you. And thank you all for coming up and speaking to us.

Leza, I'm just curious, and I'm going to ask for short answers. You obviously speak for yourself and the other 30, at the very least, producers that are left in P.E.I. Are there any beyond P.E.I. on whose behalf you would be speaking today?

[Leza Matheson-Wolters]

I was invited as a producer. My understanding is that producers, for the vast part, in Atlantic Canada with the two programs that are there.... It's the small farm that we need to make changes for. Neither of the existing programs will help us.

[Frank Valeriote, Liberal, Guelph, ON]

Right.

Now, to a certain degree we face a challenge here. There's a certain degree of impotence, I think, that this committee suffers from because we're involved in a long-term investigation right now. Pierre, you spoke of some good ideas, opening up trade with other countries, that kind of thing, which is longer term, but what I'm hearing is that there's a need in the short term right now or it will be a complete collapse of this industry.

I'm going to challenge this committee to get together at some point in the very near future to sit down and make some short-term recommendations that we might take to the minister and say, “Look, there's an obvious need here.” I challenge any of us to sit here and not acknowledge this immediate need. We can give her all of the expressions of compassion that we want, but unless we respond to it immediately, all those expressions are, frankly, meaningless.

Jurgen, this is my question. What other short-term measures do you think might be undertaken, apart from fixing the anomaly with the APP and the HILLRP and all the other anomaly programs that are out there, and perhaps the other suggestion of enforcing bilingualism in anything that comes into the country? Can you think of any other solutions that we ought to bring to the minister?

[Jurgen Preugschas]

I think as important as any of those is AgriStability, the one that fixes the negative margin. That one does affect each and every one of our producers, and I really do believe it needs to be looked at.

The other fact is that if the loan program isn't working...and I'm not saying it isn't, because it's too early to tell. We need to ensure that it does work and that the money gets out quickly, because our feed industry.... As for my personal bill from my farm, thank goodness the feed mill is carrying us; otherwise I would be out of business. So I would like to pay that bill off.

[Frank Valeriote, Liberal, Guelph, ON]

And would not having to pay back the amount outstanding under the APP go a long way to helping the farmers?

[Jurgen Preugschas]

I would suggest just writing it off.

[Frank Valeriote, Liberal, Guelph, ON]

Okay. Well, that may not be possible.

I do have one more question, if I can ask it. I want to narrow in on something you spoke about, and that was regulations.

I understand that under NAFTA, under anti-dumping regulations, we have a right to enforce minimum cost of production. I just need some explanation. Am I to understand clearly that right now the way we identify the minimum costs for American production leaves us at an amount that's too low and that those costs should be increased so we can avoid the dumping of their product into Canada? Can you expand on that?

[Jurgen Preugschas]

I'm probably not the right one to answer that.

[Frank Valeriote, Liberal, Guelph, ON]

Can any one of you answer that?

[Jurgen Preugschas]

In the rough terms of the dumping rules, we're dumping as well, because we're selling below production costs and that's what dumping is. We actually investigated the pork coming in, because we were very strongly considering launching a dumping action, but do you know what? It's hard to find the evidence, and it becomes a really difficult challenge to make.

I'm not saying it's impossible, but it is hard to do.

[Leza Matheson-Wolters]

If I could just...I'm sorry.

[Frank Valeriote, Liberal, Guelph, ON]

We'll share the time.

[Leza Matheson-Wolters]

I'd like to say just one thing. For small farms, if you could change the APP conditions, that would work.

[Edouard Asnong]

I have a follow-up comment on the dumping issue.

Every four or five years, the pork industry dumps because of the cycle, so we sell below our cost of production. We have a huge problem with the other method of dumping, which is underselling. As Canadians, we always get the highest price that we can get for what we sell in our domestic market or our export market. We never undersell or dump. But maybe those things should be investigated for the meat that's coming in.

[The Chair, Conservative, Larry Miller]

Thank you.

I have just one comment. Jurgen, you made the comment that in essence we could be dumping here, but I think there's one distinct difference. We're not doing it intentionally. Would you not agree with that?

[Jurgen Preugschas]

We're not doing what, sir?

[The Chair, Conservative, Larry Miller]

You said that in essence we were dumping into the States as well because we were putting it in there at less than the cost of production. My point is that we're not doing it deliberately, so to speak.

[Jurgen Preugschas]

Absolutely not. It's just, as Edouard said, that it's a fact of life that our cost of production is $1.55 and we get $0.95 or $1. Automatically it's below the cost of production, absolutely.

[The Chair, Conservative, Larry Miller]

Thank you very much.

Do you have a question, Mr. Bellavance?

[André Bellavance, Bloc, Richmond—Arthabaska, QC]

No, but I would like to make one brief comment, before we wrap up the meeting.

[The Chair, Conservative, Larry Miller]

I'm going to thank the witnesses.

I'd like to thank all of you very much for coming here.

Leza, as a farmer, I can very much relate, and I know that my wife could very much as well if she were here. I think we are all aware of what farm women put into their enterprises and what have you. And if you were nervous today, it did not show. I can say that. You did very well.

Thanks to all of you for being here.

[Leza Matheson-Wolters]

Thank you.

[The Chair, Conservative, Larry Miller]

Mr. Bellavance, you had something before we adjourn?

[André Bellavance, Bloc, Richmond—Arthabaska, QC]

Yes. Thank you, Mr. Chair.

Very briefly, I just want to come back to the suggestion that Mr. Shipley made at the start of the meeting, namely that we entertain the possibility of discussing the motions when we return. I just want your assurance that you will be here, because you are the best arbitrator that we have. I would like our chair to be on hand to discuss these motions.

If you can't be here on the 17th, since I would like to go along with Mr. Shipley's suggestion, I propose that we discuss the motions on the 19th. I just want to be certain that you will be here when we do debate them.

[The Chair, Conservative, Larry Miller]

At this point, Mr. Bellavance, as I indicated to you a couple of weeks ago, that's something that I'm not prepared to discuss openly. There is a chance that I may not be there, but at this point I will be, and that's all I can tell you.

The meeting is adjourned.