Agriculture Committee on Nov. 5th, 2009

[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.