Agriculture Committee on Feb. 26th, 2009

[Dennis Laycraft]

We have certainly increased capacity, so from that point of view they were successful.

Early on, back to 2006, we raised concerns about the competitive burden on Canadian packers, whether it was the enhanced feed ban or other issues that would put them at a competitive disadvantage when the border fully opened to U.S. plants. Many of the plants you talked about--Natural Valley Farms, Rancher's Beef, or Blue Mountain Packers in British Columbia--have all gone out of business.

A number of the large plants have certainly expanded and modernized their operations. The plant you referred to in your riding, as far as I know, is still operating on a single shift; it's capable of a double shift. Last year we exported 1.5 million head of cattle. We want to create an environment where it's more competitive to process those cattle in Canada. That gets down to the cost of their production. Again, if they're making a huge amount of money, there's no reason that many cattle would be going south. We need to improve their ability to maximize returns. We have a carcass optimization strategy that looks at a whole range of things to achieve that. Once we're able to bring those costs into a similar range as the U.S., and while the dollar had pushed labour.... We're starting to see that correct as we speak.

One of the things the government did do, and we have been working on it for a number of years, is to pull in more workers from other countries. We're beginning to work quite effectively with those programs and we've overcome a labour shortage. Talking about labour shortages seems to be a world away right now. But those things helped.

It's going to be critically important that we make sure we've addressed the competitiveness issues. You could keep building more plants, but it would be difficult to sustain them if we haven't addressed those issues.

There are certain regions in the country that are looking at capacity, and we have to make sure we give them a fair opportunity to survive.

[Frank Valeriote, Liberal, Guelph, ON]

From some of the reading I've been doing, I understand this captive supply arises in the context of the cattle sector, which is referring to practices whereby beef packing corporations own or control cattle on feed and finished cattle--in effect feeding themselves the cattle they need. I am curious about the degree to which they are allowed to manipulate the price that farmers are receiving by holding cattle in their own pens. Does it create a stress on the prices farmers receive? In your opinion, what if anything should be done about that?

[Dennis Laycraft]

It gets down to a market power question. We analyzed this a number of years ago. It changes if we have access to a large number of U.S. plants bidding, because then the market power is quite different from when they don't.

Captive supply is one of those things where there are good things about it and there are things that aren't good. If you happen to be one of those people who is on a formula system and developing contracts where you are able to forward-price your cattle because you're on a grid and you produce them to certain specifications, to be honest that's the type of innovation we want to encourage.

From time to time they will own more cattle on feed. If you happen to be the custom feeder who's doing that work and keeping your feedlot full, you'd be doing that differently from the person who is selling cattle the same week they're pulling cattle out of the pen.

It's never a completely simple question. The big debate in the U.S. when we went through this is that they would essentially be taking billions of dollars out of the ability to put cattle on feed if they limited packers from owning cattle.

I think the question always gets back to how you make sure in that environment that you can effectively create a competitive bidding environment. Certainly the rationalization we've seen in the packing industry is to make sure we have U.S. plants bidding actively at the same time as Canadian plants so no one plant is able to exercise over-influence on a market.

[The Chair, Conservative, Larry Miller]

Mr. Shipley.

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

Thank you, Mr. Chair.

Thank you for being a part of this.

First of all, I want to apologize that you were only given 10 minutes to present. When the NFU comes next week, the opposition agreed to give them at least half an hour to present. That wasn't the direction from here.

I have four questions to lead off, if I might. Dennis, you mentioned at the start of your presentation that some of the provinces were working against not only the commodities but the federal government in terms of the federal-provincial negotiations. What provinces would those be? Could you help us with that?

Secondly, in the province of Ontario they've brought in the unionization of workers. You just talked about workers from other countries coming in and working at our plants. We know that in the processing plant, as much as technology has come in, those jobs often are still a high-labour job and many workers come in from other countries. I'm wondering if you would have a comment about how that affects our competitiveness, or might. Maybe you don't know that just yet.

Third, I always want to go back to exports because we've talked so much about them. As you mentioned earlier, the success of the industry and the open market business is having access to markets. You mentioned earlier how we're the largest exporter of grain-fed beef in the world. I wouldn't mind having a comment about the opportunity you've seen or that we may have to expand on that particular one because of the high use of the beef we produce.

It was interesting to hear your comments about some of the costs we have. John, you mentioned we may be out $250. I don't think I comprehended how much the auto industry likely affects the beef industry, because very few vehicles do not have leather in them, or leather seats, or panelling and what have you. So I would like to have some thoughts on that.

I was struck by the amount. You said there's $82 at least per head, as an average, if we don't get these markets open; these are the ones we're talking about now. I would like clarification on that, a lot of things...and help me understand that getting to the bottom line where it works is not about one bite. If you're going to eat the elephant, I've always said, you have to eat it in a few bites, so obviously the markets and the expansion of....

When I talk to people in Canada, consumers, about the animal, when we kill an animal, what we eat in Canada and what we consider to be prime parts of the animal in Canada, there are certainly prime parts of the animal we don't eat. We can't comprehend, we likely wouldn't want to think about it, but they are a delicacy in other countries. So I think it's always about the market and being able to expand that.

Fourth, you have a market development council report of a sort. I apologize for not having the name of it. I don't know if you could expand, because I'm not sure everybody comprehends what might be in that report and its value.

Thank you, Mr. Chairman.

[Dennis Laycraft]

Federal-provincial meetings are an interesting process. You appear and then you leave, and then they discuss after you've left, so we get feedback from a number of sources. I can tell you where we've had support. I believe we've had good, strong support on moving forward from government in Saskatchewan, interestingly enough, and from there the support has declined throughout the country. We've been questioned on any number of occasions about the future of the industry, period, from some parts of the country. We've heard from many of them that they can't afford this. For a variety of reasons they felt they wouldn't make changes that would make those programs important.

I was asked earlier if this was more important than this. All these things are important when you're trying to survive to address these problems. Business risk management programs are very important in the short term. They are intended to give you breathing room while you get through difficult circumstances and move forward. We're going to continue to try to push in each province to get more involved in this. I don't know that much, sorry.

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

Sorry to interrupt, but I'm from Ontario, so I wouldn't mind having a--

[The Chair, Conservative, Larry Miller]

Your time is up, Mr. Shipley.

Would you answer briefly, Mr. Laycraft?

[Dennis Laycraft]

As far as Ontario goes, I'm not sure yet of the impact of that. It's not just bringing in foreign workers. We've been able to bring in very good, skilled foreign workers from these countries. Meat plants aren't the easiest places to attract people to. We often sort of joke that we wish that when they're deporting people from the U.S. we could set up a recruiting station there, because they have people who are really motivated to work and are very skilled at doing it.

Let's not kid ourselves. There still is this bulge, but we're going to see a decline in employable people in the near future. What we're going through right now is not a long-term circumstance in terms of employment, in our opinion. We are going to see that available group of people to employ, as the baby boomers age, change here shortly. We have to think about this more long term than the next year or two.

As for exports, we've talked a lot about how we maximize those dollars. I didn't talk about the WTO. In our opinion, beef is one of the highest protected products in the world as far as tariffs go. The study by the George Morris Centre talked about there being the equivalent of about $100 a head on the table there as well. It's going to be hard this year, but I think that as we move forward, we still believe it's crucial that we get an ambitious outcome there.

I'm sorry, what was the final question?

[The Chair, Conservative, Larry Miller]

Bev, your time is up.

We'll move to Mr. Hoback.

[Wayne Easter, Liberal, Malpeque, PE]

Excuse me, Mr. Chair, are we going to have time to deal with these motions?

[The Chair, Conservative, Larry Miller]

Yes, I'm hoping to. We still have 12 minutes left that are being eaten away.

Mr. Hoback had a question.

[Randy Hoback, Conservative, Prince Albert, SK]

Thank you again, Mr. Chair.

I'll be very quick, Wayne, so don't worry.

Again, we've seen a lot of information, and you've reconfirmed that the minister has been doing a bang-up job trying to address the needs of the industry. He is not just putting a band-aid on it but is actually trying to put the proper infrastructure underneath it.

What I'd like you to do is maybe just summarize what you've told us today and prioritize what you think would be the best thing for this committee as a whole to address.

[Dennis Laycraft]

Clearly, put the energy and resources into the trade secretariat, which the government has announced is moving forward. When you look at the ability of countries to negotiate, Australia and New Zealand have done some extraordinary things. I don't know how many of you are aware, but last year New Zealand was able to negotiate trade agreements with 10 Asian countries, representing close to 2.5 billion people. Talk about punching above your weight.

We believe that we clearly have the capability to greatly enhance this. It should be a legacy of the problems we've gone through that we become the world leader in that area. We have to tackle a number of the regulatory issues immediately. With the threat of our dollar going up, which I believe is a real threat, now is the time to address them. That became painfully clear a year ago.

We need to fix the business risk management programs. We continue to face the continual problems. It's not just the beef industry; it's Canadian agriculture over the last number of years. We're going to move forward with our efforts on the industry side with a plan, and it's largely built around solutions. We'd like to answer the question of how we move forward with a global marketing strategy that gets the highest value for every single product we produce. It might surprise people to know that right now, today, the top priority with respect to China is tallow. Tallow fell from $800 a tonne to $200 a tonne. Yet we can't get tallow into China, which is the largest market for tallow in the world. That is our top priority for that market. So it's beef and other products that could realize some immediate returns back to the industry.

Is there anything I overlooked, John?

[John Masswohl]

No. I think that as we go into what the priorities are in each market, they will be a big part of this market development plan.

[The Chair, Conservative, Larry Miller]

Okay.

Thank you very much, gentlemen. I appreciate your coming in. As always, it was very informative. I appreciate your time, and I'm sure that we'll see you back here at some point in time. Thanks again.

We'll move on. I have three notices of motion that were indicated at the last meeting. The very first one given was Mr. Hoback's. Do you want to read your motion into the record?

[Randy Hoback, Conservative, Prince Albert, SK]

Sure. Thank you, Chair.

My motion is that the committee travel to western Canada to meet with representatives of the Canadian Wheat Board and other professionals to investigate the CWB's substantial losses in commodity trades over the last two years, despite the windfall in crop prices.

We also have it in French.

[The Chair, Conservative, Larry Miller]

Is there any discussion on the motion?

Ms. Bonsant.

[Wayne Easter, Liberal, Malpeque, PE]

Yes, there is.

[The Chair, Conservative, Larry Miller]

Ms. Bonsant has the floor.

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

Mr. Chair, I am new to the Standing Committee on Agriculture and Agri-Food, and so I am interested in finding out how it works. It seems a little problematic and irresponsible to move a team the size of this committee, given the economic crisis that we are going through at the moment and the possible costs of the trip. But I am sure that we need to understand what is happening at the Canadian Wheat Board. Would it not be more responsible to invite people from the west, the president and the administrators of the Canadian Wheat Board, to come here? We have all our interpreters and our clerk right here. The Conservatives are always talking about taxpayers' money. I think that it would be better spent inviting people from the Canadian Wheat Board here rather than having us travel out there.

[The Chair, Conservative, Larry Miller]

If I could comment on that, Madam Bonsant, my understanding is that the reason this was suggested is that we had an invitation from the Canadian Grain Commission to come and visit their facility. Of course, you would have to go there, if that was the committee's wish, in order to do that. Also, the subcommittee, which is investigating listeriosis, thought there might be a good chance to also visit a Maple Leaf plant that is in Brandon, when we're in the area. So I throw that out there, and I'm not speaking for or against, but that was the rationale behind it.

Mr. Easter.

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

Agreed.

[Wayne Easter, Liberal, Malpeque, PE]

Thank you, Mr. Chair.

In the beginning, Mr. Chair, we believe it's important certainly to review the Canadian Wheat Board and establish the facts. There is no problem there.

But Mr. Hoback's motion is I think questionable in its factual interpretation in and of itself when it says, “substantial losses in commodity trades over the last two years, despite windfall crop prices”.

Mr. Chair, I would like to go to the Wheat Board report, because I think we need to look at both sides of this issue. This sums it up in its entirety, Mr. Chair. The Melfort Journal had an editorial in it that really deals with this issue, and it starts off with, “Ritz fails to be objective on CWB”. This is a serious matter. Mr. Ritz, the minister, is minister responsible for the Canadian Wheat Board, and the parliamentary secretary is David Anderson. This is what the article says, and I quote:

Last year, the CWB registered $7.2 billion in returns for Western producers, a year that saw nearly a 50-per-cent increase in wheat revenues and nearly a 100-per-cent increase in barley and durum revenues from the previous year.

Simply put, the board outperformed its international competitors, an outstanding performance that should be recognized even by the board’s most strident critics.

Mr. Chair, I think it's important to note that.

When you go to the financial records, which are in the Canadian Wheat Board, and the minister has these.... I'm certain the parliamentary secretary has these. I would think that the members opposite have these. When you go to the Canadian Wheat Board financial statements--not their annual report, but the financial statements--and turn to the auditor's report here, I would refer committee members to page--

[The Chair, Conservative, Larry Miller]

Mr. Hoback on a point of order.