Thank you, Mr. Chairman.
I was invited to speak to the committee late Friday and was asked to be available for questions and make a few short comments, so you can look forward to a few short comments.
I operate a ranch at the southeast corner of Lake Manitoba, which is about an hour north of Winnipeg, at the bottom of what we call our Manitoba Interlake district. Most of the area is quite limited in its agricultural usefulness. It's characterized by thin soil--maybe four inches of topsoil--stony, with poor drainage, and a large percentage of the area is only suitable to ruminant grazing, specifically for cow-calf or maybe bison.
The area was in the news quite a bit last summer because of extensive flooding as a result of excessive rainfall all summer, leading from insult to injury.
Over the last five years there's been a lot of equity erosion in these beef operations. There is not a lot of wiggle room left. Disaster relief hasn't been coming very effectively. The area has asked for a Canada Revenue Agency tax exemption that is sometimes used in areas that suffer drought whereby farmers are allowed to de-stock and forward the income from the livestock sales to some point in the future, allowing them to buy back in at a later date without tax implications. To my knowledge, this still hasn't happened. It would be a relatively simple thing to do.
Maybe it's not a good time to go into the complex working of the CAIS system. It's well intentioned but ill-equipped to deal with the current situation in the beef industry. There is no margin left. There is no room for advances, and so on. The result in our area has been a sell-off of cows far beyond the rate we've seen all over the country as a response to economic conditions, which is a shame because ruminant grazing is really one of the most logical things to use the land for in our area and it is an ecologically sound option.
Manitoba is really at the centre of the North American beef market. Livestock or meat has gone east-west, and local feeding has gone south for a long time. This integrated market, to my knowledge, as the previous speaker alluded to, has existed for a very long time, starting a century ago with beef being trailed north to the Canadian mining camps. Around the turn of the century, the Matador ranching company started to move their herds north into Saskatchewan, and there is a long history of an integrated beef market.
This notion was strengthened in 1992 with the signing of NAFTA, whereby we formalized this agreement more and thought this was all in place. In the 1980s, Alberta brought out its Crow offset program, reimbursing users of feed grain by about $14 a tonne, and this was one of the factors aiding the demise of the feeding and packing industry in Manitoba. One by one the packing plants closed and feeding capacity moved to Alberta. For the last 15 years or so this left Manitoba with the only viable option of killing our cattle to economically defend ourselves. In 1995 we saw the end of the Crow. It also saw a period where the government actively promoted red meat production on the prairies. The mantra was that it was the end of an era of large wheat exports--mostly to Russia, who never paid anyway; the Canadian government picked up the tab. This paradigm was to be replaced by red meat production in the prairies. Value-added products of high-value animal proteins were to go all over the world.
This met with relative success, aided by a period of low grain prices and a favourable exchange. It resulted in very significant investments all over the prairies, in barns, packing houses, transport, feed mills, and so on.
Then, of course, 9/11 happened. Fortress U.S.A. emerged. Then the BSE crisis in 2003 set off a period when the whole vision was put on the rocks. The whole system has suffered a lot of injury.
Where do I see the responsibility of my government? Responding to market signals and trying to produce below the cost of production are maybe my responsibilities at the farm level, but I feel that my government has to hold through to their vision and hold the borders open. I think the Canadian government really has two choices: work our butts off and restore the vision we had for the prairies of a value-added meat industry or go back to producing for domestic consumption only. We have to be aware, though, that we export almost 60% of our beef, so one would face a massive writeoff in the investments that have taken place in the last 15 or 20 years, and probably buy out 50% or 60% of the production. People would lose their livelihood without any fault of their own. We'd lose billions of dollars in gross domestic product. And it would be hard to measure the social and ecological fallout.
Speaking anecdotally, I talked to somebody from the sandhills areas of eastern Nebraska. It's traditionally been a cow-calf area. Over the last decade or 15 years, it's been bought out by the Ted Turner empire. The man owns now about a quarter of a million acres where they run bison. People out of that area say that the social fabric is gone. Once a year, a crew comes in and handles the buffalo. In the summer, for about a week, a fencing crew comes in, bringing all the materials with them, to maintain the fencing. And that's it. The towns are dead.
Currently, I believe 80% of our export goes to the U.S. We're all well aware of the implication of COOL. To me, I wish there was more attention paid to this issue. When there was a hint that there would be an exclusion clause in the aid packets by Mr. Obama in the U.S., our government went into overdrive; 24/7, Stockwell Day and everybody else got on the issue of rectifying this problem of Canadian steel being excluded. I don't sense the same level of activity regarding the COOL issue.
So is the model of our original vision of value-added protein production on the prairies broken? I don't know. In pork our competitors are Denmark and Holland, countries with clearly higher cost-of-production structures than we have on the prairies.
In the Interlake, I believe there are about half a million beef cows, or a little more at the moment, in Manitoba. We have a good million people. We can't very well eat half a beef apiece--maybe a tenth of that. Should we reduce our beef herd to 10% of what it is and leave all that land bare? I don't think so.
People in Hong Kong are better at producing toys, but not very good at producing beef. The Interlake is very good at producing beef, but I don't look forward to starting to produce cheap toys.
Thank you very much.