Agriculture Committee on March 10th, 2009

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

Thank you very much, gentlemen, for being with us today as we study this important sector of agriculture.

Certainly, with the other witnesses we have had before us, the theme of opening markets and international trade has been a constant message, both from the necessity point of view that we need to do this and from the point of view that we are actually accomplishing it. As you know, Minister Ritz has devoted an extraordinary amount of time and effort to international visits to open markets for the livestock sector.

In fact, I think, Mr. Drury, you were there in Saudi Arabia.

[Gib Drury]

Yes.

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

I want to ask you, either Ted or Gib, what you see as the impact on the processor chain of opening international markets. Do you see all aspects of the processor chain benefiting from this? With small farms versus medium farms versus big farms, do you see one gaining a bigger advantage than the others?

[Gib Drury]

All farms are going to benefit from the access that we can obtain. It's not just on the primary meat cuts, either; it's on the byproducts more than anything else. Parts of the animal that we are unwilling to consume in Canada will add that mythical $85 to each animal, if we can find an export market for them.

Minister Ritz is doing an excellent job, and I think he is on the absolute right track. If you send an assistant deputy minister over on a trade mission, all you ever get to meet is their equivalent over there. When the minister goes, he doesn't see only the Minister of Agriculture. In the case of Jordan, he visited with the Prime Minister. Unfortunately, that's the level these trade talks have to be at now. It's a political issue, not a technical issue any more.

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

The NFU has issued a report, and they are very much advocating focusing on the domestic market. One of their key recommendations is to focus on the domestic market. In fact, they make a statement that there is an over-dependence on export markets.

Have you any comments on that?

[Gib Drury]

These are the two specialists on the domestic market. As far as I can tell, we've already satisfied all the demands of the domestic market--100%. We are already furnishing them with all the product they can possibly consume.

I'll will turn it over to the pros.

[Glenn Brand, Chief Executive Officer, Beef Information Centre]

The domestic market is going to be critically important, as it's the main base we'll function from to create a sustainable industry as we move ahead. The challenge we have domestically is that we've seen an increase in U.S. imports of both beef and pork into Canada. That is because of cost disadvantages in the production sector.

So to maintain a strong domestic market, we're going to need to maintain our market share relative to imports to continue to move ahead.

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

Go ahead, Ted.

[Ted Haney]

On just the numbers, I agree. The Canadian market is an absolutely vital base that we need to continue to pay a lot of attention to. But again, the numbers just say that if we were able to generate a 20% increase in consumption in Canada, it would increase the absorption rate from 3 million cows--the equivalent in beef--to 3.6 million cows. We have 5.6 million cows. So it is very important.

But trade is where we bring in demand for every pound of Canadian beef, every kilo of Canadian beef, from every muscle, and make sure that the consumer at a supermarket in Japan has the ability to compete equally with a consumer in Canada or a supermarket in Canada for that same product. Through worldwide competition, prices at all levels and at all sizes within the industry improve. That is when we are healthiest.

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

I think what we're hearing is what I stated at the beginning--the importance of the international markets to the long-term viability of the livestock sector.

Certain provinces are offering a per-head payment for cattle, and we've had people asking the federal government for it as well, saying that we should be there, ante-ing up. One of the concerns we have on the government side is that if this were a national program, it would be countervailable. And if that were to happen, it would have a dramatic, negative impact on our ability to open foreign markets and to sell beef internationally.

What are your thoughts on that, given the importance of these export markets to the long-term viability of the livestock sector?

[James Laws]

I want to add something with regard to your previous question concerning the minister's visit to Saudi Arabia. We have one particular sector of our industry, the veal sector.... There is Ecolait in Montreal, and Delft Blue out of the Cambridge area. They have quite a veal industry, with farms and subcontracted farms, to get these veal calve. They were very pleased that Saudi Arabia opened up; there is quite a demand there. The next step they're hoping for is to get bone-in veal, for younger animals, into that market, because there certainly is a market for that.

From the Canadian Meat Council's standpoint, making sure that there is access to the United States for live animals and for meat is.... We truly are an integrated North American market. We saw that when the border to the United States closed when BSE hit. That totally destroyed the normal market situation in Canada. As long as the border remains open for live cattle, there are plenty of packers bidding for animals everywhere, for all the farmers. It works very well. The huge market south of us—303 million Americans for our 33 million Canadians—and, as Ted was mentioning, on top of that having other markets available to us to add value to those parts of the animal that are not particularly valued here, is the formula for success. We have to make sure we keep all those markets open.

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

Thank you.

Let's go back to my last question. We have about 30 or 45 seconds.

[John Gillespie]

I'd like to address that, if I may.

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

Please do, by all means.

[John Gillespie]

We have the CAIS program. You talked about balkanization, with some provinces having various provincial programs, and about what the federal level can do. From the Canadian cattlemen's perspective, we have been lobbying for some modifications to many of the details within the CAIS program that would make it much more responsive, and as a result of which there wouldn't be the provincial need for some of those programs. If we could make changes to CAIS such as Canadian cattlemen have been lobbying to see for several years, I think we could make the program much more responsive and make it a true, fair federal program.

[The Chair, Conservative, Larry Miller]

Thank you very much.

Mr. Valeriote.

[Frank Valeriote, Liberal, Guelph, ON]

To a certain degree, I'm like Mr. Allen in that I've only been on this committee for two or three weeks. I am still trying to get a good perspective on the industry.

My sense today is that if we listen to every one of you, everything is fine, thank you very much, and this committee can pretty much wrap itself up and go home, because Mr. Easter is doing everything just fine. That's the sense I'm getting--

[Voices]

Oh, oh!

[Frank Valeriote, Liberal, Guelph, ON]

I didn't mean Mr. Easter—I'm sorry—I meant that Mr. Ritz is doing everything just fine.

Yet a couple of weeks ago we had before us the National Farmers Union, and I'm concerned about their concerns. They mentioned thousands of farm operations basically evaporating yearly. Their solution really amounts to a certain degree of supply management, which I imagine would contravene trade agreements.

On the other hand, I've heard from cattlemen who feel that everything is working, to a certain degree. While I hear that one of the answers to this is that we open up foreign markets, we don't always have the opportunity for access to foreign markets that we need, which means that we have to deal with the problem or dilemma we face here in Canada. That is, in the absence of foreign markets being available, how do we help those farmers who are suffering and are not getting the prices? I've heard them talk about captive supply, and about any number of other issues that are of concern to me.

Somebody tell me why the National Farmers Union is wrong, if they are, in their assessment of the issue and the dilemma. And somebody tell me how the big farms, on the one side, and the small farms, on the other side, can coexist. Can somebody tell me that?

[John Gillespie]

First of all, it's a policy within the Canadian Cattlemen's Association that we believe in free and open markets. The NFU policy of restricting supply by closing borders and talking strictly domestically would, we believe, be very restrictive to producers. It would mean that almost half the producers would have to go out of business. We don't see it as sustainable.

As far as income is concerned, yes, we definitely have challenges for the Canadian beef producer. One of the ways of addressing it is, as I said, to make the CAIS program much more responsive to the smaller income that tends to go to the beef industry right now, to shore up some of the discrepancies within price. COOL is one program that has substantially reduced the price of cattle in western Canada. We can alleviate the situation by getting over some of the hurdles COOL has put before us, so that we can get competitive bidding from the American packing plants.

We do believe some live animals have to go south to keep the marketplace true and alive. We do not want to process all the cattle inside Canada. We need as many bidders in the marketplace as possible. We support the concept of the American meat-packing plants being up here buying cattle. Of course, if they're going to bid on the market, they have to be successful in buying some quantity.

So that's what keeps our marketplace vibrant and alive here.

[Frank Valeriote, Liberal, Guelph, ON]

Is there an aversion to regulating, to a certain degree, the ownership and control of cattle by packers?

[John Gillespie]

First of all, in terms of any cattle that meat packers own, they only own them for the last 120 to 200 days of the animal. They don't produce those animals. They buy those animals, all from farmers. As I say, those are all good cheques, and we enjoy selling our cattle to willing buyers.

[James Laws]

I want to add as well that many of the packers buy cattle on specific programs. If they have been specially fed to handle a certain brand market that the packers have, they need to make sure they have those cattle lined up. Some of the packers have their pricing out a year in advance, and so they need to make sure they have enough cattle in the pipeline to meet their sales needs, to keep everything going along the way.

[The Chair, Conservative, Larry Miller]

Thank you. Your time has expired.

Mr. Storseth, you have five minutes.

[Brian Storseth, Conservative, Westlock—St. Paul, AB]

Thank you, Mr. Chair.

I'd like to start out by thanking everybody for coming today. It's a very interesting discussion. I think it's very fruitful for the industry, and I'm glad you took the time.

Mr. Gillespie, I'd like to start with you and give you an opportunity to clarify something that I probably just heard wrong in your answer to Mr. Eyking.

I mean, surely you're not suggesting in any way that Alberta producers should be penalized under the federal programs because they're getting an additional $120 per head.