Agriculture Committee on March 10th, 2009

[The Chair, Conservative, Larry Miller]

You have 45 seconds.

[Blake Richards, Conservative, Wild Rose, AB]

I don't know how we can address this one in 45 seconds, but let's try.

I've asked this same question of several of the witnesses we've had appear on this issue at the committee. It's out of my concern for young farmers and for the future of the farm, particularly the family farm. Just very briefly from all three, do you see a future for the industry, for young farmers, and how so?

[The Chair, Conservative, Larry Miller]

You will have to keep that answer fairly brief, if you can, gentlemen.

[Blake Richards, Conservative, Wild Rose, AB]

I know that's very difficult, but unfortunately we're bound by time.

[John Gillespie]

Let me address that.

There has to be a personal element of optimism within any young individual to go into farming. It's all about having hope and trying. There's always a future. There's always hope. The young individual who gets into farming has to have that spirit if they're going to survive.

[A voice]

And a strong stomach.

[The Chair, Conservative, Larry Miller]

Somebody else could follow up on that in the next question.

We move to Mr. Easter for five minutes.

[Wayne Easter, Liberal, Malpeque, PE]

Thank you, Mr. Chair, and thank you, gentlemen.

I think under Mr. Richards' question, you were starting to get to it. My question really was.... You know, you folks come in here...and you must be talking to different people than I'm talking to. You just must be. Because to listen to the presentations, I would ask where could I buy a beef farm, because, man, am I going to make money.

Mr. Gillespie answered to Mr. Richards that the profitability is certainly not there. My question really was going to be this: who's going to compete in this industry after all the producers are gone? Because that's where we're headed, fellows. Look, the beef herd in Saskatchewan is shrinking dramatically--sales up, about four times, of good bred cows going to the slaughter industry.

I sat on a plane coming here on Sunday with one of the bigger producers in P.E.I. He just sold off 250 cows. He's out of the business. And we're seeing it happen every day. The question is not about opening up markets right now but what are we going to do to keep these producers in this industry right now?

That's the question this committee has to answer, fellas. That's the question we have to deal with here. And I'm not hearing anything coming forward from you guys. Whether you don't want to challenge the government or whatnot, I don't know, but I'm not hearing anything put on the table from you folks that will deal with this immediate problem to keep producers in this industry so that we have a beef cow herd that could produce down the road. I just lay that out directly to you.

The COOL situation is a huge problem, and I recognize it. But are we going to sit back and let our producers go broke while we argue about this at the WTO for three or five years? Mr. Laws mentioned the $21 million in inspection fees. Should the government be coming in and putting us on an inspection-fee level playing field with the United States? Would somebody recommend that?

Mr. Gillespie mentioned earlier some points on CAIS. I thought CAIS was gone; that's what we're told. But would these be the proposals you're talking about? Should the government be eliminating the viability test for beef and hogs? Should the producers be allowed to use the better of the Olympic or previous three-year average for reference margins calculations? Should they be able to do that? I haven't heard it from you.

Third, should they be given the choice, the better AgriStability, tier 1, or AgriInvest? Should those be what the government is doing?

Folks, we need some proposals from you, even if the minister doesn't like it. What can the government do now--today--to keep producers in business? That's my question to you.

[John Gillespie]

I agree with you. On those points that you mentioned there, that is the Canadian Cattlemen's Association policy on AgriStability.

And I do apologize; “CAIS” is old-school, “AgriStability” is the new word.

[Wayne Easter, Liberal, Malpeque, PE]

It's the same program, just a different name.

[John Gillespie]

Yes.

There are some changes to the CAIS program in AgriStability, but we definitely believe, and it is the policy of the Canadian Cattlemen's Association, that those points you made on reference margins and viability tests are our policy. We definitely want to see something addressed on this issue. Producers are throwing in the towel across Canada, and there is liquidation going on. It is common to all provinces in Canada.

[Wayne Easter, Liberal, Malpeque, PE]

What about at the plant level, Brian? Someone said earlier that the plant in Ontario, Gencor, went under really because of specified risk materials and the different cost structure in Canada. Well, you didn't say that much, but that certainly is my view.

Should the government be putting us on a level playing field at that level? We're at a huge disadvantage per cow. Only one person pays for this. You may take a little out of plant margins, which are pretty tight—I know that—but it gets back down to the primary producer.

What is the discrepancy here?

[Brian Read]

If you wanted something that was really disappointing when it came into the SRM file.... I was a supporter of the full animal feed list to protect the herd for tomorrow, as well as our country. I think it was the right thing to do. We assumed that there would be value in that process. Of course, there hasn't been; it has been a direct cost. We are paying for tipping fees.

We have appealed to the government to find use for this specified risk material—e.g., on the field for fertilizer, or we get these dreams that we can use it for energy, or that we can use it in cement. If it were economically viable, believe me, it would have been done.

We are finding no out for it, so every morning we wake up to that regulation. Across the country, we've done a major study—Jimmy can allude to the numbers. Depending on the region you're in, tipping fees and environmental costs are anywhere from $15 to $20 a head on OTM product, on a daily basis. That is a major disadvantage.

I believe...and now I am producer-owned, I think there's value in that, if we address that issue. If there was a disappointment through the whole process, it was the blatant difference in regulation between the two countries, ours and that of our major trading customer in the United States—somebody we have to compete against. I hope there's a willingness to revisit that, because it's critical, I agree with you.

[The Chair, Conservative, Larry Miller]

Thank you, Mr. Read.

We'll go to Mr. Shipley for five minutes.

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

Thanks for coming out.

I listened to Mr. Easter's question. I find it interesting, as you go back to 2003 and some of the crises that developed with the BSE, that when they had the opportunity to do some things, they didn't. And now it's our fault, I guess.

I want to follow up with Mr. Gillespie. You're talking about 6 million cows, almost. Domestically, we have the use of 3 million. If we increased the consumption in Canada, we would have 3.6 million.

How many cows can we sustain and keep the beef industry sustainable?

[John Gillespie]

We can make the industry sustainable, even if it is export-oriented. We wouldn't want to liquidate to the 3.6 million that we could handle domestically. That would mean a lot of producers would have to go out of business.

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

I have a producer who was going to go out of business and is now looking at some of the things that have been happening and has changed his mind about selling out. I think that's always a good thing; some things are happening.

This will take me to my next question. Markets were brought up. The majority of witnesses we've had in front of us over the last while have been talking about the significance of being open to markets. One thing that was brought up earlier was about selling the whole animal. I always talk about marketing the whole animal. Of course, our domestic market doesn't deal with that, or can't deal with it, because of our society and what we'll eat and won't eat. I think the comment was that we have a long way to go.

Concerning bringing in the secretariat, do you agree that we're on the right step forward? With the markets opening, have we started going down the right trail?

[Ted Haney]

Particularly the decision to work with Hong Kong on this relatively complex incremental access was a sign of great hope for our industry, because we showed our cooperative face to increase access step by step, in a way that at each step provided additional economic returns to our industry.

Yes, it is a big challenge, but re-establishing trade with South Korea and mainland China; moving Japan up from under-21-month beef to under-30-month beef; adding bone-in to Russia, Taiwan, and Saudi Arabia; and allowing Mexico to move up to over-30-month beef is the trade fix. It's not impossible, but it takes a strategic and new approach, with focused resources and a trade-first strategy, with an economic philosophy and focus, rather than continuing to treat it as a long-term tactical, technical challenge. Bring our best negotiators to the table and create a negotiation strategy that reflects the vitality of the benefit, should we come over the top on these relatively few markets.

These markets have the ability to move us back from creeping pessimism to creeping optimism. The shedding of cows stops when optimism enters our industry, and regrowth begins when we begin to trade broadly. Our industry can support a six-million-head cow herd on the basis of our strong domestic trade, great work in the U.S., and worldwide profitable trade.

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

You've hit a point. I think the minister has actually been the pillar of this marketing with his belief in opening these markets.

I want to go back to Mr. Read, on the $50 million for the improvements of inefficiencies. I think all of us understand dollars gained in efficiencies. That is $50 million, and you've talked about it. But you have to understand that it's in the budget, and until the budget gets passed, it won't flow.

Certainly, it is our intent. We brought the budget forward on January 27. This is March 10, and it is still not passed. So I think it's important that we understand that.

[An hon. member]

[Inaudible--Editor]

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

If they want the money, you have to pass the budget.

[The Chair, Conservative, Larry Miller]

Mr. Hoback.

[Randy Hoback, Conservative, Prince Albert, SK]

Thank you, Chair. I appreciate the chance to talk to these fine gentlemen.

Gentlemen, I appreciate that you took time out of your busy schedules to come back to Ottawa here and help us look at this topic. It is a serious topic in my riding and in my province.

I have a few questions that keep coming up when I talk to farmers back in my riding, and one of them is on concentration of ownership in Canada. Can you explain to me why we should or shouldn't be concerned about that?

I'll open that up to any one of you.

[James Laws]

The reason you should not be overly concerned about it is that right now the border with the United States is open. Effectively, we do operate in a North American market, and that provides plenty of bidding opportunities, for all Canadian farmers as well as for packers, to sell their products to the United States.

We certainly agree that when BSE hit and the borders closed, it was not a functional market; that was very evident. It provided all kinds of evidence that it doesn't work this way. We have to have the border open for live cattle to provide the entire North American market.

I look, certainly, to Europe. I hope that someday Canada and the United States and Mexico have a free trade agreement, as Europe has. You can move products freely between all those countries. If Canada wants to talk about being competitive and forward-looking, we need someday to get to having a complete North American market for products, and that certainly includes this.

In terms of ownership of cattle, I look at the one particular facility down in Brooks that now, as you all know, has been purchased by Excel Fresh Meats, a Canadian owner. It's my understanding that this particular facility was first a feedlot owned by a very successful farmer who then, with his partner, built a slaughter facility. It was a farmer who got very successful; that's why that 70,000-capacity feedlot is down there.

Just doing a quick calculation for that particular facility, if they process a million animals per year, with two turnovers, that's 140,000 animals, or 14% of the total kill. Is that too much? I don't think so. And this is the largest ownership, I understand, of cattle by any of the processors in Canada.

However, if you look at the situation that Mr. Read refers to, that processing facility is totally owned by farmers, who own all the cattle and who own the processing facility. Is that a captive market? I suppose in a way it is, but it's certainly owned by a group of farmers, and they've shown they can do this.

There are other examples. There's Conestoga Meat Packers. They own a pork processing facility. They try to get all their animals through there as well.

So there are different models. If you look at a company such as Maple Leaf Foods, it's publicly traded; anybody can own a portion of Maple Leaf Foods, if they want to. Tyson, now of course sold to Excel, was publicly traded as well. Anybody could purchase part of that company, but now they're moving out.

There are different business models across the country. Our opinion is that there are opportunities: anybody in Canada who wants to start a processing facility can do so. There aren't any barriers to entry that are worse than any others. Anybody can purchase one and set one up, if they want to. Farmers can start their own cooperative meat-processing facility if they so choose, etc.

[Randy Hoback, Conservative, Prince Albert, SK]

Thank you, James. I appreciate the answer.

When you look at it and first see the number 80%, you say, “Whoa; we should be careful here”, but I think we're being misled by some people saying it's the real number. It's not the real number. You're saying it's the international and the North American market and that the ability to access all the packing plants in the States creates a different scenario.

It shows you how important trade is, obviously, and that's a recurring theme, it seems, as you come forward. As we look at trade and see these new markets open up, there's a concern on the cull calf side that they're not making enough money. We have to figure out a way to get a return back to cull calf guys.

I appreciate some of your suggestions on the AgriStability side. I know that the Saskatchewan agriculture minister brought it up at federal-provincial meetings a little while back. I understand it didn't get a lot of traction, but maybe it will be brought up somewhere down the road. Again, it is a joint responsibility of both the federal and provincial governments.

One other thing I'd like to ask of you guys is what regulations and other things were put in place with BSE, for example, that are now in place and about which, after five or six years, we can say this no longer makes sense, or this makes sense? Perhaps they're barriers now, or adding costs to the industry that farmers aren't getting.