Agriculture Committee on March 12th, 2009

[Michel Dessureault]

The plan for the slaughterhouse was analyzed by its board of directors on the basis of direct government assistance in the form of a government subsidy. I do not know what the board of directors' decision will be if the federal funding arrives in a different form.

The financial capacity of the company is stretched to the absolute limit. If we really want to provide financial support to the company, that support will have to take the form of an equity contribution.

At this time, there have already been discussions with the offices of both Mr. Ritz and Mr. Blackburn. And, we are still providing information based on the same structure—in other words, a fair contribution to the company on the basis of a specific project. Why a project? Because in the current economic environment, if we can quickly create jobs for the construction of this facility while at the same time securing good results for the company through permanent, long-term jobs, Canada will benefit from the provision of that direct assistance. The company will be able to carry out its mission, which is to become an important hub in Eastern Canada for all cattle slaughter. It may even be able to move into slaughter steer. In Eastern Canada, the only other slaughterhouse is on Prince Edward Island, and it is a small company. In Quebec, there is no longer any slaughter steer facility. So, there are significant challenges associated with this project, but it is a priority for the producers.

[André Bellavance, Bloc, Richmond—Arthabaska, QC]

As I understand it, Mr. Dessureault, in your discussions with the minister and the minister's office, there has been no confirmation that it would be a loan. We read in the newspaper that Mr. Blackburn had made that comment, but you have…

[Michel Dessureault]

We have no expectation whatsoever that it will be a loan. We have made no such request. The discussions we have had and the presentations we have made do not address that option at all. That is not the clear message we have received from the actual spokespersons.

[The Chair, Conservative, Larry Miller]

Your time has expired, Mr. Bellavance. You can continue in your next round.

Mr. Atamenenko is next, for seven minutes, please.

[Alex Atamanenko, NDP, British Columbia Southern Interior, BC]

Good morning and thank you very much for being here today.

I have a couple of specific questions. The first is addressed to you, Mr. Rouillard.

You mentioned that, in Quebec, approximately 4,700 tons of lamb are produced and that this represents only 50 per cent of total consumption. That means that 50 p. 100 is imported. It seems to me that there are some market expansion opportunities in Quebec. However, in the report, it says that 60 per cent of farms have suffered losses of about $20,000. I do not understand that and would like to know why that has happened. We are talking about market expansion potential, and yet there are these losses occurring. So, that is my first question.

I will go through all of my questions quickly. The second one relates to the importation of food products that meet the same standards as those that apply in Canada. I believe you addressed that question, Mr. Dessureault. Quite a few people in Canada are wondering why we allow food products to enter Canada that do not meet the same standards as regards pesticide use.

Should those products be blocked from entry until they meet the same standards as our own?

I think Ron and others have probably read the NFU report on the cattle sector. There are a couple of questions there and some recommendations, and I guess before even asking specifically about those recommendations--you mentioned COOL and what we should be doing: document the losses, negotiate, do all those things aggressively, trade challenges, which our government is trying to do on behalf of producers.... What if we do everything, and the Americans say they're not going to change? Ultimately, when we trial this, is there an alternative?

The other question is, you mentioned the EU, and they're rejecting our cattle because of growth hormones and other standards they have. I'm just looking at a couple of recommendations in the report. Number eight says that one way of getting around this is if we were to test all cows for BSE and ban artificial hormones, this eventually would be cheaper than all the SRM removal. This would open up our market. We wouldn't be trapped in a North American market. It would diversify markets, give us more negotiating power with packers--in other words, allow more chance to export if we had those same standards.

The other one they talk about here is dramatically reducing antibiotic use, because this would spur more decentralization of livestock finishing, slow the development of antibiotic resistant bacteria, and probably open up more markets in countries that have stronger rules than we have.

Those are just three questions. Hopefully we have enough time to answer some of them.

[The Vice-Chair, Bloc, André Bellavance]

Thank you.

Would someone like to answer?

[Ron Bonnett]

I'll start on some of your last questions.

You mentioned the NFU report. Some aspects of that NFU report do bear some looking at, but I think we have to recognize there is consolidation in the packing plants, just because of costs. We know that's going to happen, but we also know, where producers have tried to invest--I'm one who invested in Gencor, and we couldn't compete in that marketplace.

I think we have to recognize there is consolidation in the industry. We have to take a look at how we can make sure we get our fair share, because the processing is concentrated. I don't think that's all going to change.

What do we do to deal with that? I think we do some of this domestic marketing, getting small local slaughter plants, additional marketing initiatives to address that.

You mentioned as well some of the SPS barriers we have, whether it's hormones or vet standards. I think we have to be very wary of going down the road and starting to address these standards outside a scientifically based approach, because all of a sudden you could have different rules that every country could put in place and you'd have a set of standards for going into Europe, into Asia, going someplace else. That's why it's incredibly important to make sure your bilaterals and WTO look at getting consistency in that.

From a producer's perspective, the reason this is important is that there's only a certain price for that product at the bottom line, and if extra costs are incurred in meeting these different standards, it's going to get driven down to the producer's level. So I think we have to continue to make sure we stay on that science-based approach.

The one thing I would caution, though, is the assumption there's widespread antibiotic use in the industry. I think a lot of people are throwing that out there. The reality is that with the production systems we have today and the cost of treating animals that have to be treated, there's more of a concentration on treating the animals that are sick, but it's not as if you just throw antibiotics at them and use that as a tool. That's not the case in today's sector.

[Alex Atamanenko, NDP, British Columbia Southern Interior, BC]

Okay, thank you.

[The Chair, Conservative, Larry Miller]

You have one minute left.

[Michel Dessureault]

If you don't mind, I will tackle the question regarding reciprocity of standards.

I have a little story to tell that is a clear demonstration of just how abnormal the situation in Canada really is. An American buyer who comes to an auction in Canada and buys a cull cow will pay 1¢ more per pound than a Canadian buyer. An American buyer can afford to do that. He then takes it back home for slaughter where regulatory costs represent 7¢ less per pound, and turns around and sells the meat back to us here and competes with us in our market.

So, rule reciprocity is a major issue that will have to be addressed, because otherwise, the slaughter industry will face some hard realities in future. It is a major issue. There is the matter of regulatory reciprocity, but there is also a need for reciprocity at other levels. In Canada, rules apply with respect to animal welfare. However, are all the importers that bring animals into Canada subject to those same rules? That is a concern for us, as producers. We are also concerned about reciprocity in relation to transportation, production and environmental standards.

In my opinion, we can live with imports and exports here in Canada, so long as there is reciprocity in terms of the rules that apply. We have know-how here in Canada. The slaughter operation at the Levinoff-Colbex plant is extremely efficient. That facility is just as capable of high-level performance as any other slaughterhouse in the world. However, it has to be able to operate in the same commercial environment, because otherwise, not just that company but all Canadian slaughterhouses will be in trouble.

[The Chair, Conservative, Larry Miller]

Thank you.

Mr. Shipley, for seven minutes.

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

Thank you, Mr. Chair.

Thanks to all the witnesses who have taken their time to come.

We're in the midst of an incredible discussion around the red meat sector. We've had a lot of presentations and, quite honestly, with some varied views on it. That's not to be unexpected. I think all of us here around this table, though we may have different approaches, actually want to continue to work to improve a significant industry within our economy.

I'll start my first round with Mr. Vincent and Mr. Dessureault, if I may, just on the beef and the pork particularly.

In terms of the export markets, we've met with a number of folks. The sustainability, we've been told, is about making sure that we continue to move ahead with our export markets. In combination with that is the comment that more than one of you have made that life is really about a balance, and in this particular case it's also about a balance of markets. So, one, is it the view of the folks at this table, including Mr. Bonnett, that the export markets are something that we need to pursue, and, actually, with the secretariat in place to help move that, is this a direction that we need to press forward on?

Secondly, help me understand how we can help you with your domestic markets, because those are the sustainable things we don't want to lose. And they have to be profitable.

So how do we build on those domestic markets, and continue to have those, and then I'd like your comments on the export markets.

And while you're doing it, there's been a lot of discussion about traceability, but not much about age verification. Age verification is becoming a large issue, in terms of export markets. We seem to be struggling—“we” as a general term—in the industry to get all the producers to buy into the significant importance of age verification. I'd like your comments on what we might be able to do to help support that.

Mr. Vincent.

[Jean-Guy Vincent]

I think we need to ask ourselves whether the export market has a future. Why do we export? First of all, we export when there is demand for our products. Analysts around the globe are all saying that the population is increasing. We will need more and more products to feed people. For example, pork is the meat that is most in demand in the world: global demand grows at a rate of more than 2 per cent annually. So, there is definitely a market for it.

We are currently in the midst of a crisis, but the government has to support its exports and its agricultural products because there is a market for them. Is it important for Canada to have a presence across the globe? Yes. There are rules governing international trade. Indeed, we are currently negotiating those rules at the WTO.

You asked a question about market access. If the European Union would just abide by WTO rules aimed at allowing European consumers to access up to 5 per cent, when European market access is now only 0.5 per cent, that would already be an incentive to the countries of the world to abide by WTO standards, which we are in compliance with.

As producers, we comply with Canadian standards, which are stricter than those of most countries. That is why I was saying that we have to focus on standards of quality. Mr. Vilsack said that food safety and security act as a barrier to Canadian exports. That is a tremendous concern for us, knowing that Canadian producers are held to a higher standard. One example would be Carbabox, which is banned in Canada but is used in the United States.

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

That raises another question, and I'll go to Mr. Dessureault on this.

I'm assuming that you're going to say a little bit of the same, because you raise an interesting question on standards and harmonization. I would like to raise and discuss this issue, because we do have in Canada, and have been asked and demanded to have, such high standards here. One of the issues, obviously, then becomes, how does that affect us in terms of our viability, in terms of cost-related production? And if we harmonize with other nations, meaning bringing some of those standards in line with the other large nations we trade with—Europe and the United States, both of whom we always talk about how good they are—then we will hear politically, and certainly from specific groups, that we cannot do that, because we're jeopardizing our health.

And I'll go back to Mr. Bonnett's concern about scientific-based evidence. We've had that in Ontario, where scientific-based evidence, particularly on pest management, has been swept aside in lieu of emotional evidence. There have been allowances made for the use of pesticides in certain areas, where all people are amenable to its use, thus targeting it toward agriculture.

So I'm wondering, how do we sell the scientific case? That is a huge issue for us in Canada. I need to let Mr. Dessureault answer first.

[Michel Dessureault]

I will tell you what Canada should be doing. Maintaining high quality slaughter facilities in Canada would be a good decision on the part of the Canadian government. Some of our product categories require live inputs from the United States. But that doesn't create jobs in Canada, nor does it generate economic activity, other than transportation. In developing programs, it will be important to ensure that a minimum number of slaughtering facilities continue to exist all across Canada. That answers your first question.

Your second question deals with traceability. What distinguishes the Quebec beef industry from others is that, since 2002, Quebec has had legislation in place that forces producers to identify their cattle from birth and to officially register the birth with the government within 10 days. In Quebec, we are already able to do that at the farm level for beef and lamb. As regards pork, the system is currently being developed. The industry then has to use that information to ensure better traceability all the way to the consumer. That is what still remains to be done; however, in Quebec, the infrastructure is already in place to make that happen.

[The Chair, Conservative, Larry Miller]

Thank you very much, Mr. Dessureault.

Mr. Easter, for five minutes.

[Wayne Easter, Liberal, Malpeque, PE]

Thank you.

Thank you, lady and gentlemen, for coming here and making some good presentations.

I might say, to begin, that I'm pleased to see that in Quebec you recognize the marketing power of marketing through a single desk. There are some people around this table opposed to that kind of system of marketing power for producers. Certainly not me; I support it strongly.

In the previous discussion, Mr. Vincent's answer was “if” the EU respected the rules. Somebody else said “if” the United States would respect the rules. There are a lot of “ifs” out there. While we're waiting for all these ifs to happen in the theoretical world of free trade, whenever we're going to have a level playing field down the road, we're going to have no producers left. We're caught in the industry's consolidating. We're losing producers each and every day. The government is sitting on its hands, just increasing the loan portfolios and not really doing anything at the producer level to keep these producers in business.

I'm hearing horror stories every day. I sat on a plane last week with a guy who sold 250 cows. I talked to another fellow on the phone a few minutes ago, after the meeting started. He sold off 180. We're losing an industry. One way to put it, I guess, is that Rome is burning while we sit here and watch.

Let me ask you some specific questions. First, about specified risk material removal, should the Government of Canada be covering the full cost of that, at least to the minimal level that they are in the United States, to make us cost-competitive?

Any response to that? It's not a trade violation.

[Michel Dessureault]

That is what we are asking the Canadian government to do.

[Wayne Easter, Liberal, Malpeque, PE]

Okay. That wasn't specific. So you are asking for the government to cover the cost of SRMs.

It's the same for the regulatory side; we've heard a lot on the regulatory side. We know that in the United States, the government picks up a lot of the cost of inspections that we do not. Am I right in assuming that the Government of Canada should get on with it? They don't have to do a lot of monkeying around for two years. They could do it next week. They could start picking up those costs and it wouldn't be a violation of the trade rules.

Am I correct on that?

[Jean-Guy Vincent]

You began by talking about market access, and you are right. If you read the report released by the European Union with respect with the use of the green and amber boxes, you can see that there has been a transfer between the amber and the green boxes. The solution is to work with the green boxes.

But, what should be in those boxes? Well, that should depend on our standards with respect to the environment, quality assurance and animal welfare. There is a lot of room for action there and a lot of opportunities for the government to invest and help our farm producers.

[Wayne Easter, Liberal, Malpeque, PE]

The government should pick up those costs. They're not doing it.

Now, I believe—

[Ron Bonnett]

Wayne, just on that issue of regulatory costs, I think it should be brought—

[Wayne Easter, Liberal, Malpeque, PE]

Ron, I have three questions later that you can answer together.

[Ron Bonnett]

Okay.

[Wayne Easter, Liberal, Malpeque, PE]

Mr. Dessureault, you mentioned that you had done some analysis on phytosanitary and veterinarian drugs, etc. Could you get a copy of that report to the committee? If it's in French, don't worry about that; it can be translated here. We'd appreciate receiving that.

My other question--this should tie it up--is with regard to the producer level. Simple things could be done right now to assist producers. The safety net program is not working for beef producers and hog producers across this country. The viability test is gone. They're not qualifying.

One, what's your view on eliminating the viability test? The government could do that tomorrow. Two, what's your view on using, say, the better of the Olympic or previous three-year averages for reference margins calculations? And three, what's your view on giving producers a choice, whether they want to go with AgriStability, tier 1, or AgriInvest?

Those three areas would deal with some of the problems at the producer level. What are your thoughts on that?

The key here is to get money into producers' pockets and reduce the costs at the plant. This could be started before the end of March.