Good morning, ladies and gentlemen. I do not intend to read this document, because I cannot read, but I have prepared something.
First of all, what is the Federation all about? It was established in 1981. Quebec has 1,250 sheep farms, with sales of approximately $60 million. The Federation markets all heavy lambs, in other words 36 kilos and over. The Federation has also been mandated to start selling all lambs by 2010 or 2011. That means about 145,000 additional lambs per year.
Still in terms of background, Quebec annually produces approximately 4,700 tons of lamb meat, which only represents 50 per cent of total consumption in Quebec. The rest is made up primarily of imported New Zealand and Australian lamb.
Lamb meat consumption accounts for 0.5 per cent of total meat consumption in Canada. However, it is important to realize that there has been a rapid increase in consumption since 2000. We have noted an increase of 40 per cent since 2000, which represents an annual average of 5 per cent. Finally, it is the only meat, along with poultry—although we don't really know anymore when it comes to poultry—with an annual rate of consumption that is on the rise.
The Standing Committee asked me to address three issues in particular, namely the producers' economic situation, concentration in our sector and, finally, the effect of COOL labelling.
I would like to begin by addressing the first item. The economic situation of producers is currently very much a concern and subject to variations, depending on the producer. In the material I provided, there are two sets of numbers. As for most types of meat, production costs per lamb have risen considerably in the last five years. However, the important point here is that producers' equity has declined significantly. In 2001, it was 40 per cent. However, according to our most recent figures, that equity fell to 28 per cent in 2007. Therefore, the equity value retained by producers in their operations has fallen by 30 per cent since 2001. It is also important to mention that, in 2007, a Financière agricole study of its sheep farm clients showed that 60 per cent of sheep farms had suffered losses in Quebec that year, the average loss being $23,350.
In 2007, following these particularly catastrophic results for sheep farms, the Centre d'études sur les coûts de production en agriculture carried out an in-depth analysis of success factors associated with certain farms. The analysis distinguished three types and grouped them into three categories: the lead group, the middle group and the end group. The results showed a four-fold difference in gross margins, depending on whether the farm was in the end group or the lead group. The lead groups therefore have a margin which is four times better than those in the end group.
The study also identified the factors that explained such variations. The three most important factors were the following: the annual number of births per sheep per year, which explains 45 per cent of the variation; the cost of feed per lamb sold—not so much the cost as the quantity of feed used—which explains 12 per cent of the difference; and the lamb mortality rate, which explains 10 per cent of the difference.
For the federation and the entire sheep farming industry, the most important point is the need to ensure that producers have access to advisory services. Paradoxically, however, the less sheep farms can afford to pay for advisory services, the less they use them, even though they actually need more. In 2006, 127 producers made use of advisory services, whereas in 2007, that number had fallen to 102. I will come back to this again in my final comments.
In terms of concentration in the industry, I have divided my comments into two parts. With respect to production, a table explains the number of ewes per farm level and the percentage of producer-owned farms.
What we see, looking at the table of changes that occurred between 2002 and 2007, is that small farms with between 50 and 200 sheep still represent approximately the same proportion. Larger farms of 400 sheep or more have increased in number, and the median category—farms with between 201 and 400 sheep—have been decreasing in number year over year.
As regards industry concentration, certain choices were made in Quebec by both the Federation and the Financière agricole du Québec, with respect to concentrating production. In terms of its own sales regulations, the Federation gives priority to lambs that were born and raised on the same farm. Similarly, to be eligible for the stabilization insurance provided through the Financière agricole du Québec, one of the criteria is that animals have been born and raised on the same farm. That is the choice that we made, one that means that production remains well distributed across the province to the greatest extent possible.
Now, let's talk about slaughtering. At the present time, eight buyers in Quebec use eight slaughterhouses that are either owned or used on a contractual basis. The two largest buyers make 65 per cent of the purchases. As far as we are concerned, the current concentration with respect to slaughtering operations is not a major concern, as it could be in other areas of production.
Finally, you asked us to talk about COOL labelling regulations. In the statistics I provided at the beginning of my presentation, I stated that Quebec and Canada are net importers of lamb. On average, for the years from 2002 to 2007, Canada exported 325 tons of lamb meat, whereas it imported 25,000 tons. For the time being, COOL labelling is not a major irritant for sheep production. There are already tight restrictions in play regarding sheep exports to the United States, whether it is live sheep or lamb meat. Those restrictions are related to the disease that affects sheep known as scrapie, which could be a source of disease in cattle. The restriction is such that only animals or animal meat that is less than one year old can be exported. I also mentioned that, in Quebec, sheep slaughter works quite well. However, that requirement must be met.
In closing, I would like to turn, once again, to the producers and their financial circumstances. In 2007, 60 per cent of producers had negative margins. For the Federation and for the Financière agricole du Québec, the most important issue is advisory services and ensuring that producers are able to access them, as such services currently exist. However, when you cannot afford to pay for them, there is no access. In the Federation's five-year plan, three of the seven items relate to advisory services. If government intervention is required, it is particularly needed in the sheep farming industry to allow sheep farms to benefit from advisory services that allow less productive sheep farms—earlier, you saw the gap that exists—to become more productive, so that they can remain in operation.