Agriculture Committee on March 22nd, 2010

[The Vice-Chair, Liberal, Mark Eyking]

Good afternoon, everybody. Larry is not present at this time, so I will be taking the chair today.

We have people here from the Canadian Cattlemen's Association. Our main topic is specific risk materials management. Other topics can be discussed, or the openers can even talk about different issues, but it's the main thing we'll be doing today.

I'm sure you gentlemen have been at a committee before. You will have roughly ten minutes, combined, for your presentation. If it goes over or under, it doesn't matter too much. We're not that strict here.

Welcome, gentlemen. You have the floor.

[Travis Toews, Vice-President, Canadian Cattlemen's Association]

Thank you very much.

My name is Travis Toews. My family and I have a cow-calf yearling operation in western Alberta, west of Grande Prairie. We've been in the business for a couple of generations and I'd like to say that we're optimistic about the future of the cattle industry in Canada despite the difficult times we've had over the last number of years. I also currently serve as the vice-president of the Canadian Cattlemen's Association.

Federal budget 2010 included three provisions totalling $75 million that are intended to maintain a competitive cattle processing industry in Canada, with $25 million of the total specifically designated to assist with the cost of collecting and disposing of specified risk materials. We've been asking for this for over three years and are pleased to come before you in support of this much-needed assistance.

I note that this committee has supported action on this front as well. Multi-party support and the support of multiple agriculture organizations show how much this action is needed. We appreciate the added momentum your influence gave our request.

By way of brief background, in 2007 the government implemented costly new regulations intended to expedite the elimination of BSE in Canada. While we fully support that objective, CCA requested that, whatever approach was implemented, Canadian and U.S. regulatory costs in this area be harmonized. This did not happen. Instead, the U.S. regulation was implemented two years later, in 2009, and is not nearly as extensive or costly as the Canadian approach. A survey completed by the Canadian Meat Council last summer showed that the average volume of SRM for each cow over 30 months in Canada in a federally inspected slaughter facility is 58 kilograms. This equates to about 10% of the weight of the animal that has to be disposed of.

When we think of packers in Canada, very often it is the larger companies, such as Cargill or Excel, that come to mind. But we shouldn't forget that there are hundreds of small, important, provincially inspected facilities in rural locations all across the country. The amount of SRM treated waste coming from these facilities is easily double that of the federal facilities per head, at somewhere in the neighbourhood of 20% to 25% of the weight of the animal.

In the U.S., as I mentioned, less material is considered SRM and they have collection and treatment options that are not allowed in Canada. In the U.S., each animal over 30 months produces only one pound of SRM waste for disposal. This equates to nearly $32 per head, which is the cost disadvantage to killing an animal over 30 months in Canadian federally inspected facilities versus facilities in the U.S.

You can easily understand that U.S. companies are able to use that cost advantage to outbid Canadian packers for their Canadian cattle. Without the assistance included in federal budget 2010, the ability to continue slaughtering cattle over 30 months in Canada will be in jeopardy. We've already seen consequences in every province, with packers either closing their doors completely or changing their policy regarding the cow kill. The assistance in the federal budget should help to reverse this trend.

Nevertheless, I do want to assure you that in our view this assistance should not be needed forever. Our ultimate objective is to return Canadian and U.S. SRM disposal regulations to a harmonized state, to a harmonized approach. We are pleased that Minister Ritz has instructed his officials to work toward this objective. We are participating in a government-industry working group with the goal of accomplishing just that.

Unfortunately, it's clear that changes will not come quickly. The disposal cost assistance in the budget will help to ensure that cattle slaughtering remains in Canada until the competitive balance with the U.S. can be restored.

I will leave my comments on the budget at that, but we'll wrap them up by saying again that the Canadian Cattlemen's Association is very supportive and appreciative of the budget provisions to maintain the slaughter of cattle in Canada for the benefit of Canadian producers.

One other comment on cutting government spending is warranted. As belt-tightening measures are examined, one thing that's come under fire is ministerial expenses. I'm as likely as the next guy to get frustrated at spending that seems unnecessary, and I certainly support holding the government to account. One area, though, that we believe needs support from all parties is departmental, ministerial, and prime ministerial participation in opening markets.

Minister Ritz has had a very ambitious and quite frankly unenviable travel schedule since he's taken the agriculture portfolio. Minister Day, when he was Minister of International Trade, and Prime Minister Harper have engaged other foreign ministers on behalf of Canada's beef and other agriculture goods producers. We expect Minister Van Loan to continue this trend as well.

The politics of market access often demand ministerial intervention to get over the hurdles presented, and it takes a great deal of departmental work to set these meetings up. We would like to see all parties support these initiatives, as they are critical to the future viability of our industry.

Thank you for the opportunity to speak to these issues. We'd be happy to entertain any questions you may have.

[The Vice-Chair, Liberal, Mark Eyking]

Thank you very much, Travis.

We're going to open it up to a seven-minute question-and-answer period. Starting off with the Liberals, we have Mr. Valeriote.

[Frank Valeriote, Liberal, Guelph, ON]

Thank you, gentlemen, for appearing today.

Of course it's not the first time that we've heard the issue. I know that for some time the policy with respect to the treatment of SRMs has been an onerous task for farmers. I'm certainly curious about how many farmers have already suffered beyond the point of recovery because of the issue. I'd like you first to enlighten me on that particular point.

I did notice in your action news your accolades to the government for providing money in the budget for dealing with SRMs.

The minister was before us last week. I, too, welcomed the $25 million to deal with the issue of SRMs and the close to $32 per head that it was costing. However, in response to my question about the use of that money, it wasn't clear whether it would be deployed to farmers or the processors. The concern, of course, is that if the processors get this money it will not be funneled down to the farmers.

Can you tell me what your understanding is of the use of this $25 million? It has to be used this year, and it has to be used effectively so that the farmers benefit from it and not the processor. So how many people do you know who have suffered to the point of non-recovery, and what's your understanding of how this $25 million is going to actually be deployed?

[Travis Toews]

Thanks for that.

In terms of how many producers have suffered, I'm not going to be able to answer in terms of definitive numbers at this point in time. As you well know, we have many variables in the industry that are at play: currency, supply and demand fundamentals, a weak demand in North America due to the recession. But clearly our herd has been declining in Canada; the statistics show that. And as our processors are less than competitive, that impacts what they pay for live cattle; clearly that's been a contributing factor.

Our primary concern, as the Canadian Cattlemen's Association, is the risk of losing more processing capacity in Canada and once again becoming dependent on U.S. processors, such as we were in 2003, when we discovered BSE. That is our primary concern. We do not want to see an unlevel regulatory playing field once again create dependence on U.S. processors.

So the goal of this program, in our view, would be first and foremost to level the playing field until we can harmonize our regulations. We want to level the playing field for processors so two things can occur: one is that they can continue slaughtering over-30-month-old cows in Canada, keeping the jobs and the infrastructure in Canada; but secondly, so they can outbid their American competitors for Canadian cattle, which will provide a direct, immediate benefit for Canadian producers.

[Frank Valeriote, Liberal, Guelph, ON]

So you think this $25 million should be used by the processors to outbid, and through that outbidding process, that money will funnel its way down to cattlemen, to the farmers.

[Travis Toews]

Because we believe the goal is to ensure that the packing industry remains viable in Canada for the benefit of producers, we believe the program should be put together in that way.

[Frank Valeriote, Liberal, Guelph, ON]

And do you feel that it's more prudent to rely on the processors to do that than to get this money more directly to the farmers?

[Travis Toews]

The difficulty with it going directly to the cattle producers is that it will not accomplish the goal of keeping the processing capacity in Canada. That's because at that point in time, U.S. processors will continue to have the same advantage that they've had before this budget on outbidding Canadian processors for those live cattle.

[Frank Valeriote, Liberal, Guelph, ON]

And the $40 million that they provided in the budget over three years for the development and commercialization of innovative technologies for the removal and use of SRMs.... You know about that amount, obviously.

[Travis Toews]

Yes.

[Frank Valeriote, Liberal, Guelph, ON]

What objectives do you think the $40 million program should have? Are we talking about simply introducing technologies and plants that will burn the SRMs and create energy? Is that your thought, or do you have any other thoughts on it?

[Travis Toews]

I would agree with that statement. Obviously we think those funds should be used to further technology and also to assist in implementing that technology. We recognize that there could be a period of time when our processors don't have that level playing field on a regulatory basis on the SRM issue.

[Frank Valeriote, Liberal, Guelph, ON]

You talk about the competitiveness gap due to the differentiation in regulations and your goal to harmonize it. I understand that includes you in those collaborative discussions. Can you tell me if the Canada Food Inspection Agency is part of those discussions?

[Travis Toews]

Yes, they are.

[Frank Valeriote, Liberal, Guelph, ON]

And have you heard any position on their part to this point?

[Travis Toews]

That working group is continuing to meet, continuing to deal with issues. I will say there are challenges in dealing with issues with CFIA on these matters, but we're all in one room working in good faith to try to accomplish the end goal.

[Frank Valeriote, Liberal, Guelph, ON]

Can you be specific about your proposals on harmonization?

[Travis Toews]

I'm going to defer to John, as I'm not on that working group.

[John Masswohl, Director, Government and International Relations, Canadian Cattlemen's Association]

Yes, Travis mentioned that in Canada it's about 58 kilograms per animal. In the United States it's one pound per animal. So we have two objectives here. One is to get the volume of material closer to the U.S., and the other, the $40 million, is to find a marketable purpose for the material we can't eliminate.

Now, specifically, why are we 58 kilograms and they're one? I'll give you one example. In the U.S. they have the ability to use.... We just refer to it as brain-sucking. They basically vacuum the brain out of the skull and then they take the brain material, they dehydrate it, and they've basically got less than a pound left. In Canada we cannot suck the brain out of the skull because according to our regulations or procedures that would still leave a little bit of material in the skull. So we treat the entire skull as SRM material, which is quite a bit of weight.

So that's one example. Another is how the spinal column is treated. So we're trying to get closer to the American approach. Those are just a couple of examples, but we've got basically an action plan with a number of different areas like that. CFIA is investigating what to do. They're doing samples in the packing facilities, doing pathology on the results to see if it actually does eliminate the SRM material sufficiently.

[The Vice-Chair, Liberal, Mark Eyking]

Sorry, your time is up. We have to move on to the Bloc.

Mr. Bellavance.

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

Good day. Thank you for being here and providing us with your testimonies.

A week ago, we heard from pork producers because of the urgent situation they are in. You are here today because we are still looking for solutions that would help the livestock industry recover from the critical state in which it has been for several years. We have talked about SRM a lot. Even you mentioned it in your statement.

In the latest budget, sums are allocated to the slaughter industry, but we are not really familiar with the details. Perhaps you have had the opportunity to examine the testimony given to the committee last Wednesday by the Minister of Agriculture and Agri-Food, Mr. Ritz.

I asked Mr. Ritz if he could give us more details on the announcement that $75 million will be allocated to the slaughter industry. Earlier, Frank provided us with a breakdown of these funds, but when I had asked the minister about the specifics of the program, how it would be applied, when the money would be available, who would have access to the sums and whether it would really close the gap between Canadian producers and U.S. producers, who are not held to the same standards when it comes to the disposal of SRM, he tried to make light of the situation. He told us that the budget would likely be passed and that by voting for it, we could get the details faster. We are well aware that the budget will be passed. There is no delay, and there are not enough Liberals to vote against the budget and defeat it. I am sure you can see that this was not a satisfactory response.

We would like to know if the minister has at least assured you, as producers, that the funding announced in the budget would really be used to offset the disadvantage resulting from the different standards imposed by Canada and by the U.S. with regard to SRM.

[Travis Toews]

Thank you for those questions.

There are a couple of components to the program, but we believe the immediate need relates to the SRM disposal costs. While we are also not aware of the details of that program, we've committed to work with the minister and his staff on behalf of Canadian cattle producers to ensure that the program, as much as possible, meets the goal of providing a level playing field for processors in Canada who kill over-30-month-old cattle, for the benefit of Canadian cattle producers across the country.

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

Last Wednesday, the minister explained to us that the sum of $25 million would be used for stimulating innovation. As an example of innovation, he talked about thermal hydrolysis, a process which would apparently make it possible to break down SRM in order to turn it into fertilizer. This is why I asked if you have been assured that the $25 million will be used to offset the $31.70 per head you are losing owing to U.S. competition.

When the minister talked about stimulating innovation, I thought that would be covered by the $40 million and not by the $25 million. Now I have some concerns.

So I repeat my question: has either the minister or any member of his staff assured you that the budgeted $25 million or any of the money included in the $75 million will really be used to offset the impact of the gap between Canadian and U.S. standards?

[Travis Toews]

As we are not yet privy to the details, we believe that the $25 million needs to be a measure to assist in disposal costs of SRM. That has been our understanding to date.