Agriculture Committee on March 22nd, 2010

[John Masswohl]

That's basically what I was going to say. On our understanding of how it's going to work, the $25 million and the $40 million are two different sets of money for different things. The $25 million is to address the $32 per head cost. The $40 million is for investing in technologies, infrastructure, and perhaps thermal hydrolysis or other things. We don't know specifically what kinds of projects people might apply for in the $40 million. It's perhaps a little more uncertain where that will go, but it's our understanding that the $25 million is for the $32 per head.

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

This was my understanding, but in his testimony, the minister announced that the $25 million would be used for innovation. Are those two things related? This could cause problems and make it impossible to meet the demands of producers to address the gap caused by the imposition of SRM-related standards.

This was a concern of mine, especially since two budgets ago, an announcement was made that $500 million would be set aside for the AgriFlex Program. It then came to light that this amount did not cover income support, and that the AgriFlex Program would therefore not be genuine. That was not the first time that it came to light, after an announcement, after the specifics were reviewed, that the allocated sum was not actually meeting the needs expressed. This is what I was concerned about. I wanted to know if you have had more in-depth discussions. I wanted to bring this issue to your attention. I know that you will look into this, but I wanted to advise you to ensure, when you discuss the matter with the minister, that the sum is truly meant to offset the impact of the gap.

We have talked about the program meant to close the gap of $31.70 per head. The program would cost around $24 million for one year. Do you believe that the announced $25 million will enable the industry to make some progress or that this is only the first step? It would cover approximately one year. Would that be enough for you?

[Travis Toews]

I see a couple of things. Again, it is our understanding that the $25 million is to be used for SRM disposal. We agree that this will be critical in order to keep a level playing field until new technology is introduced and/or until we see a harmonization of regulations around SRM handling and disposal.

I think it will depend on how far industry is able to go with technology and the use of the $40 million in terms of handling their disposal costs down the road. I do expect that we will be challenged with this down the road in the future and probably for more than one year. However, like we said, our commitment is to see that we get to the point where we have regulations that are harmonized with those of the U.S. and we have a level playing field.

[The Chair, Conservative, Larry Miller]

Thank you. Your time has expired, Mr. Bellavance.

Gentlemen, I had to speak in the House so I missed your opening remarks. Thanks for coming here again today. It's good to see you.

Mr. Allen, you have seven minutes.

[Malcolm Allen, NDP, Welland, ON]

Thank you, Mr. Chair.

Thanks to both of you for coming here today.

There's obviously some lack of detail at the moment. We don't have the details, and you don't either, as to how the money actually will be spent. For all of us, it's a bit of conjecture on our part to figure out exactly what this is. There are some assumptions here that we hope will happen in certain forms.

Travis, you talked about the packer end in the sense of trying to make sure that.... When Mr. Valeriote asked you about where the money should go, you believed that it should go to the packers to keep them open in Canada so that you're not stuck with the U.S. packing system, where basically we're at their mercy.

On the face of it, that seems reasonable, but I would ask you to comment on the fact that what we're seeing in this country is that we still have packers, yes, but they're also contracting in the sense that they're being bought out by one or two major groups that are diminishing the amount of competition they have amongst themselves. They're not necessarily just Canadian national packers either; they're on both sides of the border when it comes to that.

If you see any problem, or if there's an alarm bell going off, albeit quietly, inside of your organization and you're saying that maybe you ought to take a look at this as well and keep an eye as to what goes on here.... Because if we're simply floating money to them--and it's easy to float money across the border--does that necessarily help our cattle producers or does it go to somebody else's bottom line?

[Travis Toews]

I think our concern is that this program, the $25 million, be developed so that it does meet the objectives of ensuring that down the road there is a processing sector in Canada for cattle over 30 months. It's for this reason that those program expenditures need to go towards actual SRM disposal costs.

Packer consolidation in Canada and in North America has been a reality over the last number of years, and I think it is a concern to the cattle industry on both sides of the border. But that's why a program such as this one is critically important. Because in fact, the most disadvantaged processors are the small regional processors, the small provincial packing plants, that by virtue of their process actually have a larger draw-off that ends up being SRM. They're even further disadvantaged against the larger federally inspected plants.

[Malcolm Allen, NDP, Welland, ON]

I understand the logic of that. But my concern is still the consolidation and the fact that the harmonization of regulation that you're espousing--and I'm not arguing with it--isn't coming in a year; that's my guess. I don't have a crystal ball, but I would rely on your experience, both yours and John's, from the work that you do, the connectedness you have with your counterparts in the U.S. This isn't happening overnight. In this business a year is almost like overnight. It takes a long time for regulation. Let's face it: if the Americans use this to their competitive advantage they're going to continue to say they don't want the 30-month-old and older; you leave it up there and take care of it and this is how we're going to do it.

Based on all of that, I still have some concerns about the medium- to longer-term future of what we see when it comes to the packing industry vis-à-vis what may be needed.

That being said, do you see an issue whereby you may have to come back next year and ask for additional funding to keep the program in place if you don't have harmonization? The other part of that is the CFIA piece. What's your sense of how much headway you are making with CFIA as far as how they are looking at SRM and how they want to see things done? Ultimately they're the ones calling the shots when it comes to the issue of food inspection and at the end of the day they're going to set the rules. We can ask for all kinds of things, but ultimately they need to call the shots. Do you have any sense of what direction they seem to want to take at this point?

[Travis Toews]

I'll defer the specific question on CFIA and the working group question to John.

At this stage of the game I think I would agree that the world will likely not be righted within 12 months. We will have to re-examine where we are down the road perhaps.

The real answer is probably twofold. When we're ultimately able to harmonize our regulations that will be the real answer. There will also be answers coming in technological improvements and processors starting to adopt processes, thermal hydrolysis or power generation, co-generation opportunities, steam generation opportunities that are being investigated right now in the processing sector. Those technological developments and implementation of those developments will also in part be the answer.

So I can't predict the timing of how that all fits together, but this could be an issue for a period of time, and I think we're going to have to evaluate as to where we are at that point.

[John Masswohl]

I guess as we work with CFIA one thing we're keenly aware of is that they take these things extremely seriously. They don't remove or loosen a regulation without a great deal of thought and scientific evidence behind it. That's the process they're going through, and unfortunately that takes time. I don't think Canadian consumers would want it any other way, and we certainly don't want to push them to do something that's not justifiable. We think this is the right objective, and we hope to get there. I would say the jury is out on how far we're going to be able to go and how quickly.

[The Chair, Conservative, Larry Miller]

You still have a couple of seconds, Mr. Allen, if you want.

[Malcolm Allen, NDP, Welland, ON]

You know I'll never take a few seconds, Mr. Chair, so I'll pass them on to Bev.

[The Chair, Conservative, Larry Miller]

Okay. He'll get back to you anyway, Mr. Allen.

Mr. Shipley, seven minutes.

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

Thank you, Mr. Toews and Mr. Masswohl, for coming back today.

It seems over the past year we've had you and your organization in front of us a number of times. The harmonization approach: you indicated to us the over-30-months in the United States--I don't know if you did the conversion or I may have missed it--the meat that comes in, is there a different amount of SRMs in the U.S. meat compared to the Canadian produce? That is, once it goes in and is slaughtered you talk about the meat that comes off the back, the amount that is left. I hear varying stories about having to leave so much more and others saying it's not that way at all. Please explain to me if there's a difference in the amount of meat that has to be left on the spine between the United States and Canada or in other places where the meat hits the consumer in the over-30-months.

[Travis Toews]

On our processing regulations and SRM removal for food safety purposes, our regulations are harmonized in Canada and the U.S. From jurisdiction to jurisdiction, probably in both of our countries, at times different approaches are taken, perhaps due to the staff on the ground. But as far as regulations, we have regulatory harmony on the food safety aspect of SRM removal, which is important.

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

All the food that comes is obviously safe and inspected. To be really clear, is there any difference in the amount of meat that is left for disposal?

John, you talked about the brain, the head. I'm not talking about that; we'll talk about that in a minute. I'm talking about the amount of meat left on the carcass because it's an SRM. Is it the same in the United States as it is in Canada?

[John Masswohl]

The regulations are the same, but we've seen in practice in some facilities, in Ontario in particular, that some of the meat around the spinal column is required to be left on to a certain depth. I can't remember exactly the measurement around the spinal column, but there's some pretty good meat there.

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

Why is that?

[John Masswohl]

The term “abundance of caution” comes to mind. I'm not sure where the directive has come from. But our working group is looking at the U.S. approach, looking at what's done in Canada, and having pathologists look at spinal columns prepared in different ways to determine whether there's any risk in doing it one way versus another.

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

Is it because there's a higher level of technology in the United States than in our plants to actually remove the exact amount without leaving an excess?

[John Masswohl]

I don't believe it's a technology issue.

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

Okay.

Can I move to the $40 million for new technology? Travis, you talked about a number of initiatives that are already in place in the States in many cases--the thermal hydrology, the steam generation, the way of capturing heat. We've put money into the processing plants--I forget now how many millions. Why haven't our processors or our industry adopted that technology and taken the money that has been given to them to do that?

I'll go back to the money that went to them due to BSE, for example. Maybe some of that should have been put towards new technology--or some of the money from the provinces and the federal government later. Has that been adopted, or, as Malcolm was talking about, are we starting from scratch? I would have a lot of difficulty returning to this same debate if this money....This is not new news to the industry.

[Travis Toews]

It is not new news. I guess I can't answer, on behalf of the packers, what they have implemented or not in using budget opportunities in the past. But I do know that some of our key processors have definitive plans to move forward in this area and become more competitive in their plants by being able to deal with SRM in a less costly manner. I'm not going to say a constructive manner, but perhaps a less costly manner. So at this time there seems to be serious buy-in and uptake on the need for it.

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

So $75 million is going to go. Just to be clear for the record, this is the only side of the table that is actually voting in support of the initiatives. Everyone else is opposing them and standing up for that in the House.

So we believe we need to put money toward the table to help the beef producers. But my concern is still going to be--and I've followed the comments of my colleagues--to ensure assistance with the disposal. I think the biggest issue is around the regulatory issues. In your roundtable discussions, can you help us with the regulatory issues around the disposal of the SRMs?

John, obviously that's a lot of weight when you take all the contents of the head and use them and they don't become part of an SRM. You said one pound to 58 kilograms--that's an incredible difference. If we change regulations, what sort of percentage will affect that one-to-58? Is that all regulatory in there?

[John Masswohl]

A good part of it is. This is the sort of thing we're trying to figure out ourselves as we participate in this working group. How far can we get with this? I don't think we believe we can get down to the one pound in Canada, at least in a year or a couple of years. I don't think we believe that. But how far can we get? Can we get a 20% reduction, can we get 10%? How much of that 32 can we get back? That's a question that we have in our minds right now. The only honest thing I can tell you is that we don't know at this point until we work through it. I imagine we'll be back here again at some point in the future reporting on that.

I do understand that one of the things that CFIA has committed to is to review the whole SRM policy at some point in the future, and I believe they're talking about 2012. That was a date that was established right at the implementation. It was implemented in 2007, so it's a five-year review. That's on the horizon. Those things are out there.

Part of it is how much cost reduction can we get by making the pile smaller and how much of it can be accomplished by creating some value for it through technologies, through thermal hydrolysis or other things. At this point we just don't know what that mix is going to be.

I think one thing to come back to is the differentiation between the federally inspected facilities and the provincially inspected facilities and why the amount of material in a provincially inspected facility is nearly double. Really, the answer to that is that the renderers, when they accept waste material from a provincially inspected facility--because those federal inspectors are not there on a regular basis--the renderers are treating all waste from provincial facilities as SRM, whether it's SRM or not. Basically what they're saying is that they can't trust or take the risk that what is in that container of waste material might be SRM or not, so they're going to treat it all that way. As we develop the details about how this is delivered, that's something we want to take into account, that these small facilities have a much higher cost to deal with.

[The Chair, Conservative, Larry Miller]

Thank you, Mr. Shipley.

John, I'd like to clarify something you said in your response to something Bev asked you at the start. You said that in some places the SRM removal is being interpreted differently, and you said specifically in Ontario. Is that because of an overly cautious approach by the packers here? Is it overzealous inspectors who just happen to be in Ontario? Is it different interpretation? Can you just enlarge on that a little bit?