Agriculture Committee on May 14th, 2012

[Brian A. Read]

Well, in Canada, we feel that in the beef sector, if we don't disappear 70% of our production domestically this year and next year, and for the next possibly two years, we've failed domestically, only because of where the herd is. Our cow herd is down. We have heifer retention.

The cow plant in Calgary closed because of supply. We chewed through the over 30 months pretty quick, pretty heavy. We made these plants pretty efficient.

So if we don't disappear 70% in Canada—in Canada we can compete, there's no doubt about it—then we feel we've failed from a marketing standpoint. As far as access to the domestic marketplace, there are no restrictions, but it is all price. That's the business we're in currently.

One of the big problems we have, if we're talking about the supply chain, is the disappearance of middles—strips and ribs. We see ourselves in a new economic world, one where people cannot afford to buy strip loins and buy ribs. Once it gets over a certain price threshold, it sits.

People say, “Well, is that ever funny. You can buy ground beef at $4.99 a pound, and yet you can buy strip loin at $4.99 a pound.” Well, a 16-ounce will feed two adults if you cut it into eight-ounce steaks. That's $10. With a pound of ground beef, you can mix it with Kraft Dinner—which I enjoy—and feed a family of four.

That's the problem we run into in the North American marketplace. It's not just Canada; it's North America. The disposable income by our consumers is disappearing. It's hard for us to comprehend that in this room, because if we want a steak, we can go out and buy one. A lot of people can't, and they're our major customers.

I don't know if that answered your question, but that is a concern of ours when we talk about supply chain. We do need the return on those middles.

[Randy Hoback, Conservative, Prince Albert, SK]

Rory, you made a comment, and I'm going to give you a chance to answer your own question. You said you hoped somebody would talk to you about why we should be converting to sow barns.

Could you enlighten us on that?

[Rory McAlpine]

I appreciate that. If you've followed the media in recent months, there has been a wave of announcements from retailers and food service operators in Canada and the United States stating their commitment to stop sourcing pork from any operator that does not adopt open housing systems in their production.

This issue has captured a lot of attention. There has been a lot of activist pressure on it. It's been recognized for some time in Canada, but it's hugely expensive. There's still debate about the pros and cons of different housing systems for sows, but the market has spoken at this point. As Maple Leaf Foods, we have made a commitment to convert all of our sow barns by 2017. That's in terms of what we produce in Manitoba. We procure 80% from non-Maple Leaf systems, so we're still dependent on the production from the industry as a whole.

It has been estimated that if all sow barn places in Canada were converted in the next couple of years, it would cost half a billion dollars. It's an enormous capital expense to redo foundations and rebuild these systems.

We're facing an enormous potential risk at this point in terms of market access, customer acceptance. We talked about getting into the market environment in Canada. It's one thing to be cost competitive, but now we're facing even more challenges in meeting these new standards. Obviously food safety is critical, but now it's animal welfare standards.

We think there's every reason to think about this strategically as an industry, with government. How can we help to offset this and get Canada into a lead position, which ultimately is going to be critical for global market access? For example, the European Union has some of the highest animal welfare expectations, both regulated and commercial, in the world. We're about to conclude a trade agreement with Europe. How are we going to get our pork in there if we can't comply with expectations on animal welfare?

The sow crate issue is the key one, and we can share some thoughts with the committee on what such a program could look like.

[The Chair, Conservative, Larry Miller]

Thank you very much.

Mr. Valeriote, five minutes.

[Frank Valeriote, Liberal, Guelph, ON]

Thank you, Rory and Brian, for coming today to speak to us.

Brian, talk to us more about Canada being a net importer of beef from the U.S. You mentioned that in the last year we've become a net importer.

What's the negative impact of that, and why is that happening? Tell us all the reasons you think that's happening.

[Brian A. Read]

With regard to Canada and the United States, agriculturally, trade is of great value to both countries. It's a road. If we have equivalent food safety systems, we shouldn't have border interference in any way.

We're working towards that with the RCC, and we see big positives there. If it's not two-way, then of course we can't just make it another metric system. That can't happen. I think most of us in this room remember that one. It made us all bilingual, though.

What's happening is that it's a truck ride for these products to come up here. You come out of an area where Bennie deJonge used to operate his company in Guelph, and he operated it very successfully. As we all learned from Bennie, his product got a premium domestically and he used the export market if he had surplus. That's how he maintained his business. I believe that was his business model. I don't need to tell you that, Frank.

It's critical that we have equivalent systems between the two countries that allow us to be equally competitive. That's all I'm saying, Frank. The SRM, and I hate to bring it up, is one of those regulatory issues that is a burden for the beef packing industry today.

[Frank Valeriote, Liberal, Guelph, ON]

Brian, I heard another story the other day about a double inspection of our meat going down there and a single inspection of the meat coming up. We sometimes get stopped at I stations, I think they call them.

Can you describe the incongruity in that as an example of where we need better harmonization?

[Brian A. Read]

Sure, and I think that's a good one for all of us in the room. I think we all understand it.

The Americans have what they call I houses at key points at all border crossings. So when our trucks show up at the border, they have to go to customs and they have to get approval. They have to be allowed to enter the United States, as do United States trucks coming into Canada; they have to go to Canadian customs to be allowed to enter into our country.

When the trucks coming up out of the United States come into Canada, the majority of re-inspections occur at the customer base. The federal inspection is there, and they do the re-inspection at the point of delivery. When we are going into the United States, we would be re-inspected at the I house. Now, it's a random re-inspection, but we would be detained. We have to reroute ourselves to the I house. Clearing U.S. customs doesn't allow our meat to go all the way to the customer in the United States or to the end user for re-inspection. It has to occur at the I house. If we go all the way to the customer by error, the product is used by error, that product is declared adulterant, and all the production that the product was used in is condemned, for want of a better word.

That's the difference with the two inspections.

The other thing is we now have two new six STECs, which are additional E. coli—they're 105, 121, 123. The list is well known. They're going to start random samples of lots at the border. So those two combos that they take off and take the samples from will be detained, and we'll probably bring them back.

[Frank Valeriote, Liberal, Guelph, ON]

Thank you.

Rory, in regard to the labelling on meat coming in and not knowing where it's from, can you better describe that? It almost sounds as if there's a black market, with some meat coming in here for which we don't know point of origin, and we're not sure how it is being labelled up here. I suspect that it's not labelled properly, not labelled from its proper point of origin.

[Rory McAlpine]

That's right. I wouldn't say that we necessarily have any food safety concerns, but the meat inspection regulations and the consumer packaging and labelling regulations lay out certain mandatory elements that have to be on foods sold at retail in Canada. In the case of meat, there are several elements of what has to be on that label, including an identification of the country of origin.

So the question of whether those labels are accurate or not is a matter of CFIA enforcement. The labelling can be a combination of what's put on the pack when it leaves the plant in the United States and what's added on the in-store label when the price per pound is added to the product in the store.

It doesn't matter where the information is. The point is that we often see product at retail in Canada that does not identify the product as product of the United States. Sometimes you may not even see a meat inspection legend. Now, we know it's coming from a federally inspected plant in the United States, but these elements, to our view, are important for consumer education; they're important for awareness. As we try, as a Canadian industry, to build consumer confidence and awareness of the Canadian product, we're fighting this constant challenge of unidentified product at retail.

[Frank Valeriote, Liberal, Guelph, ON]

So is it a matter of better enforcement at the retailer level then? Is that where we're looking?

[Rory McAlpine]

Yes. There's no way any inspection agency can inspect the thousands and thousands of retail stores in Canada. But we would argue there does need to be better enforcement, nonetheless, with more random checking, and ultimately it's also an obligation of the retailers. They don't want to be misleading consumers; that's not in their interest to do that. But it's hard in their business environment sometimes to get it right, and we're continuing to flag that, and we hope the CFIA will help us in that.

[The Chair, Conservative, Larry Miller]

Thank you very much.

Brian, just for clarification, Frank was asking you about meat going south, trucks that have to go to the I house. I think what you're suggesting is that it would be better if the U.S. didn't have that extra step in there—that random checking versus being checked right at the I house. You're not suggesting that we implement this I house or duplication inspection up here, are you?

I just want to be clear on that.

[Brian A. Read]

At this point I would say absolutely not. Two wrongs never make a right.

[The Chair, Conservative, Larry Miller]

That's right.

[Brian A. Read]

But the issue is that if you don't have something to give away, you're negotiating with only one hand, and it's kind of hard. So we look forward to the success of the border cooperation. We really do.

[The Chair, Conservative, Larry Miller]

In an ideal world, it wouldn't happen at all.

[Brian A. Read]

No, it shouldn't happen at all. We have equivalent inspection systems. We strongly believe the two countries have equivalent systems and they should both recognize that, and these trucks should move freely. That would help us tremendously as well.

[The Chair, Conservative, Larry Miller]

Great. I thought that's what you meant. I just wanted to clarify it.

[Brian A. Read]

I'm sorry, Frank, if I confused you.

[The Chair, Conservative, Larry Miller]

Mr. Lobb.

[Ben Lobb, Conservative, Huron—Bruce, ON]

My first question is for Mr. McAlpine.

Could you tell the committee where the U.S. is currently with its regulations for sow crates?

[Rory McAlpine]

There are no national regulations in the United States, but several states, under pressure from activists, have adopted bans on the use of sow crates in hog production. These typically have been smaller states that have pretty small populations of hogs, but the Humane Society of the United States has an aggressive campaign to secure petitions that are going to increase the number of these bans state by state. There are several cases of states that will commit to eliminating sow crates by 2017 or beyond and—

[Ben Lobb, Conservative, Huron—Bruce, ON]

Could I stop you right there? This is being led by activists, I guess, at this point.

Can you tell me what the issue is with the current state of crates for sows? This practice has been going on for decades. What is the risk to the consumer or a food retailer by having a sow in a crate?

[Rory McAlpine]

It's fundamentally a question of perception and science around the well-being of the animal. That's where it starts. Of course, as an industry we believe that is paramount. That's the number one issue to focus on.

The debate—