Thank you, Mr. Chairman, for this opportunity to contribute to your study of the food supply chain in Canada. I'm pleased to offer a perspective from Maple Leaf Foods, particularly as it relates to the pork sector.
In November 2006 I appeared before your committee to talk about challenges facing the Canadian pork industry and identified six big concerns: animal disease pressure, particularly PRRS; declining relative productivity in efficiency, particularly managing the higher feed and energy costs; insufficient scale of Canadian processing plants; the competitive threat of pork industries in emerging countries; international market access barriers and trade risks such as country-of-origin labelling in the United States; and finally, and most of all, adjusting to a strong Canadian dollar.
Looking back five and a half years later, it's hard to avoid the conclusion that these six issues have shaken the Canadian industry to its core, but in fact there were at least three more challenges that no one anticipated in 2006: the financial crisis and global recession of 2007-09; the 2008 listeriosis tragedy, which was linked to our company's products; and finally, the so-called swine flu outbreak of 2009. In the last couple of years I could also mention growing health, animal welfare, and environmental concerns that have been linked to our industry's products and continuing evidence of declining per capita consumption of pork in Canada.
These events, of course, caused multi-year losses for producers, the exit of hundreds of experienced producers from the industry, record debt levels, processors facing overcapacity and margin pressure, loss of domestic and international market share, and millions of dollars spent on government support programs.
For Maple Leaf Foods, a radical transformation of our business model to meet these challenges had begun when I spoke to you in 2006. The imperative to complete it has only grown. Between 2010 and 2014 we'll be spending $560 million in strategic capital across our protein and bakery operations to reduce costs, boost productivity, and drive market value. We're doing this largely on Canadian soil, securing Canadian jobs, and helping to ensure the Canadian pork industry and our value-chain partners can again profit and grow as market conditions improve.
Our industry must now think and act differently since the favourable cost structure we enjoyed in the 1990s and the early 2000s is unlikely to return. The product quality, pricing, and reputational advantages we long enjoyed in both domestic and international markets can no longer be taken as given. We have to embrace product and process innovation, investments in scale, operational efficiencies, food safety leadership, and market development with purposeful strategies and coordinated efforts.
This brings me to the important question of how governments can help, bearing in mind that despite herd consolidation, the Canadian pork industry still slaughtered over 21 million animals last year, generated $5.1 billion in sales, and set a new export record of $3.2 billion.
Let me again go back to 2006 when I presented the following five recommendations, and if you'll allow me, I'll just comment briefly on the progress, the shortcomings, and new priorities to be considered in each area.
The first recommendation I gave then was to move forward on smart regulations and improve federal-provincial coordination. I can say progress here has been very positive. In the aftermath of the listeriosis crisis and the report of Sheila Weatherill, a great deal of positive changes occurred in food safety policy, programs, resources, regulatory approvals, enforcement, and governance.
We particularly commend the government on the recently tabled and long-overdue amendments to the Food and Drugs Act to speed up regulatory approvals, and also the anticipated consolidation and strengthening of food safety and inspection legislation under CFIA. Those were the CFIA initiatives on regulatory and inspection modernization, enhancements to import licensing and inspection, some very good changes recently proposed to the meat inspection regulations, and an ambitious agenda under the border action plan between Canada and the U.S.
We could still do much better on federal-provincial coordination in food safety, animal health, environmental standards, and other areas, but we do now have a national farmed animal health and welfare strategy, and I see hope for a similar food safety strategy based on efforts begun earlier this year.
The second recommendation I delivered then was to enhance trade through bilateral agreements and better infrastructure. While we wait to see deals concluded, the scope and ambition of the government's current bilateral trade agenda and the services of the Market Access Secretariat also deserve praise.
In addition to the above-mentioned commitment to Canada-U.S. regulatory cooperation, free trade deals with high-value markets like the EU and Japan would bring enormous opportunity to the Canadian agrifood sector. Getting into the trans-Pacific partnership is also extremely important, especially if Japan is admitted.
I must, however, mention specifically the need to conclude an agreement with South Korea. As just one company, we had $75 million in pork exports to Korea last year, and these are in immediate jeopardy because we now face a tariff disadvantage relative to our U.S., European, and Chilean competitors. Total Canadian agrifood exports to Korea were over $1 billion last year, and it's all at risk.
The third recommendation, five and a half years ago, was to improve labour market flexibility and foreign worker recruitment. In the past few years, we—our workforce, our union partners, and the communities in which we operate—have enjoyed considerable benefit from the temporary foreign worker program and the provincial nominee programs. Since we commenced recruitment of foreign nationals in 2002, we've employed 2,194 skilled or semi-skilled workers and 154 skilled workers, with a retention rate of about 60%.
Many aspects of program administration by the federal departments and coordination with the provincial departments of labour and immigration have improved. Efforts to accelerate labour market opinions and restore two-year approvals are appreciated. However, two years is still too short, especially given the new and higher English language threshold that has been established to gain permanent residency. This new threshold has already compromised our recruitment of lower-skilled workers and threatens the success of the program in communities such as Brandon, Manitoba.
Also on the labour front, I do again have to point to fragmentation across the provinces when it comes to employment standards, pension regulations, and so on, and the frequently threatened labour disruptions to rail and port services. Speaking about rail, though, we do welcome the government's response to the rail service review and look forward to the promised legislation.
The fourth recommendation was that we support more science and innovation in animal disease prevention in Canada. Here, our assessment is somewhat mixed.
We appreciate federal funding for science and innovation under Growing Forward, including the swine science cluster, the Swine Health Board, and other bodies, but we see an erosion of publicly funded agrifood research in Canada, an underfunding of meat and livestock compared to the crop sector, and unfortunate changes that were made to the SR and ED program in Budget 2012. We certainly hope support for science will be strengthened under Growing Forward 2 and that we maintain the continuity of the clusters.
I would also remind the committee that the $23 billion Canadian livestock, poultry, and meat industry faces the constant threat of a major foreign animal disease outbreak. We've made progress in Canada in terms of improved traceability, on-farm biosecurity, east-west disease zoning, and coordination of surveillance and laboratory testing, but we still lack a comprehensive national foreign animal disease response and recovery strategy.
In terms of animal welfare, we're finally updating the national codes of practice for animal care, but we still have a fragmented, outdated approach to animal welfare and standards across the country.
Finally, the fifth recommendation was for stable and effective farm support programming. Well, the Growing Forward framework, which began in 2008, introduced the suite of cost-shared programs that we know of today. In fact, if you check, there are 187 Growing Forward programs on the agriculture website—a lot of programs.
We've had ad hoc programs to help the hog sector downsize and adjust to harsh market conditions, various AgriFlexibility programs dedicated to animal slaughter, traceability, and food processing innovation, and new provincial programs, such as the risk management program in Ontario.
As a major pork processor, Maple Leaf values national, whole-farm programs that provide income stability and investor confidence in hog production. We do not welcome commodity-specific provincial programs that expose the industry to trade risk and create distortions in interprovincial trade and investment.
In Growing Forward 2, we hope that strong commodity prices will allow a rebalancing in favour of more support for science innovation, food safety, animal health, international trade, and environmental protection. We particularly believe that a program should be developed to help offset the capital cost of converting sow barns from gestation stalls to open housing—and I hope you ask me why I think this is important and how it could be done.
In summary, recent years have brought adversity to Maple Leaf Foods, especially in its pork business, but we've weathered the storm and accomplished much on our path to becoming a globally admired meat, meals, and bakery company. With the help of government policy supporting a strong business climate, our future in Canada and globally is promising.
I look forward to your questions.
Thank you.