I'd like to thank you for the opportunity to express the views of the rendering industry to this committee.
My name is Graham Clarke. I am an independent consultant who represents the Canadian Renderers Association in Ottawa.
The membership of the Canadian Renderers Association is composed of the three major independent renderers in Canada. They are Sanimax, which has operations in Quebec, Ontario, Alberta, the United States, and Mexico; Rothsay, which is part of Maple Leaf Foods and has operations in Nova Scotia, Quebec, Ontario, and Manitoba; and West Coast Reduction, which is based in Vancouver and has operations in British Columbia, Alberta, and Saskatchewan. Other companies that have large rendering operations in Canada are Cargill, in High River, Alberta; XL Foods, in Brooks, Alberta; and Maple Lodge Farms. These are all sizeable businesses. Rothsay, for example, employs over 500 people in its six plants across the country.
Every year the Canadian rendering industry recycles approximately three billion kilograms of perishable material generated by the livestock and poultry slaughter and processing industry; some fish processing companies; and the food processing, supermarket, and restaurant industries.
The industry produces protein meals, fats, and oils through this recycling process. These are valuable ingredients or raw materials for the animal feed and pet food industry and for the oleochemical industry, where they are used in the manufacture of soap, paint, varnish, cosmetics, pharmaceuticals, leather goods, textiles, lubricants, and many other commodities, including renewable fuels, such as biodiesel.
From an environmental perspective, you should note that biodiesel derived from recycled materials, such as used cooking oil and rendered fats, has a greenhouse gas reduction, versus conventional diesel, of greater than 90%.
The industry is also a major exporter to Asian countries as well as to the U.S., Africa, and Central and South America.
Ultimately, the rendering industry is a service industry. The major customers are the livestock producers and the packing industry. But the industry also collects and recycles material from restaurants, supermarkets, and other food production facilities.
The rendering industry does what it can to service these industries in the best way possible, and it takes very seriously its responsibility to provide a timely and efficient means for its customers to dispose of their waste products. I don't need to explain the impact on stakeholders in the entire red meat value chain that a cessation of service for a couple of days would have.
There are a number of challenges currently being faced by the industry. The first one is in the category of raw material supply. The rendering industry, of course, relies heavily on the domestic slaughtering industry for its raw material. It is very vulnerable to downturns in the domestic livestock and meat processing industry in that the supply becomes reduced when these downturns occur.
Deadstock is another source of raw material. But the increasing cost of pickup, as a side effect of the BSE situation, as you have already heard, has a negative effect on the livestock producers' ability to pay. Consequently, they tend to dispose of the carcasses themselves. This further reduces the raw material supply.
Just for clarification purposes, bovine deadstock, by definition, contains specified risk material. The amount of deadstock being collected has dropped by 30% to 60%, depending on the part of the country we're talking about, from pre-BSE times, meaning prior to 2003.
This raw material, the deadstock, is now being buried on the farm, composted, incinerated, or in some cases, left to decompose in the environment, which is clearly not a satisfactory situation. Economically, it's very unfortunate that the farmers are no longer able to pay for collection.
The other environmental impact of this applies to all deadstock, because when you lose the volume of bovine deadstock, which constitutes a very large volume, it is no longer economical to run trucks along the trucking routes to pick up the material. Consequently, it has an impact on small stock, such as hogs, sheep, and so on.
Another major concern right now is the theft of raw material, in particular grease, which is generated by the restaurant industry. This has become a very serious issue in the past 24 months. In fact, the industry is meeting about this next week to look at anything further that can be done to prevent it. The high market value of fats and oils has led to an increase in the theft of this material, which is now calculated to be in the millions of dollars annually. It's very costly for the industry due to the loss of raw material and damage to containers. They need to supply more expensive and secure ones, along with other preventative measures.
I just need to tell you that an unregulated market in grease poses potential threats of contamination to the whole animal feed chain due to the potential for mixing this material with fats from other sources. This could be extremely costly and would be a threat to animal and public health, and it could generate enormous negative publicity for the entire livestock value chain.
Four major incidents have occurred in Europe in the past 13 years. Two were in Germany, the last one in January 2011, one was in Belgium, and one was in Ireland. Each time fat destined for industrial use ended up in animal feed. The May 1999 incident in Belgium resulted in costs estimated at $1.5 billion, and the Irish problem with pork, in 2008, cost the industry 100 million pounds.
There's also increasing competition from alternate disposal methods. I personally believe that rendering is still the most efficient and effective recycling process for animal by-products. The industry continues to try to improve efficiency in order to reduce the costs.
Other means of animal by-product disposal, such as biogas, hydrolysis, and composting, are being researched and promoted, which may create competition for raw material. To date, these alternate methods have not seriously impacted the rendering industry, but they might have the ability to do so in the long term.
Another trade issue is the continuing negative impact of BSE on exports. Since Canada had its first case of BSE, some countries have banned the importation of certain rendered products from Canada. Many of these countries banned the importation of not only meat and bone meal but also tallow—a ban which is unscientific and not in compliance with OIE regulations. It has taken many years to negotiate the reopening of markets for tallow, but progress is being made and finally a reopening of the export market to China is hopefully close.
Canada, as you know, is classified as a “controlled risk” country by the OIE. The OIE recommends that importing nations not allow the import of ruminant meat and bone meals from controlled risk countries, which is a major barrier to the export of ruminant protein meals from Canada.
Canada does export ruminant meat and bone meal to Indonesia and the Philippines under bilateral agreements, but would like to have access to additional markets to ensure export stability. Recent problems with the trade to Indonesia have highlighted this as a major issue.
There are a few other issues I'd like to mention in passing, mainly three of them. One is perception, and the others are environmental regulations and energy costs.
The major market for rendered products is the domestic animal feed market. Certain livestock and food companies market their products to the consumer as not being fed animal by-products. This puts some restriction on sales to some feed companies.
As far as the environment goes, increasingly costly environmental standards are being imposed on the industry, which can restrict its ability to build new infrastructure in convenient locations and which raises both the operating and development costs. Rothsay, for example, has invested more than $50 million in environmental upgrades during the past seven years.
Lastly, there are the energy costs. Rendering is a very cost-effective recycling process, but it is a high user of energy, so increasing energy costs for raw material, collection, operation, the rendering, and transportation all negatively impact the process and may negatively impact overall profitability.
This concludes my presentation. I appreciate the time you've given me. I'll be happy to answer any questions.