Thank you, Mr. Chairman.
Good afternoon.
My name is Bob Lowe. I'm a rancher in Alberta and also the president of the Canadian Cattlemen's Association, the national voice of Canada's beef farmers and ranchers. With me is Dennis Laycraft, executive vice-president of the CCA.
Thank you for the opportunity to appear before the committee to discuss beef-processing capacity.
The beef industry is Canada’s largest agricultural sector, contributing $9 billion in farm cash receipts and $17 billion to the Canadian GDP, while generating over 225,000 jobs. It supports strong rural communities and is the largest Canadian conserver of the great northern plains. The sector’s contributions to Canada’s economy and environment would not be possible without the ability to process our product for national and international customers.
Today we will talk about what is needed to optimize beef-processing capacity. It is not a black and white issue of having too much or too little; rather, we need to attain the right mix of size and scale of processors within Canada. Large processors are efficient competitors nationally and internationally. They allow Canada to take advantage of trade agreements, while small to medium-sized packers allow for slaughter capacity for local food systems. Over the last number of years, the beef industry has been challenged with maintaining small to medium-sized packers and having sufficient processing capacity in eastern Canada.
During the pandemic, our sector demonstrated great resiliency, but vulnerabilities were identified. If we look at eastern Canada, which includes Ontario, Quebec and the Atlantic provinces, packing capacity was approaching full capacity prior to the pandemic, and the sector seasonally experienced long delivery times to get cattle to market. This resulted in longer feeding periods, increased costs and lower prices for producers.
We refer to a processing plant's capacity as its “utilization rate”. To meet demand surges in 2020, eastern packers pushed utilization rates in March through June to above 100% by using Saturday shifts. While we are lucky that these operations were able to push past 100%, this is not sustainable, as they require time for regular plant maintenance.
When the Cargill plant shut down in December, a backlog of 10,000 to 15,000 head of cattle was created. The set-aside program under AgriRecovery has helped bring stability to the market. However, the backlog of cattle remains, as it is difficult to increase capacity beyond 100%, further demonstrating the precariousness of 100% utilization rates.
Overall, limitations in packing capacity have had a significant financial impact on eastern Canada’s beef industry. It is estimated that the Ontario feeding sector has experienced cash losses of $238 per head in 2020.
Over the past five years, the majority of Canada’s total beef processing has taken place in western Canada. In the spring of 2020, temporary slowdowns effectively halted 70% of Canadian beef-processing capacity over a two-week period and resulted in a backlog of approximately 130,000 head of cattle in western Canada. The resulting feedlot losses were a total of $152 million between mid-March and mid-June.
Western processing plants have had an impressive recovery and have efficiently processed the backlog, which was possible due to available capacity. While cattle producers suffered significant profit losses from low market prices and high input costs associated with managing their cattle supply, the set-aside program helped stabilize the market and avoid even greater losses.
Now that I've provided some context, I'll turn it over to my colleague, Dennis Laycraft, to speak to our recommendations.