We'd like to thank you for allowing us to appear before this committee.
My name is Bob Lowe, and I'm a rancher and feedlot operator in southern Alberta. I am also the current president of the Canadian Cattlemen's Association, the national voice of Canada's 60,000 beef operations. With me is Dennis Laycraft, the executive vice-president of the CCA.
To start I would like to stress that we strongly believe that if current challenges are strategically addressed, the Canadian beef industry will emerge as a key recovery sector post-COVID-19. However, we cannot take the current challenges lightly, and they must be addressed urgently, as the beef industry is the foundation of jobs for 228,000 Canadians and it contributes $17 billion to the Canadian economy.
As you've likely seen in the news, challenges brought forward by COVID-19 have resulted in a number of Canadian and American meat processing facilities significantly reducing their processing capacity. The scale of the impact is daunting. The Cargill plant in High River alone slaughters just under 40% of the total Canadian production. Every day they are not operating about 4,500 head of cattle are being backed up in the beef supply system. Prices are falling and costs of keeping cattle for longer than intended are mounting. To further compound the problem, other facilities have also had to reduce their processing capacity to adapt to COVID-19, and these challenges are in addition to the shortages we were already facing in eastern Canada. For beef producers, this has resulted in limited options on when and where cattle can be marketed, increasing costs of keeping cattle on farm for longer periods of time and severe market volatility.
We have already seen the value of a single market ready beef animal drop 30%, or over $500, for the week of April 12, 2020. Without some intervention, we estimate that losses will grow by an additional $500 million by the end of June. With such stark losses, one cannot help but relate this to the hard times of BSE in the early 2000s, which resulted in fundamental changes to Canada's beef industry, including the loss of 27,000 beef operations and the related loss of five million acres of Canada's endangered northern great plains.
It's not only processing capacity that has become a challenge, but the main risk management tool that we use in the beef industry, price insurance, has seen the premiums jump from what used to be $10 to $15 per animal to over $70 per animal. This is especially difficult for our young producers, who carry higher debt loads and need this insurance to be able to access loans from banks.
We have put forward to the federal government a set of policy solutions that support market stability and enable sound business decisions to continue to be made across our sector. The time to implement these policies is now, before it's too late.
Our first recommendation is to establish a set-aside program that will address the severe processing shortage by putting a set number of cattle on a maintenance diet rather than the growth diet they would normally be on. This will help better match the number of cattle ready to market with the amount of processing capacity available. This flexible policy tool was used successfully during the BSE years. It brings market stability and avoids a potential market crash.
We also recommend addressing the sky-high premiums that have made our main risk management tool, price insurance, unusable, as well as making the tool available in the Atlantic provinces. As I mentioned previously, this is very important to our young and new producers.
We also recommend adapting the advance payments program, similar to what was done for canola producers last year, to provide added liquidity and flexibility. This will enable cattle producers to market their commodity at the best time and actually make reinvestments in their herd. This three-legged stool approach of set-aside, livestock price insurance and adaptations to the advance payments program is a proactive set of tools that together will address the challenges being faced by different parts of our industry.
I would like to stress that our recommended approach will help avoid costly payouts from the AgriStability program, which is helpful for addressing losses but is more reactive in nature. Our recommendations will save government money and get the beef industry back to growth faster.
I would also emphasize that the current funding programs announced in CERB, wage subsidies, loan programs or otherwise are almost entirely unusable by our industry. Furthermore, the existing suite of business risk management programs come nowhere near being able to address the current challenges we are facing. We need smart policies implemented that are proactive and address the unique nature of agriculture and the pandemic.
We would emphasize that the beef industry can be a growth industry for the Canadian economy as we emerge from the COVID-19 pandemic. We have robust international access and our Canadian product is in high demand. However, if beef producers aren't able to make sound business decisions due to market volatility, the beef industry will emerge from COVID-19 in difficult shape, just as many other Canadian businesses.
Thanks.