International Trade Committee on Feb. 25th, 2014

[Massimo Pacetti, Liberal, Saint-Léonard—Saint-Michel, QC]

Thank you, Mr. Chair, and my thanks to the witnesses for being here today.

Mr. Arsenault, I have a number of questions to ask you, but, since my time is limited, I am going to focus on two or three.

You said that most of your cheeses are made from milk from cows, goats and ewes. Cow's milk is covered by supply management, but are goat's milk and sheep's milk regulated too?

[Louis Arsenault]

No. The industry and the Syndicat des producteurs de chèvres du Québec have put a price maintenance agreement into place. I cannot tell you what the situation is for the rest of Canada. The producers and processors have agreed on a price, but there is no supply management program as there is for cow's milk.

[Massimo Pacetti, Liberal, Saint-Léonard—Saint-Michel, QC]

Are the base prices for goat's milk and sheep's milk competitive?

[Louis Arsenault]

No, not at all. the situation is kind of the same as for cow's milk. For goats milk and sheep's milk, we see the same pattern.

[Massimo Pacetti, Liberal, Saint-Léonard—Saint-Michel, QC]

Is that because French farmers are subsidized?

[Louis Arsenault]

Yes. As I said previously, goat's milk production is subsidized at 100% of gross revenue. Without subsidies, farmers would not make it, you understand. For sheep, the rate is 115% to 125%.

[Massimo Pacetti, Liberal, Saint-Léonard—Saint-Michel, QC]

Can you give us a recommendation about a type of subsidy or a way in which we could help you? What form could that assistance take? Would it be a lump sum, a fixed amount?

[Louis Arsenault]

That is a very good question.

As I told you, the overall impact that all this will have on the market remains to be evaluated. For it to be fair for everyone, we would like to receive the same ongoing financial support that European producers presently receive on an ongoing basis. We could evaluate the assistance in a decreasing or graduated way. In other words, starting from a zero point, the point at which the cheeses start arriving, as a company's sales increase, the overall assistance program would decrease.

[Massimo Pacetti, Liberal, Saint-Léonard—Saint-Michel, QC]

Would that financial assistance be intended to pay for raw materials or would you prefer to use it to invest in your equipment?

[Louis Arsenault]

I think it should be a blanket assistance. It should be available for upgrades to the farm as well as to the businesses themselves.

[Massimo Pacetti, Liberal, Saint-Léonard—Saint-Michel, QC]

It has to be quite a flexible form of assistance.

[Louis Arsenault]

Exactly, it has to be quite flexible.

[Massimo Pacetti, Liberal, Saint-Léonard—Saint-Michel, QC]

I have another question for you.

When I go into a cheese shop or into a supermarket, there is always imported cheese and local cheese. There seems to be so much production that sometimes the cheeses do not sell. Even with more imported cheese, there will always be Quebec cheese, Canadian cheese and international cheese, will there not?

[Louis Arsenault]

If you are a shopkeeper, of course, you are going to sell the cheese that gives you the highest margin. That is just human nature. It is as true for the consumer as it is for the seller. Ultimately, the shopkeeper wants to make money. I have to tell you that, when cheeses come into the port of Montreal, their average price is $10 per kilogram. In the dairy industry, that barely covers the price of the milk necessary to make 1 kg of cheese. Let us be clear on that; I am talking about those who use only milk to make their cheese.

[Massimo Pacetti, Liberal, Saint-Léonard—Saint-Michel, QC]

I would like to ask Mr. McInerney another question.

In the ethanol industry, who would benefit more under CETA, the Canadian exporters or the European exporters? You're not exporting right now from what you were saying in your presentation. Meanwhile the Europeans are buying at higher prices. If I'm a producer, would I just not sell more to Europe, or is Europe using us to lower the prices of the raw material when it comes to ethanol?

[Gary McInerney]

You're perfectly correct, as I stated, that Canada is a net importer of ethanol. The only question would be who would benefit more from this. You have to look at the economy as a scale and the cost of production. We as Canadians are more cost-effective producers than the Europeans. That's a known fact.

[Massimo Pacetti, Liberal, Saint-Léonard—Saint-Michel, QC]

Our cost of production is lower even though we have less—

[The Vice-Chair, NDP, Don Davies]

Sorry, Mr. Pacetti. You're out of time, so I'll just ask for a brief answer.

[Gary McInerney]

Yes, our cost of production is lower in Canada than it is in Europe, more so than to offset that any transportation dealt a difference between the two countries.

[The Vice-Chair, NDP, Don Davies]

Thank you.

Mr. Hoback, for seven minutes.

[Randy Hoback, Conservative, Prince Albert, SK]

Thank you, gentlemen, for being here this morning.

It's a very interesting conversation for sure, with both sets of witnesses we've had today.

I'm going to talk a little bit about ethanol because there are some comments that I definitely want to get on the record here.

You talked about your four plants being located next to the corn. Why is that?

[Gary McInerney]

Corn is our number one cost of production, our number one feed cost. It represents anywhere from 80% to 85% of the cost of production, depending on the price of corn that year.

[Randy Hoback, Conservative, Prince Albert, SK]

So the reality is the logistics in shipping corn is a lot more expensive than shipping the end product, correct?

[Gary McInerney]

It absolutely is. For every one unit of corn you bring into the plant, you bring in one-third by weight ethanol, one-third by weight animal feed, and one-third by weight CO₂.

[Randy Hoback, Conservative, Prince Albert, SK]

Then of course you've got a market for the distillers grain and for the other products in the Ontario and Quebec regions.