Proceedings of the Standing Senate Committee on
Agriculture and Forestry
Issue 1 - Evidence - Meeting of November 22, 2007
OTTAWA, Thursday, November 22, 2007
The Standing Senate Committee on Agriculture and Forestry met this day at 8:08 a.m. to study the present state and future of agriculture and forestry in Canada.
Senator Joyce Fairbairn (Chair) in the chair.
[English]
The Chair: Good morning and welcome to the first meeting of the committee in this new session of Parliament. It comes at a time when the livestock industry is in a difficult position. While there is currently a boom in feed grain prices, there has been a decrease in cattle and hog prices. Media reports indicate that the cattle producers are losing approximately $400 per head sold. As such, we have chosen to begin this new session by hearing from representatives from the livestock industry. Today, we will begin with the beef producers. We have with us, from the Canadian Cattlemen's Association, Hugh Lynch-Staunton, President, and John Masswohl, Director of Government and International Relations; and from the Fédération des producteurs de bovins du Québec, Michel Dessureault, President, and Vincent Cloutier, Assistant Secretary. We have asked these leaders to speak to us today about the crisis facing the beef producers across Canada. This situation has been going on for awhile and Canadians sometimes forget that it is still happening.
We have two and a half hours, gentlemen, to cover a wide array of issues so I invite colleagues to keep their questions as brief as possible to allow the witnesses to respond fully, and to allow everyone to contribute to the discussion this morning. Mr. Lynch-Staunton, please proceed.
Hugh Lynch-Staunton, President, Canadian Cattlemen's Association: Thank you for this opportunity to share our current dilemma. We appreciate all the help that your committee gave during the bovine spongiform encephalopathy, BSE, crisis; it was timely and helpful to us.
I will first explain what the Canadian Cattlemen's Association is. We are the umbrella group for provincial livestock associations for all of the provinces, except for Quebec and Newfoundland. We represent slightly under 90,000 cattle producers, and our mandate is to further the interests of our industry on the national and international scene.
I should back up a little bit. We have not finished the BSE scenario but things are getting much better. It looks like our markets are opening. While it may be temporary, there has been good news this week: We think the American border will open completely soon or in whatever timeframe it may take to finish a court case. In any event, that is happening. We also have indications that our overseas markets are starting to widen. We view what happened this week in the United States to be an important step in resuming normal trade.
Having said that, our industry faces an almost perfect storm. Ironically, the biggest single factor — the appreciating Canadian dollar — is the one that we have the least control over and the least experience in dealing with. Its rise has been devastating to us, the toughest time being several weeks ago. The reason is, traditionally, our Canadian fat cattle prices have been Omaha prices less the cost of transporting cattle there. That market has set the price trend in North America and, some may say, the world. Every time our dollar rises, that equivalent amount goes right off our gross receipts for finished cattle, and that reduction works all the way back through the chain.
Feed grain prices have been higher than we have experienced in recent times. The biofuels policy both here and in the United States has had a large psychological effect on this market. In Canada, the actual volume consumed by biofuels probably cannot justify the price range, but the psychology has been there.
Something that is not in my paper but that I wish to add is that we have had a pent-up group of people my age who, in the normal course of events, would have left the industry during BSE, but they were not able to do that. Therefore, we have a bit of pent-up exit leaving as well. On top of that, we have people exiting who are diverting out of marginal land — out of forages back into grain — where many of them would prefer to be in the first place.
All these things are happening at once, and that situation has created a tremendous price collapse. Also, as you mentioned, there are some serious losses on cattle; the value of all our cattle, whether or not they are sold, has diminished.
We are trying to make sense of this situaton. Our prediction is that the dollar is likely to be shaky; we do not think we will go back to 70 cents for a long time. We would not mind going back to that level but we are not likely to. We think that the biofuels factor will become increasingly bigger in the feed grain market. In the West, and probably in the rest of Canada, too, labour availability is a factor when we look at demographics and our economy, et cetera.
The marketing access, of course, is critical to our industry. In rough figures, we export about half our production. Therefore, if we are confined to a domestic market, we will probably need to saw our industry in two.
As I mentioned earlier, it looks like we are returning to access to a wider range of markets. One more thing while I'm speaking of issues: We face country-of-origin labelling in the United States. That issue is another one that is difficult to assess because we do not know what that will be and what it will look like. The proposed legislation attached to the Canadian Farm Bill that should be enacted, or would be enacted next fall, is much better than the one that is on the books. However, we do not know if that bill will pass and we do not know how the regulations will apply. Likely, the regulations in the country-of-origin labelling will determine how difficult it is for us to access certain segments of the American market.
On the other hand, we have talked for years as an industry about branding our product. Now it looks like the Americans will brand it for us, so we will find out if that was a good idea.
Things are not all bad. We have what seems to be a terrible situation, and it is, so we have tried to look at short-term things that our industry can do, with the help of the Government of Canada and the provincial governments. We understand that the influence on the Bank of Canada is limited, but we think that a lower interest rate would be useful in terms of decreasing the relative value of our dollar.
We are seeking changes to the Canadian Agricultural Income Stabilization, CAIS, Program. We find it a bit troublesome that CAIS was applied differently in different provinces; we have always felt that every region should be treated equally under that program. The CAIS Program has a number of shortcomings that we need to work on and we have done that work.
Since this paper was written, we have had consultations both here and across the country. We have talked with the Canadian Pork Council. We have had common ground; they have a similar situation to ours, except that they have been hit even harder than us at the moment. We have asked the Government of Canada for cash advances from CAIS quickly and with enough magnitude so it will give us time to develop and refine other plans to move our industries forward. We must work with our various sectors and with governments at all levels to develop these initiatives, as I have indicated.
In our paper, item 4 is a new trade directorate. When we look at things that we can do in terms of market access, the efficiencies that we need and the ways in which we can cut costs, in almost every instance there is a component relating to the Canadian Food Inspection Agency, CFIA. We have been of the opinion for some time that this organization has a regulatory culture. Obviously, that role is a huge part of their job but we do not think that they have enough resources to do all the things necessary for our industry. They have a huge influence on trade advocacy and good people in that area but they do not have enough of them. Trade and commerce is not the priority. Therefore, expansion of that work with industry is critical to us for moving ahead.
Our fifth point is the uncompetitive regulatory costs facing our industry, including the enhanced feed ban and user fees in meat inspection costs. One thing that emerges clearly in our times of trouble in our packing industry is that our American packing houses have a lower cost base than ours. It might be some comfort that the American packers are losing money generally as well, but not as much as our packers. That situation is troublesome to us, and having gone through a great deal of trouble recently with the BSE crisis to increase our packing capacity, we are at risk of losing it. A couple of the factors relevant to this issue are health inspection fees, meat inspection costs and our enhanced feed ban. Those costs that we incur are easily identifiable.
What will happen? Again, we are not sure where things will go. The dollar seems to be slipping. If it slips more, obviously it would be better for us and would help a lot. We can adjust to normal fluctuations in feed grain. The grain farmers of Canada have had a terrible number of years and it is nice to see profitability returning to their work.
We have identified other factors in research and production. We do not think our nation has undertaken the kind of research that is needed in forage production using grains as a base. A number of factors have been an impediment to that research, one being the focus of grains for feed and export. A number of wheats, in particular, have great feed- grain potential but have not been licensed because they cannot be distinguished visually from other grains that are better for flour. Some measures can be taken easily to change the requirements for kernel visual distinguishability, KVD. We think that public and industry funds need to be invested in research on forages to make similar strides to those made by the Americans in corn production. We cannot turn wheat into corn but we can do a great deal with wheat, barley and other forage research.
We have talked about labour a bit. We have had good news in the area of temporary work programs for immigrant labourers to help run our packing houses. Positive changes have been made and will be helpful. We spelled out in our paper how the enhanced feed ban has added costs to our packers. We have been discounted in some markets and do not think that discounting needs to happen. That issue is in short term. A number of plans are under development with other factors in the industry that will be for the longer term but we need time to work these plans out and to negotiate the various elements.
One positive result of this crisis is that all segments of the industry, including the packers, seem to express willingness to work on common solutions, and we have a climate that allows us to do that. For example, we are working on improvements in the flow of information through the value chain from the packer back to the seed stock producer and the geneticist. We are working on ways that we can add value to our product. A great deal of base work has been completed, such as our identification and traceability system that is almost up and running. We have a lot to offer.
Last week, we were knocking on doors and I was surprised and in disagreement with the sentiment expressed that this situation is part of life, that our industry is too big and that this situation is the way things are. We heard that comment too many times but we do not believe it for a minute. There is all the potential in the world, with decreasing supplies of red meat and increasing prosperity, and so we think that our industry should and could grow. Certainly, it can maintain the present level if we can get over this major ``speed bump,'' as I call it.
That is all I will say at the moment, although I am sure I have missed things. I will be happy to answer questions as the morning progresses.
[Translation]
Michel Dessureault, President, Fédération des producteurs de bovins du Québec: Madam Chair, with your permission, I will make my presentation in French. First, let me note that we have several factors in common with the Canadian Cattlemen's Association. La Fédération des producteurs de bovins represents 20,000 Quebec producers, divided into five production groups, where the veal industry plays a dominant role in Canada and the beef industry is similar to that of the rest of Canada.
Since May 2003, Canada's beef industry has been going through a grave crisis, that of BSE. This crisis has brought to light two fundamental weaknesses in the beef industry, its double dependence on slaughterhouses and the American market. This crisis has also brought to the fore a serious imbalance in the market power of the different links in the industry chain.
In this context and with the encouragement of the Government of Canada, Quebec's beef producers have been proactive, collectively acquiring the two largest slaughterhouses in Quebec: Levinoff-Colbex and Billette of which the producers owned 10 per cent, thereby improving their competitive position. Unfortunately, the adverse economic conditions were too much for Billette, which had to close its doors in August 2007.
Though the United States reopened the border last Monday to animals over 30 months of age, as well as to meat from animals over 30 months old and breeding cattle, present conditions (non-harmonized regulations for SRMs, increased inspections at the American border, the high Canadian dollar, soaring costs for feed and energy, et cetera.) suggest a dark future for the Canadian beef industry, and consequently for the beef producers of Canada and Quebec.
The complete lifting of the American embargo, following the principles set out by the OIE, was both expected and necessary. However, after more than four years of absence, regaining access to the meat market among our neighbours to the south can only happen gradually. Meanwhile, cattle are already crossing the border more easily, penalizing our slaughterhouses all the more.
The Government of Canada should act quickly to stop the progressive erosion of the slaughter sector, the dramatic reduction in feed lot finishing and the decline of cow-calf inventory. To that end, we suggest the following actions. First, regarding the exchange rate, the overly rapid appreciation of the Canadian dollar over the American dollar is a threat to the survival of Canada's manufacturing industry. It is also jeopardizing the production and processing of beef and veal in Canada. The Quebec Beef Producers' Federation recommends a prompt lowering of the Bank of Canada's key interest rate, particularly in-as-much as inflationary pressures in western Canada are weakening.
Regarding regulations on SRMs and the competitiveness of slaughterhouses, since July 12, the use of animal meal containing specified risk materials (SRMs) is forbidden in the feeding of all livestock. SRMs are bovine tissues that could potentially contain the infectious agent responsible for bovine spongiform encephalitis (BSE). In Quebec, some 50,000 tons of SRMs are generated annually, in slaughterhouses and on the farm.
The United States does not intend to adopt similar regulations. The SRMs of American cattle can therefore be processed into animal meal fed to poultry and hogs. The absence of regulatory harmonization between Canada and the United States seriously weakens the competitiveness of Canadian slaughterhouses and indeed the entire Canadian beef industry. This is because Canada's new regulations entail significant costs. Slaughterhouses and rendering plants must invest significant sums and incur repeated upgrading costs to segregate SRMs from other slaughterhouse by-products. Animal meal from SRMs no longer has any commercial value. Worse still, in Quebec we have to pay to bury them.
Managing SRMs represents an additional cost of $30 to $35 per head for cull cow slaughterhouses. For example, in the case of Levinoff-Colbex, the largest such slaughterhouse in eastern Canada, these measures entail additional costs of $4 million to $5 million per year compared to its American competitors. There is no way our slaughterhouse can absorb these additional costs.
If nothing is done, the absence of regulatory harmonization across North America will lead to a drastic reduction of slaughter capacity in Canada, and by extension, to an increase in the dependence of Canadian producers on American slaughterhouses. Yet, the BSE crisis clearly demonstrated that dependence on American slaughterhouses represents a major risk for the Canadian beef industry. Let us remember that this crisis has already caused a loss of $8 billion to $10 billion for Canada's beef producers.
Regarding two-tier governmental financial support, to help the industry comply with the new requirements, Agriculture and Agri-Food Canada, in collaboration with the provinces, has put in place a financial assistance program of $80 million. Some $10 million of this is slated for Quebec. This sum adds to the $10 million already budgeted by the province. Unfortunately, the sums initially earmarked by the Government of Canada are not enough to support the necessary investments by the industry. For example, the investments required by Levinoff-Colbex come to over $5 million whereas the program only allows for maximum compensation of $1 million per facility. Moreover, significant sums are required to cover the loss in value of slaughterhouse by-products, the additional costs for SRM disposal and the costs of additional manpower.
The Quebec Beef Producers' Federation asks the Government of Canada to add to the $80 million already earmarked to help the beef industry comply with the new regulations on SRMs, to ensure that our competitiveness is not unduly affected. The new sums must be enough to cover 75 per cent of the costs incurred by the separation of SRMs in slaughterhouses and their processing treatment by renderers. Also, to create an assistance program of $50 million, to be paid to producers over two years, to cover the loss of income for our cattle due to the additional costs incurred by the industry to manage and dispose of SRMs.
Regarding North American regulatory harmonization, we recognize that the government cannot indefinitely finance an industry whose competitiveness is diminished due to regulatory factors, particularly in a context of liberalized markets. Solutions must therefore be put forward so as to continue the swift eradication of BSE in Canada while minimizing the negative consequences for the Canadian industry.
As of November 19, 2007, the American border is once again open to cattle born after the ``effective'' imposing of the feed ban, that is, March 1, 1999. This reopening is based primarily on a risk analysis by the USDA. Their analysis clearly shows that the risk of BSE propagation is negligible for Canadian cattle born after March 1, 1999. It would be very much in Canada's interest to use a similar approach to that of the American government in strengthening the ban on animal meal and cattle feed. The Quebec Beef Producers' Federation proposes that only SRMs from Canadian cattle born before March 1, 1999, be forbidden in the use of livestock feed. Such an approach would make it possible to maintain the rapid eradication of BSE in Canada by radically reducing the risk of cross-contamination, to reduce the volume of SRMs with no commercial value, thus alleviating the negative consequences for industry and the environment, and to maintain Canada's status as a controlled-risk country with the OIE, especially since our principal commercial partner (also categorized as a controlled-risk country) recognizes that the risk is clearly different depending on whether Canadian cattle were born before or after March 1, 1999.
Such an approach seems to us to make very good sense. It would make it possible to mitigate considerably the impact of the regulations on the Canadian beef industry, while maintaining the objective of rapid eradication of BSE from Canada. Indeed, the mandatory identification and traceability system in Quebec makes it easy to manage this measure.
With respect to market access, the borders of several countries are still closed to Canadian cattle and their meat, particularly for cattle more than 30 months of age. The situation is even worse in the case of edible by-products. There again, cattle more than 30 months of age are penalized even more. Yet this is a major source of income for cull cow slaughterhouses. The Quebec Beef Producers' Federation asks the Government of Canada to take on a greater leadership role and to coordinate the efforts of all ministries and agencies involved to obtain speedy access to all markets, in compliance with the OIE rules, for Canadian cattle, their meat and edible by-products.
Reinspection at the border and the principle of reciprocity: since mid-November, American authorities — the FSIS — have increased the number of tests on meat products from Canada (beef, pork and poultry). This decision was taken after a joint inquiry by the United States and Canada that identified a Canadian company that had exported meat to the United States that was contaminated with E. coli 0157. The FSIS is currently conducting audits at a number of Canadian slaughterhouses. The increase in the number of meat tests will continue until the end of the inquiry. Analysis of the slaughterhouse audits and meat tests will determine whether the USDA maintains the increased number of tests at the border.
The federation is disappointed with these new protectionist measures, which constitute an additional constraint on the meat trade in Canada. The Quebec Beef Producers' Federation asks the Government of Canada to intervene with the Government of the United States to express its disapproval of the new American measure of reinspection of meats at the border, and to demand its immediate withdrawal. It also calls on the Canadian government to apply systematically the principle of reciprocity for imported meats so as to make trade more equitable.
Financial assistance for the acquisition of Colbex by producers: in announcing, on September 10, 2004, its strategy for repositioning Canada's livestock industry, the Canadian government invited groups of producers to invest in increasing slaughter capacity. Unfortunately, the budget of $10 million set aside for this purpose under the Ruminant Slaughter Equity Assistance Program, announced a year later on October 25, 2005, was clearly insufficient. The fact is that Quebec's beef producers, who have collectively acquired 100 per cent of the shares of Levinoff-Colbex, the largest cull cow slaughterhouse in eastern Canada, received nothing from this program.
The Quebec Beef Producers' Federation asks the Government of Canada to participate in the capital investment of the beef producers of Quebec in their acquisition of Levinoff-Colbex, in the amount of $5 million, which corresponds to the maximum government contribution under the Ruminant Slaughter Equity Assistance Program.
A genuine Canadian agricultural policy: we are delighted that on November 17, the federal and provincial ministers of Agriculture finally recognized that the best approach consists of meeting the needs of agricultural producers and the entire sector. The financial situation of producers is critical. Many are seriously short of liquidity. Our creditors are knocking on our doors. The Quebec Beef Producers' Federation asks the Government of Canada to act quickly on the solutions proposed so often by producers to give Canada a competitive agricultural policy, one that is flexible at the provincial level, simple, transparent and effective, and take into account the fluctuations of input costs and market prices.
[English]
Senator Gustafson: Thank you for appearing before this committee this morning. I will go right to the nitty-gritty.
I have not seen such a difficult time for cattlemen as in the current situation. Generally, cattlemen are independent and look after themselves. They do not ask for much. It seems to me that the fallout here will be severe. The reason is that many cattlemen in our area have 100 to 150 head of cattle, and some less than that. When we look at the price of equipment, it does not pencil in. With the grain prices where they are, there will be a movement for land, which governments provided subsidies to help buy, and it will come back out and go toward grain.
From Moose Jaw east, it appears more truckloads of cattle are going to Garden City, Kansas, than I have seen in a long time. What percentage of our cattle is moving south? If that movement is not there, we are in big trouble.
Mr. Lynch-Staunton: I do not have the exact percentage of feeder cattle going south, but it is significant, there is no question about that. That is one reason our plants are having trouble. I am sure you are aware that at least the big ones have the economic model of reducing their unit costs by huge throughputs, and they have not been able to do that.
At the same time, we think it is important for our feeder cattle as well as our fat cattle to have access to the U.S. for reasons of competition.
With regard to grain, our family has been in this business for a long time and, of course, we hear more stories about the bad times than the good. That is the nature of the business. There is some drama there. Somehow, most people that want to stay in the business have prevailed, at least historically.
You may also agree that grain farmers are good at growing grain, and it does not take many years in a row before they grow a lot of grain. Therefore, I do not know where those things will shift, but we think we can adjust to those types of things.
We cannot stand too many weeks like we had two weeks ago when the dollar popped up three and four cents per week. When that happens in any market situation, people stand aside of the market.
Mr. Masswohl passed me a note that we normally sent 2,000 to 3,000 head of feeder cattle south every week, whatever normal used to be, and now it is 15,000 to 20,000 head a week.
Senator Gustafson: It is obvious.
Mr. Lynch-Staunton: It begs the question, is this situation good or bad? If we could sell them here at higher prices, they would not go south. Therefore, the product flows to the highest market.
Senator Gustafson: Grain stocks worldwide are as low now as they have ever been. That will take some time to change. Grain prices could stay here for a long time.
In our area, much of the barley has been trucked into Alberta feedlots. In fact, on the western side of the province, Senator Fairbairn told me they dumped their grain right on the ground and the trucks picked it up and took it to the feedlots. This is a switch. It is difficult to replace barley, unless they bring in corn from the United States, and there is talk about that.
Mr. Lynch-Staunton: Lots of corn is coming into Southern Alberta. It is cheaper than barley. It seems odd, but I think that is okay, as long as we have equal rules and equal harmonization on both sides of the border, as my colleague has referred to. That goal has been one of ours for a long time.
Senator Gustafson: What countries in the offshore business are buying our cattle? Are there alternatives to the U.S.? What is the situation?
Mr. Lynch-Staunton: This situation has been a real dilemma for us because, obviously, we are aware of the problems with trading in the U.S., but they are our biggest customer. The U.S. is the largest importer of red meat in the world, with the largest general dollar value. It is the richest market for us, and it is right next door. That is a no-brainer. Obviously, it is better if we can diversify, and we are diversifying as much we can.
Japan is the market we hear about the most, and it is a valued market for some cuts. It is not likely that we could send whole carcasses there, but we want to be able to. Right now, we can market products of cattle under 20 or 21 months of age if they are identified and age-verified.
The market is open a little bit. At this stage, it does not help us much. If it opens to 30 months, which we think will happen sooner than later, that change will help considerably.
Korea probably has better potential for us than Japan because of the wider range of products they take. Negotiations are continuing, and sometimes we feel good about them and sometimes we do not. It ebbs and flows.
We are shipping considerable product through Hong Kong and Macau; the market has huge potential. If we can ever access Mainland China in a meaningful fashion, that could do a lot.
We export cattle under 30 months to Taiwan, which is helpful, but we need a full list of openings to use our full products.
Again, I go back to where I was before: There is huge potential if we play our cards right and if we can go there. We have not been able to access these markets at this end because we have not been able to play our cards as well as we should have. Those things are some of the ones I have referred to.
The North American market, I think, must be considered our bread and butter, and Mexico is second to the U.S.
As a matter of interest — and I am sorry to ramble here — we have worked closely with the National Cattlemen's Beef Association in the U.S. and the Confederación Nacional Ganadera in Mexico. We have signed an accord with the three cattle organizations that we believe in trade on a North American basis, we want our industries to be harmonized and we want the health protocols to be based on science.
That accord is our mainstream declaration of the value we see in this integrated market and production system.
Senator Gustafson: It is an experience to go to Garden City, Kansas and see the operation. It is unequalled in any industry.
Mr. Lynch-Staunton: There are many impressive things in the U.S. and Mexico, but we are not shabby either. Canadians tend to downplay what we can do, like ``Feedlot Alley'' near Lethbridge and other operations across this country. I do not think we need to denigrate ourselves.
Senator Gustafson: You mentioned cash advances. What does the industry need to survive at this time? CAIS was one case.
Mr. Lynch-Staunton: We have been struggling with that question, and one of our working committees has come up with a number that we are not confident in. We will not publicize it until we receive board approval. It is a guess, frankly. We think the industry needs short-term liquidity, which it does not have.
All the people you said that want to leave the industry, and will, are real. We want to keep the people in the industry who want to stay there. It is important for liquidity. We think it is important psychologically to know that the rest of the country wants these people to be there. We are confident that the industry, working together with government, can come up with exciting plans as to how we can compete worldwide.
I do not think those things are far away. I think we can put them together.
Senator Callbeck: In this country, the processing industry is dominated by two large packers, yet we do not have sufficient processing capacity here. In Prince Edward Island, my province, a beef plant was established within the past two years that has the support of the beef producers in the Maritimes, plus Co-op Atlantic. It is the only facility that is registered federally in the region.
This facility faces serious financial difficulties, although I understand that those difficulties are not as serious as they were at one time. I also understand that is the case for many small operations across this country.
In other words, we have a situation where the processing is dominated by two multinationals. We have a shortage of capacity. We have a lot of small, struggling plants. What steps do we need to take to develop a more diversified processing sector in this country, one that would result in a higher return for producers?
[Translation]
Mr. Dessureault: We are concerned. We own one slaughterhouse in Canada. The first thing we must have is regulatory harmonization. The Canadian industry cannot have a regulatory system that costs more than that of our competitors. At the moment, our industry is paying between $35 and $50 a head for the regulatory system. Our employees may be just as competent as those in other countries, but the Canadian regulatory system hampers slaughterhouse activities. Recently, the major Canadian slaughterhouses have said that if the regulatory situation continues, they are going to move their facilities entirely to the United States.
The second thing is that it takes money. Producers have been asked to invest in slaughtering and processing, but no support has been given in Quebec. It has all been up to the producers in Quebec and perhaps in other provinces as well. The Canadian government announces a program, and then kills it two years later by not putting any money in it. The same thing happened with Rancher's Beef in the west, the Colbex slaughterhouse and Billette in Quebec; the government assistance that was announced never came through.
If the producers can acquire slaughterhouses with equity comparable to the Canadian industry, I think that there is room to keep small slaughterhouses and processors, at least to supply the domestic market. It seems to me that we should have learned something from the BSE crisis. We need to stop depending on one large market and work to develop other markets. But market development is expensive, it takes money, and we also need to stay competitive in the market.
The Canadian industry, on a regional and national basis, is facing problems that multinationals do not have to deal with.
The Quebec company Levinoff-Colbex is a multinational corporation. It is one of the major cull cattle slaughterhouses in Canada. It was present in all the markets, nearly everywhere in the world. But with harmonization, regulation and the reopening of various markets, our companies will be able to develop in various regions.
One of the main problems in Canada is market access. Slaughtering can be done in a profitable way. However, the domestic market is controlled by a few high-volume buyers, which makes it very hard for small slaughterhouses and small local stakeholders.
Right now, the food distribution chain is not based on local companies. It only looks at product price. So we need to look at this issue a little more broadly in Canada.
That said, the situation is not completely negative. Canada is capable of becoming a major player in the world beef market. In Quebec, we have been working on a permanent identification system since 2001-2002. Animals are traced right from the farm until they leave the slaughterhouse.
The American legislation on labelling could be applied in Quebec without any problem. Because of the quality of Canadian beef, we could create a brand image by tracing our products.
Getting producers in Quebec to accept this idea was not easy. It was a big job. But we did it, we are administering it today, and the rules will become even tighter in Quebec in 2008.
The system exists in Canada, but it is not functional. It is impossible for a Quebec producer right now to obtain information on his animal, even though it is registered in the Canadian bank. That is unacceptable. We have a lot of trouble trying to get the Canadian industry to develop tools that will distinguish it on the international market.
I mentioned recently at a roundtable that the industry in Canada has a reputation for quality. Most of our product consists of beef under 20 months. So we have a quality product, which is recognized by the most demanding countries. But if we cannot identify or trace our animals, we cannot develop a brand.
We ask a lot of our producers, who are already experiencing a lot of on-farm difficulties. But we feel that the beef industry in Canada has a future. We need to make sure that the slaughter industry has the tools it needs to remain competitive. For a year or two, producers will need ad hoc assistance, at various levels, to be able to adapt to the new regulations.
[English]
Mr. Lynch-Staunton: I agree with everything Mr. Dessureault said. However, I have a few things to add.
Although local areas may be short of packing capacity, such as the Maritimes, the sad fact is that today we have overcapacity in Canada. Our plants run at a capacity of 60 per cent to 70 per cent.
That situation is good from the point of view that they are competing with their American counterparts. In general, we think competition is good. However, it is bad because plants are under a severe strain right now and I think we agree what the reasons are.
One problem is what we consider to be overregulation. Obviously, we need good regulations, but the more demands we place on a packing plant, the less competitive the smaller ones tend to be. The big ones tend to be able to adapt and spread their costs over more cattle. However, whenever we have a higher standard or a tougher regulation, it is harder on the abattoirs in small towns or the provincial plants, which is of concern.
I do not have as much problem with foreign ownership or the two big multinationals as many people do. I am old enough to remember what it was like trying to obtain a fair price from the Canadian packers we used to have. I have had better dealings with Cargill than I ever had with Burns or Canada Packers. However, that anecdote is only personal; I hope I will not be sued for libel.
The other thing that the multinationals bring to the table is an international marketing organization. Cargill Foods — High River is probably one of the best venues for certain cuts into Japan right now. The operation is seamless and they have a huge investment in Canada. Obviously, over time, if they find a better place to invest money, they will.
I think we could try to attract investment in that end of things from other countries as well. The Australians have major packing investment from Japan and that situation has not hurt their access to the Japanese market.
A lot of money was allocated to move to an enhanced feed ban when we dealt with the question of specified risk materials, SRMs, and a lot was allocated for infrastructure that was not used. The industry, or at least our part of it, asked early that this money be moved into the disposal end of SRMs rather than into capital costs. That request was ignored, and a lot of work can still be done to clean up some of this stuff.
We are trying to enforce some of the things on BSE to 99.9 per cent when 99 per cent is probably good enough. I do not know the exact percentage, but it is up there. That extra .9 per cent or 1 per cent, whatever it is, is what costs the money.
Again, I am not sure we want to back off on that yet. We needed the classification from the World Organisation for Animal Health, OIE, and that might be fragile at the moment. We may need to wait a while before we tinker with that process much.
[Translation]
Mr. Dessureault: I would just like to add something about the slaughter capacity in Canada, without contradicting what Mr. Lynch-Staunton has just said. Yes, there is over-capacity in some regions of Canada. I will give you an example: in Quebec, there is no slaughter industry, so there is not an over-capacity, but rather an under-capacity. In the past few weeks, over 50 per cent of the animals, steers and others, that were produced in Canada have been slaughtered in the United States, because that structure is not in place. If it is not done in the United States, it is done in other Canadian provinces. Some producers have even gone to Atlantic Beef or to Ontario.
We need to look at this on a national basis, I agree, but we also need to consider certain regional differences that mean that small Canadian markets do not even have federally approved slaughterhouses in terms of quality. To address market proximity, if you want to maintain a significant number of farms in Canada, there have to be slaughterhouses in every Canadian province. That is the approach that producers have taken in Quebec, where they asked what was being done to create capacity, if there were no major investments, because they had major operations elsewhere.
Yes, there is over-capacity in the slaughter industry in Canada and yes, there is under-capacity in certain Canadian provinces.
[English]
Senator Callbeck: We have that problem in Atlantic Canada. It is important that this beef plant makes a go of it for the producers. Otherwise, they are at a big disadvantage.
Senator Peterson: I want to return to the issue of short-term liquidity where cash advances are needed until a new structure can be put into place. I do not know what that new structure would be and maybe therein lies the problem.
In terms of the variability of the dollar, in the next year or so, I think it will not go lower than 85 cents to 90 cents.
Mr. Lynch-Staunton: That level would be good.
Senator Peterson: We talked about the CAIS. The old CAIS did not work and the new CAIS is not much better. Do we need to come up with a whole new template that would be a national food policy built around variables where the safety net would be based on a cost of production? The variables would be the price they receive for their product, the price paid for feed, the foreign exchange, and the regulatory impact. Factoring in the regulatory regime as well allows the model to show how changing the regime affects what it could do for producers, and would also show, with regard to their product, where they are going. Rather than pick a number for this year and say we need X millions of dollars right now to come through this situation, would this be something we could put down and present in a more logical fashion?
Mr. Lynch-Staunton: One hopes we could do a better job of forecasting, but we have not done that, and that is a weakness. The exchange rate caught us by surprise, although it was creeping up. Maybe we need to work out something like that, but I disagree with you somewhat that we have only a vague hope of what we can do as an industry. The Beef Value Chain Roundtable has done a good job of pulling the industry together and we have some concepts that look to me like they are workable in a significant fashion.
If we can go to that 90-cent-or-lower range, then we have a lot more to work with, irrespective of government. In one sense, we agree with you because the liquidity we want is to try to have a better view of what can be done. We have good plans, but in my view right now, we cannot make reasoned judgments as to how much public funding we will require, if it is necessary.
John Masswohl, Director of Government and International Relations, Canadian Cattlemen's Association: More details will be coming and a lot of discussion with analysts and those sorts of things. I want to give examples of the areas where we need to move to make the short-term liquidity situation work a little better.
This program of cash advances has been around for grains for some time, but is new in the livestock area. It was created quickly, and the legislation moved quickly. This situation is the first time where widespread livestock producers, both cattle and hogs, are trying to use this cash-advance program to obtain money up-front to prevent them from panic-selling their animals. The idea is, they want to be able to hang on to their animals, maybe until the situation improves. They do not rush and make bad decisions.
The way the system works is they can obtain an advance up to 50 per cent of the value of animals, up to the maximum of their CAIS level. CAIS works wherein if they have bad year after bad year, they receive less from it. Unfortunately, because the system is linked to this CAIS Program, we are finding everyone's CAIS level is the binding constraint right now. We are seeking a legislative change to decouple the cash advance from the CAIS margin. The reason that connection is there is so CAIS is the security for the advance. We would like the livestock itself to be the security.
In the grains world, the grain is the security. They do not need that connection to the CAIS in the situation of grain and we need to move more in that direction with livestock. That example is only one little technical thing we could do to make a huge difference for the liquidity of livestock producers.
Senator Peterson: You have a lot of good ideas and are working hard, but when you come to the table you need a plan that says here is where we are going, what we need and what we will get out of it. If numbers change a bit, you need to show the impact rather than saying we are all hurting and saying the dollar caught us off guard. That situation is too bad but we have no control over it. That is the price you receive for your product and what you pay to produce it. You need to find the mechanism. I know CAIS did not work, but you need to find one that will work. Maybe decoupling is one way, or the cost of production or something you can identify as the reality you are working to fix. It is only a thought.
Mr. Lynch-Staunton: I fully admit that we have not done our homework as well as we wanted to, but at the same time what we are hearing from our producers is that some of them do not have the time for us to get a good story.
[Translation]
Mr. Dessureault: I would like to react concerning farm support programs for producers. Any industry looking to the future needs a predictable environment; over the past 25 years, the federal government's assistance programs have changed every two or three years.
There have been strengths and weaknesses in every program. In Quebec, there is a predictable program. The situation is actually quite difficult when the dollar fluctuates, since it is changes in input costs that are taken into account and not the value of the dollar, but at least the program is predictable.
Can something be done to make the federal programs into predictable programs based on input costs? I would put the dollar in another category. Energy costs have increased significantly in Canada, along with the cost of food and fertilizer. Quebec producers have been calling for implementation of this by the federal government for many years.
You are asking Canadian producers to compete with the governments of other countries. The American government has just brought back a very generous farm bill for U.S. farm producers. Europe is maintaining its very generous programs. People here in Canada think that, even with nothing left on the table, the Canadian beef industry will be able to develop. That is a utopian approach. We need to step back and realize that we have strengths and skills in Canada. But can we compete with the American government? That is the question we need to ask. It is hard to convince people in Canada that the Canadian beef industry will decline unless we have regulations and assistance programs that are comparable to those of our competitors.
That does not mean having exactly the same programs, but they must be predictable so that we can react. Moreover, we have been experiencing a crisis since 2003. Quebec farmers are very discouraged right now, and the Canadian government needs to send a clear message.
At their meeting in Toronto a few days ago, the ministers of Agriculture expressed their concerns about the beef and pork industries, which are the hardest hit industries in Canada right now.
This situation needs to be addressed so that farmers get access to predictable programs. We need to take off the blindfold when competing with the U.S. corn and barley markets. Quebec has already made proposals and is prepared to do so again.
I am glad to hear that in western Canada, farmers are able to stand out from the pack without government assistance. Unfortunately, that is the exception rather than the rule and it is increasingly tough to make one's mark without relying on government assistance.
Things are happening in the provinces. Alberta just announced an additional $165-million CAIS program. Faced with this announcement, how are the other provinces supposed to adjust when they are all part of the same country? The thing is, we all live in the same country. Things are really going to get tough and it is time for the Canadian government to support farmers.
One wonders whether every province will be able to sustain the much-talked-about 40 per cent required by the Canadian government. Legislation is all well and good, but will the provinces be able to cope? Maybe some provinces will be able to sustain this, but others will not, so we really need to etch out a common vision.
The upcoming agricultural strategic framework will focus on the future of agriculture, but the tools are the same as they were 10 years ago, in other words, an enhanced CAIS. And that certainly does not amount to a future for agriculture.
[English]
Senator Gustafson: With respect to the financing issue, it seems to me we let the banks off the hook. There was a time that if anyone had cattle, the banks would loan them any amount of money and the banks would stand behind them. As I see it, they have moved out of financing to a great extent and are throwing the responsibility to guarantee support at the feet of the government. My question is: Is this the case? I believe it is the case in many areas.
Mr. Lynch-Staunton: Yes: I hope my bank stays with me because it is a significant partner at the moment.
I think banks have done some shifting as to what agricultural accounts they want to deal with. The bank I am with deals with agriculture in a serious fashion. However, I think that varies.
Interestingly enough, when we leave here, we will meet with the Canadian Bankers Association. We talk to them regularly. They are interested in what we are doing, as you can imagine.
Senator Peterson: I agree entirely with what the presenter has said. That is why we need a national food policy. Our producers can compete with producers in other countries. However, they cannot compete with national governments in other countries that have distorted policies. We need something on our side, a national food policy, to deal with these issues as we move forward. We are a federation. We cannot have one program for the West and another for the East. The program must work on a national basis.
Mr. Lynch-Staunton: Our association has not lobbied for provincial governments to top up CAIS or the other programs. Our policy is that the programs should be national and uniform across the country.
The Chair: Going back in memory, in a report that we released not long ago — and farmers liked the title, Putting Farmers First — one of our suggestions was along the lines that Senator Peterson has been concerned about.
Senator Mahovlich: First, I want to mention that Mr. Lynch-Staunton's brother is terribly missed here in the Senate.
The Chair: They are cousins. I certainly miss him as well.
Senator Mahovlich: John Lynch-Staunton: I miss him because he kept me up to date on everything that was happening in Montreal. He was amazing.
I know from travelling around that the American dollar has been suffering. It is not that we are gaining; it seems that the American dollar is losing. When I went to Europe, our Canadian dollar was holding its own, but the American dollar was going down.
Therefore, with the American dollar down, have their exports in cattle increased, say to China? I know that for many years Canada was number one with the United States as far as trade was concerned, and last year China had taken over. Is the United States in the market with China? Have they increased cattle exports to China?
Mr. Lynch-Staunton: I do not think the United States can ship beef to China at the moment. I think China shut down with the BSE thing, and I believe it has not opened up to U.S. meat, either.
Senator Mahovlich: There is no cattle trade between China and the U.S.?
Mr. Masswohl: The U.S. still has many challenges restoring BSE market access, as do we. There is a patchwork of countries, and we are making progress in many of them. China is a market that is still closed to both Canada and the United States for all beef. Neither of us can ship anything to China.
With respect to your point on the currency exchange, the U.S. is seeing some gains in some markets. The gains are not dramatic yet, but it is happening.
Senator Mahovlich: The currency has an effect, then, on the market. Argentina is number one in South America, as far as cattle trading is concerned. Is that right?
Mr. Lynch-Staunton: Brazil is now. Argentina was previously, but Brazil has made huge productive strides, and they have been troublesome, at least in our imaginations. They hold a huge part of world trade. We understand, though, that their production is levelling off, and they are diverting some of their production into grain, oilseeds and biofuels.
Senator Mahovlich: I see.
Mr. Lynch-Staunton: Argentina has huge potential, but every time things seem to go well for them, they do something like ban exports, which they did a few years ago, to bring down the domestic price of beef. It worked.
Senator Mahovlich: I was in Russia in 1972 and 1974. It was a Communist country at that time, and finding a steak to eat was difficult. I remember going to restaurants, and I think we were eating caribou or something like that. That market has opened up now. Have we entered the cattle market with Russia, or do they have enough of their own cattle?
Mr. Lynch-Staunton: Oddly enough, we are sending in live cattle there. I am not sure if we are finished with products yet or not.
Mr. Masswohl: We are at a critical moment with Russia right now. Progress has been made in the last couple of months. Russia technically has approved Canada to send beef again, but we are at the point where they must come and approve the specific plant. In terms of the nuts and bolts, that is being done.
There have been two major shipments of live cattle to Russia recently, mostly dairy cattle in the spring, and there was a load of mostly beef breeding cattle three or four weeks ago.
Senator Mahovlich: It would be a good idea not to depend on the U.S. as much as we do now because it seems like there is a crisis every time something happens. If we can have a little buffer, that would be great for us.
Mr. Masswohl: While some markets may not be large for dollar value, an important thing about having access to all these different markets is that they buy a lot of the parts that North Americans do not crave such as tongues, stomachs and livers. People do not want to throw a liver on the barbeque. Many of these markets will pay a premium for these products. We often hear, ``Why, if the price of cattle is so low, do they not see the same reduction at their grocery store for steak?'' Part of the answer is that, in Canada, we do not sell the whole animal anymore. Bringing back these markets for all these variety meats, as we call them, will contribute to the overall bottom line of selling that whole animal again.
Senator Mahovlich: I have a question relating to these multinational corporations that have bought out the smaller farmer in Canada. While travelling in Alberta, we visited a few livestock producers, and on an acre of land we saw something like 9,000 head.
Do we have fewer farmers now than we used to have, or are there more multinational corporations?
Mr. Lynch-Staunton: We have fewer farms. The farms are bigger, and that seems to be the trend. However, not many people that we consider to be multinationals or corporations find it profitable to be on farmland. The typical corporation that farms is one such as the one I own, which is a farming corporation owned by our family. We have used the corporate structure to manage our growth for all sorts of reasons.
I do not think there is much corporate ownership in land based on agriculture. Having said that, Tyson Foods in Brooks, Alberta, has a feedlot that was part of the Lakeside Packers operation when Tyson Foods bought that operation a number of years ago. They kept the feedlot.
Senator Mahovlich: Is there more risk with larger farms? I know that with regard to fish farming, disease can sometimes come in there, and the effect can be drastic. Do the farmers feel the same effect if there is a problem?
Mr. Lynch-Staunton: I am speaking only from a personal view, but yes, I think that as they specialize, they face more risk. If they specialize, they should make more profit or, if they are a farmer, experience fewer losses.
When we were kids, the mixed farm was a solid thing but it did not pay well. They always had enough to eat but that was it. If we went back to that type, we could still have enough to eat but we probably would not go to Europe all that often.
Mr. Masswohl: That point brings us back to what Senator Gustafson said. In his area, cattle producers are switching from cattle to grain. If they can have that diversification, they can manage that risk. Not all the cattle producers across the country have that same option. In fact, we see a lot of cattle on marginal land. The land does not have enough soil, it is rocky or whatever, or the climate conditions cannot support a crop, which is the reason there is cattle on it. Therefore many people in the cattle world tend to have fewer options.
[Translation]
Mr. Dessureault: One of the greatest assets in Canadian beef production are cow-calf farms. The work they do needs to be in harmony with the environment. To make this happen, we need grazing land and pastures. There are 42 calves per cow-calf farm on average in Quebec. That is more or less similar to the western Canadian average where there are about 50 head of cattle per farm. Of course, this varies, and some farms are smaller than others.
Quebec farmers have decided to band together to improve their position in a big business-oriented market. Producers are developing joint marketing plans. By doing this, they are able to create structures that are equivalent to those you would find in a major corporation.
The typical finishing farms in Quebec have feed lots and sustain about 700 head of cattle. The belief is that these farms have an opportunity to double their production by next year. On some farms, you find eight or nine thousand head of cattle, others are limited to 100. There are 4,000 steers up for sale per week and there is only one place to sell them right now, and that is the U.S. market. The American buyers are front and centre because it is easy for them to get access to this cattle.
Travelling around the small farms to get cattle is an additional constraint the major farming corporations face. So farmers have to find other ways of staying afloat if they want to keep their farms and remain productive. They need to be given the same tools, tools which respect the decisions they have made, and which will give them access to markets in which they wish to remain competitive.
If, for example, 50 farmers contact Cargill one morning, because it is the only big business in that field in Canada, they will get 50 different variations on the same question. But if there is only one single representative selling to everybody, individual farmers will have a better chance of getting a fair price for their produce. Of course, you have to factor in the comparative pricing tables which are based on different quality control levels. Farmers will need to be strategic if they want to keep their farms and continue to focus on the various interesting niche markets that are out there.
One of the great strengths of the beef industry in both Quebec and Canada is its expansiveness, and this is true of the maritime provinces and Quebec. There are beef-producing cows to be found throughout Quebec. The situation is a little different with respect to feed lots, but in every region of Alberta, you will find cattle farms. Making sure beef production survives right across Canada can only benefit our country, but we need to give farmers the tools they need to survive.
[English]
Senator Mahovlich: Elections are coming up in the United States. They may have an effect on the dollar.
Are you looking at those effects at all, or do you have any speculations?
Mr. Lynch-Staunton: I can share my personal views, which are probably not insightful.
What we think is likely to happen in the next set of elections is that the likely winners will be more protectionist than the last ones. How that plays out is something we do not know. Hopefully, we will be back to what we used to think was seamless trade; maybe increased protectionism will not play out.
The Clinton administration was pro trade. If the new administration is like that, maybe it will be too. It is troublesome for sure. That is the problem for exporters: They must deal with all these things, and they need trading arrangements to be as strong as they can be while trying to deal with the issues that Mr. Dessureault referred to. Namely, they need to deal with different levels of subsidy on different sides of the border, as well as dealing with each other.
I noted a couple of extra comments: As an industry, we can finish cattle and be viable by reducing the amount of grain and simply keeping the cattle on forage longer. As well, the European Common Market has huge potential for us but for all kinds of reasons we do not have meaningful access to it. We could use help from the Government of Canada to assist us in accessing that market. It becomes more and more complex because the negotiations of the World Trade Organization, WTO, have huge potential on what Canada can do for market access, and what products are sensitive and what products are not.
It is a huge mix and I wish solutions were simple. Mr. Dessureault and I agree on the problems, although we have different opinions on some of the solutions. The situation is clear.
Senator Callbeck: I have an additional question, Mr. Lynch-Staunton. You mentioned the mandatory country-of- origin labelling that will come into force in the United States in September 2008, I believe. You said that assessing the impact will be difficult until you see how the regulations will work. I heard it suggested that labelling could mean that some packers in the States will not even take Canadian cattle and, if they do, they will take them only at a discount. Is labelling a concern that could have a major effect on the industry in Canada?
Mr. Lynch-Staunton: That is our fear but not for the packers as much as for the retailers because they are the ones who are likely to bear the cost of labelling or creating shelf space, and so on. If labelling is simply a matter of a sticker on a package, then it will not amount to much. However, if there is a need for segregated meat counters, some people will find it easier not to deal with it at all.
If we enter those scenarios, we will be discounted, in theory, because we do not know how it will pan out. If we are segregated, labelled strongly, and discounted, we will move the product. If we market properly, we should be able to create a demand.
There are many ``ifs'' but we can do it fairly well.
[Translation]
Mr. Dessureault: My personal perception is that there are facts and realities here. Americans are net importers of meat. Yes, there are purists who prefer to ``buy American'' first and foremost, but there are other buyers as well. We should be concerned and be ready to respond on a commercial basis by providing an equivalent product, which is well tracked and well labelled, with added value.
We have to see it from that perspective. Though the U.S. will always need beef, we should bear in mind the fact that we need to diversify to prevent the crisis we saw with the 2003 shutdown. If our markets had been more diversified at the time, Canadian farmers would have probably taken less of an economic hit. So we do have to be concerned, but let us hurry up and get ready here in Canada.
I often come back to traceability; we do have traceability in Canada. Let us work on what we have here in Canada. We can say that there will be demand in Canada — and even in the U.S. — for animals that are born, slaughtered and processed in Canada, with a quality seal showing them to be under 20 months. That accounts for most of the animals.
However, one rather odd aspect of this bill, which concerns me somewhat, and which is somewhat U.S.-like in nature, is that chicken is not there. All meats are there, including pork and beef, but not chicken. It is almost as if chicken were not meat. We do hear about ``veggie chicken,'' but it is still odd. The Canadian government should stress this point and ask why chicken is not in there? Perhaps that would help us.
[English]
Senator Gustafson: An interesting shift is happening in the cattle business in Canada. When I was a boy, all our cattle were shipped to Winnipeg, Manitoba. Then the Alberta government, in effect, bought the cattle feeding industry, although that could be argued. I fed cattle in Alberta when they paid us $70 port price on steers. Farmers could not feed cattle in Saskatchewan and compete with that. Therefore, Saskatchewan cattle producers concluded that they had to sell their calves to Alberta and let them feed them.
I heard the other day that the Province of Alberta has made a sizeable dollar investment in the industry. It seems to me it was $100 million plus. Do you know the figure?
Mr. Lynch-Staunton: The Province of Alberta announced a package of $165 million to be delivered to the CAIS Program. It was made quickly and the Government of Alberta bureaucrats are trying to figure out how to deliver it. We are trying to figure that out, too.
Senator Gustafson: My point is that in Saskatchewan, we cannot compete with that investment. We have no alternative but to move our calves to Alberta and anyone who thinks that the feedlot industry in Saskatchewan can compete with Alberta is dreaming in Technicolor. One or two producers are trying but they are having difficulty, and I do not see that changing. Rather, we must adapt to the change. On the other hand, perhaps Saskatchewan's opportunity is grain because we have 40 per cent of the arable land in Canada for growing grain.
That view seems to be more optimistic than the view has been for years. Provincial differences can create major problems in many different areas of trade from province to province across the country. There is no question about it.
Mr. Lynch-Staunton: The Canadian Cattlemen's Association must take a national viewpoint. As an Albertan, my sense of history varies from yours a bit. I understand that Saskatchewan had some generous feeding programs at different times but I think the greater shift occurred with the Crow rate benefit offset. I was not involved in cattle politics at the time so I cannot take any blame or credit for that.
Senator Gustafson: It cost us a buck a bushel.
Mr. Lynch-Staunton: There is no doubt the infusion of public funds can move an industry from one place to another.
Senator Gustafson: I have one more question about cattlemen disbursing their herds. There is always the normal disbursement when people become older and decide to quit, but now more herds will be disbursed than have been because of this down time and difficulty. Older farmers are saying, ``I have had it with this,'' and they sell out. I heard the other day one market had 13 dispersal sales.
Interestingly enough, there are more auction sales than ever. Those decisions were not made on today's grain prices but on ongoing things such as machinery and combines costing $300,000. Farmers are saying. ``There is no use trying to maintain this. I may as well get out and save what I can.''
This dispersal will be a major factor. For some, it will be a real hardship as well. These farmers are older. The younger farmers in our area decided to go to work in the oil fields and maybe feed 40 or 50 cattle in the evening. It becomes an additional thing they do in regards to their job, which is now their livelihood. This factor is becoming larger and larger all the time.
Mr. Lynch-Staunton: I think I referred to that issue a little bit, but maybe not enough. What you say is true. There is a demographic exit of the industry that is pent up. What would have been spread over four years is probably all happening this year because of BSE. Now that it looks like there is a future in grain, we have had a shift from people who kept cattle to feed their grain to, to people dumping their cattle. They want out. They do not like getting up in the middle of the night in cold weather, and I do not blame them. That shift is happening.
You are right that bred sales, at least in the West, are backed up two or three months. They must book ahead. We do not know how many of those cattle are changing ownership. We know, anecdotally, at least, that a number of mixed farmers would like to get out, but the fact is that bred cows are so cheap that they are not getting out but they are buying them again. It is an opportunity for the young people who want to be there. If they can buy a good bred cow for $400 or $500, that is good.
Senator Gustafson: That cow brings in $1,200.
Mr. Lynch-Staunton: Yes: Those things are happening, but we will not know how the business shifts.
There is also a pent-up American demand for breeding cattle. Their numbers have slipped because of drought. We hear that many of those producers want to restock, so that is another factor. Many factors are at play, and we do not know how they will spin out.
Senator Gustafson: I think that the good cattle will probably go back to the farms, and the poorer cattle will be gone. The whole situation puts additional pressure on the industry.
Mr. Lynch-Staunton: It is really in flux. There is no question about that.
[Translation]
Mr. Dessureault: It is worrying to see that, in the past, this sector provided a good enough living for producers to make it with 50 or 60 cows. Today, however, young people come into the industry and still need to have a full-time job outside.
It is profoundly worrying that we are no longer to live from our farming operations and achieve a decent standard of living without having to take an outside job as well. Thinkers among Canadian officials say that beef production should develop in this manner. But how many Canadian industries develop this way, with the notion that its employees have to work elsewhere as well so that the industry can survive? Farmers in Canada can no longer continue working this way. We need to become aware of the problem. These operations have their place in every Canadian region. What are we doing to enable farmers to live decently? I am not talking about 50-cow operations; perhaps 70 or 100 animals would be a better figure. But people have to be able to make a living on their farms. They look for work in the same municipality. They want their children to go to the same schools, and to have a chance at higher education. But you cannot do that if you do not have an income. You can work outside and work on the farm, but when you divide yourself up that way and spread yourself so thin, you cannot have the quality of livestock you once had. There are consequences, and society should take a good look at what is happening. You are in strategic situations, situations that could encourage the Canadian government, our elected officials, to get on the right track. This applies to cow-calf operators, and will automatically hold for downstream operations. Not so long ago, the grain industry in Canada was in crisis. Many parts of the industry were dismantled, and beef producers are going in the same direction. This is a good time to give Quebec some real help. We need the senators' support to inform decision-makers properly about what the right approach must be.
[English]
Senator Gustafson: The problem is that there is no backtracking. I recall when Europe was making the decision and advocating that farmers take off-farm jobs. Germany especially was strongly supporting that idea. We are into that practice in a big way in Canada right now. I think we will not know what even the grain industry will look like in three or four years, or maybe two years, because all kinds of small farmers are cash-renting their land to somebody that is farming maybe 150 quarters. It is general. Those people will never go back into grain farming. It is impossible. That situation will impact the price of land, and this movement will cause a lot of fallout in Canadian agriculture.
I contend that we have not looked at agriculture in Canada from the global perspective and how trade affects our farms in Canada. Governments need to take a good look at agriculture and say, ``Here is where we are going. This is what we want agriculture to look like, and this is what it will look like.'' There are no choices left.
The Chair: Does anyone want to comment? If not, I would like to ask a question now. During that dreadful period of BSE, we shared your pain in this committee. To my recollection, as things moved along, a fairly aggressive notion was that we should have our own packing plants. Indeed, I think something happened in British Columbian and Manitoba, but in Alberta during that period of time a great deal of effort was made. Something was expected to happen near your area, Mr. Lynch-Staunton, and in Lethbridge and elsewhere in the province. Nothing came of it. Was that lack of action due to the overpowering presence of the American organizations, or was it the whole talk of niche marketing as well, that these plants would be different kinds, and then that was waved off? What happened?
Mr. Lynch-Staunton: Our packing industry grew during that time from a capacity of around 72,000 cattle a week to 105,000. A large proportion of the industry grew with the majors expanding. Those companies had the expertise and could handle the increase in volume.
Many initiatives were producer-based. If people are in a bad situation, they work together to try to get out of it. If they did not think the American border would re-open, that was important.
During the period when margins in packing were high, most of these initiatives did not get off the ground. One that did that I am most familiar with was Ranchers', and it ran into all sorts of regulatory problems — first for approvals, then to start. Its opening could not have come at a worse time because it opened right after the border opened up to American packing competition. We all know that Ranchers' went out of business. Probably it will be sold and started by someone else.
The two major packers are huge, but in the West we also have Excel that recently bought two packers in the Pacific Northwest, so it is not all a sob story. Whatever we think of the big packers, they are good at what they do.
It is naive for a bunch of farmers to put the capital together. It would be like me and my friends practising hockey for a while and coming up against Senator Mahovlich. We would not last long. We would have a lot to learn from him before we could stay in the same rink. That is the way the world seems to be.
The Chair: We hoped some of these groups that have come together would produce something in terms of competition, but it could not be done. However, what happened to the notion of broadening the kinds of markets — the niche marketing that some of those smaller organizations talked about? Is that thought still an encouraging one for some, or are we sticking with the way the system has worked up to now?
Mr. Lynch-Staunton: Niche markets are being developed. A local group of producers at home, Diamond Will, are trying to go into the organic meat market. They have gone through a lot of work and they are becoming successful. That market seems to be a growing one, but they contract the killing and packing to other packers.
I think there is potential to do that. However, as long as the bulk of what we produce is a commodity, it will be hard to compete with the professionals in the commodity market.
There was real naiveté among producers because we always thought that the packers made lots of money at our expense. Historically, however, there have not been big margins in packing. Margins have been narrow and the people who have made money are good at it.
Senator Mahovlich: We are talking about niche markets. When we visited the West, we dropped in on a farmer out there. Apparently, there is demand in India for doves; he had a hog farm and he was going into raising doves. I have not heard anything, but I wondered if he was doing well. He was almost guaranteed a profit, which was difficult to believe.
The Chair: Was that doves or pigeons?
Senator Mahovlich: I think it was doves but it might have been pigeons.
The Chair: I have not heard anything about that farmer since we were there.
Senator Mahovlich: He was converting his whole farm. He needed to contain these birds, so he converted his hog farm into cages for these birds.
Mr. Lynch-Staunton: Things like that are happening all over and that is exciting; but if too many people go into doves, the price goes down after awhile.
Senator Mahovlich: Exactly.
Mr. Lynch-Staunton: I am optimistic about the things that farmers can do but they cannot do them overnight.
[Translation]
Mr. Dessureault: I would like to comment briefly on new productions. Often, the ones who do the initial launch of new productions do very well for themselves. Take, for instance, ostrich farming in Quebec. It is supposedly the animal with the best feed conversion ratio in the world. Do many people want to eat ostrich? These are highly segmented niche markets. When it comes to niche markets, the first market to target is the commodity market. When ordinary Canadians go grocery shopping, they buy food they are used to eating. Occasionally, they may treat themselves to a specialty product. There are good examples of this, such as Angus beef: a North American product that holds its value. However, developing a niche market requires significant money and work. When a producer is just starting out, he will start in meat processing, and the primary market is the commodity market. The process involves slaughtering, selling, working with a perishable item, and possibly freezing it, but stocking it is not the final goal.
In Quebec, we had a steer slaughterhouse that was trying to develop a niche market. There were problems, and it shut down. That does not preclude us from slaughtering steer in Quebec, but the primary market is the commodity market. Then we can target niche markets and consumers. That brings me back to the Angus beef niche market. The amount of money invested in developing the brand, which is a niche market, to my mind, is exorbitant. At the same time, we must remain competitive with the commodity market.
Senator Lynch-Staunton talked about organic products. Many buyers want organic products, but when asked how much they are willing to pay as a premium to producers, they lose interest fairly quickly. We have to be able to deal with this reality. There is room for niche markets, there are costs involved in developing them, and consumers will buy what they are able to afford today. Fortunately, or unfortunately, Canadian consumers are used to affordable food, and therefore will spend a little more on specialty products on certain occasions. For instance, when we get together with an old colleague with whom we used to play hockey, an extra effort will be made. Yes, there is room for niche markets, but it is not a panacea. There are projects underway to develop niche markets, but we know that the money invested there is not being used in our companies.
[English]
The Chair: Are there any other questions, senators?
Senator Gustafson: It is the answers we are looking for.
The Chair: I want to thank the witnesses for coming on short notice. This committee, because of where the members come from, keeps an eye on what is happening in our areas. We thought the time had come to talk to the two of you, who live it every day.
We are sorry there is a blizzard today but we are glad you blew in. The session has been a good one for us and I hope it has been for you. I think I speak for our committee when I say that we hope your consultations with the government are useful. We know there is always a problem that needs to be fixed and changed if we are to continue to be what I still believe are the best farmers in the world. This country grew on farming and we do not want it to end. Thank you for all you do.
The committee adjourned.