Proceedings of the Standing Senate Committee on
Agriculture and Forestry
Issue 2 - Evidence - Meeting of October 20, 2011
OTTAWA, Thursday, October 20, 2011
The Standing Senate Committee on Agriculture and Forestry met this day at 8:05 a.m. to examine and report on research and innovation efforts in the agricultural sector.
Senator Percy Mockler (Chair) in the chair.
[English]
The Chair: Honourable senators, I call the meeting into session.
[Translation]
Welcome to our two witnesses, Mr. Bergen and Mr. Lee.
[English]
The Chair: My name is Senator Percy Mockler from New Brunswick. I am the chair of the committee and I would like to ask senators to introduce themselves.
[Translation]
Senator Robichaud: I am Senator Fernand Robichaud from Saint-Louis-de-Kent, New Brunswick.
[English]
Senator Fairbairn: I am Senator Joyce Fairbairn from Lethbridge, Alberta.
Senator Mahovlich: I am Senator Francis Mahovlich from Ontario.
Senator Plett: My name is Don Plett and I am from Landmark, Manitoba.
Senator Ogilvie: My name is Senator Kelvin Ogilvie, from the beautiful Annapolis Valley in Nova Scotia.
Senator Eaton: My name is Nicole Eaton and I am from Toronto.
[Translation]
Senator Rivard: I am Senator Rivard from the riding of Laurentides, Quebec.
[English]
The Chair: Honourable senators and witnesses, the committee is continuing its study on research into innovation in the agricultural sector. To share a bit with you, the order of reference is about developing new markets domestically and internationally. It is about enhancing agricultural sustainability and improving food diversity and security. Today we are focusing on understanding innovation in the agriculture and agri-food service sector from the producers' perspective. On behalf of committee, thank you Mr. Bergen and Mr. Lee for accepting our invitation. You have a lot to offer with your experience in the Canadian industry.
Reynold Bergen, Research Director, Beef Cattle Research Council, Canadian Cattlemen's Association: Thank you. I am Reynold Bergen. I am the science director for the Beef Cattle Research Council. The BCRC is a division of the Canadian Cattlemen's Association, and it administers the research portion of the national check-off that gets collected on Canadian beef cattle sales. I am accompanied today by Ryder Lee, who is the CCA's manager of federal-provincial relations here in Ottawa. Thank you for the opportunity to present.
The beef industry makes a significant contribution to Canada's economy. In 2010, farm cash receipts from cattle and calves exceeded $6 billion. Together with the multiplier effect from downstream economic activity, the beef industry contributed $25 billion to Canada's GDP. Although beef cattle are raised throughout Canada, Western Canada is home to many of them. This is because raising cows requires a large land base for grazing and forage production and because the feedlot sector requires an abundant feed grain supply and a dry climate. The feed grain supply in Southern Ontario makes it another important feeding area. All across Canada, cattle are raised on marginal land that is best harvested by grazing cattle. The 83,000 Canadian beef producers managing this land base are stewards of the rangelands and waterways of much of inhabited Canada.
The disparity between where Canada's beef is produced and where most of the consumers live, has led to some interesting trade patterns. First, southern Alberta's large beef packers are physically closer to several large population centres in the western U.S. than they are to large cities in Central Canada. As a result of this, North American beef trade is predominant north-south. Much of Western Canada's beef is exported to the U.S., while some of the beef consumed in Central and Eastern Canada is imported from the U.S. Second, Canada's large land base allows us to produce more beef than Canadians consume, so Canada is a net exporter of cattle and beef.
Canadians presently consume 60 per cent of the beef produced in Canada, while 40 per cent is exported. Canada is the world's fourth largest beef exporter and the world's second largest exporter of grain-fed beef. Canada's exports peaked at 58 per cent of total cattle and beef production in 2002. Restricted market access due to BSE reduced Canada's exports below 40 per cent in 2003 and 2004. They returned to 50 per cent in 2010 and are predicted to be at 44 per cent of total production this year. U.S. country-of-origin labelling laws and increased currency exchange rates have driven the most recent reductions in trade.
Sixty-nine per cent of Canada's beef and cattle exports go to the U.S. Mexico is Canada's second biggest customer at 11 per cent. Another 5 per cent goes to Hong Kong and Macau, 4 per cent to Japan, 2.5 per cent to Russia and the remaining 8.5 per cent goes to other markets throughout the world. Although small, Canadian beef exports to Asia, Eastern Europe and the Middle East have risen dramatically.
There are valid reasons to expect that Canada is well positioned to continue as a global beef supplier and that global beef demand will continue to grow.
Food demand is increasing in countries like China and India, where both populations and incomes are growing. As incomes grow, food consumption also grows. After $2 a day, most hunger problems are solved. Between $2 and $9 per day, people eat more meat, dairy, fruits, vegetables and edible oils, causing a rapid growth in demand for raw agricultural products.
World food demand is projected to double by 2050. In order to meet this demand, agricultural productivity will need to increase by 1.75 per cent annually, above the current rate of 1.4 per cent. Beef is considered a luxury good in many countries, but beef demand is rising in areas where incomes are increasing. Continued income growth in developing regions, including Asia, North Africa and Brazil, and resolution of trade issues, particularly South Korea, China, Taiwan and the U.S., will all drive demand for Canadian beef.
Canada is in an advantageous position to respond to demand signals and export opportunities in light of reduced global supplies. Within five years, our industry is expected to move from consolidation to expansion. Higher prices in the fall of 2010 provided cow and calf producers with the first signals to reduce the liquidation that has been occurring since 2005. Increases in heifer retention have already taken place in 2011, pointing toward producers' ability to quickly respond to market signals. Large areas of marginal land that is not suitable for cropping but is ideal for grazing gives Canada an edge. In several other countries, grazing land has been converted into crop production.
Contraction of the U.S. and global cattle herds will support North American beef and cattle prices. The U.S. has seen a slow but steady liquidation of its beef herd over the last decade. Despite positive market signals, producers have not expanded, and severe drought has compounded this issue due to lack of feed supplies. As one of the largest beef producers in the world, an expected decline in U.S. production will increase opportunities for Canadian product in export markets for grain-fed beef.
Our industry has developed the Canadian Beef Advantage brand to promote the benefits of Canadian beef. These include our farm-to-fork production and environmental stewardship practices, beef quality and yield advantages, globally recognized animal health status, and robust food safety practices. Research is fundamental to quantifying our production practices, as well as improving them.
Canada's ability to compete in international markets depends on several other factors: Firstly, successful trade negotiations are needed to obtain, regain or expand market access. Secondly, Canada must maintain and grow consumer demand for beef in domestic and international markets. Thirdly, Canada must provide competitively priced beef in these markets. Research and innovation are critical to all of these efforts.
Canada's beef industry consistently advocates for science-based trade and market access regulations. Animal health and food safety are increasingly important in trade negotiations. Research from Agriculture and Agri-Food Canada and other Canadian institutions has provided the science necessary to demonstrate the integrity of our animal health system. One example includes research that helped to overcome anaplasmosis and bluetongue import restrictions that were a significant trade irritant with the United States.
Research to develop improved methods of detecting and combatting food-borne pathogens will continue to reduce the need for food safety recalls. This helps to maintain domestic and international consumer confidence. Research to improve consumer satisfaction with beef quality will also benefit demand.
Research to improve feed efficiency, and to improve feed, forage and grassland productivity and to reduce animal health and welfare concerns is also important. More efficient production will make us more competitive with other protein sources, in both domestic and international beef markets.
Many of the animal health, food safety, beef quality, efficiency and environmental attributes that underpin the Canadian Beef Advantage brand result from research first conducted by Canada's beef research community and then adopted by industry. Continued progress requires long-term research investments to maintain our current standards, and to ensure that our industry can respond and adapt to new issues and opportunities that arise. However, we are very concerned that a considerable loss of research infrastructure, funding and expertise may hamper further progress.
In 2008, the Beef Cattle Research Council and the Beef Value Chain Roundtable launched a review of Canadian and international beef research. This study revealed several things.
Firstly, industry support for research and development varies among beef-producing countries. At the time, 13 per cent of producer check-off funds collected in Australia and the U.S. were directed towards research. In Canada, it was 6 per cent. Since then, Canada's beef industry has increased the research allocation of its national check-off by 150 per cent, meaning that we are back up to the same level as the others.
Canada's beef research funding is fragmented among at least 30 different funders. The BCRC, which I represent, is the main national beef industry research funder. Agriculture and Agri-Food Canada's research branch is the main federal government funder. The Agri-Environment Services Branch, the Canadian Food Inspection Agency and the Natural Sciences and Engineering Research Council of Canada also fund some beef-related research. Most provincial beef groups and provincial agriculture departments also have their own research funds and processes. Each of these funders sets their own research priorities. This has led to situations where lots of funding gets directed towards the issue of the day, while equally important but less glamorous research gets overlooked, underfunded and neglected.
Fragmented funding also increases the resources consumed by internal administration and makes it difficult to achieve a coherent national research direction focused on key outcomes. It is important to have clearly identified research priorities, but it is equally important to base these priorities on clearly defined research outcomes that are aligned with industry goals. Many research funds do not have clearly defined outcomes. Food safety is a priority. A 50 per cent reduction in beef recalls due to E. coli O157:H7 is an example of a research outcome.
The large number of small research funds with varying priorities also forces researchers to devote a considerable amount of time to applying for funds to maintain their research programs. They then need to spend a lot of their remaining time generating progress reports for these funders. This time comes at the expense of teaching, publishing, and technology transfer.
Fourth, some research programs require long-term funding to bear meaningful results. The current system of allocating and delivering government research funding on a five-year basis needs to be re-examined. A five-year perennial forage, animal breeding or environmental field study will generate only preliminary results.
On a related note, significant delays in delivery of the Growing Forward program produced a two-year funding gap, and then a three-year window to perform and complete what was originally a five-year research plan. This places significant limits on what can be achieved. It also makes it difficult to attract new research talent to Canada, when longer-term funding portfolios are available elsewhere.
In general, research provides a 6:1 or 7:1 return on investment. This is even higher when producer investments are considered. A study done for the National Check-Off Agency reported that the overall return to producer check-off dollars was 9:1. Returns to marketing were about 7.5:1 and returns to research were 46:1.
However, the issues described above reduce returns to research investments. The BCRC and the Beef Value Chain Roundtable have established a research committee to examine how to further consolidate and coordinate various provincial and federal government and industry research funders.
Agriculture Canada beef research funding declined by 29.4 per cent, in inflation-adjusted terms, between 1995 and 2007. This came after an 18 per cent across-the-board cut in research branch funding in 1994 and 1995. This has led to declines in project funding, expertise, and infrastructure.
Some provinces, notably Alberta and Saskatchewan, have increased their beef research project and infrastructure funding. This has neither offset declines in Agriculture Canada funding nor addressed diminished national research capacity in food safety and quality, and forage production.
The Beef Science Cluster is an important first step in overcoming some of the challenges identified by the beef research strategy. The cluster brings together Canada's largest industry funder, which is BCRC, and public Agriculture Canada beef research funders to align dollars and priorities to achieve research outcomes that will meet industry needs. Some funding is allocated to ensure that Agriculture Canada refills some critically needed research positions. Some funding is also directed towards improving technology transfer to ensure that promising research outcomes get adopted.
Public research funding also has a major role to play in ensuring that long-term, high-risk discovery research continues. This knowledge is critical to advancing science that will inform solutions and opportunities that we are not even aware of yet. Collaborative research initiatives between industry and government that align applied research priorities and funding are needed to ensure that key research outcomes are achieved. Finally, the knowledge and technology developed by this research needs to be transferred out to the beef industry so that the solutions can be implemented.
Accomplishing these things will require renewed and increased funding commitments. Funding is needed to support research activities. We also need the support of scientists and technical staff to carry out both discovery and applied research. Funding is needed to ensure that the physical infrastructure and facilities are available, functional and maintained so that research can continue.
In closing, we would like to provide five points that summarize what is needed to ensure that research continues to support and enhance the growth and competitiveness of Canada's beef and cattle industry.
First, long-term, predictable research funding commitments from both government and industry are needed. Moving beyond the current three-year funding cycle will allow for more meaningful research outcomes to be achieved.
Second, the current fragmentation of research funding and associated bureaucracy needs to be addressed. While everyone's objective is to support research that enhances industry competitiveness, we are inadvertently making research less productive.
Third, continued cuts to research funding under the federal government are of significant concern in light of the continued need to address issues of a public good nature in areas such as food safety and quality, environment, and animal health and welfare.
Fourth, we need a strong research community to achieve desired research outcomes and to train new researchers. Ongoing reductions and fragmentation of funding is not helping to attract or retain talented researchers. Capacity is critical to ensuring that scientific expertise and experience is available to respond promptly, effectively and strategically to issues and opportunities that arise.
Finally, while we welcome the Beef Science Cluster initiative, we were extremely disappointed to note that the research funding approved for the beef cluster was substantially lower than what the beef industry was willing to support with leveraged industry funds. Industry groups were invited to apply for up to $16 million per cluster. The beef industry applied for $10.7 million and received $8.6 million. This was particularly surprising in light of the fact that a greater level of research funding was approved for two agricultural commodities that contribute less than half of the farm cash receipts generated by the beef industry. A number of other clusters also received levels of funding that bore no clear relationship to their economic contribution to agriculture or to the Canadian economy.
We are optimistic that these issues can be addressed in the next version of the science clusters program under Growing Forward 2. With that, I thank you for the opportunity to speak to you today.
The Chair: Thank you very much, Mr. Bergen. Mr. Lee, do you want to add anything?
Ryder Lee, Manager of Federal Provincial Relations, Canadian Cattlemen's Association: Thank you. I have just a short note. Mr. Bergen covered it well from the research standpoint.
When you talked about the parameters of your study, you mentioned new markets and sustainability, food diversity and security. I just wanted to touch on the term ``food security.'' It is something we need to be careful about in Canada. With our population and land base, I do not see food security as an issue. However, diversity is an issue, and one can pair those two together well.
Diversity is basically a climate issue in Canada; there are only so many things we can grow. To maintain our standard and style of living, we would be much better served to speak of market security, access to imports and access for our exports, which will lead to better outcomes, not only for our producers but for our consumers in Canada. If we turn inwards and only discuss food security, we will short-change those who produce the food in Canada that we are well set up for, we will reduce choice for consumers, and we will have higher prices for what is available. Neither of those is a good outcome.
The point I had to make is that the term ``food security'' is not a forward-looking phrase for Canadians, and it always pokes me in the side when I see it.
The Chair: Thank you, Mr. Lee.
Senator Plett: Thank you, gentlemen, for showing up here this morning. It is an excellent report. Some of the questions I have are based on your earlier comments about export, doubling of food demand and trade negotiations.
Correct me if I am wrong, but I think you said we are the second largest exporter of beef. Is that correct, Mr. Bergen?
Mr. Bergen: Yes and no. We are the fourth largest exporter of total beef and cattle, and we are the second largest exporter of grain-fed beef behind the U.S.
Senator Plett: My question was second to whom. We are behind the U.S., yet we are exporting a lot of it to the U.S.?
Mr. Bergen: Yes.
Senator Plett: What is our relationship with the U.S.? You said we were almost back to where we had been, maybe even past that, since the BSE crisis. What long-term impact did the BSE crisis have? What impact did the comment that a prominent Albertan made about ``shoot, shovel and shut up'' have on our capabilities of exporting our beef to either the United States or other countries?
Mr. Bergen: I just want to make some notes to frame my answer, if that is okay.
Senator Plett: Take your time. I have an hour and a half.
Mr. Bergen: In the first two years of BSE, it hugely impacted the Canadian beef industry. The farm cash receipts from cattle and calves in those first two years dropped by a third. That is just supply and demand. When you are supplying a lot more than you need and suddenly it cannot leave the country anymore, obviously the receipts will go down.
That was partly mitigated by the fact that the U.S. is our largest trading customer and, fortunately, that relationship was quite strong. Although we continue to have some market access issues as a result of BSE, some countries are not taking our beef at all. South Korea is one that continues to be a concern, and we are also facing market restrictions in Japan on an animal age basis, which is also an ongoing concern.
The U.S. actually worked with us fairly well. In the fall of 2003 — I think it was about four months after the border closed initially — we were sending boneless under-30-month beef to the U.S. at that point. It was in 2006, I believe, when the border opened to live cattle, and then it was late 2007 before over-30-month beef and cattle started to go to the U.S. It was a gradual climb back as a result.
In the meantime, some of our exports to the United States are still impacted, partly because exchange rates went up as well, so our beef is more expensive there. Also, country-of-origin labelling has impeded our ability particularly to market live cattle there. I think live feeder exports are down to just a trickle of what they used to be. As to how much of that is country-of-origin labelling and how much is exchange rates, Mr. Lee might be in a better position to answer.
Mr. Lee: The only thing I would speak to on your last question about the effect of comments made in Canada, the rules of trade coming out of something like BSE are something that live at the OIE, which is the World Organisation for Animal Health. OIE is the French acronym, but in English it is the World Organisation for Animal Health. You can never measure the effect of comments like that, but what we found after that case is that maybe Canada's house was not in the best order it could be because our rules for our trading partners were exactly as bad as they were to us following finding that case of BSE.
In the intervening period, Canada has done a lot of work at OIE to move to a better stance of responding to finding cases like this that are not necessarily a widespread health risk or a herd risk. There is a concern there, but the rules and the responses were well out of proportion to what the threat was to humans or to animals. That has been a long process, but Canada has been leading at OIE. There are other forums, like Codex, where not everyone has a plan to be able to respond to these cases well because it is all what-ifs until it happens.
Senator Plett: I think you said food demand will double by 2050. I live in an area where the majority of our beef is grain-fed. In those areas for sure, land is becoming an issue. If food production is supposed to double by 2050 and we run into the problem of land shortages, how will you deal with this, or will this be a problem for grazing cattle? Maybe there is a lot of available land and it will not be a problem for grazing cattle.
Mr. Bergen: Part of the question is about grain supply and part is about just general access, or the use of land for grain, right?
Senator Plett: Right.
Mr. Bergen: To answer that question, the feedlot cattle do require a lot of grain, but it is important to note that actually 80 per cent of the beef production is forage-based. That is not forage-finished. They are not on forage until they are done; they are on forage for a good chunk of their time. It is just the last period of finishing is where the grain gets fed, so that is important to note.
There are two things to point out about a good deal of the grain that does get fed to cattle during the feedlot phase. First, in Western Canada it is barley-based, and much of that barley was never grown to feed cattle. That was barley grown to make beer, but the barley did not make the grade for the beer so it was fed to the cows or chickens — maybe not chickens, but pigs. A lot of it is food that was grown but did not make the grade for human consumption.
The other point there is that an increasing proportion of our cattle diets in feedlots come from distilleries grain, by- products of the ethanol industry, which is also a major consumer of grain currently.
The second question was about if you need grain but there is a bigger demand for grain, will the land not all go to grain: Absolutely. We have certainly seen that in other countries. I think that is happening to a certain extent here as well, driven by grain prices. If you are going to make more money growing grain than raising cows, then that is where the land will be used.
The important thing to keep in mind is that that can be a little bit dangerous. Many of our cattle in Canada, in particular, are raised on marginal lands in Western Canada. That is partly why many of the cow herds are small, because if I have a big chunk of land and this part is too steep, or too rocky, or too dry, or has too many trees on it to cultivate, so I will put some cows there and at least I can use it. Some of that land simply is not suitable for raising crops.
Another issue there is that a big chunk of our land — particularly in Western Canada, even Northern Ontario — is land that, in Western Canada at least, evolved under grazing. It is very marginal land, very dry, thin soil, essentially, and does not lend itself to crop production. It is very prone to soil erosion. We could grow grain on it; it has been done before. It was done a fair bit early in the last century. When we did have a few years of drought, the dust bowl happened and that sort of indicated that maybe that land is better used for permanent cover crops and grazing than for trying to grow grain.
Does that answer the question?
Senator Plett: Yes. Thank you.
Chair, if there is time I will have more questions later.
[Translation]
Senator Robichaud: I would like you to tell us about Canada's research capacity. You said there was a little fragmentation. How does Canada compare with the United States and Brazil? They are our competitors, are they not?
[English]
Mr. Bergen: The study I referred to, which was funded by the BCRC and the Beef Value Chain Roundtable, did look at the United States. The funding model in the United States is somewhat similar to Canada's, although the USDA does take a larger lead in terms of providing the funding. In the U.S. model, the USDA does much of the funding of research so the individual states are much more involved in agricultural extension. The USDA will fund the research and then the states are much more active in terms of turning that research into useable tools for the industry.
It is interesting that quite often those extensions specialists will be located in universities. The USDA-funded research is often being done in places that are co-located with an extension specialist so that expertise and technology can get fine-tuned and implemented by producers.
In terms of Brazil, our study did not specifically look at that, so I cannot answer it. Their productivity has been quite staggering, although their cattle industry is facing some of the challenges that Senator Plett referred to with grazing land being converted to crop land.
Does that help?
Senator Robichaud: Yes. I do not know if I understood you correctly, but you seem to be saying that there is more coordination south of the border than in Canada on research and moving it to the producer or to the people who would respond to such research. Is that correct?
Mr. Bergen: The United States has maintained their extension capacity to a much greater degree than Canada has. Over the last 20 years, there has been a considerable loss in applied research and technology transfer in Canada.
Senator Robichaud: Your recommendation to this committee would be in that sense?
Mr. Bergen: My recommendation is that under the beef cluster, there are two points. First, the intent of the beef cluster is to try to address some of this fragmentation in funding and try to coordinate funding it. If you do not get everyone to pour their money all into one big pot, at least try to understand what are your priorities and what your desired research outcomes are so that if this fund is focusing strongly on animal health issues, then that is good. We will not be duplicating that research here, but, if there is an important issue that they are not looking at, we will try to ensure that does get addressed somewhere. It is the same with food safety or animal welfare or feed efficiency, that sort of thing. Try to improve the coordination of the funding so that the research outcomes that industry needs to be addressed are getting done, so that we know where they are getting done and so that nothing is falling through the cracks.
An example of something that has fallen through the cracks over the years would be forage research. That is rather embarrassing to admit, to be honest, because the beef industry needs a lot of forage. We have not funded a lot of forage research. Part of that involves the forage growers. We fund beef research and cattle research; they can fund forage. It turns out that they do not have an ability to raise check-off funds to support forage research, so research in forages has declined over the years. Once we understood that through improving communication, we recognized that as a concern. We recognized the loss in research capacity and infrastructure as a concern and we have devoted a lot of our resources to forage and grassland research in recent years, for example, grazing, breeding and improving productivity. That is one thing: Make sure that we know who is doing the research where so that everything gets done and is achieving what we need it to do.
The second thing is to ensure that those research outcomes are transferred to industry. You might have a really good concept, but it must be field tested and adjusted and whatnot so that it can work outside of a controlled research environment. We have put new resources into technology transfer under the beef cluster. It is very early stages, but we are starting to make an effort.
Senator Eaton: Thank you Mr. Bergen. To continue on the line of questioning, does Industry Canada set goals for the beef industry?
Mr. Bergen: I have no idea.
Senator Eaton: Bear with me for a minute. You are talking about coordination amongst research. If someone at Agriculture Canada set goals for the beef industry — and if you knew what the end game was going to be in 2010, 2020 or 2025 — would that not make it easier for you guys and the universities to coordinate your research?
Mr. Bergen: That can be kind of challenging. It is difficult to know what the industry is going to need or what demand will be 20 or 50 years from now.
Senator Eaton: You just said that the need for food in the world and demand for beef is going up.
Mr. Bergen: That is true. We do expect that to go, but we do not know exactly what specific consumer demands will be. We do know that regardless of where things go, the objective of the industry is to be more competitive. Its need is going to be to improve consumer confidence and demand and to improve production efficiencies regardless of what the vague shape of things turns out to be 50 years from now. There will be demand for beef. We need to be able to produce it efficiently, and we need to be able to meet those consumer demands.
What is important is that industry and Agriculture Canada — who is doing much of the funding — work together to ensure that the research funding, infrastructure and expertise are in place to get that work done.
Senator Eaton: If I am in Agriculture Canada handing out money, I would sit around a table with you guys and say, ``What is our goal here?'' I do not think I would just give you money and say, ``See you next year.'' I would like to know where you are going. I understand that you cannot predict the outcomes of research, but would it not be useful to set some goals? You could then look into research that either would help or not, depending on the outcome. It seems to be pretty loosey-goosey.
Mr. Bergen: We are agreeing. I am sorry if I did not make the point clearly, but what we need is to ensure that the funders — industry and Agriculture Canada and the various other provincial funders — recognize what key outcomes the industry needs to achieve in order to improve consumer confidence and production efficiencies.
We need to identify those key outcomes, as you said, so we can figure out where funding needs to go to improve the various weaknesses.
Senator Eaton: We are on the same page.
I would like to ask something else on the research side. What is your relationship with universities? I have been to Guelph and I am sure other senators have been to other research areas across the country. They are doing very interesting things. What is your relationship with university research?
Mr. Bergen: I will add one more point to the previous question in terms of the agreement on key outcomes among the funders. Identifying those key outcomes and presenting a research plan to Agriculture Canada was what the beef cluster is about. It was not a request for, ``Can you give me the biggest possible cheque and then we will go spend it?'' It was not that. We presented a very comprehensive research plan saying, ``Here is what we need to do for industry. Here is what it is going to cost. Will you share it with us?'' That is what the whole science cluster program is about.
In terms of the university issue, a lot of our research funding does go to universities. One of the innovative things with the science cluster program is that it is funding coming from Agriculture Canada. However, where appropriate we can direct funding to universities if the expertise in a particular area happens to be at universities. A lot of the animal health stuff we are funding is getting done at various vet colleges. The animal breeding stuff is getting done at universities; the University of Guelph is doing a lot both on animal health and on the genomics side. We work very closely with universities and we value them highly.
Senator Eaton: You talk about consumer confidence. You talk about country-of-origin labelling. Does it mean that if it goes across the U.S. border or to Japan and has ``grown in Canada'' on it, that is a detriment?
Mr. Bergen: No. The Canadian Beef Advantage program is designed to promote the benefits of Canadian beef. I will let Mr. Lee elaborate on my ramblings because he is more familiar with that issue than I am. However, our concern with country-of-origin labelling in the United States has to do with the fact that for a long period of time we would send calves to the United States. Over the next year and a half the calves would be fed down there and turned into beef. They spent most of their time in the United States. Under the country-of-origin labelling law they needed to be put into various categories according to how much time they had spent in Canada versus the United States. That increases the cost and paperwork of sourcing cattle from Canada for that customer. As a result, the U.S. industry became less eager to buy Canadian calves, and that reduced the demand.
Mr. Lee: It reduced the price they are willing to pay for Canadian calves and fed cattle as well. We are proud to talk about Canadian beef anywhere we sell it — in Canada or in the U.S. — and if it comes from a Canadian plant it has ``Canadian beef'' on there and it is sold as such. It is only an issue for how our live animals are treated. They are currently being discriminated against under that rule and we hope to remedy that.
Senator Eaton: Is it only paperwork?
Mr. Lee: It is paperwork and segregation. If your feedlot is full of a bunch of U.S.-born and -raised cattle, some from Mexico and maybe some from Canada — depending on what the market is and what the supply is — you have to be able to keep those separate. You have to be able to tell the packer which came from where. The packer has to be able to keep the cuts from which animal separate as they go down the line and have the right label for the right cattle for the right cuts that go to the different supermarkets. If they go to supermarkets they need it. If they go to food service they do not need that.
It is not just paperwork; it is physical chores they need to do.
Senator Mahovlich: I want to thank the witnesses for their presentation.
I would like to talk about the size of the herds. I visited Western Canada a few years ago. There are corporations that have bought out family farms and are becoming larger and larger. Is this a good thing?
Mr. Lee: Thank you for the question, senator. I grew up on a corporate farm. It was me and my dad and the rest of my family. My brother and dad are still there. I think we had 100 cows at the time and I think they will have about 250 now. It is a family farm but it is incorporated. Incorporation and corporate farms, as much as anything, are a bookkeeping thing. The reason we went from 100 head at that time to currently is because we went from square bales and stooking by hand to round bales and being able to do so with a tractor. It was the same on grain farms; you went from 10 feet to 20 feet to 80 feet behind a bigger and bigger tractor. What can be done as one person, as one family unit, has continued to grow, so the ability to farm more and farm bigger has created larger operations. What you can make as an income has grown from that as well.
What you do for your bookkeeper, whether you are incorporated or a co-op or a single proprietorship, is definitely a misnomer. The grand majority of farms in Canada and the U.S. are family operations, and as they grow, sometimes there are three or four families still together. Yes, they are big, but it consists of a few families, and maybe they have extra people working as well. It still takes people power to do a lot of those things and run those machines, look at those animals, keep an eye on the way things are working and the expertise to do it well. It is not a problem per se; it is just the way technology has moved for the largest part.
Senator Mahovlich: They are still well managed, even if they are large? Say there are 10,000 head of cattle at one of the farms.
Mr. Lee: Absolutely.
Senator Mahovlich: They are still well looked after?
Mr. Lee: You cannot afford not to.
Senator Mahovlich: Talking about consumer confidence and the advertising for gluten-free products, there is a tennis player now winning many tournaments, and he is advising us to stay gluten-free. A hockey player used to live on steak. Does the cattle business have any studies on steak and what affect it has on an athlete?
Mr. Bergen: I am not a nutritionist, but absolutely. There is a lot of information about the nutritional value of beef, and one of them, to your concern, might be that there is no gluten in beef. That comes from grain products. Therefore, in terms of the healthfulness of beef, it is chock full of nutrients. There are 14 essential nutrients, an awful lot of zinc, iron, protein and B12, and those things are not always easy to find in every product on the grocery shelf. Yes, keep eating beef.
Senator Ogilvie: I really appreciate your frank and direct approach to the issues.
I would like you to help me understand the research conundrum you outlined earlier. I just want to get some of the parameters straight. From what you have said and to my general understanding, the three principal funders of research in the area you are interested in — this would be true of other agricultural areas as well, but let us focus on beef — would be, as I understood it, Agriculture Canada, the industry and provincial funders. Now, I assume there are individual researchers that get NSERC funds and so on, but are those the three principal funders of research affecting the beef industry in Canada?
Mr. Bergen: Those are the three major ones. There is considerable private research that goes on as well. There are private research organizations, as well as some of the agri-business firms, that will do private research, and it is very good stuff. The challenge with some of the research is that it is proprietary. There is good research that comes out of it, but what happens is that in some areas we need research — I will provide an example.
One of the major advances in cow-calf production that has come along in the last 20 years has probably been extended grazing systems. The idea there is that rather than keeping your cows on the pasture in the summer, then bringing them into the corral in the winter and feeding them hay all winter that you harvested in the summer, then hauling the manure out the next spring, which can be really costly and time consuming as well, in the last 20 years, there has been much research and a shift towards maybe not needing to do that. Maybe we can grow our forage in such a way that we can graze them in the summer and then graze them in the fall in different areas, keep them out there longer so that the cows can harvest their own forage and spread their own manure.
The reason this is relevant is that the only person who profits from that is the person who is doing it; there is no proprietary gain. You did not ask about that, but it is worth knowing.
Senator Ogilvie: I appreciate the example. I want to get to an understanding of the research infrastructure and how it works.
I understand you have added private and some agri-research organizations, and presumably some of that is done completely independently, but if they are going to fund research, there is a lot of infrastructure needed. Therefore, probably some of that goes back into some of the facilities that are funded by the other areas as well.
I am trying to get a handle on this idea of fragmentation you talked about, to come to the real issue, which is to be able to focus research on the key areas.
We have the principal funders. The principal locations of research, from my limited experience here, is at either federal research facilities through Agriculture Canada or university departments of agriculture. Those would be the two biggest ones I am familiar with. What are the other major examples of where the research is actually conducted, other than the individual private-type associations you would use in that example?
Mr. Bergen: You have most of it there. Most of it does happen at Agriculture Canada stations. A good deal of it happens at universities as well. There are some provinces that do have active agriculture research programs as well.
The other one that is in a bit of a grey area is some regional research and extension groups, where they will do some of that tech transfer that tends to be very specialized. Much of that is in the forage area, and it tends to be very local.
Senator Ogilvie: This comes right back to the issue you outlined at the beginning. That is the background needed for me to understand the answer to this question.
You described two principal problems with the research funding. One is the fact, as you mentioned, that much of the research is unfocused and so on, and you were concerned about the idea that researchers had to reapply for funds after a three- to five-year period for most funding.
From what you have just said and because of the power of the beef and cattle industries in this country — for example, Canada was a world leader in the biotech dealing with cloning, embryonic transfer and the multiplication of herds around the world. Therefore, I do not understand, given the clear nature of where the research occurs and the limited number of funders, why your industry cannot have a major impact in identifying the research programs that could be carried out there.
Second, if there is any area research that ought to have a focus, it has got to be in the agricultural area. I realize there is some research that might go off into interesting areas funded by NSERC or whatever, but in terms of what is done by the organizations you indicated, I do not see why it should not be highly focused.
I would also say that you want to be careful about giving researchers too much time before they have to reapply and have their research vetted. It does not mean they will not get ongoing funding, but it means, particularly in your areas, that the researcher must demonstrate there is clearly an ongoing research program that meets the standards to benefit from the research funding.
Can you help me a bit there? That will be my last question on this issue.
Mr. Bergen: Yes, I think I can help you with that, actually.
Industry does have a major role to play. If we want long-term research to happen, industry does need to support it. Part of the issue is that until very recently, as I mentioned early on, Canada's beef industry was not a huge supporter of research. I think I said 6 per cent of our national check-off funds are allocated towards research, which is very small; it is about half of what other major beef-producing nations had.
Canada was quite slow to recognize the importance and benefit of research. I will be clear about that. However, since then we have recognized that. We have made major efforts to increase the amount of funding we do allocate towards research, and it has gone up by 150 per cent. It is still very small compared to other funders, but we do have bigger resources to put toward the issue. That is important.
In terms of overcoming that fragmentation, the way we are trying to approach it is using this beef cluster as the starting point. We have two of the big funders, between BCRC and Agriculture Canada. The next step is to try to bring in some of the other big funders. There are 30 funders, but most of them are pretty small. If we can identify some of the major ones — and those are the ones we are approaching first — Ontario, Saskatchewan and Alberta, and if we can start working closely with them, we will be a long way down the road.
In terms of the research reporting and keeping them on track, I will not disagree at all with that. I do not think there will be any decline about the need to crack the whip. One of the issues is that if I am a researcher and I want to do a $50,000 project, I might get $10,000 from Mr. Lee, $5,000 from you, and $35,000 from everyone else around the table. That is to do one project. I need to submit reports to each of you every year. If we can get that down to one we can still get the accountability, but the researchers will be able to spend more of their time doing the thinking and the actual work.
Regardless, for us to move our industry forward and continue and increase our contribution to the economy, we will need to increase funding, both from industry and the government funders, to support the expertise, the staff, to provide the research funding and to maintain the infrastructure that we need in order to do that.
Senator Ogilvie: Mr. Chair, could I ask you to consider asking him to provide a follow up with this? The answer is well focused and we would, I think, benefit in this study we are doing from a follow-up report from you on this issue, covering the matters you have just gone over in some detail.
Mr. Bergen: I will have to look at the transcripts to see what I just said that was so wise.
The Chair: We will be asking the clerk to link up with Mr. Bergen and Mr. Lee in order to follow up on the comments made by Senator Ogilvie.
[Translation]
Senator Rivard: Mr. Bergen, I noted down the five points that you made at the start of your presentation. The first point was that you wanted long-term commitments for research and development assistance programs.
The various representatives of the forest industry testified before our committee for two years, and most of the witnesses made that same point, that they wanted long-term commitments. In its final report, the committee proposed minimum 5-year commitments and even wanted programs spread over 10 years.
I suppose there would be some interest in 5-year programs, even though 10 years would be even better for you, but I understand that you could live with 5-year commitments for federal research and development programs. Would you be comfortable with 5-year commitments?
[English]
Mr. Bergen: A five-year commitment is the way the programs are designed now. I think even getting our current programs to perform the way they are designed to would very much be an improvement. Growing Forward, the beef cluster program, was a whole new way of approaching research between industry and government, and it is a very good thing. There were some growing pains associated with that, which helped to explain why it dragged out. Going forward, a full five years would very much be an improvement. The importance of long-term research is critical as well. To do any sort of environmental study, if you want to look at carbon sequestration by forages or if you want to look at the environmental impacts of feeding cattle, in five years it is pretty unlikely that you will find anything terribly meaningful. Five years would be an improvement. Some mechanism to ensure that some vision is applied to long-term research would be still very much worth considering.
Mr. Lee: Within that five years, what we have seen over the last couple of years — and I think these rules spring out of Treasury Board, but I am not sure where exactly — year over year, some of the flow and the administration of funds is such that you have this block of funds for this year, and it is for this year. Come March, if that has not been spent, then it is gone. We need to look at this through the lens that this is a long-term project and let the funds go where they need to. If it is something that is biological, you do not necessarily follow the clock or the calendar. If it is something that takes something to build and winter comes along, again the calendar can get in your way. Not only is it that five- or ten-year window, but it is how it flows from one year to the next. That has been confounding some people recently.
[Translation]
Senator Rivard: When you talk about the difficulties involved in recruiting researchers, that is precisely because the program is not long enough and because it is therefore difficult to recruit researchers who are currently earning a living from an unstable job, with a contract of three or four years, whereas it would be easier to recruit researchers if the programs ran for 5 to 10 years. Is that what we are to understand?
[English]
Mr. Bergen: Our researchers are innovative on numerous levels. One is their ability to stitch funds together to carry on a research program. They have managed to struggle through, by going from three-year project to three-year project, to attempt to maintain a long-term research project. They are struggling through, but the situation is not ideal.
The availability of longer-term research funding in other jurisdictions has caused some problems. Two recent examples are a beef researcher from the University of Guelph, who moved down to North Dakota State University, and, more recently, a world-renowned geneticist from the University of Alberta who went back to Australia to head up their research program because he was getting kind of tired of not being able to get long-term funding commitments in Canada. Yes, that is absolutely an issue.
[Translation]
Senator Rivard: I believe the Association des éleveurs de bœuf du Québec does not belong to your Canadian association. First, has that association previously been a member? And if the answer is yes, why did the Association les éleveurs de bœuf du Québec leave your Canadian association?
[English]
Mr. Lee: Presently, the federation is not a member of CCA, but we work closely together with them. My history with CCA is only about six years old, and that is the way it has been. We have an open relationship with them. Part of their membership in UPA is aligned with supply management and an orderly marketing system that is a little different from the open market set-up of CCA. Just because we are not in one organization does not mean that we are not working together. Wherever we have common cause — and I think this spreads over into research as well — we are working together. It is a political thing rather than a practical thing, for the most part. I do not know if there are research examples to talk about in terms of what is going on in Quebec.
Mr. Bergen: Yes, there are. My history with the CCA is a year and a half, so it is relatively short. Research is a pretty non-competitive issue. Most people recognize the value of it, and we are not opposed to funding research in Quebec if that is where the expertise lies. As an example, some of the forage research we are funding under the beef cluster involves researchers in two or three locations in Quebec. It is a big project that goes across the Maritimes, Quebec, Ontario and all the way to Manitoba. We do fund some research in Quebec.
Senator Mercer: My colleagues are surprised I have not asked questions earlier. The reason is that myself, Senator Mahovlich and Senator Fairbairn have been on this committee for a number of years. This is the first time we have had representatives from the Canadian Cattlemen's Association here when we were not talking about a crisis. I have been sitting back enjoying myself listening to the discussion this morning. We were not talking about immediate problems that needed to be solved and farmers who were in crisis. I am sure there are lots of farmers who have problems, but not like we had during the BSE crisis.
My questions are rather mild in comparison to what they used to be.
The Chair: Let us hear the questions first.
Senator Mercer: Back when we were in the middle of the BSE crisis, we took a trip to Washington and met with people in the department. We were expressing concerns on behalf the Government of Canada. One of our concerns was country-of-origin labelling. We were worried at the time that as the product ended up on the supermarket shelf, the real discrimination would take place. We worried that the American consumer would come in and see a piece of beef that had a U.S. label and another piece of beef that had a Canadian label on it, and they were always going to pick the U.S. label.
Since we have been down this road for a bit now, has there been follow-up? Is that indeed the case? Have our fears been realized?
Mr. Bergen: I will take a shot at it and invite Mr. Lee to add his clarifications. Before I talk about country-of-origin labelling, I will talk about crisis. You talked about what a pleasure it is to talk to beef guys when we are not in the middle of a crisis.
However, there is a research angle to that. It is critical that Canada maintain its infrastructure and research expertise. Crises will happen, and we will need expertise to find the solutions to those problems. It is important that we maintain our infrastructure and expertise — the people and the skills to develop the solutions we need when the crisis happens — so that we can overcome problems more quickly.
In terms of country-of-origin labelling, there absolutely has been discrimination. Much of it has been due to things that Mr. Lee mentioned earlier, including more discrimination on the buying of the cattle side and the agony of dealing with all the paperwork and segregation associated with the cattle. The processing and retailing end of it has led to former cattle and beef buyers in the United States saying, ``We are just going to source it at home, because we do not want the hassle.'' That has been a big problem.
I am not sure there has been as much in terms of consumers actually caring, to be honest with you. It is more the hassle of getting it there. There are some retailers in the United States. The new industry marketing organization, Canada Beef Inc., has put efforts into developing specific Canada retail programs in the United States. There has been some success with that. I think generally most people say, ``I want to buy my own country's stuff.'' However, they have had some success with specifically Canada-branded stuff in places in the United States. However, I do not have a lot of details on that.
Mr. Lee: It is been interesting in that country-of-origin labelling has forced us to brand Canadian beef in the U.S. and actively market it as such. There have been pockets where we have smaller retailers that we can supply, and they like Canadian beef. A good chunk is in areas where they have a lot of immigration from Central and South America. They like the red, bright white fat of Canadian beef. That is a channel for us. We do not have enough production to supply bigger retailers like Wal-Mart. The studies we were looking at as we were fighting the country-of-origin labelling case at WTO showed that Canadian labels were not showing a lot of discrimination. Consumers were not concerned about the Canadian label. They are finding different behaviour around a Mexican label. Many of the labels say ``may contain Canadian and U.S.'' The information going to the consumer is not that enlightening and is not delivering something they are looking for. As Mr. Bergen said, it is more about the live cattle and the discrimination there than anything on the grocery store shelf.
Senator Mercer: I am happy to hear that we were wrong when we expressed our concern.
One of the issues we had during the BSE crisis was the fact that we did not have enough research to back up our arguments about the safety of our cattle. We now have more of that, and it is a good thing. I congratulate everyone for that.
When research moves along and researchers find or invent something new, it is the transfer of the technology from the lab to — in this case, the farm — to make it practical. How is that transfer working? We have issues with researchers in other areas. We are doing good research. The issue is moving it from the lab into production. How is it working from your side?
Mr. Bergen: It depends on two things. It depends partly on the sector. Different sectors of the industry have different inclinations to try new things. The packing and feedlot industries tend to be more aggressive and willing to try new technologies. The cow-calf industry tends to be a little more conservative. A big part of it is that on the packing and feedlot side, there tends to be more organized industry service providers in place to help with that process. Hopefully I am getting to a point that helps you.
There are two keys to getting technology adopted. One is whether the right question is being asked in the first place: Are the researchers focusing on a key outcome that the target sector needs? The second is whether, when something comes out, it is cost-effective. If research finding comes out that is needed, provides a solution to a real problem or provides a clear route to a real opportunity for industry, it gets adopted very quickly.
If it will either save people a bunch of money or make people a bunch of money, and if it is practical, something where they can actually turn the key and make it go, then it will get adopted very quickly. That is even on the cow-calf side. The extended grazing thing I referred to earlier is a shining example of some long-term research. It took 15 or 20 years to get that management approach fine-tuned and generalized enough so farmers could use it. Once it was done, and once people had a real incentive to reduce their winter feeding costs through BSE — because prices were down, so they had to reduce their costs of production — that got very widely and very quickly adopted, even at the cow-calf level.
Senator Fairbairn: As you know, I am from Southern Alberta, in the foothills of the Rockies. When things are fine, it is a great place for cattle. When things get a little bit off-the-page, which has happened a bit this summer, I was wondering if there had been any around that area, around the mountains? Has there been something, during this period, that has been difficult for our fellows and families in the area where all the cattle are?
Mr. Lee: Every year is different. It is funny. We come to a summer or a spring, and we say that it is the strangest spring ever. The next spring comes around, and we say the same thing.
Senator Fairbairn: I am right with you on that.
Mr. Lee: If you are in the Interlake of Manitoba, you are probably saying that you wish it were different. They have had so many years of too much rain, and it is five feet high and rising all over the place.
When you look at Southern Alberta, there was a lot of rain, and there were some challenges there. Then there was not enough rain. That is kind of the cycle that we go through.
Senator Fairbairn: Up and down.
Mr. Lee: It is the same in Saskatchewan. There are some places where it was biblical this spring, and then, through the summer, they did not have much rain. Those weather challenges are there. In the middle of Manitoba, it is structural. People did some things as far as letting out the water that they steered out of one watershed into another. That needs addressing on a long-term basis. The rest we will take as it comes.
From an overall picture of the industry, though, there is a positive outlook because of the supply in North America. It is well down in Canada and in the U.S., and, due to the drought through Oklahoma, Texas and much of the southern United States, they have sold a lot of cows. They will probably not be rebuilding that herd any time soon because winter grazing and fall grazing are on wheat, which is well down. The size of the cattle herd in Texas is the size of the cattle herd in Canada, so that is well down.
The number of cattle in North America is well down. As well, the demand for beef in the world is up, and the supply in the world is that not great either. Brazil is starting to eat more of its own and not export. Those competitors going to market are fewer. You have seen it in prices. Traditionally, a high dollar has meant lower prices. High grain prices mean lower prices for cattle. Right now we are cruising with very high grain prices, a pretty high dollar and very high beef prices. The other thing that has usually hammered Canadian beef prices has been a struggling market in the U.S. It is no secret that they are still stuck in a very poor economic position, and yet the prices are still very good.
The lower demand in the U.S. is the probably the one thing that prevents us from having really good prices for cattle. The challenges that producers have are high grain price and high inputs from petroleum-based products, depending on whether it is fertilizer or fuel. Although prices are good, costs are high as well. People will say, ``Look at one side; it is o.k.'' However, the other side is challenging as well.
When we look at those other factors that usually push our prices down, and they are in a bad spot, we start to think that it could get better if those start to go to a traditional place that improved prices. There is a bit of a hopeful outlook there. The fundamentals definitely point to a good future over the next several years.
Senator Plett: I have a comment on the research funding. I am fully supportive of the constant need to support different industries, from the government level, for research funding. I was happy to hear you, Mr. Bergen, say that the industry has improved its funding for research from the 6 per cent that you were at at one point to at least 12 per cent or whatever it is now. This is not a question, but just words of encouragement. I would really encourage you to ensure that you try to get that up a little more yet. I think the more the industry funds itself, the easier it is for you to then get help from government. That is more of an observation than a question.
My question is more based around supply and demand, to some extent, and the pricing of products. I know that over the years there has been a problem, certainly in my province, with a lack of slaughterhouses and packers. How is that across the country? I heard on the news last night that Maple Leaf, for example, is closing a number of plants across the country, although they were putting a huge amount of money into improving what they were doing and into building one more plant. I was happy to hear them say that they were going to put some money into the plant in Winnipeg.
For beef, I do not think there is a plant in Manitoba. I am not sure. We have a couple of good ones for hogs. Where are we at in Western Canada on slaughterhouses and packing plants?
Mr. Bergen: In terms of large packing plants, I believe there are four in Canada. There are two in Alberta. One is Cargill. Another one is owned by XL Foods, which is a Canadian company. There is one in Ontario, which is also Cargill, and one in Montreal. It is Levinoff, a Canadian company.
There are a number of smaller plants throughout the country. There is one in P.E.I. Then there are smaller ones dotted across the country. Manitoba does have at least one federally inspected plant. There is one in Carman, Plains Processors. Smaller plants are challenged in that the overhead costs are really high for doing this sort of thing. For them to compete with some of the bigger players can be challenging.
Another issue, generally, is that the packing plants tend to be where the cattle are too. Most of the cattle feeding is concentrated in Alberta and in Ontario. That is where the plants are as well.
Mr. Lee: The fact that the North American supply of cattle has been well down, going back to the early 1990s and even before, will be a challenge for feeding. Our feedlot capacity in North America is well above what our cows will put out over the next several years. Subsequently, our packing capacity is as well. We have more hooks and processing ability than we have animals to put through there.
What that challenges us to do in Canada is to ensure that the competitiveness and the regulatory environment here, for turning cattle into beef, are equivalent or better than in the U.S.
Some of the hangover from BSE is that the rules that we have in Canada for how you treat SRMs — which are the jiggly bits that are suspected of being able to spread BSE — are more onerous in Canada than the U.S. It is more costly to handle that product out of the back end of the plant, so there is a concern there. The other is labour supply and cost. It will be a trick over the next several years. When you rebuild your herd, the first thing you do is stop sending young heifers to town. Not only do we have less, but when we start to rebuild we will be sending less to market as well. A plant that is running at 80 or 90 per cent capacity is economical. We are getting closer to 60 per cent. As we have less supply, we are going to be pressuring the plants we do have to be able to continue.
There is a pile of plants on the side of the road that tried during the post-BSE years, when our kept capacity and numbers of cattle was well up. They tried, and discovered that it is not all high-fives and back slaps in that industry. It is hard and it is cyclical. You have to have deep cash reserves to handle the downturns and to get into the upturns. It is going to be a challenge.
Senator Plett: I just came back from 10 days in China on Sunday. At a lot of our meals, they served us beef. On the last day we were there, we went to a restaurant. I ordered a steak and asked that it be a Canadian steak. They assured me that it would be. I do not know if I understood me or if I understood them. What were the chances that it was a Canadian steak? There are almost 1.4 billion people in China. How much do we export to China?
Mr. Bergen: I think China has agreed to take Canada's beef, but we do not presently have the technical details hammered out. My understanding is we do send beef to Hong Kong and Macau. We sell beef to Hong Kong and it goes to China. I think we are sending a lot to Hong Kong and Macau because some of that is going into the big market. Getting arrangements made so that we can send beef directly to China would be very helpful. That is certainly identified as one of the areas where both incomes and demand for beef are rising.
It was not a question, but I do want to brag a bit. Your comment about improving the research allocation from six to 12 per cent is something to be proud of. It is important to note that much of that happened quite recently. When we originally started with the national check-off, it was 5 per cent across the board. Saskatchewan was at 10 per cent because they recognized the value of research. In recent months, both Saskatchewan and Alberta — who are the two major beef producers — went up to 20 per cent. There is a clear recognition of the value of research. It is kind of new, but it is getting there. There is hope.
Senator Plett: Keep up the good work.
Senator Robichaud: My question was just that. Do your members see the need for more research? Are they the ones driving the engine for research and innovation? You just answered that in some places they have raised their contribution. If you were to go to your members now and say, ``Well, 12 per cent is not quite enough. If we were to raise it to 15 or 20, we could leverage more money out of the other players,'' how would they react?
Mr. Bergen: I am not sure how they would react. To make it clear, there were also increases in Nova Scotia and B.C. They both doubled from 5 per cent to 10 per cent, which is very welcome. That was partly recognition that research is important and a vote of confidence that we need more. I am not terribly politically savvy, but I suspect they would prefer to see good results coming out before we ask for more.
I will now answer Senator Mercer's question about how tech transfer happens.
In order for us to make the case that we need more research allocation, I think we need to show the benefits of that research. That is where the tech transfer comes in. For them to see the benefits, it has to be something they use or are profiting from, making it more efficient and paying them for more calves. The question was how tech transfer happens. I will give two examples.
If we are dealing with animal health research, a university researcher may be working on a vaccine. They find some new molecule that makes it more effective and you get a stronger immune response. They will do the basic science and field trials at the university and say it looks good. Then they will typically patent it. The university will sell or licence that to a pharmaceutical company. The pharmaceutical company may have to do other trials for registrations and safety to meet regulatory approvals, and then market that.
That would work for a vaccine, but let us say there is a new technique as opposed to a new technology. A new technique is something you can do and you do not have to buy or pay for it. There are two ways that can happen. First, a farm could do their own trial. They could read about something new and try it themselves. It is a lot easier to do that if you have a big operation. That is one of the reasons I was stammering and gasping a while ago about feedlots and technology adoption. Feedlots are big enough. They have employees. They can specialize in what they do. They have enough animals and facilities to do a meaningful farm trial themselves.
That is a lot more difficult for a small farmer to do, especially a producer who is working off-farm. Likely, they do not have the time, facilities or expertise to do that themselves. Traditionally, that is where provincial agriculture extension specialists would come in. They would help a farmer implement a new management technique or demonstrate a technology on their farm. They do on-farm trials and field days to demonstrate how well it works.
I think part of the reason that there has been an increase in research allocation is because of a real concerted effort that we have made over the last year or so — in terms of increasing awareness about what we are actually doing with your five per cent check-off allocation now — and what the researchers are finding out. People were astounded, or happy to hear it at all. We are not just putting money into this. We are learning something from it. When they see some benefit and that it is going somewhere, they are very willing to fund it.
Senator Robichaud: This is a supplementary to something you said. Some farmers work off-farm and their operations are not sufficient to keep them going.
I know a few years back many people were going that way. Is that trend still going on?
Mr. Bergen: I will let Mr. Lee contribute to this as well. A number of years ago I worked for Alberta Beef Producers, which is the provincial affiliate to the CCA. While I was there, the ABP was a pretty major funder. There are provincial cattle organizations that support or fund research as well. However, your question was about off-farm work.
I left there in 2009. In the few years leading up to that, it was fairly clear that a lot of producers were working off-farm. A lot of them were actually working in the oil patch. In probably 2007 or 2008 that really slowed down. Part of that was because the oil patch slowed down, and part of it was because the cow economy started to improve a little bit. There was a bit of a trade-off there.
Mr. Lee: It is an interesting dynamic because everyone does it for a different reason. Sometimes it is because you can, or because you always have. Some people who work off-farm, though not 100 per cent, have gone back to the farm and been able to buy a small parcel of land, become a farmer and live the dream. Having 20 head of cattle or grassing some steers on the quarter-section you own is different from being a full-time farmer. With the technology and some of the things we have these days, we are able to do that and still do a good job of both. It is not necessarily that people are being driven to do it, but that some are moving that way.
Someone mentioned land prices. The ability to grow — to get big enough to have a critical mass — is not within everyone's means. That is part of our expectations. If you wanted to live the same way you lived 100 years ago, on the same size of land that your family farmed on 100 years ago, you probably can. However, if you want to have a tractor with cabbed-in air conditioning, go to Mexico every year and have a few TVs and a few vehicles, et cetera, then you have probably changed. Your size of operation to furnish that will be different. As our expectations change, what a farm looks like changes as well.
Senator Eaton: When I visited Guelph last year, one of their worries was that they were not attracting the usual number of undergraduates to their agriculture programs. Is this a worry to the industry?
Also, what threat, if any, does ethanol pose to prices of grain to feed cattle?
Mr. Bergen: Absolutely. The industry needs new, highly trained, educated people to move the industry forward. There is absolutely a concern about getting new people trained. To do that, we need researchers, institutions, infrastructure and funding. That is a concern. We want to see more of it. As an industry, we also need to continue to —
Senator Eaton: You are talking about infrastructure and funding. They seem to think it was more that young people did not understand what a technical, interesting thing farming had become. They still thought of it as the old getting out the shovel and the manure and cleaning out the barn. They had not been able to convey the image that a farm is now an exciting, interesting, technologically advanced place to work.
Mr. Lee: It is a good question. If you dial the clock back eight, nine or ten years, the grain industry was not having a lot of fun. The beef industry was not having much fun. You would hear people in the agriculture industry joke that the definition of child abuse is passing the farm on to your kids. That kind of mental space that the industry was in at the time sure did not help agriculture universities attract people.
Making sure that the people who are in it are making a profit and are selling it as a good thing to do for you and your family is part of it. Only 2 per cent of people in Canada, right now, are farmers or connected to the farm. We need to be able to attract people who are not farmers. We are doing a good job in Canada of attracting farmers from off of our shores who think this is a great place to farm. Maybe we are not doing a good enough job of selling the kids who are growing up within Canada that this is a great place to farm.
That is turned around to some degree, especially in the grain business, but also in some of the livestock sectors. If things are going well, you feel more positive about paying for your kid to go to agriculture college rather than shoving him towards law school or something.
The cattle industry recognizes this as a challenge, as well. One thing we have done is started up the Cattlemen's Young Leaders Program. It is a mentorship program where producers or other people involved in the industry can get hooked up with a mentor in the sector of the industry that they are interested in. We are building that awareness that this is a good industry and that there are a lot of different ways to put agriculture to use or to be in the cattle business. The industry is responsible for driving that renewal. We have recognized that maybe we were not doing a good enough job of that in the past several years, and we are addressing that.
When it comes to ethanol, the biggest and first thing you will hear is that the price of grain is a complex thing. It absolutely is. It is a global market. It has to do with weather, investment and demand and supply. Traditionally, livestock, cattle and pork are one the biggest buyers of grain. One of the growing buyers of grain is the ethanol industry. We compete on an open market for what we sell. This new competitor in the market has a mandate for the use of what it sells, tariff protection against its competitors and subsidies for production and construction of their plants. All we would like to see is open competition. That way, if ethanol is the best use of feed grain, and if it is the most productive thing for our economy, then that is where it will go. Right now, it is a bit of an artificial market. The price of grain is not necessarily the concern. It is that competition that is not open-market that really is —
Senator Eaton: Because it is subsidized and you are not.
Mr. Lee: Correct.
[Translation]
Senator Rivard: I see from the document that, in 2011, Canada produced 12 million cattle and calves and that the federal government charged a levy of one dollar a head. Our market is the domestic market and the United States is our main customer. To your knowledge, does the United States levy any amount per head?
In addition, is the livestock market subject to NAFTA? And if so, have there been any disputes on either side, as was the case with the softwood lumber industry?
[English]
Mr. Bergen: I missed the first couple of words of your question.
[Translation]
Senator Rivard: According to 2011 statistics, Canada produced 12 million cattle and calves and the federal government charged a levy of one dollar per head. Canada is our main market for beef and the United States is our main customer. Does the United States levy any amount per head?
In addition, is the beef market covered by the NAFTA free trade agreement? If that is the case, have there previously been any disputes over the beef market, as we had over softwood lumber, for example?
[English]
Mr. Bergen: If I understand the question correctly, it is about the beef cattle check-off. The United States has had a $1 per head beef cattle check-off since the mid-1980s. They use that predominantly for marketing and promotion, and some for research as well. When Canadian cattle go to the United States to processing or feedlots and are subsequently sold in the United States, $1 from that Canadian animal goes to support U.S. marketing and promotion each time that animal is sold.
Canada has a similar program. American cattle typically have not come into Canada, largely because of exchange rates. That might change now with the par dollar. If American cattle came into Canada and were sold, that $1 per head check-off would be collected here and used for Canadian marketing and research. It is fair that way.
What Canada does not do is collect a per-head equivalent check-off on beef imports. In the past it has not been as big a deal. With the 65-cent dollar we were not importing that much beef. With a par dollar, we are. Canada will collect an equivalent check-off on U.S. imports into Canada. I am not sure who needs to do the work or heavy lifting to get it done, but I know it is under way. As far as I know it is not a trade dispute. It is just an exercise in getting it arranged.
Mr. Lee: That is to be collected on imports of beef from the U.S. and from offshore as well. That is kind of new. We had to be able to do it in all provinces and be doing a national treatment. The U.S. herd is about 10 times the size of ours, so their $1 per head check off is a little different. The equivalent in Australia is a $5 per head check-off. There are differences in what is taken and in how big of a pool that builds competitively.
On your question about NAFTA and challenges: Yes, it is an open market between Canada and the U.S. We would like to keep it that way. That is where country-of-origin labelling is such an issue because it confounds that open flow. Generally, we figure the cattle and the feed should move to where it is best for them. When things are working right, that is what happens. If there is a drought in Western Canada, cattle will probably move more to the U.S. and vice versa. If we have a better feeding advantage in Canada, then cattle will come up. That has happened to some degree this year.
In 1999 there was a countervail challenge. We were seeing cattle flow in through the northern states into the U.S. Producers did not care to see liner load after liner load of Canadian trucks go by. They were thinking, ``This cannot be just exchange or the market. These have to be being dumped into the U.S. They have to be getting subsidized by the Canadian government.'' We were taken to trade court, and it was found that the case did not have merit. However, there was a time of collecting countervailing duties. It was damaging to many producers. Who knows what happens as time goes by? Everyone has their chance to take a trade case to NAFTA or to WTO if there are grounds or if they find others are breaking the rules. That is why we were at WTO over country-of-origin labelling. The status quo is a wide open market.
The Chair: Witnesses, I will be asking the clerk and researchers to connect with you again. However, there are three questions I would like you to consider. Could you send us your responses in writing because of the lack of time in this meeting?
First, I noticed in your presentation that you have approximately 83,000 cattle producers. Could you help us define what you call ``the family farm'' in cattle producing? What percentage do you have within that 83,000 producers versus industry production?
Second, I would like to have your knowledge on the potential for energy production in the utilization of manure and animal rendering. We had a farmer talking about bioenergy previously this week.
Third, we would appreciate your comments on the role of Canada in worldwide genetic production.
Witnesses, thank you very much. You have been very knowledgeable in sharing your industry's challenges, production side, and markets with us. On behalf of the committee, we thank you.
(The committee adjourned.)