Proceedings of the Standing Senate Committee on
Agriculture and Forestry
Issue No. 11 - Evidence - Meeting of May 19, 2016
CALGARY, May 19, 2016
The Standing Senate Committee on Agriculture and Forestry met this day at 9 a.m. to study international market access priorities for the Canadian agricultural and agri-food sector.
Senator Terry M. Mercer (Deputy Chair) in the chair.
[English]
The Deputy Chair: I would like to welcome you to a hearing of the Standing Senate Committee on Agriculture and Forestry and remind you that we are from the kinder, gentler chamber of the Parliament of Canada. Our major fights happen when Senator Plett and I are struggling over the grapes on the fruit tray in the reading room, so there will be no fisticuffs this morning.
I am Senator Terry Mercer from Nova Scotia. I am Deputy Chair of the committee. I would like to start by asking my colleagues to introduce themselves, starting on my left.
Senator Merchant: Good morning. I am Pana Merchant from Saskatchewan.
Senator Unger: I am Betty Unger from Edmonton.
Senator Tardif: I am Claudette Tardif. I am from Edmonton, Alberta, as well. Welcome.
Senator Dagenais: My name is Jean-Guy Dagenais from Montreal, Quebec.
The Deputy Chair: Today the committee is continuing its study on international market access priorities for the Canadian agricultural and agri-food sector.
Canada's agriculture and agri-food sector is an important part of the country's economy. In 2014 the sector accounted for one in eight jobs in Canada, employing over 2.3 million people and close to 6.6 per cent of Canada's Gross Domestic Product.
Internationally the Canadian agriculture and agri-food sector was responsible for 3.6 per cent of global exports of agri-food products in 2014. Also in 2014 Canada was the fifth largest exporter of agri-food products globally.
Canada is engaged in several free trade agreements. To date eleven free trade agreements are in force. The Canada- European Union: Comprehensive Economic and Trade Agreement, the Trans-Pacific Partnership Agreement and the Canada-Ukraine Free Trade Agreement have been concluded and the eight free trade agreement negotiations are ongoing.
The federal government is also undertaking four exploratory trade discussions with Turkey, Thailand, the Philippines, and a number of states of the Mercosur which include Argentina, Brazil, Paraguay and Uruguay.
We are very happy to be here in Calgary to hear from western Canadian government departments and stakeholders involved in the sectors of agriculture and agri-food.
We also understand it is a difficult time for people in Alberta and we want you to know that we share your pain. I commented to someone yesterday that many of my constituents are part-time residents of the Fort McMurray area and travel back and forth from Nova Scotia to work regularly. Many of those people who are now home unexpectedly would rather be up in Fort Mac doing the good work that they do there, so we share your pain and we wish you well.
Today we are very pleased to have as our witnesses from the Government of Alberta, the Honourable Oneil Carlier, Minister of Agriculture and Forestry and Mr. Dave Burdek, Assistant Deputy Minister of Agriculture and Forestry; and from the Government of Saskatchewan, the Honourable Lyle Stewart, Minister of Agriculture, and Mr. Rick Burton, Assistant Deputy Minister of Agriculture.
We thank you for accepting our invitation and we invite the witnesses to make your presentations. Following the presentations we will have a question and answer session. As I recognize senators they will be given five minutes for questions and answers in that period and there will be as many rounds of questions as time will permit.
Yesterday we were very good. We managed to get through at least two rounds in each session. We will try to do that, but that only happens when the questioners are succinct and the responders are succinct. We want to gather as much information and knowledge as possible.
We are going to start with the minister from our host Province of Alberta, Mr. Oneil Carlier.
Hon. Oneil Carlier, Minister of Agriculture and Forestry, Government of Alberta: Thank you, Mr. Chairman, for your kind words about the tragedy that is currently happening in northern Alberta. I also thank you for your invitation to appear before you here today.
I will try to keep my comments brief. I have a background in agriculture of 20 years with Agriculture Canada. My roots are still firmly planted in the good soil of Saskatchewan. My family still farms but my love is for my adopted province of Alberta.
As Alberta's Minister of Agriculture and Forestry I am pleased to be here to talk about our industry's strengths, opportunities and challenges as well as identify strategic areas where we need to focus our attention. I hope you will find the information useful.
Our government recognizes the importance of our renewable resource sectors such as agriculture and forestry to continuing to build a strong economy. The recent struggles of the oil and gas industry have further highlighted why it is essential that we continue to support and encourage economic diversification in other sectors. For these sectors to maintain their long-term success and be in a strong position to explore new opportunities in the highly competitive global marketplace we have identified six key areas of focus that are critical: (1) supporting an increase in value-added and new product development; (2) access to capital and investment support; (3) investing in infrastructure and facility development; (4) enhancing market development and investment attraction; (5) investing in research and innovation; and (6) labour support.
While Canada and Alberta have earned a reputation as a reliable supplier of raw commodities such as wheat, canola, cattle and timber, we must continue to look for more opportunities to encourage growth of value-added industries here at home.
We were encouraged to see an emphasis on food processing in the recent federal budget. In Alberta food and beverage processing is our third largest manufacturing industry, generating nearly $14 billion in sales. We believe there is tremendous potential to build on that success.
The growing middle class globally has led to increased consumer demand for processed products. We must continue to ensure that we are well positioned to tap into those market opportunities. Enhancing our processing sector not only creates more opportunities for employment but also makes our agriculture and forestry sectors more resilient and less vulnerable to the commodity boom and bust cycles that affect primary producers.
In order for agriculture and forestry sectors to grow they need to have access to adequate capital and investment opportunities. The ability to access sufficient capital at the right time is a critical factor for expanding existing operations or starting new ones.
The fact of the matter is that agriculture and food processing operations are bigger today and require substantial investment to achieve economies of scale and remain competitive globally, adopt new technologies that will reduce costs in the long run, enhance sustainability by minimizing the use of resources such as water, and develop new products.
Alberta supports a coordinated federal-provincial approach to encourage investment in innovation in the food processing industry which studies unfortunately show is trending down. We need to encourage greater investment by the food processing industry in equipment and modernization of facilities to ensure we can remain competitive in the global market.
The need for enhanced investment and a coordinated approach goes beyond the industry itself. Support for the construction and upgrading of critical infrastructure and facilities is necessary to ensure the efficient and reliable movement of goods and services along the supply chain to market.
The year 2013 exposed some of the limitations of our transportation network when there were significant challenges moving a bumper crop to market by rail and through limited port capacity. The consequences of these limitations if not addressed have the potential to substantially affect our reputation as a reliable international supplier, undermining our market access and market development efforts.
This further emphasises the importance of addressing the recommendations of the Canada Transportation Act review in a meaningful way, including the development of a long-term infrastructure plan.
As a province that produces more food than we consume Alberta continues to focus on extending our reach into new and emerging markets like those of Europe and Asia. By diversifying our export partners we also reduce some of our reliance on the U.S. market.
Alberta will continue to provide input and support to the federal government in its pursuit of beneficial trade deals that reduce barriers for Albertan and Canadian producers and companies. We also recognize that the Canadian government has a crucial role spearheading the defence of our market access in co-operation with the province and industries.
The recent repeal of the U.S. government's mandatory country of origin labelling legislation on beef and pork was a hard-fought victory and a clear example of how important it is for advocacy efforts to be aligned. This ongoing collaboration will be essential as we address other trade issues such as the negotiation of the new softwood lumber agreement to ensure secure market access for our forestry industry.
As we move forward we are also supportive of continuing our strong relationship and collaboration in target market activities through joint trade missions, the consulate networks and Alberta's international offices. We also must look for opportunities to work together to encourage interest from foreign investors in our agri-food operations which in turn helps support economic growth, job creation and further integration into the global economy.
In Alberta an important tool we have to facilitate growth in the food processing sector is our development centre and business incubator in Leduc. The facility works with local companies and foreign investors looking to expand in the Alberta market. This facility provides research and development equipment, business coaching and assistance to companies to help them become ready to export. As a matter of interest we are expanding that facility to include 10 more suites because there is actually a waiting list for companies looking to take advantage of it.
We know that historically low levels of investment in research and development have been a longstanding challenge. We also know that part of the foundation of Alberta's and Canada's efforts to be a leader on the world stage must be a commitment to innovation. It is the heart of industry's ability to adapt and evolve to overcome challenges such as pests, diseases or drought as well as meet the changing demands of the marketplace.
Sociologists are telling us that there will be two billion more people on this planet in the next few decades. I think we have an opportunity to take advantage of that. I would suggest to all of us that perhaps we have a responsibility to take up that challenge as well.
The successful application and commercialization of research and development help increase productivity and production, allowing for the more efficient and cost effective use of resources, enhanced sustainability by reducing the environmental footprint of agriculture and forestry operations, and enhanced food safety and animal health and welfare which build consumer confidence and strengthen industry's social licence.
We know that the strategic programs available under Growing Forward 2 have been important to help with research, adoption of best practices as well as market and business development. We are optimistic that the next generation of federal-provincial programs which are currently under development will build on this success and continue to recognize the flexibility needed for programs in each province to meet the unique needs of their sectors.
I would like to highlight another key factor that influences our cost competitiveness in the international market, and that is access to labour. Unfortunately a chronic shortage of labour especially in the food-processing industry has been a significant obstacle. While the downturn in the oil industry has eased some of the intense competition for workers we can expect those challenges to return when the price of oil recovers.
Alberta food processors have been relying on the Temporary Foreign Worker Program and Alberta Immigrant Nominee Program to address labour challenges and would like to see more flexibility in the number of workers that the can be accessed through these programs. We also know that these programs are not designed to be a permanent fix and that long-term solutions need to be found to help ensure a reliable pool of labour. Otherwise the competitiveness of the food processing sector in Alberta will continue to be compromised.
I would like to briefly touch on some trends that are influencing how our agriculture and forestry sectors continue to evolve. We know that the demands of consumers both abroad and at home are changing. They are increasingly interested in where products come from and how they are produced. Food safety, animal welfare and environmental sustainability considerations have become measures by which many consumers make their purchasing decisions.
An important tool to provide assurance in food safety and our ability to address animal disease is a robust traceability system such as the one in Alberta. With the federal government currently consulting with stakeholders and proposed amendments to health of animal regulations we must continue to work together to build an effective national system that addresses areas of concern such as cost, confidentiality and compliance.
In Alberta we are committed to working with producers to enhance education and encourage compliance. Growing Forward programs such as funding for radio identification equipment have been important tools to support this work. Major food companies such as McDonald's are also taking steps to address consumer trends by developing new sustainability standards in partnership with the Canadian Roundtable for Sustainable Beef and pilot projects in Alberta.
These standards will be the basis of their product sourcing decisions in the future. The federal and provincial governments are also taking a leadership role in addressing climate change. In Alberta, for example, we have accelerated the phase-out of coal-generated electricity, are encouraging an increase in renewable energy sources and are introducing a carbon levy.
Like all industries our forestry and agriculture producers will also continue to adapt their practices to reduce their environmental footprint as well as the use of resources such as water. These industries have come a long way over the years to improve their operations through the adoption of new techniques and the use of more efficient equipment. I have every confidence that they will continue to adapt. It is not only the right thing to do but it makes economic sense.
While change always carries with it some challenges I know that advances in sustainability with strategic support for government will ultimately result in our industries becoming more competitive globally.
That concludes my presentation. I have included in our slide deck that we will be presenting later some stats about are agriculture industries. Thank you.
The Deputy Chair: Thank you very much. Minister Stewart, please.
Hon. Lyle Stewart, Minister of Agriculture, Government of Saskatchewan: Thank you very much and thank you as well, Minister Carlier. I am honoured to be presenting to this committee and I am doubly honoured to be presenting Saskatchewan's very dynamic agriculture industry.
Agriculture is a major driving force of Saskatchewan's new economy. Trade plays a fundamental role in that. Saskatchewan is home to roughly 40 per cent of Canada's available arable farmland. The agriculture industry accounts for nearly 10 per cent of our provincial GDP and nearly one-half of our total exports.
Saskatchewan is also proud to be Canada's top agri-food exporter. In 2015 we led the country in agri-food exports with a record setting $15.3 billion worth of agricultural products exported from Saskatchewan around the globe. That is the fifth year in a row that we have broken records for agricultural exports. It represents almost 25 per cent of Canada's total agri-food exports to the world. We are pleased with this achievement and I know the industry is very proud of it.
However we see further opportunities for productivity, diversification and growth. To strengthen Saskatchewan's business and trade potential our government has a vision for 2020 and beyond. We call it the Saskatchewan Plan for Growth. In this plan we have set ambitious targets for agriculture including increasing crop production, value-added revenue and agricultural exports.
We are also striving to be an international leader in biosciences. These targets reflect Saskatchewan's ambitions to build on our position as a leader in agriculture while achieving greater economic and social prosperity through trade.
However we can't do this alone. Advancement of market access and infrastructure considerations by the federal government and our key trading partners is necessary. We need to foster a more dynamic and competitive trading environment.
I would like to take this opportunity to highlight some of Saskatchewan's key agricultural market access and capacity priorities. These include the Canada-European Union: Comprehensive Economic Trade Agreement, CETA, and the Trans-Pacific Partnership Agreement, TPP. These agreements offer significant opportunities to expand trade benefits for our agricultural producers and exporters.
Trade agreements improve market access in two important ways: first, by reducing tariffs in key markets that directly impact the competitiveness and profitability of our agriculture and agri-food sector and second, by strengthening the trading regime in areas related to non-tariff barriers. They can streamline international transactions and unlock wide-ranging benefits through agricultural supply chains.
On the point of tariff reductions industry has highlighted several potential benefits. According to the Canadian Canola Growers Association, Japan's TPP commitment to eliminate tariffs on canola oil over five years would provide opportunities of up to $780 million annually in additional oil and meal exports from our province alone.
In the grain sector Cereals Canada has highlighted estimates for wheat showing a potential growth of 20 per cent over the six million tonnes currently exported by Canada into the TPP region.
The Canadian Cattlemen's Association has indicated that under TPP Canada can expect double or triple its annual beef exports to Japan alone to nearly $300 million. The Canadian Pork Council has estimated that TPP could increase the demand for Canadian pork in the amount of 1.2 million extra hogs a year.
However if Canada is not a part of the TPP our agricultural sector would face losses due to increased competition from other countries with preferential market access through tariff reductions. The Canadian Pork Council estimates its sector could lose $330 million or more in export sales if we are not included in TPP.
TPP allows us to prevent these types of losses by strengthening market access and ensuring a more level playing field with some of our largest trading competitors such as Australia and the United States.
With respect to non-tariff barriers CETA and the TPP contain obligations to foster closer co-operation between member organizations responsible for standardization, conformity assessment and accreditation. In addition TPP includes enforceable provisions designed to provide minimum standards of environmental protection in TPP countries. This promotes greater environmental sustainability.
These agreements also support trade in products of modern biotechnology through enhanced transparency, co- operation and information sharing. We are hopeful that an improved dialogue on modern biotechnology enabled by CETA and the TPP will reduce some of the trade risks currently faced by the developers and adopters of modern biotechnology.
These types of commitments create a more predictable and transparent trading environment that facilities international commerce. While there will continue to be challenges facing trade in the products of agricultural biotechnology we believe that commitments on dialogue and engagement are steps in the right direction. Continued progress on this front is needed to grow agricultural production through the development and adoption of modern technologies.
Saskatchewan strongly supports the ratification of CETA and TPP and urges the federal government to proceed with ratification. Throughout negotiations and the federal consultation process Saskatchewan's agricultural stakeholders have been clear in voicing our support for these agreements. Failure to ratify either of these agreements would result in major setbacks for our agriculture industry and our economy.
Looking beyond CETA and TPP, Saskatchewan also calls for further liberalization in other key markets, particularly the substantial and rapidly growing markets of India and China. In 2015 India was Saskatchewan's third largest export destination for agricultural products with significant demand for pulses. In fact nearly half of Canada- India trade is Saskatchewan agricultural products. We hope Canada will continue to pursue ongoing negotiations with India in an effort to strengthen our close ties and solidify long-term market access.
In 2015 China was our second largest export destination for agricultural products. One of our largest agriculture export competitors, Australia, has already completed negotiations for a trade agreement with China. This leaves Canada at a disadvantage. Keeping pace with our competitors in this important market is essential to the long-term competitiveness and prosperity of Canada's agricultural sector.
If we are highlighting some of Saskatchewan's other market access priorities I want to quickly touch on the broader impact of enhanced agricultural trade for innovation. Given Saskatchewan's position as an export oriented province, expanded access to markets has a strong influence on our innovation capacity. Our agricultural research system is greatly benefited by producer levies which are largely directed towards public research.
According to Saskatchewan's ag-biotech industry organization, Ag-West Bio, western Canadian crop producer organizations invest roughly $50 million per year into public research institutions. With producer revenues tied to trade market access realities ultimately influence the resources available for investments in productivity enhancing technologies.
These linkages mean that expanded trade opportunities like those enabled by agreements such as TPP and CETA can strengthen Canada's leadership in agricultural research. TPP and CETA contain beneficial but limited commitments on biotechnology. Yet challenges remain around the application of biotechnology.
In particular the issue of low-level presence, LLP, related to trade in the products of agricultural biotechnology causes considerable uncertainty for those who adopt and develop these new tools. Innovation and adoption of biotechnology are needed to respond to pressing climate change and sustainability issues.
Saskatchewan experiences have demonstrated that genetically modified crops, GM crops, have increased crop yields dramatically while reducing tillage and pesticide use. Plants can also be adapted for climate change stresses with traits such as drought tolerance. This has important implications for food security and the environment. Yet developers and producers adopting the technology face challenges due to lack of harmonization on approvals for crops in different countries. This can lead to trade disruptions.
Low-level presence becomes an issue when approval of genetically modified crops is authorized by an exporting country but not yet secured by an importing country. It occurs when low levels of an unapproved GM event are found in an imported shipment. With the increased commercialization of GM crops around the world the chances of such occurrences showing up in commercial shipments increase day by day.
The enforcement actions taken by importers when unapproved biotech events are detected even in small amounts can be very disruptive to trade. This creates risk across the entire supply chain. Recognizing these risks Canada has taken a leadership role in engaging the international community for co-operation. However more work is needed to minimize the market access challenges presented by low- level presence. Therefore Saskatchewan encourages the federal government to continue its leadership in addressing this issue.
Canada must work toward developing further policy solutions to strengthen international trade in the products of biotechnology. A trading environment where we have predictable, transparent and science-based rules is essential. It is required to continue advancing our production capabilities and adapting to the challenges posed by climate change.
Another important area with market access implications relates to maximum residue limits or MRLs for crop protection products. The responsible use of crop protection products plays an essential role in expanding global food security and strengthening production on the Canadian prairies.
However capacity limitations within Codex and differing domestic approval systems result in lengthy delays in establishing MRLs for crops. These limitations unnecessarily complicate trade as many importing countries, especially those with developing economies, depend on Codex to establish MRLs. Without MRLs or maximum residue limits being in place they can apply zero or near zero default tolerances for residues which result in unnecessarily onerous technical trade barriers.
The lack of internationally synchronized maximum residue limits has the potential to cause serious market access issues. Food producers, manufacturers and distributors supplying global markets must comply with the MRL of each importing country regardless of the demonstrated safety of higher MRLs.
Industry players such as Pulse Canada, Canola Council of Canada and Cereals Canada are taking a leadership role in advocating for progress in this area. We urge the federal government to continue supporting industry efforts relating to MRLs especially through producer awareness and leadership on international standards setting.
Finally I want to talk about the transportation infrastructure needed for Saskatchewan and Western Canada to take full advantage of global market opportunities. Saskatchewan consistently produces over 30 million metric tons of grain annually. We expect yields to continue to increase. Our province exports the majority of agricultural products we produce, all but about 5 per cent. That is we export 95 per cent of all agricultural products we produce in the province.
At the same time our producers and processors have some of the greatest distances to transport their goods to port. We know that rail efficiency has increased over the past decade. We need to ensure shippers have tools like extended interswitching that allow them access to rail service at competitive market rates and more accessible and effective dispute settlement mechanisms among railroads and shippers.
Given our reliance on transportation it is essential that the supply chain is efficient, reliable and has the physical and regulatory infrastructure to move our growing exports to international markets. Beyond rail we encourage the federal government to examine the growing need for port capacity on Canada's west coast.
Saskatchewan producers look forward to meeting growing demand in Asian markets. However adequate port infrastructure is needed to ensure our ability to service growing demand over the longer term. We need to ensure Canada's transportation system can support future growth safely, reliably and efficiently.
I am a Saskatchewan farmer. We grow grains, oilseeds and pulse crop and raise beef cattle on our family farm in southern Saskatchewan. I am very passionate about these issues. I hope I have been able to illustrate how productive and important our industry is to Canada. Our province of 1.1 million people continually exporting in the neighbourhood of $15 billion worth of agricultural products every year is not only a major contributor to our economy but a contributor to the Canadian economy as well.
Agriculture is an industry that is dependent on the hard work of many individuals. I hope all of us can work together to ensure Canada remains one of the best countries in the world to do business with and particularly business related to agricultural trade. Thank you very much.
The Deputy Chair: Thank you both. We appreciate your presentations.
I thought for a moment we were going to escape a session on the railway issue today. Thank you, Minister Stewart, for focusing on that. Every witness we have heard from in the last two days has raised rail.
As a matter of fact I personally am trying to have a meeting with both ministers concerned with respect to extending the ongoing issue of interswitching. There is a deadline here so I am undertaking that on my own. It is not that the committee has asked me to do it. I will report back to all the witnesses if I have any success.
It would have been easier if I was still a member of the Liberal caucus, though, because I could just sit down next to them on a Wednesday morning. However that is political history.
We are now going to start with questioning and again please be succinct.
Senator Unger: Welcome. I am very happy to have the first opportunity to meet Minister Carlier and Minister Stewart.
Minister Carlier, you expressed a lot of plans for Alberta. I am personally disappointed that you didn't speak at all about our oil industry which has in fact been the economic engine of Canada for many years. Yes, we are struggling because mainly of forest fires and on the subject of forest fires I would appreciate if you would comment a bit about the situation.
I saw the premier on TV very briefly this morning. I know it is an ongoing issue so my first question would be to ask you to comment about where those fires are. Are they under control? What is happening?
Mr. Carlier: Thank you, senator, for this opportunity. Just to touch on your opening comments on oil, I concentrated my comments on agriculture. Our government has right from the beginning been talking about diversifying the economy. I want to be clear to you, and I hope I am being clear to all Albertans, that does not mean diversifying away from oil and gas. That means diversifying the oil and gas industry as well because it is our economic driver even in these times and will continue to be so, I would suggest, for generations to come. Oil and gas continue to be important.
On the wildfires I haven't seen the updates today on the one called the Horse Creek fire but I suspect it has burned close to 500,000 hectares. To put that in context we had a really bad forest wildfire season last year where the total forest burned was about 500,000 hectares. This one fire is already close to surpassing what all the wildfires consumed last year. It is a bad fire.
We have another one near Peace River that is mostly in B.C. but is somewhat in Alberta as well. There are a number of wildfires this year already. It is pushing 500. My concern is that most of them are not lightning strikes. There is only one other cause for a fire and that is human cause.
Because of an extremely dry winter there is a lot of dry grass. It is not having an opportunity to green up because there is not a lot of moisture. I hope my concern is getting out to the public: Be careful. Don't be that next person who starts a wildfire that for all intent and purposes should have been preventable. That is a problem.
The wildfire in Fort McMurray was characterized by the fire chief of that city as a beast. It has been but I thank all the first responders, the municipal officials, the provincial wildland firefighters and others who have successfully evacuated without any serious injury or loss of life 88,000 people out of a city with one road in/one road out. I thank a lot of people for that.
Going forward it is going to be an effort from all of us, all Albertans, all Canadians, to rebuild that city as important as it is to the economic livelihood of Alberta and of Canada.
Senator Unger: My next question has to do with taxes. There are a lot of ambitious plans to diversify Alberta's economy. That has been the dream of Alberta going back for a few decades. Effective January 1, 2017, Alberta will be implementing a carbon tax. Additionally the federal government is pushing for a federally mandated minimum carbon price. There are going to be more and more taxes. First of all the carbon tax will affect everybody but then we start taxing industry. The amount of future investment that is pulling out of Alberta is hugely significant. I am wondering if the government is making a connection between high taxes and losing business and industry.
Mr. Carlier: Even with the carbon levy we will still be one of the lowest tax regimes in Canada because there is no fee for health care, for instance. There is no personal income tax and it will remain to be so. The agriculture fuel will be exempt from the carbon levy. We will be able to do that for agriculture.
I have heard some criticism that raising the price per litre of fuel next year by 4 cents will somehow damage the economy. The price of fuel fluctuating over the years as much as 20 cents a litre for some reason didn't so I am not sure if I agree with the sentiment that a 4-cent per litre levy will hurt the economy that much.
As a matter of fact our philosophy is that it will help because all that money will be reinvested in Alberta, back into industry, back into finding innovations around addressing climate change issues and making sure that we are a world leader in climate change. We are looking forward to having those innovations, having those efficiencies for all industries.
Senator Unger: I have one last question. You talk about the carbon tax, that all that money will be invested back into industries. I know that doesn't always happen. Where will that revenue go? Governments have good intentions at times but the reality is different.
Mr. Carlier: Premier Notley is a very determined person. When she says something will happen, it will happen. Both her and Minister Phillips, the Minister of Environment and Parks, have been adamant that the moneys raised through the carbon levy will go back into diversifying the energy economy into a green economy.
For instance, the state of Texas produces twice as much renewable energy as Alberta does. We need to shape Alberta as an energy province, not just in oil and gas. As important as oil and gas are and will remain, we need to fashion ourselves as an energy province whether it is oil and gas or renewables.
Senator Merchant: Welcome, we are honoured to have you here today. We are trying to work together with you to make some recommendations regarding agriculture, regarding our exporting abilities and regarding the partnerships we are trying to form around the world. I sincerely thank you this morning for coming.
I have known Minister Stewart for a long time. He is passionate about this. As he said, he farms and he has been the Minister of Agriculture for a number of years. His advice is very sage, and I thank him very much.
Yesterday we heard from several different groups of people involved in the farming industry, people who grow canola and grain and food generally for us. They all mentioned that we really needed education to be sure that we all understand.
You have pointed out some of the impediments in forming trade agreements. For instance, Minister Stewart mentioned that a barrier to concluding an agreement was that CETA genetically modified products. You also said that it was important for the federal government to have very clear rules.
What are your departments doing to educate the stakeholders in our provinces to grow products that will be acceptable in other countries?
Mr. Stewart: I would be happy to take that at least first, and thank you for your kind remarks, Senator Merchant. We certainly agree with the underlying premise of your question. It is important to educate our own people first as we try to spread the good news about science-based agriculture around the world. We have a substantial ag awareness effort in Saskatchewan which starts with our school children but doesn't end there. We do certain amounts of advertising and outreach to the general public as well but with a major focus on school children in the grade 5 to 8 level. We have a program specifically for them called Ag in the Classroom. It has received pretty good uptake from the education community around the province.
There is such a misunderstanding of modern agriculture that we have to pretty much start at a young age in our efforts to re-educate the population as to both the economic and environmental benefits of modern science-based agriculture. We are spending a fair amount of money and making a substantial effort to do that.
Senator Merchant: I am glad that you mentioned the education of the general population, but what about the agriculture industry? I think farmers were saying themselves that they need to understand.
Mr. Stewart: Yes. Our producers in Saskatchewan are very early adopters of new technology. We spend a lot of money in research and outreach to inform our producers about the latest developments in research. History shows that our producers have been among the earliest producers in the world to adopt new technology. They are very aware and they have become aware because they pay attention to what is available for them.
Their keen interest is to increase production and the quality of the products they produce. They are motivated to pay attention to what is out there in terms of new technology. Early uptake is something that we almost take for granted now with them.
Mr. Carlier: It is somewhat surprising that Alberta is the most urbanized province in the country. We have 90 per cent of our population living in one of the major cities or one of the smaller cities. That leaves 10 per cent of the rest of us in rural Alberta.
There is the danger of becoming more and more disconnected even though a lot of urban people will feel they are connected to the farm because their parents, grandparents or aunts, uncles and cousins are still on the farm. It is important that we maintain that connection so that they know where agriculture is from.
The educational process in Alberta is fairly good but there is room for improvement so that our urban relatives and friends have an understanding of the importance of agriculture. Agriculture is the second largest industry in Alberta, followed closely by forestry and tourism, but it is important we don't lose the connection to agriculture. It is important that all our consumers, starting with those at home, know about naturally raised scientifically enhanced foods. Everybody gets on the Internet and reads articles on Wikipedia for five minutes and becomes an expert.
How do you argue with someone who tells you right to your face, "I don't your facts''? It is tough. It is a difficulty. At the same time we need to be very conscious of our social licence. We don't need some fool with a stick in a feedlot somewhere and some other fool with a camera. That hurts us all. Those incidents that do pop up are extremely small examples. We do all we can to ensure we have that social licence going forward. It is important to protect our markets. It is also important to protect our reputation both at home and abroad.
I agree with absolutely everything you said, senator. The challenge is the 90 per cent of the population that is no longer connected to agriculture.
The Deputy Chair: Minister Stewart, you mentioned railways in passing but you also mentioned the growing need to examine port capacity on Canada's west coast.
I represent Nova Scotia and the Port of Halifax is the best port on the eastern seaboard. We have not had a labour dispute at the Port of Halifax since 1976. Some people in this room weren't even born at that time. That gives you an idea of the labour stability. The same cannot be said about the Port of Vancouver.
You haven't addressed that. You talked about a growing need for port capacity on Canada's west coast. You didn't talk about capacity and reliability. Have you expressed your concern to federal officials about the reliability of the Port of Vancouver?
By the way I also sit on the Transport and Communications Committee so that is why I am focusing a bit on the reliability of the Port of Vancouver. It becomes a bottleneck for getting your good products to market in a timely fashion because every delay at the Port of Vancouver reduces the quality of the excellent products that have been grown either in Alberta or Saskatchewan that both you gentlemen represent.
Mr. Stewart: Yes, that is a good point. Reliability from a labour standpoint is an issue from time to time. I don't think it is appropriate for me to speculate on the reasons for more labour instability in the west coast ports than in your Port of Halifax.
The Deputy Chair: Oh, come on now.
Mr. Stewart: I don't think I will go there. For sure that's an issue but it goes to port capacity. Generally speaking I don't know what government can do about labour instability but there is no question that the Port of Vancouver is a bottleneck. .
There has been a lot of money spent recently by the private sector and by the City of Vancouver on a welcome attempt to make it more accessible and to expand the facilities there.
Prince Rupert is an excellent natural port, probably the best one in North America. Unfortunately it is only accessed by one railway, CN. Its great potential may not be realized as long as that is the case.
As for using eastern ports, I wish we could use eastern ports more. Since I was a young fellow the world trading patterns have changed and our biggest markets are in the Pacific.
The Deputy Chair: Thank you, Mr. Minister. The number of contracts that are signed to operate the Port of Vancouver compared to other ports like the Port of Halifax is significant. At the Port of Halifax we might have two or three contracts to sign to operate the entire port. It is not the way it works in Vancouver where there are multiple contracts. This means multiple opportunities for something to go wrong and they seem to do just that.
Senator Tardif: I reaffirm the comments made by my colleague Senator Merchant in saying how much we value your presence here this morning and thank you for being here.
Minister Carlier, you indicated in your presentation that there was an increased consumer demand for sustainable agricultural production. I would ask both of you: Have you put in place programs that will support producers as they pursue sustainable production?
Mr. Carlier: That is a good question. That question came up in Question Period just yesterday.
Senator Tardif: Oh, really. I did not follow it.
Mr. Carlier: Fair enough. I think why it came out in Question Period and why you and a lot of consumers are asking about it is that it is topical. For the most part it is being led a lot by industry being the experts in their products.
I believe the United States has taken a lot more regulatory role in what is certified and what it is not. Up here it is not necessarily as legislated as perhaps it could be. I am not sure on that.
McDonald's has a sustainability pilot project. All McDonald's burgers come out of their patty processing plant just west of Edmonton. In Canada they all come out of Alberta so it is all pretty much Alberta beef used in McDonald's restaurants. Take that, Earls.
I had the opportunity to meet the international president of McDonald's and the Canadian president. They were very excited about this pilot project that is just starting to wrap up. There is one example of industry coming up to the plate realizing that all of us in society have become foodies. We are more interested in where our food comes from and the sustainability of it.
There is some confusion among the general public about what is certifiable, what is humane raised and what is organic. It is a bit of a confusing mess for most consumers and perhaps for some wholesalers.
Senator Tardif: But has the Alberta government put programs in place to help sustain these producers?
Mr. Carlier: We are a large contributor to the Canadian Roundtable on Sustainable Beef, as an example, to start developing strategies around what that means and what we can use to make consumers more welcome to the products. The Alberta Livestock and Meat Agency has done a lot of work as well but we are working in partnership with industry in developing that.
To answer your question directly, senator, there is not a lot of regulation around that. I am not sure if that is necessary, knowing the lead the industry is doing and the good job industry is doing. I don't think it is necessary at this point anyway.
Mr. Stewart: Through Growing Forward 2 programming we support such things as environmental farm plans in Saskatchewan. We support industry and sustainability roundtables for both the grain sector and the beef sector.
We are participating with industry currently on broad-ranging research in the grain sector and specifically research for feed additives in the beef sector that can reduce methane gas emissions by cattle and things of that nature. Generally speaking the industry is way ahead of us in Saskatchewan.
Starting about 1980 the grain industry changed the way that farming was done in Saskatchewan and Western Canada eventually and the western part of the United States. It largely started in Saskatchewan around 1980 just before zero-till and continuous cropping. It virtually eliminated the previous practice of summer fallowing which was a huge emitter of CO2 not only from the power it takes to pull heavy tillage implements multiple times at growing season but, more important, through the CO2 that is released when fields are tilled, fields that contain decaying plant material. That CO2 goes directly into the atmosphere. It was a huge emitter. It made agriculture a huge emitter.
We started in 1981 on my farm and of course my neighbours thought I was crazy. For a number of years it looked like they might be right but it turned out that it worked. It has made farming more profitable, dramatically increased production and turned our soils into a carbon sink rather than a huge emitter of CO2.
The industry did that with some background help from government research. We are pretty proud of what our industry has done and we try to keep up with them.
Senator Tardif: Further to that, what are your governments doing to help mitigate pest and disease challenges?
Mr. Stewart: There has been ongoing research particularly in the crop sector on insect pests, funguses, and weed control, something that is very much under control in western Canadian agriculture. It used to be more of a problem before modern science pretty much got on top of it, but funguses and insect pests seem to adapt to the times.
It seems that we are always fighting new issues. For instance, clubroot in canola is an issue for Alberta and western Saskatchewan. We do a lot of research on that and a lot of monitoring. It is being contained at least and controlled over time.
A lot of work is done through the Veterinary Infectious Disease Organization at the University of Saskatchewan on insect pests, biodiseases in livestock and things of that nature, with particular focus on diseases that can be spread from livestock to people. A number of vaccines have been invented there and are now used around the world.
Precision farming or more specific application of fertilizers and chemicals only where they are needed is something that is in its early stages but being advanced by our producers in the province and supported by government research. These are some of the things.
Mr. Carlier: Even in these tough economic times we are able to maintain the funding to the agriculture services boards in Alberta. These agriculture services boards do the work in the counties and the municipal districts on identifying issues around fusarium, clubroot, grasshoppers or the introduction of new weeds. They are really on top of that. They are doing a really good job on that even though there are challenges.
Last year there were challenges around finding clubroot what was thought to be clubroot-resistant canola. They found instances of clubroot. That is an ongoing challenge. It will probably never not be but it is important that we maintain our diligence.
The introduction of new pests and new weeds happens. We are proud that Alberta is rat-free but what about the weeds? A new jimsonweed was found last year in the southeast corner of Alberta and is actually a deadly toxic plant. We have to always be conscious of that and being able to keep up with it. It is important.
There are new technologies, as Minister Stewart talked about, around the variable application of fertilizers and different chemicals that are going long way for our environmental stewardship social licence as well.
Alberta has over 40 per cent of the irrigated land in Canada or about 1.4 million hectares. I can't remember the percentage that is actually cultivated but it makes up a very large portion of about 25 per cent of our cash sales. It is important for our specialty crops.
There is opportunity and challenges there as well for different pests to be introduced as we introduce new specialty crops. It is important to diversify but we always have to be vigilant in making sure of being able to keep track of that with research and continuing to stress how important research is.
The Deputy Chair: Minister Stewart, you mentioned land use and your change in land use. I remind everyone that our former colleague Senator Herb Sparrow from Saskatchewan was a world leader in talking about proper land use. His 1984 report from this committee which he chaired in those days called Soil at Risk: Canada's Eroding Future had a tremendous effect. It may have been part of what led you to make some changes in your own farming operation.
Sometimes people forget what reports from government committees can do. Senator Sparrow had a tremendous effect on farming in Western Canada. His books and writings on the subject were quoted worldwide and had tremendous effect on farming elsewhere. Saskatchewan has been a leader for many years.
[Translation]
Senator Dagenais: First of all, I would like to thank our guests. I am of course delighted to meet ministers from western Canada. Mr. Carlier, each time I come to Alberta, I always enjoy Alberta's famous beef, and since Tuesday, I have indulged in it. It is as good as ever.
That said, in your presentation, as Senator Mercer noted, you stated that sooner or later, perhaps even tomorrow, we will have to address the drought problems. California, as we know, is having real drought problems. Has your government looked into ways of preventing drought, or at least into land irrigation?
[English]
Mr. Carlier: It is most certainly on the top of my mind and on the minds of most Albertans now especially with what is going on in our forested area. We have a lot of forested area in Alberta. We have a lot of cultivated agriculture land, pastures and forage as well.
It is already May. It should be one of our wettest months and it hasn't proven to be so. I saw a map yesterday showing red being the driest parts of Alberta and there is no other colour but red. We are extremely dry.
Specifically on our irrigated land last year and for this year as well we had pretty good snowpack for drainage into our irrigated reservoirs. The main reservoir that feeds most of the irrigation is the St. Mary Reservoir. It dropped a little. Everything else was normal. I don't foresee any circumstances where our irrigated crop will be in jeopardy because of the drought. As a matter of fact summer last year was quite hot and they did extremely well in the specialty crops.
Our Agriculture Financial Services Corporation is our crop insurance as well as lending for rural Alberta. It has a full suite of management programs for drought that is very well subscribed to. Close to 90 per cent of producers use some sort of insurance product through there. The majority of the rest have insurance products through some other means. We are in good shape going forward.
It could be another drought year. I am still hoping for rain but we are in pretty good shape to support our farming community with some of those products and in partnership with the Canadian government. We need to be aware of that and be ready for the circumstances that could be there.
[Translation]
Senator Dagenais: Thank you, Mr. Minister. I also have a question for Minister Stewart.
Mr. Stewart, pork producers in Atlantic Canada have told the committee that the lack of federally-regulated abattoirs limits their ability to export to other provinces and other countries. Are western producers facing the same problem?
[English]
Mr. Stewart: We are not in terribly bad shape currently. Most of our hogs are actually slaughtered in Manitoba around the Brandon area, but there is enough capacity to increase production in Saskatchewan and continue to have those hogs slaughtered in Manitoba. There is a smaller plant at Moose Jaw, Saskatchewan, as well.
We may possibly see expansion of federal slaughter plants if we proceed with CETA and TPP. While there is a distinct possibility of that we certainly have adequate and excess capacity in Saskatchewan and Manitoba for current demands.
[Translation]
Senator Dagenais: You mentioned the TPP. There will certainly be demand to expand your products, including pork. So I would imagine that you are already considering some expansion or at least improvements in order to reach sufficient production.
I have another question, Mr. Chair, for Minister Carlier.
In your presentation, you mentioned the importance of product traceability. Can you tell us about the labelling of consumer products for export? I imagine you are aware of the issue of consumer labelling, and in particular the labelling of products for export.
[English]
Mr. Carlier: Knowing that Alberta has 40 per cent of the cattle herd there is a real focus on traceability around our animals to make sure that we can maintain that. If there are any issues around biosecurity for whatever in reason in pork as well as beef we are able to keep track of that. We are able to trace back to the farm or the processing or whatever the issue might be as quickly as possible to ensure that we don't lose our market access.
A few years ago we had one incident again of BSE in the same farm that had that incidence some years ago. Even though it was a small incident it almost instantly had an effect in our markets in particular in South Korea. They had put restrictions in place. Traceability — tracking animals, tracking premises and the tracking itself — was really important to maintain. We had to make sure that the world knew we had biosecurity measures in place to ensure that we continue having a healthy product.
It comes down to health. We don't want anyone out there to be sick in any way, shape or form because. First off as humans we don't want to do so and, second, we want to make sure we maintain our market access as much as possible. We don't want borders closed for any reason and especially with biosecurity.
The Deputy Chair: I was on the committee during the BSE crisis. It was shortly after I was appointed and joined the committee. It was a great education for me. I learned the most from Alberta farmers who came before the committee. They were staunchly independent. They didn't want government interference and maintained that throughout the whole crisis. They understood that we were all concerned and all wanted to try to help.
I guess many of us thought afterward that Premier Klein was probably right that Canadian honesty and fair play get in the way sometimes. Premier Klein said "Perhaps we should shoot, shovel and shut up,'' but that wasn't the right thing to do and we persevered. The industry really needs to be credited and all Albertans need to be credited for going through that problem and surviving it.
A minor blip recently happened. It didn't last because there is a faith in the ability of the Alberta government and the Canadian government to manage a problem when it comes up. I thought a real lesson for all of us came out of what was a very serious issue in the original crisis.
Senator Unger, please.
Senator Unger: I would like to continue with Alberta beef. What can you tell us about the decision that Earls made? Alberta is the third largest producer of organic livestock in Canada with a total of 41 producers. They were all in serious jeopardy by Earls' decision.
What was the issue? Why didn't our beef producers live up to what Earls' expectations were? Do you think this was just a one-off or do you think that this could be, and hopefully not, a continuing problem?
Mr. Carlier: That is a very good question. I didn't personally have a conversation with anybody from Earls, but I heard and we all heard the media talking about how their head chef said they want humanely raised beef because it tastes better. It was one of the many odd things that came out of that controversy.
They also said that they talked to the industry and the industry themselves told them they couldn't meet their products. You will be hearing a bit later this morning from a representative from the Alberta Beef Producers who will tell you he knows of no one in the industry that they spoke to. So who they spoke to, we have no idea.
You are absolutely right. The product is there. They have come to realize because they reversed their decision that they are able to find what meets their needs in Alberta. I am hoping it resonates with the public as well that whatever they are looking for — humanely raised, certified organic, organic, natural and all the other buzzwords out there — is available in Alberta.
Even the cow-calf guys raised on grass are within minute details of being organically humanely raised. It was a poor decision. Earls recognized it within a fairly short timespan that it was a poor decision.
Earls is a pretty large organization. They have about 38 different restaurants. If it hadn't made any news, if it hadn't become public, it wouldn't have made a blip of difference to producers themselves, but because it became public was where the issue was.
I don't want anybody, consumers both domestically or internationally, to think for some reason that Alberta beef is in some way inferior. It most certainly isn't. Producers and processors across Canada and the United States know the quality of Alberta beef is some of the best.
Senator Unger: Minister Stewart, Premier Brad Wall commented publicly about using GMO crops as being beneficial and safe for farmers, consumers and the environment. I really applauded his honesty or his opinion on this issue. We have heard a lot about how bad GMO crops are and the dangers they represent especially to organic farmers. I would like your comment on that.
Mr. Stewart: Thank you very much for the question. There are few food safety issues that have been as extensively researched in the world as GMOs have. Every peer reviewed study that has ever been conducted has found that they are not only safe but virtually undetectable in terms of food quality from non-GMO products.
GMO is a shortcut in developing new and better types of plant, better breeds and so on. It has no effect on the end product in any way, shape or form except to make it more plentiful, healthy and available around the world.
It is not only a responsibility of ours to produce as much healthy food as we can to feed the world but an opportunity. Saskatchewan feels the responsibility part of that as much as we do the opportunity. We only have 1.1 million people and we have all of this production. We are one of the few jurisdictions in the world that has the ability to feed millions and millions of people so we take our responsibility seriously.
We continue to increase yields. We use a science-based approach toward food production. We are assured. We know that that is safe. Many scientific peer review studies are done to prove it. We are very happy with that. For those who say the chemical companies and Monsanto are doing the GMO studies, they have done some but the vast majority does not involve them. We are not only assured. We are certain that GMOs are perfectly safe in every respect.
The Deputy Chair: I often wonder, minister, how we are going to feed nine billion people on planet earth by 2050. If we were to exclude GMOs, feeding 9 billion people is going to be impossible. As we look at it today it is going to be an absolute catastrophe if we don't figure out a way to do it by 2050. It is probably impossible to do without the use of GMOs. If we can't increase our production by one way or another we are never going to get to that point.
Senator Merchant: Minister Stewart, congratulations on meeting your 2020 target for agri-food by 2015. Could you tell us how you accomplished that? Maybe we can learn something from you. Can you tell us if you still face some challenges, technical challenges or others in trade? Perhaps, if there is time, the Alberta Minister could also tell us about the challenges that he faced in the agri-food sector regarding trade barriers, please?
Mr. Stewart: Part of me wishes that I or we could take credit for that, but it is not so. It is our producers. Like I said before they are among the earliest adopters of new technology on the planet and they continue to surprise everybody.
When we announced our goal of producing $15 billion worth of exports one major financial writer in Saskatchewan wrote that I specifically was dreaming in Technicolor. Two years later we surpassed that target, not because of anything I or we did. It was because of our producers and their science-based approach to production.
Mr. Chair mentioned how necessary that is going to be to feed the world in the future. Certainly our hands will be tied if we can't conduct trade with our science-based technology that we use and export. That is why low-level presence and things of that nature are of critical importance to have those issues worked out with other countries.
If food does become short, if we are not allowed to use all the tools, all the arrows in our quiver to produce food for the world, the people that will go hungry first are the people from the poorer nations. I don't think any of us wants to see that. There are some good intentioned people that oppose modern science in food production but they are misguided. They are going to hurt the very people they think they are protecting. I am optimistic for the future of feeding the world as long as we are allowed to use the tools at our disposal.
Mr. Carlier: As an example of challenges there are different tariff regulations. The TPP and others are a good step for going forward to increasing our products marketability right across the world.
As an example, Japan currently has a restriction on honey coming from Alberta because of an extremely small trace of an antibiotic we use to control mites. It exists nowhere else in the world. It is just one of those tiny barriers that for whatever reasons in place doesn't make a lot of sense. We are one of the 10th largest producers of honey in the world. We have 40 per cent of the hives in Alberta. It is a very robust industry in Alberta. Our bees are doing very well as an example.
We need to look at these one-off things. It is a challenge. Alberta has offices right across Asia especially to help address these problems and to make sure in co-operation with the federal government that we increase those markets.
It is about these little things that make a big difference to our producers and the bigger things around the trade deals that exist and the ones that are forthcoming. They are great opportunities and other things we can do to improve the trade deals that exist.
Even with the existing trade deals we can get into trade wars, get into the courts and consume a huge amount of time. Country of origin labelling is an example of a lot of time, a lot of money and a lot of years. It took eight years to resolve that finally. Even when trade deals do exist we have these hiccups that we always need to be conscious of in working with our partnerships with other provinces and with the federal government to do all we can to ensure we can prevent them.
The Deputy Chair: I remind everybody that this committee initiated a study into bee health that has been quoted significantly around the world but particularly around North America and in Canada. We are very proud of that study and many of my colleagues here participated in it.
Senator Tardif: Minister Carlier, you indicated that you wanted to enhance value-added products in your desire for economic diversification in the province and especially in the food processing sector.
Can you tell us a bit more about your attempts to enhance this sector? Is it dependent on having access to labour? How problematic is it that we do not have sufficient labour in order to go forward?
Mr. Carlier: Thank you, senator. I will address the issues around labour first.
The two largest beef processing/packing plants in Canada are in Alberta, one in High River and the other one in Brooks. At High River, the last I talked to them, they were about 250 positions shy. To be at their full capacity they would need to fill 250 positions.
The beef industry has taken a bit of a dip right now but it is still a fairly good industry. Industry is looking to open up another plant north of Calgary that will be actually marketing beef to meet the European standards. That is pretty exciting news as well. They are not operating yet but they don't feel they will have as much of a labour challenge at a smaller plant closer to the city of Calgary.
We are looking to develop further our food processing by diversifying a segment of the economy again not away from oil and gas. Our Leduc incubation centre is a fantastic facility. It is currently 52,000 square feet. We are looking to expand it, putting some $10 million into expanding the suites there.
There have been some really great success stories out of there. The businesses that are able to use the facility have about an 80 per cent chance of success once they go out into the world and prosper out there. It has been a real success. There is anything from Kinnikinnick Foods to Seawind Foods to other organizations.
Separate from the incubation centre there have been other great success stories through the Alberta government AFAC. One of my favourites is The Little Potato Company which is marketed right across Canada now. They are headquartered in Edmonton. It was a father and daughter operation, operating out the back of their pickup truck at farmers' markets. They now employ 100 people and they are going to be operating and opening a new plant out in Idaho. There is a success story with a little assistance from the Alberta government with the programs we have. That is just an example. There is much more room to grow in Alberta in food processing from big operations to small operations.
Senator Tardif: Minister Stewart, are you having the same skilled worker shortage problems? Well not skilled necessarily but perhaps.
Mr. Stewart: Yes, primarily so-called unskilled or semi-skilled. Part of our plan for growth is to increase our value- added agricultural production from $4 billion to $6 billion by 2020. We have seen substantial growth in industries such as canola crushing and so on. We also have a smaller meat packing sector at Maple Leaf Foods, particularly in Saskatoon, that is always chronically short of labour and was somewhat disappointed in the recent changes to the Temporary Foreign Workers Program that made it more difficult for them, for certain.
Our history in Saskatchewan with the Temporary Foreign Workers Program was that the majority of those workers that come to work temporarily in our province become citizens of this country. They are here to work. They are good people. It is a good program. It is necessary for our economies in Western Canada, particularly in the processing field, and I would encourage the government to liberalize the rules around it if anything.
The Deputy Chair: Senator Dagenais, please.
[Translation]
Senator Dagenais: Thank you very much. I have one final question for the two ministers.
Some consumers are of course concerned about the treatment of animals, specifically the use of growth hormones in production.
Does this concern resonate with your respective governments?
[English]
Mr. Carlier: Around any additives within the feeds or within growth hormones, antibiotics are commonly used in the feedlot industry to ensure the health of the animal. That is important. That is a message that needs to go out. There are often inoculations for the cow and calf operators around even vitamin A. They will give them other vitamins.
As far as growth hormones there are strict regulations in place to ensure that there is a standard met before those animals are butchered or go to market. I haven't heard much criticism from consumers. I think consumers in Canada and perhaps most of North America are fairly sophisticated in realizing that it isn't an issue.
Some segments of the retail industry or the restaurant industry will take that as a marketing strategy. It is somewhat wrongheaded but they are private businesses and do what they wish. I know we had some controversy around A&W talking about antibiotic free, et cetera. I am not sure if they ever applied that to chicken but chicken has been antibiotic free in Canada since the 1960s. I realize that the quality of their beef isn't there because we all know it is eight-year-old cows from Brazil. They took that as a marketing strategy. It is what it is, free will being what it is.
There is continuing effort around education. The welfare of animals and the welfare of the humans sometimes necessitate the use of antibiotics and we need to be able to develop our products.
Minister Stewart alluded to the work we are doing around genomics. We haven't touch on that. It is really important in our livestock industry, not just beef but other livestock as well, to increase our environmental stewardship and to increase our ability to raise our social licence for that marketing. There is no crystal ball in front of me but I think there are going to be some really good days ahead for agriculture.
Mr. Stewart: Canada has the animal code of practice. It is fairly recent but producers have bought into it. It is very close to what Earls was talking about with their humanely raised beef. In fact all the issues they talked about are dealt with in our animal code of practice. I am proud to say that virtually all of the meat, and particularly beef, produced in Canada is humanely produced.
As far as hormones go, hormones are a tool to make animals grow a little quicker. They can't be used for a period of time before slaughter so there is no residue in the product. The difference between the level of the hormone in treated and untreated animals is detectable but very similar. There is not much difference.
For instance, just as an example, an equivalent weight of cabbage contains 800 times as much of the hormone as treated beef does. People don't know that but I just use it as an illustration to show that we are not dramatically changing the product but bringing it quicker to market has consequences other than economic. The animals use less water, less feed and produce less methane because they don't have to live so long to reach market weight. There are huge advantages to it. My colleague brought up A&W as an example of using this as a marketing ploy. It is just that. Our product is a superior product, certainly to what A&W are using and to what Earls is getting out of Kansas. The code of practice makes it not only safe but humane a well.
The Deputy Chair: We will have to keep quiet what you said about cabbage because the cabbage industry will suddenly become a focus. Everyone in here is sworn to secrecy. No discussing cabbage outside of this room, please.
I wanted to make you one offer as we finish. Federal officials will be meeting with the committee as we near the end of our study and on occasion we get to see federal officials on issues that come up during this study.
Is there anything that you want us to ask them or put to them on your behalf? It is fine if you don't have an answer to that question today. You can feel free to send us a message via the clerk if you don't have a suggestion today. We will consider it particularly when officials appear before the committee, and they will be, as we come close to the end of our study.
Do you have any comments, ministers?
Mr. Stewart: Both Minister Carlier and I discussed a number of topics in our presentations and answered questions that are critical to western agriculture, but for today's message from my perspective it is absolutely crucial for western Canadian agriculture that we have access to these markets. We are exporters. Without TPP and CETA we have a serious problem because we cannot go back to the status quo.
We lose those markets if we don't have the trade deals. We are locked out of them because of tariffs. We will not be competitive in those markets again. That is my message out of all of my ramblings today if we have to narrow it down.
Mr. Carlier: I had six high points that can be included in what we are leaving behind. I welcome the opportunity to add to that and we will present it a bit later.
I am having the opportunity to host the federal-provincial-territorial meetings for agriculture here in Calgary in July. It only happens once every 13 years so I am really tickled by that. I am really honoured to have that opportunity to discuss the federal-provincial agreement that I suspect will probably be called Growing Forward 3. Knowing how important that is to agriculture in Alberta and Saskatchewan and across the country, I am looking forward to those discussions with our federal counterparts. That is going to be at the top of our mind throughout the summer and especially knowing that the FPT on agriculture will be in Calgary.
The Deputy Chair: My political background would tell me that Growing Forward 3 is not an option for a name. Politics being what it is they will want to invent a new name that will be their name. It will be actually Growing Forward 3 but called something different. That is what politics is all about.
Thank you again, ministers. We really appreciate your time and Mr. Carlier, I am glad we could get you out of house duty today.
Mr. Carlier: So am I.
The Deputy Chair: We know how difficult it is to do that sometimes.
Thank you all.
Senators, we now have with us from the Alberta Federation of Agriculture, Mr. Lynn Jacobson, President; and from the Alberta Food Processing Association, Ms. Marilynn Boehm, President.
Thank you for accepting our invitation to appear. We are going to invite you to give your presentations in a moment. Following your presentations we will go to questions from my colleagues. Each senator will be given five minutes for questions and answers, and we will try to get in as many rounds as possible. We have been very good since we have been here in Alberta to be able to accommodate almost all questions. We have left very few unasked questions.
We are going to start off with Mr. Jacobson from the Alberta Federation of Agriculture.
Lynn Jacobson, President, Alberta Federation of Agriculture: Thank you very much for inviting us. We are happy to make a presentation to you today.
My name is Lynn Jacobson. I am President of the Alberta Federation of Agriculture. I am also a producer, a farmer. I farm in Enchant, Alberta, which is 50 miles northeast of Lethbridge.
People keep wondering where Enchant is so I draw them a triangle between Vulcan, Brooks, Lethbridge and Taber. You do the cross and we are in the middle of everybody. We either think we are the centre of the universe or we are the farthest from everybody. Those things happen. It is 50 miles wherever we go.
The AFA is a general farm organization comprised of ranchers, farmers and agriculture enterprises. We have been representing the interests of Alberta agriculture producers since the early days of the last century. We were officially incorporated on our own act in Alberta in 1959.
We started out as AFA. Our last name basically was Wild Rose Agriculture Producers. It did run into a bit of a problem, as you could probably expect, between the Wild Rose Party and that. We kept being accused of being a political party so we finally thought it was better maybe to change and go back to our roots, to where we were. We thought Alberta Federation of Agriculture fit the name very well.
Our mandate is to formulate and lobby for policies that support the agriculture industry in Alberta and in Canada. AFA as Alberta Federation of Agriculture is an active member in the Canadian Federation of Agriculture, which is Canada's largest farm organization, representing over 200,000 farm families. CFA membership includes provincial general farm organizations and national commodity groups.
AFA is actively involved with the CFA in developing policy in several areas including international trade. A Lot of our trade policies that we come up with in our organization is basically a collaboration of all general farm organizations and those organizations that I talked about in CFA. It is more of a country-wide view. It takes into account a lot of different aspects of different types of production all the way across the country.
Anyway one of our priorities for AFA is trade. You have heard that in the last presentation. You probably heard that yesterday quite a bit. We can say with some confidence that most farm organizations in Canada see Canada as a trading nation and one of the few countries that produces more food than it consumes. That means a lot. That means we do have to have trade.
Some 80 per cent of our production actually goes out on to the international market, where 80 per cent of U.S. production is used internally. That is one of the differences that we work with in this country.
Canada is the fifth largest exporter of agriculture and agri-food products. Alberta exports of primary and processed agriculture and food products were $9.7 billion in 2014 or about half of what Minister Stewart just mentioned to you. We are half the size on that end of it on agriculture products. That is what happens on the land base between Saskatchewan and Alberta.
In the same year the agri-food industry and agriculture producers employed around 86,000 people in Alberta. You can see we are a significant employer of people in Alberta. This does not take into account all the other jobs that are related to agriculture.
I know it was mentioned that labour is one of our big issues in agriculture and it will remain. We have a Temporary Foreign Worker Program that is working to a certain degree, but there are changes that we have recommended through CETA, a group working through our CFA. We will probably be talking to you about different changes we see that are needed in the agriculture industry to come forward out of the group. I am not an expert on that. One of our board members is actively participating in that end of it.
I guess AFA and CFA members support a balanced approach to international trade negotiations as both domestic and international markets are vital for farmers. We think a balanced approach is critical to our rural economy across Canada. That is a bit different from a lot of the other groups I suspect you have probably heard. The canola producers and the Alberta wheat people are more interested in trade. They are not interested in that balanced approach.
As a general farm organization we take into account all agricultural production in Alberta and Canada. Part of agriculture production is supply management that we take into account because they are members of CFA too. We try to have what we call a balanced trade position between all our groups.
I guess primary agriculture differs from other agricultural sectors in many distinct ways. Individual farmers and not large integrated corporations are the main drivers of our industry.
Farmers often face challenges due to circumstances beyond their control. For example, extreme weather events, excess moisture, drought and hail are all examples that can result in huge production variabilities on our farms. Producers do not have the ability to set prices to cover costs or pass those costs on to buyers.
We can lock in prices but we don't actually have the ability to influence prices. We are price takers all the way down the line. Sometimes jokingly we say we are bottom feeders. I guess everything comes down to us and it stays on us because we cannot pass it on.
Producers are largely supportive of the recently completed CETA and TPP agreements but our support is contingent on clear market gains for our exporters and mitigation for losses that supply management sectors may incur as a result. We are happy to see that the government has initiated talks with the dairy industry over their CETA losses. We would also encourage them to talk to the supply management industry over losses that may happen over the TPP agreement. We would encourage the government to live up to the conservative promise to mitigate those losses if they happen.
For our future trade agreements what are we looking for as farm organizations and farmers? We are looking for real and meaningful market access to our export oriented sectors such as red meats, grains and oilseeds. You heard the ministers in the previous session talk about real access and mitigation.
We need assurance that market access gained in trade agreements is not eroded by non-tariff barriers. These types of barriers favour domestic goods over foreign goods and can take the form of technical rules, certifications, inspections, standards and other requirements.
An example is the low-level presence of genetically modified organisms and MRLs are also an issue. Not only are GMOs an issue but the ag chemicals and the residues of ag chemicals in other countries. We say there needs to be a recognized standard negotiated within the world to do that and mitigate some of the fears and some of the things that have happened so far.
We need action to address leaks in import controls for supply managed products. Another example of that would be spent fowl being imported from the United States as meat from broiler hens. This allows sellers to avoid tariff duties. We think imports of milk protein are another example that the dairy industry has been talking about.
We need recognition that Canada must maintain its ability to define its own food and agriculture strategies. All countries have their own defensive and offensive positions. Most of them have an internal food strategy. We have to respect that to a certain degree, but we do need negotiated agreements set up that actually allow us to import into those countries without issues arising that are not part of the trade deal.
Competitiveness and profitability are another issue that we are talking about. Measures that boost farm profitability are often tied to those that enhance our competitiveness. When it comes to finding efficiencies in food production governments need to work through a science-based process to improve access to new low risk technology and products. One specific example is the need to speed up the harmonization process and change some of the import rules between the U.S. and Canada.
We need to allow Canadian producers to have access to the same technologies as U.S. producers at a competitive price. One example that comes to mind that we have been working on for a while is fungicides and the cost of some fungicides sold on both sides of the border, registered in both countries, controlled by a country, but we have no access to the cheaper pricing.
I have been told by one person who has been trying to do this that fungicide which costs $15 an acre up here for one application costs $3 in the States. You can see the difference, economic viability and the competitiveness of our industry on that issue.
We need to harmonize international standards so country standards do not act as a barrier to trade as has been mentioned before.
In Western Canada transportation of our goods or our production to port is essential. AFA is involved with the grain transportation coalition. We also think the recently released Emerson report has opened debate about transportation in Canada and for us specifically rail transportation issues.
Sadly we do not think the recommendations concerning rail transportation adequately address our concerns about railroad operations, reciprocal penalties, service contracts, interswitching and rail capacity. It has also been mentioned that port capacity is an issue in Western Canada, and that is of great concern to us too.
One of the things around port capacity is access into the port and transportation right to tidewater. Others are the working agreements between the railroads and their staff, how the railway perceives transportation agreements and what happens down at the terminal for the export. There are other different capacity issues.
When the wheat board was here they had the sharing of grain between all the terminals. That doesn't happen anymore so that does reduce capacity to a certain degree again. Those are some of the issues that we talk about within the grain industry.
Looking ahead what AFA and the CFA really want to offer to the members is we think Canada needs to focus on a broad scale export strategy for agriculture. We want to be willing partners with you to develop new ideas on going forward.
On that point I would like to thank you for your time and I am happy to answer any questions you have later on.
The Deputy Chair: Thank you, Mr. Jacobson. You are from a part of Alberta which we are familiar with at this committee, those of us who have been on the committee for some time. This committee was chaired for a long time by Senator Joyce Fairbairn from Lethbridge and not a meeting went by that she didn't remind us what was needed in your part of the world. We miss her tremendously and we wish her well.
Mr. Jacobson: Yes. I knew Joyce very well and I also knew Senator Sparrow. I have been around that long.
The Deputy Chair: There you go. We are happy that you are here.
Marilynn Boehm, President, Alberta Food Processing Association: Hello, everybody. I am really pleased to be able to be here today.
The other provincial food processing associations of B.C., Saskatchewan and Manitoba were invited but weren't able to attend. I am speaking more or less on behalf of them as well. In that way I haven't vetted what I am saying today. We had a meeting last week. We all have our individual issues, but for the most part we are all on the same page.
The Alberta Food Processors Association started in 1974. It was really a visionary group of food processors and a couple of people in government who decided that we needed to more actively promote Alberta food products, et cetera. It has a long history and it has gone through many ups and downs during that time.
I joined the association two years ago. I worked with Alberta agriculture for about 26 years a few years ago, from 1982 to 2008 and I worked with the food processing industry. It is a passion of mine to try to grow and advance this industry.
Our industry, Alberta's food processing industry, is the second largest manufacturing sector in Alberta. People are often surprised by that. We have sales of approximately $14 billion. Ontario has about $40 billion, Quebec has $20 billion, and we are third at about $14 billion.
The meat processing sector makes up approximately $7 billion of that. I wanted to illustrate that to show the importance of the meat sector to Alberta's economy and the importance of the food processing industry to Alberta's economic base.
The processing sector employs approximately 27,000 people, but like agriculture producers the impact of the sector extends well beyond the direct jobs that the industry provides in both rural and urban Alberta.
We source ingredients from local farmers adding value to the commodity products such as livestock, grains and dairy products. We also provide indirect employment to many Albertans who are employed by companies that offer equipment, products, services and transportation for food processors.
The processing industry also contributes in a major way to diversifying Alberta's economy which everybody is talking about right now in Alberta. There is a real opportunity to further grow the industry.
The Food Processing Industry Roundtable is a national group made up of federal representatives, provincial government representatives, provincial associations, food associations from across Canada and some large companies as well.
It is coming on a year ago they made a presentation to the provincial agriculture ministers and proposed that the food processing industry could grow to $130 billion — by 2019 with appropriate investment in innovation and R and D. It is currently at approximately $105 billion.
The representatives of the Food Processing Roundtable that did this presentation spoke to an innovation fund. Approximately they were asking for $500 million to $800 million in retooling the food industry across Canada. What they were saying to politicians was in 2008-2009 the automotive industry was retooled. The food industry has always been chugging along but it is very important if this industry is going to remain competitive that we have the opportunity for innovation, automation, et cetera.
The food processing industry supplies approximately 75 per cent of processed food and beverage products. The industry is the largest buyer of agricultural products, using approximately 35 per cent of its output.
Access to a reliable labour supply continues to be an issue for Alberta's food industry. While Alberta is currently experiencing a slowdown in the oil and gas sector, the skills and aspirations of these workers may not be a fit for the food processing sector.
The food industry employs a wide variety of skills including marketing and sales reps, food safety professionals, human resource professionals, tradespeople, shipper/receivers, meat cutters and production line workers. The industry aggressively tries to recruit workers from across Canada with assistance actually from Alberta Agriculture and Forestry, but jobs continue to remain unfilled particularly in the meat sector. It is a huge challenge there.
The industry did use the Temporary Foreign Worker Program because it was an available tool to recruit additional workers to compensate for the worker shortfall. Our industry never wanted to recruit temporary workers. We used it because that was what was available.
We could bring workers in for four years but we know that these jobs aren't temporary. We make every effort to integrate the temporary foreign workers and support them so that they will be selected to become nominated as permanent residents.
Alberta will continue to need to recruit a certain number of workers from outside Canada and the federal government needs to work with industry to develop an appropriate mechanism to be able to do so.
My takeaway or my big message is that the food industry does not want throwaway temporary workers, et cetera. We want permanent workers. We want new Canadians who can work in our industry and help to grow and develop the industry. Until this issue of labour is resolved the ability of the processing sector, again particularly the meat industry, to grow will be limited.
New business opportunities are being turned down and the industry won't be able to take full advantage of the market opportunities arising from new trade agreements. My members tell me constantly that they are turning down orders and turning down customers because they can't guarantee a supply. They need to make sure that they can supply their existing customers rather than taking on new customers.
In Alberta food processes are automating as much as possible. Thanks to the programs through Growing Forward 2 we have been able to have some automation programs, et cetera, that have been very helpful to the industry.
They have been able to reduce labour and increase capacity by automating. These programs have been vital in reducing assembly line jobs but they will continue to be renewed and expanded if the industry is going to grow and remain competitive.
The government puts out the call in early April for the automation program for the crop side and within a month or two it is already subscribed. There is simply not enough money there for the industry to be able to do what it needs to do in terms of automation.
Other challenges the industry deals with daily include the retail and food service consolidations and less and less customers. Safeway and Sobeys are now together. Shoppers Drug Mart and Real Canadian Superstore are together, et cetera. It makes a very small pool of buyers who can buy our products.
Input costs also can be a challenge, transportation and distribution costs, utility costs and changing regulatory requirements.
In all the years I have worked with the processing industry I can't believe how resilient it is and how it continues to reinvent itself and adjust to overcome new challenges. If there is an industry in Canada that is resilient, this is the one and of course the producers too. It is constantly innovating, developing efficiencies and introducing new products that will appeal to buyers and consumers.
Canadian food processors need a level playing field if they are to remain competitive in Canada. As you all know Canada has stringent food safety standards that the industry follows and is willing to do so, but food products imported into Canada may not follow the same standards. How do we ensure that the products imported into Canada comply with our food safety standards so that our industry isn't at a competitive disadvantage by having higher levels of food safety?
You talked a bit about exports. Our food processing exports total approximately $2.7 billion. We have a long way to go in terms of improving that. Of this meat products make up about half, about $1.4 billion.
Exporting is not an easy business. We are a long way from major markets so logistics, as one of my leading processors tells me, need to be outstanding in order to compete. If they are going to make it they need to really be on top of that. There have to be other competitive features in Alberta and Canada that allow companies to offset logistics such as electricity, labour costs and taxes.
It can take many years and a lot of money to develop a new market. Many companies that try it don't succeed. Government programs are not really in sync with the needs of new exporters. For example, a program may cover travel to a new market once but it could take 50-plus trips to develop that market. The government would happily pay for the company to visit another market. Why are we doing that when the focus should be on these one to two key markets they are focusing on?
To tell you the truth, going into the Pacific northwest a couple of those major cities would be huge orders, huge business for our industry. Let's have them focus on Portland, Oregon, Los Angeles, et cetera, rather than sending them all over the place and not really having them succeed, looking back in five or ten years and not having a success story.
Again from my processors, government needs to look at industry as investors. We need to develop a very meaningful food strategy around what we are going to do to maintain the competitiveness of the industry. That is production and processing. If we had a foods strategy in Canada where we could hopefully get everybody on the same page and all working in the same direction, we would be a lot further ahead.
We have the opportunity to lead the world. Like you said, we are one of the few places where there is still opportunity to grow more food products than we consume. Currently we are only producing 35 per cent of agricultural production. Why don't we set it at 55 per cent instead as a reasonable goal to achieve that? That is pretty much a Canadian statistic.
Trade agreements offer opportunity but it also means we have more competitors in the market. If they don't need to comply with the same high standards, same regulations, et cetera, our processors are at a competitive disadvantage.
We need to be business friendly. Successful processors are frequently wooed by American states and other provinces to relocate their businesses. They are willing to give land. They are willing to give tax holidays. They are willing to do all these kinds of things.
We know that major food processors are moving out, moving their plants south of the border in Eastern Canada and Western Canada. How are we to ensure that more of our major industry doesn't leave? That is a huge issue right now. We want to have these facilities remain in Canada and develop these products for Canadian consumers.
We talk about food but isn't it great to have a Canadian supply of beef? Isn't it great to have our Canadian wheat processed into further products? What if we had to import all those products? If we lost our food processing industry it certainly would be a disadvantage. I don't think that it is what we are striving for. I think that we are proud to eat Canadian food products.
The Deputy Chair: Thank you very much, both of you.
Ms. Boehm, I appreciate your comments about the Pacific Northwest market that is available in the United States, in Washington State, Oregon, et cetera. that you mentioned. We should be able to do that in concert with developing markets further afield through the TPP and through the European free trade agreement as well.
Can you give us a quick comment on that? We don't forget about the neighbour next door but when we start talking about international trade we don't concentrate on that. Another issue is that interprovincial trade is an ongoing problem in Canada but let's talk about the Pacific Northwest on its own.
Ms. Boehm: I wanted to try to get a processor here today. I almost had one but he had to cancel on Monday or Tuesday because he had a Japanese buyer. You are asking farther from Pacific Northwest and into Asia, et cetera.?
The Deputy Chair: Yes.
Ms. Boehm: In Western Canada we have had a big push on that for years. Some companies have succeeded and some haven't necessarily succeeded. It is a huge market for both our beef and pork products. There are different levels of value added and different levels of processing. I wanted to have Sunterra Foods here today, but unfortunately Ray Price was in Ottawa. One of his vice-presidents was going to come but he was the one who had to stay behind to meet with the Japanese buyer. They are an example of a company who has found a niche and is selling high quality specialty pork into Asia.
The Deputy Chair: He made a wise decision. He is meeting with a customer.
[Translation]
Senator Dagenais: Ms. Boehm, you talked about new markets, new agreements, including the TPP. There is also the agreement with the European Union, which should be beneficial, I hope.
Has your association thought of developing new partnerships in order to remain competitive?
[English]
Ms. Boehm: New partnerships with whom? What would you be thinking of? Would it be with other countries?
[Translation]
Senator Dagenais: Yes, exactly. I imagine you have partners in Canada. On the other hand, to deal with new competition on the international market, I think you will have to develop new partnerships in Canada with other processors and producers.
[English]
Ms. Boehm: We in Alberta have talked a lot over the years about how Denmark does things, how Holland does things, how Belgium does things or how Britain does things, but we have never really yet come to a good point. We have had some small partnerships, I would say, but nothing sustainable. It is an excellent idea. We are a very small association. There are only two of us plus one person who runs our health and safety program, but moving on and looking forward that is an excellent opportunity.
As a matter of fact all food processing organizations make up the Canadian Council of Food Processors. When I meet again with them I will bring that up because I think on a national perspective especially that would be a very good point.
In Canada we are not as united as Australia or the Netherlands or wherever. Alberta does its thing. Saskatchewan does its thing. I don't really think that we are ever going to achieve what we could achieve unless we try and work at a national level. That is an excellent point. Thank you.
[Translation]
Senator Dagenais: Thank you very much.
Mr. Jacobson, in your presentation, you spoke about the labour shortage and labour training. I would like to return to the fact that some processing plants do have difficulty finding skilled labour. I hope that problem has been partly resolved.
What could the Government of Canada do and what recommendations could you make to the committee to help make up for the shortage of skilled labour, specifically for processing plants?
[English]
Mr. Jacobson: I can't talk too much about the processing plants on that end of it. I can talk more about the labour shortage on our farms which is critical in some areas.
A lot of the workers in the Temporary Foreign Worker Programs in my area are coming out of Mexico, Jamaica or the Philippines. There are some problems within the Temporary Foreign Workers Program with the people you have to contact, their embassies and how you go about it. There is a technical difficulty there.
I have talked to some of my neighbours. One fellow hires around 27 people a year. He brings them in. He has found out, though, is that he could bring back a lot of the people he had in the past for four years. Then when they are very skilled they couldn't come back anymore. They were locked out.
There needs to be an avenue to citizenship through those programs. That would help us to a large degree, especially for the people that you train up on your farms or in your processing industry. If they had access to citizenship then they are more interested in doing it.
A lot of Filipino people or a lot of the labour out of the Philippines is a very well-educated workforce. They have people with a high degree of skill not only in agriculture but in other industries and other professions that can't practice here. Offering an avenue to citizenship is really important as we go along.
There is a portion of temporary foreign workers that come in on a year-to-year basis that want to go home. Many of them are from Mexico, Jamaica or whatever. They want to come in. Their families are in their countries. They are here to make some dollars to provide a living and then they want to go home. That is fine if they want to do that but we need to have that separation. That access to citizenship would be good.
Senator Unger: Ms. Boehm, you mentioned taxes. I have two questions. One is concerning how the new Alberta provincial carbon tax will affect your organizations. I would like your comment on the proposed federal government added tax on carbon pricing.
You talked a lot about innovation being essential. I understand it is if you look ahead 10 years or less with automation already replacing a lot of workers in the grocery stores. I typically now scan everything through instead of going to a clerk. Walmart and McDonald's are not hiring as many people.
I would like your comment on how soon you think innovation is going to replace large numbers of people. I have those two questions for you, and then I have a question for Mr. Jacobson.
Ms. Boehm: Like I said our companies are constantly automating. It is to get rid of the low-skill jobs where it is difficult to recruit individuals and to create higher paying, higher skilled jobs.
While that is constantly happening there will still be jobs that need to be done in processing plants that require some labour. The meat industry is one where those big plants in southern Alberta employ 2,500-plus people.
Senator Unger: But nobody wants to work there.
Ms. Boehm: Nobody wants to work there. The meat industry in Canada is still short 1,000 workers. In terms of new Canadians, if you have been to Brooks you see that the make-up of the community is so much different from what it was 10, 15 or 20 years ago.
When I look at innovation part of it is automation but part of it is companies reinventing themselves and coming out with new products. It could be a further processing of commodity products that we don't necessarily do that much of, like some pulse products and stuff like that. It could be higher level ingredients like more functional foods or this kind of thing.
In terms of the tax structure we haven't had a lot of information yet on the carbon tax. Food processors are still waiting to see. The provincial government increased corporate tax rates as well in Alberta. It is the bottom line.
We worked with Alberta agriculture. We managed to get a program to look at building capacity, sustainability and environmental or carbon footprint. We are going to be running more workshops. We are going to be having a conference in a year and a half on sustainability.
A lot more of that is happening in Ontario right now where there is a lot more capacity. We will be building capacity and working with our processors to reduce their carbon footprint as much as possible to help mitigate some of those things. We are still waiting to hear about the carbon tax and what the federal government has planned.
Every single tax or every single thing that happens takes away from their bottom line. They have to cut somewhere else because it is an extremely low margin business.
Senator Unger: Mr. Jacobson, I have just a general question. To what extent do interprovincial barriers affect getting goods, products and services to market or getting everything to market?
Also I would like your comment about the Liberal government moratorium on shipping from the west coast. To what extent will that impact? The East Coast is a long way from Alberta and Western Canada generally. Would you comment on those points?
Mr. Jacobson: Thank you for the question. I will talk about the moratorium first. Basically you are talking about the Emerson report when it mentioned the regulated amount of grains and oilseeds that had to be shipped out. I think that is the program you are talking about.
Right now CN and CP are meeting their shipping needs or are very close to what the orders are. They are coming in with 89 per cent, 92 per cent or sometimes even higher of car orders. They are doing that. There are some corridors down into the States where there is a bit less. This is a roundabout way of answering your question.
What has allowed CN and CP to meet the demand in the grain industry is the lesser demand for their services by the oil industry and some of the food processing and other industries affected by world recession to a certain degree and what is happening in Canada.
What would happen if things get back to what we would say are more normal conditions where the demand is starting to rise on transportation issues? We have to remember that rail transportation is the only way that we actually have of putting our goods into port position. As that capacity is eaten up with more people wanting to use it again we feel we are going to be in the same situation as we were before. Nothing will have changed because CN and mostly CP are saying, "Look at me. I am doing fine. I am meeting all my orders. We don't need any regulations. We don't need to have reciprocal penalties. We don't need to have agreements with our shippers because we are doing a good job.''
The Deputy Chair: Until something goes wrong.
Mr. Jacobson: Yes, until something goes wrong again. That is what we are saying. We think the norm in the future is going to be more demand on that system. When they talked about the rail system and the lack of capacity of the railways they were saying it was winter. Our experience is that winter happens every year, so don't give me that excuse. We thought that was to a large degree an excuse.
There are some extra problems with that but specifically CP laid off employees. In fact over the last year they laid off 3,400 employees.
Senator Unger: Just recently also.
Mr. Jacobson: Recently, yes. One of our board member's son works for CP in the railyard. This is anecdotal or what I have been told by his father. Now that he is working in the yard down there they don't have time even to check the loads going out. They used to be able to do an inspection on the cars as they built the train.
Now he said they walk by with a flashlight and look at it. Yes, the car is there but they don't know what shape it is in. We think maintenance cost could be part of the cause of some of the derailments and accidents in coming years. If things don't improve I think that is going to happen.
We need to have some controls on that. We need to have some stick that we can hold over the railways. We need to have legislation saying they have to ship within a certain area. If they don't have to meet commitments all the commitments are on the part of us as shippers, line companies or grain companies. There are lots of examples where the railway says we have to be loaded within 12 hours or 24 hours of showing. They are going to show up on Wednesday and they don't show up on Wednesday or they may show up on Saturday and there is no penalty.
Senator Unger: It has to be fair.
Mr. Jacobson: If you have your loaded car there you have to bring in your staff and everything else whether or not the train shows up. There is an extra cost for you and an extra cost for me as a producer because that all gets passed down to me.
There needs to be some type of agreement between the shippers and the haulers that will allow a penalty. If you don't show up within a certain timeframe you are going to have to maybe pay for that.
That happens at the Port of Vancouver. CP says, "We can't haul to the port because they are never there.'' They run a shift and if nobody shows up they pay that whole shift. They sit around and do not work. The next time CP says they are going to show up, what is the port guy going to do? He is going to hire another guy, but then it happens again, again and again. He can't work 24 hours a day because the train might show up at twelve, at two or at six o'clock in the morning. There have always been problems on that end.
The Deputy Chair: I will be going to Senator Merchant in a moment, but it is a recurring theme with the Port of Vancouver and a recurring with railways.
Mr. Jacobson: Yes.
The Deputy Chair: If they had to compete in the real world of competition, if they were selling cars, for example, one of them would probably be out of business pretty fast and the other one might not be far behind because the competition isn't there and they would look for the best. Anyway that is me editorializing.
Mr. Jacobson: Yes. Senator Unger, you had one more question for me.
Senator Unger: It was on interprovincial barriers.
Mr. Jacobson: There are not many interprovincial barriers to trade. A lot of the interprovincial barriers to trade centre more on the food processing and meat industry.
One example would be our small abattoirs which are under provincial legislation and provincial inspection. They cannot sell that same product or that same pierogi or whatever they are producing in Saskatchewan because they don't have a federally inspected plant.
One of our board members has been trying to set up a rabbit industry and a killing plant. There doesn't seem to be any consistency on the inspection end because one inspector will say no, your wall has to be such-and-such a height or your ceiling has to be such-and-such or you have to have lights down here. Then the next inspector will say that guy got it wrong and you have to change it again.
There seems to be an inconsistency in enforcing the rules on education on the part of the inspectors because they each seem to have their own idea of what is going to go on. That is one thing.
If we produce a sausage here in Alberta and it has to go through a federally regulated plant, the costs of getting that federally regulated plant are so expensive that people just don't bother doing it. If they had brought that cost down and had one inspection for everything provincial and federal that would probably help us out.
Senator Merchant: Thanks to both of you for being here this morning.
You heard earlier the two ministers saying that our producers are ahead of the government in many ways, that they are very alert and very well educated about what is needed to have top quality products.
Sometimes what happens in these international agreements is that some developing countries have not really developed protocols yet. That is what is causing some of the difficulties sometimes. I guess there is a need to harmonize and to bring everybody to the same level.
What can the federal government do that it is not doing to help in these agreements with developing countries? Some of the governments of the populations we are trying to serve, for instance the new middle class in India or in China, are not ready yet to play the game according to recognized international rules.
Mr. Jacobson: You have hit on one of the issues of international trade that people have been trying to solve for a long time. We must recognize that other countries have their own customs and their own food. They have the right to make their own rules to a large degree just as we in Canada have the right. We would feel imposed if New Zealand said you have to do this, this and this. It really didn't make sense for us but we have to do it anyway. We have to realize that the government is being as helpful as it can in certain areas. I am not a real expert on trade. You would have to talk to the CFA a bit more and some of our trade people there.
When we are talking about a lot of our trade, especially stuff that affects meat, it is going into more developed countries. India is a developed country when it comes down to it. They are not a third world country. China is a developed country. They are not a third country anymore. Partly what happens within those countries is that there are not set standards to change the rules and the standards. That is how they keep out a lot of our things.
Low-level presence or the MRLs are issues with Korea and Japan. If they don't really like or they don't know what is happening, they can test down into the billions or parts per billion for products. Virtually for whatever a country wants to happen they can actually do a test and refine it down to such-and-such a level that they can kick you out if they want. Maybe that ability has to be negotiated. You have to set certain standards. That is what we are talking about on that end of it.
I don't know how much trade we actually do with some of the developing populations like those of the Caribbean countries.
Ms. Boehm: Not a lot.
Mr. Jacobson: Not a lot, yes. It is more of a niche market. As we go along we are getting better and better. In Saskatchewan now there are more small, bulk shipments going into certain producers. There are some dangers in doing that too because you will ship a railcar of peas into Turkey or India or whatever. It depends on your relationship and the relationship of the government and what is happening. Lots of times it is not what you know. It is who you know in some of those countries too.
There are all those issues. The government has to be reminded that we need to work on it, but I am no expert on that end of it. I see some of the problems that happen to my friends and neighbours that have tried it but I don't really have the solution sometimes.
Senator Merchant: Ms. Boehm, you were talking about innovation and producers. You mentioned some very attractive deals that were given to producers which make them move somewhere else, but even when they stay here sometimes they have to just change their plans.
Last week we had the milk producers appear before us. One of their issues was that they didn't have a drying facility and they were pouring out the skim milk. They were just pouring it out. They had two options. One was to renovate a current facility for about $80 million, I believe they said, or to build a new one which would have been a quarter of a billion dollars.
When you are talking about these kinds of issues are you looking to government to provide the funds? Are you talking about that new thing now about private/public partnerships? What is the way that you think we have to go to make it possible for our processors to be competitive and be able to use the products that we have in this country to our best advantage?
Ms. Boehm: Right. Certainly over the years I have worked with companies that want government to build their facilities and then the individual entrepreneur can run them. That isn't going to wash obviously. With some of those innovative things maybe there is an opportunity for a partnership with government. For some of those things it would be industry-wide and it would be of advantage to many, to the milk industry, the dairy industry or whatever.
For the most part what we did in Alberta under Growing Forward 2 is we developed an automation program. Actually we developed a beef product market development program when BSE hit and we couldn't sell any over 30- month cattle. We were given a measly $5 million and the minister at the time, Shirley McClellan, just raved about it. She talked about it all the time because of all the extra ground beef that was processed after that. It really was an opportunity to use beef that wouldn't have had any other use because it had to be fully cooked, et cetera.
That was an example of where in that program we provided 20 per cent of capital cost for automating. Then in Alberta we have Alberta Agriculture Financial Services Corporation, Alberta Treasury Branch and other more patient bankers, you could say, to help fund the rest of it.
In terms of what the processing industry across Canada is looking at, it is some sort of assistance with these capital costs, marketing costs, international marketing costs, but not just one trip into a market and out again. This innovation fund would be something that could do that.
Jim Thorne, one of the key guys at the roundtable, talks about retooling. The auto industry was retooled. The food processing industry needs to be retooled. Where are the incentives for them to expand or for them to invest in equipment? Is it 20 per cent or 30 per cent of capital costs? That kind of model would be a good one to look at unless there was something industry-wide that would benefit that entire industry. Then I think another model could be looked at.
Senator Tardif: My question is for Ms. Boehm. Knowing that a reliable labour supply continues to be such an issue for Alberta especially in meat processing plants do you have an idea why that is so? The meat processing industry represents 50 per cent of sales in the food production industry. It is a very important issue and to be short a thousand workers across Canada is no small amount.
Is it lack of knowledge of the job opportunities available? Is it the fact that there is a lack of training facilities? Do our educational facilities not prepare people to be meat cutters? I don't know. What are the issues that are preventing our young people and perhaps older people to go into that field of work?
Ms. Boehm: It is not a great environment in those processing plants. It is a pretty intense environment. Some of it is heavy work. It is dangerous work in some ways, using knives and this kind of thing. The skill of being a baker, a butcher or a meat cutter is kind of lost on the next generation.
Many people immigrated to Canada and opened butcher shops and bakeries and that kind of thing. Some of them are still operating on a smaller scale but these big plants are a real challenge. Each of them has well over a billion dollars in value of shipments. They just need a lot of workers. It is just the volume.
Brooks is a small community. High River is a bit closer to Calgary. They certainly bring workers in from Calgary but there are only so many Canadians that want to do that kind of work. We need to look outside Canada. Without the Temporary Foreign Worker Program it has caused a huge issue.
When I was in agriculture in 2006 the labour crisis was horrible. The provincial agriculture minister at the time got calls all the time so we decided to work with the industry in terms of teaching them how to recruit.
They had to hire people who had a grade 12 equivalent. They had to hire people who had some grasp of the English language. They had to hire people that were below a certain age because some of these jobs are heavy jobs and a 55- year-old or 60-year-old person wouldn't necessarily be the best for that. Staff of mine went to the Philippines with the companies and taught them how to recruit appropriately so that these workers would at least stay and work in Canada.
The problem is the 40 per cent to 50 per cent turnover. You were constantly churning workers through and through and through. You have used up your Alberta workers and Canadian workers. You go on and on and on. Those companies have done everything. They relocate people. They settle people. They offer bonuses. They try and promote within. They have done everything they possibly can but it is just not an easy job to do. Sorry for that long-winded explanation.
Senator Tardif: Are these American companies that are operating these plants in Alberta?
Ms. Boehm: Now they are, yes. Brooks used to be a Canadian plant.
Mr. Jacobson: Argentine.
Ms. Boehm: Yes and now it is Argentine and Cargill is American, but when the plant in Brooks started it was Lakeside Beef Producers and local owner Garnet Altwassert.
Senator Tardif: It was sold. I understand there were difficulties.
Mr. Jacobson: Maybe I shouldn't answer but one of our board members is a meat guy. He has set up meat plants and we have had good conversations. Gerald has set up meat plants all across the world for people and has run meat plants. He designed a meat plant in Moose Jaw.
Some of our neighbours have worked in the plant. Partly wage is an issue for Canadians. We had the meat processors last year at the CFA meeting. They were talking about where they were paying $11 an hour for their labour. They thought they couldn't pay any more. Lots of times how silly it got to a certain degree is that they talked about a husband and wife who were employed and they were paying them $22 and not $11. It doesn't work.
Another issue is the working conditions in a plant. If you have never gone through a meat plant you don't understand. I mean it is work that I wouldn't do, to tell you the truth. In the past a butcher actually took the animal and used a butchering skill on the cutting floor or whatever. Now you just cut one piece of meat out and it rolls down to the next guy to cut out. It is basically assembly line work now. The nature of the work has changed.
More automation probably is the answer for the meat packing industry because I cannot see people wanting to work on those floors in some of the conditions there. One of our neighbours had to wear a Kevlar vest. He had 30 seconds to quarter a beef. Those types of things are not that great.
Senator Tardif: On the other hand we need good wages and good working conditions. We need people who will do a good job because it affects our food security and our food safety. We don't want to get into situations where our Alberta beef is refused because of sanitary issues relating to it and sanitary issues around the plant. I know that happened in the past. I think the issue of workers is really an important one. I am not sure if the temporary workers program is the only solution to that problem.
I have another question that is for Mr. Jacobson more particularly. Well perhaps yes and perhaps no. In this agriculture and trade negotiation we have heard a lot about non-tariff barriers from different organizations that appeared before us in Calgary as well as in Ottawa. They said that Canadian food processors are facing a myriad of technical and regulatory burdens from the EU that makes exporting products into that market unfeasible or cost prohibitive. How serious is this for your industries?
Mr. Jacobson: On the crop side it has cut out some of the crops, canola specifically.
Senator Tardif: Because of the GMO?
Mr. Jacobson: Because of the GMO issue. There are other issues with crops that are not treated the same.
Another issue with the meat industry is the hormones and the implants within animals. That is a big issue. There is also some issue on what we call humane raising of beef and what happens with these things.
The caging system or the raising of chicken system over in Europe is different from ours. That creates a barrier because they expect us or they want us to have the same standards as they do and we don't to a certain degree.
When they talked about making that change for some producers there was reluctance on the part of producers to change their own operations to accommodate anybody else because we think we are the best sometimes. We have to get over that attitude.
There is a sensible alternative that we have to look for, but you can't deal with a country that is basically self- sufficient in its own food and is only going to allow in the amount of food it actually needs as it goes along.
The social licence or public sentiment of how food is raised, what they want to do locally to the food, has huge impact now. That social licence is going to get bigger and bigger for agriculture as we go down the road. We talked about it but the refusal to label what is in our product in my opinion is going to hurt us. You talked about scanning your product. It tells you what is there.
People know what is in there. We have gone past an era of "Trust me. We know what is best for you. We are going to put what is in there. You don't need to know what you are eating.'' I think we have gone beyond that era.
Senator Tardif: Is there resistance on the part of industry to label and to do the types of things that you are saying?
Mr. Jacobson: Yes. We have to argue that out between us. Some people think it is going to lead to more trade. I guess my opinion as some of us are saying is that it is already here. People already know what they are eating.
All of a sudden you get a report on Wikipedia or Facebook saying something is in something. It is not labelled. There is no education process. They don't know what it is. Lots of times on the hormone issue people think hormones and steroids are the same thing. Steroids are bad for us. Hormones they don't understand but they relate to them. Everybody eats hormones so it is an issue.
The Deputy Chair: Mr. Jacobson and Ms. Boehm, we would like to thank you for your presentation. You have made an important contribution to our study. If when you leave today or next week or sometime in the future you think of something you should have told us, don't hesitate to write and send something to the clerk. He will make sure that the rest of us get a copy of it so that we can take it into consideration. It is not lost even though our time here is limited as is yours.
We do appreciate your taking time from your busy schedules to be here and to give us your insight and advice.
Senators, on our next panel we have with us from the Alberta Beef Producers, Mr. Bob Lowe, Chair; from the Saskatchewan Cattlemen's Association, Mr. Ryan Beierbach, Chairman; and from the Manitoba Beef Producers, Mr. Brian Lemon, General Manager. Thank you for accepting our invitation.
I am going to invite the witnesses to give their presentations. Following the presentations we will have questions from the senators. As I call on each senator they will be given five minutes for the question and answers, and we will try to move through as many rounds as possible.
For some reason we are much more disciplined since we have been here in Alberta than we are when we are in Ottawa and we have got through a number of rounds. During the question and answer period I would ask that both the questioners and the responders be succinct so that we can get as much information as possible.
We are going to start with Mr. Lowe.
Bob Lowe, Chair, Alberta Beef Producers: Thank you, Mr. Chair. Good afternoon, committee members. On behalf of the Alberta Beef Producers I thank you for the invitation to speak today and welcome you to Calgary.
My name is Bob Lowe and I am Chair of the Alberta Beef Producers. My family and I have a farm cow-calf operation and feedlot near Nanton, about 100 kilometres southwest of here.
Alberta Beef Producers is a democratic and representative organization that speaks and works on behalf of close to 20,000 cattle and beef producers in Alberta, representing all sectors of production including cow-calf backgrounding and feeding.
While I want to show respect to my colleagues from other provinces it is fair to say that Alberta is a very important part of the Canadian cattle and beef industry. We have 40 per cent of the cows, 70 per cent of the cattle feeding capacity and 70 per cent of the beef processing or packing in Canada.
Agriculture is Alberta's second largest industry and our largest renewable industry. Beef cattle represent the largest single commodity in the Alberta farm economy with over $4 billion in farm cash receipts or over one-third of the total farm cash receipts. The cattle and beef industry is estimated to contribute $20.2 billion annually or about 6 per cent of the total of the Alberta Gross Domestic Product.
Trade is vitally important to Alberta producers. You have heard from the Canadian Cattlemen's Association and you will hear from my colleagues how important international market access is to the Canadian beef industry. We export almost 40 per cent of the beef we produce in this country but with interprovincial and international sales Alberta exports 86 per cent of the beef that we produce.
Alberta beef represents 73 per cent of the Canadian exports of beef so clearly trade is very important to Canadian and Alberta cattle producers, but diversity of markets is also very important.
Almost three-quarters of our beef exports go to the United States. The U.S. is our largest and best customer but it is not healthy to be so dependent on a single customer. Cattle producers face the same challenge as the oil and gas sector with respect to reliance on the U.S. markets.
The recent Alberta budget talks about a differential of $15 a barrel between Western Canadian Select and West Texas Intermediate. The beef industry faces a similar differential. We call it the basis. There are many factors influencing the size of the basis but having more markets for our products will reduce it.
Due to the size of our trade with the U.S. our top international market access priority in the past seven years was country of origin labelling. Our industry invested close to $4 million in legal fees fighting COOL. Over half of that money was from Alberta. We celebrated when COOL was repealed last December. We very much appreciate the hard work and support we received from the federal government and provincial governments on this issue.
We also think it is essential for Canada to retain our authorization from the World Trade Organization for retaliation in case the U.S. moves again to create similar discrimination against our cattle and hogs.
Now our top priority is establishing new and wider international market access through trade agreements. We are looking west and east for these agreements. We see tremendous potential for our industry in improved access to Japan through the Trans-Pacific Partnership Agreement and new access to Europe through the Comprehensive Economic and Trade Agreement or CETA.
The Canadian beef industry strongly supports the TPP and wants to see ratification of this agreement quickly. Ratification of the TPP here will continue momentum toward implementation of the agreement and put Canada in a stronger position if other countries are wavering in their support or seeking to alter the agreement.
Japan is our primary target in the TPP agreement, a big win for the Canadian beef industry. The TPP will put Canada back on a level playing field with our competitors in the Japanese market. Right now we face a 38.5 per cent tariff in Japan. Australia is at 28.5 per cent and continuing to drop every year. With the implementation of the TPP we will immediately drop to the same level as Australia and continue to drop until we reach a tariff of 9 per cent in 15 years.
With a TPP agreement we think we can double or triple our exports to Japan to $300 million per year, representing over a 10 per cent increase in the total value of our beef exports. In contrast, without the TPP or a bilateral trade agreement we could lose 80 per cent of the value of our exports to Japan.
TPP has the potential to be the biggest trading bloc in the world and as traders we need to be there. We continue to believe that CETA provides great potential for Canadian beef exports to the European market. The CETA contains a commitment that will remove the European tariff for a significant quantity of Canadian beef.
Removal of tariffs is an important step toward Canada sending beef exports to Europe but we will to resolve the technical barriers our processors face if we are going to make the CETA work for our industry. If there is sufficient demand for beef meeting EU requirements our producers will adjust their production practices to meet this demand but the technical conditions imposed on our processors will need to be acceptable.
There are other international market priorities for our industry. We are pleased that the Canada-Korea Free Trade Agreement was implemented last year. We hope that Korea's interest in joining the TPP will allow us to accelerate the elimination of tariffs on Canadian beef to bring us level with the U.S.
The TPP agreement will also provide us with the tariff reductions in Vietnam, a market that we see having growing importance in the future. We would like to see a reopening of markets in Taiwan and Indonesia that were closed as a result of the last BSE case discovered here in February. We also would like to achieve access for bone-in beef in China and beef from cattle over 30 months old in Mexico.
The Alberta and Canadian cattle industries are built on trade. We relish it. As the world's population explodes the discrepancy of where people are and where the food can be produced is diverging. This is going to mean more trade. We in the cattle industry are up for the challenge and trust that all levels of government realize the importance of global market access and favourable trade agreements. I would like to underline "favourable.'' Trade will be the key to the future prosperity of our industry and to Canada as a whole.
Thank you for the opportunity to speak to you today and I look forward to answering your questions.
The Deputy Chair: Thank you very much, Mr. Lowe.
Mr. Beierbach, please.
Ryan Beierbach, Chairman, Saskatchewan Cattlemen's Association: Good afternoon to committee members and thanks for inviting me here today.
My name is Ryan Beierbach and I am Chairman of the Saskatchewan Cattlemen's Association, representing Saskatchewan's over 18,000 cattle producers and feeders. I ranch near Whitewood, Saskatchewan, with my wife Tania and our three kids.
Saskatchewan is home to the second largest cattle herd in Canada. In 2014 cattle and cows accounted for $1.9 billion in farm cash receipts or nearly 20 per cent of the total farm cash receipts in the province. Despite this there are no federally inspected kill plants in the province so our producers are reliant on exporting feeder and slaughter cattle to other provinces and to the United States for processing.
The beef industry is an important contributor to the Canadian economy, providing $33 billion worth of sales of goods and services annually. In addition, for every $1 of income received by workers and farm owners another $2.08 is created elsewhere.
On the importance of trade to the cattle industry, the beef cattle industry in Canada is highly trade dependent with over 40 per cent of the cattle and beef production exported on an annual basis. Gaining unfettered access to new markets and removing trade barriers and existing ones are key to our industry's sustainability and success.
Currently we ship beef and beef products to 58 countries around the world. The U.S. is by far our largest market, accounting for 71 per cent of all meat exports. China, Mexico, Japan and Hong Kong round out the top five markets and together with the U.S. account for 95 per cent of our total exports.
It is important to me that you understand how trade adds value to the cattle that I produce. Every animal that I sell becomes hundreds of products: meat of course but also leather, offal, pharmaceuticals and industrial goods. Each part is worth different amounts in different countries.
If we are limited to selling in Canada our cattle would be worth a fraction of what they are now because of our taste for certain cuts of beef. Things like livers, tongues, tripe and others are worth dollars per pound in other countries instead of cents per pound in Canada. Some would have to be disposed of at a cost instead of sold for profit in other countries.
This is why we value market access. Each part going to the highest bidder around the world makes our processors profitable. If Canadian processors have less market access than our processors in the United States or elsewhere in the world our plants perform less profitably. Over time they will close and these other more profitable locations will be where cattle are processed.
Without a profitable processing sector our feeding sector and cow-calf sector will be less viable. We support, assist and generally do all we can to help the Government of Canada open markets to Canadian beef and cattle products. It goes right to our bottom line. We need to make sure gaining market access is given the resources to do the job and that politics do not get in the way of this process.
The other areas I want to stress are how much our competitors will work to keep our exports out of what they see as their market. Country of origin labelling is a good example. The United States Department of Agriculture admitted that it was not about food safety. We already proudly label meat from our plants that go into the U.S. market. The law was designed just to make it more expensive for U.S. processors to handle Canadian cattle. A group of protectionist U.S. citizens thought that it was a positive thing that they were able to get their government to implement the law and it greatly cost our industry in Canada as well as the U.S. and Mexico.
The European Union is another example. Irish beef producers see the EU as their market so they are doing all they can to keep beef exports out. They succeeded last week in getting beef off the table in a trade negotiation with South American countries. They seem to be succeeding in keeping the EU from recognizing Canada's food safety regime for beef processing.
Without recognizing certain carcass washes as safe, products that come from plants in North America can't go in under CETA. This means that agreement doesn't mean much to us. This is not a food safety issue. These steps actually add safety and that is why our plants won't turn them off to access the EU market.
In both these cases there is a limited amount to what we can do as industry. We can point out the issues to government. We can advocate for solutions and work on making sure that our industry is well informed, but most of the negotiations are government-to-government and require people in Canada and these other countries to negotiate.
Sometimes these people are called back office people at the Canadian Food Inspection Agency. Those back office people are important to me as a cattle producer because they work on showing that our food system is safe.
I want to ensure there is recognition that we need ample resources and technical and market access negotiation and defence within the Government of Canada. As I said, the industry will do all we can to assist but when it comes to government-to-government negotiations we are often not welcome in the negotiating room.
You have heard what our market access priorities are. I don't want to repeat them but I will just go over them briefly so that you know we are all aligned. As mentioned the U.S. takes a great amount of our exports so it is critical that we have access to that. It is important that we retain the retaliatory rights granted to us by the WTO regarding country of origin labelling to prevent something similar from happening in the future.
Japan and the TPP hold great promise. Japan is a key market with the agreement allowing us to get back on a level footing in that market. Korea and Taiwan are two good customers that could have better access to Canadian beef. Being in there early will give us negotiating power over countries that may wish to join later.
In regard to the European market CETA addresses a majority of tariff barriers but we need to get the technical barriers cleared up to take advantage of this. With that I will conclude and thank you for allowing me to present today.
The Deputy Chair: Thank you very much. We do appreciate that.
Next is Mr. Lemon, please.
Brian Lemon, General Manager, Manitoba Beef Producers: Good afternoon. My name is Brian Lemon. I am the General Manager of Manitoba Beef Producers, and I would like to thank you for the opportunity to bring our perspective to your discussions and your study.
Manitoba Beef Producers is the primary voice for Manitoba beef industry, representing approximately 7,000 producers in Manitoba including cow-calf, backgrounding and finish sectors. Our goal is to represent producers through communication, advocacy, research and education within the industry, to governments, consumers and others with the goal of improving prosperity and ensuring a sustainable future.
You have heard from my friends of the largest and the number two. Manitoba is number three in terms of the size of our herd with approximately about 10 per cent or 12 per cent of the national herd.
Our industry has certainly weathered its share of significant issues and challenges in recent years including BSE, our loss of the processing capacity, adverse weather conditions due to primarily too much water, labour shortages and trade disputes such as the mandatory country of origin labelling.
Manitoba remains very well suited for beef production. Our members remain very resilient and optimistic about the future. The province has large grassland areas that are well suited for cattle production. Certainly the improvement in prices over the past number of years has brought more interest into the industry.
There is certainly potential to grow the industry and increase the number of cattle finished and processed in Manitoba. Currently only about one-quarter to one-fifth of our calves produced in Manitoba are actually fed to slaughter weight in Manitoba.
As you can imagine exports are as important to the beef industry as they are to my friends. In Manitoba we exported over $72 million in beef last year. We certainly wish to thank the efforts of former Ministers Ritz and Fast as well as current Ministers MacAulay and Freeland for their diligence on the trade files specifically in terms of the challenge to COOL in the U.S. You have already heard from the Canadian Cattlemen's Association how important that market is to our industry.
Another challenge that certainly has taxed the Manitoba beef industry has been the loss of the federal inspection capacity. The story is not that dissimilar to that of Saskatchewan.
If we go back to 1979 and the 20 years that followed we lost five major federal processing plants which cut our processing capacity by 97 per cent. We went from just under 580,000 head being slaughtered in Manitoba in 2006 to just 21,000. The rest were obviously exported.
Having slaughter capacity is critical to being able to fully realize the benefits from exports. We are pleased to say that recently Manitoba is once again home to a federally inspected slaughter facility, True North Foods.
This new federal slaughter capacity fundamentally changes the landscape in Manitoba. It creates significant opportunities for exports directly from Manitoba to markets around the world and is especially valuable as new and expanded markets are achieved.
Thus the opportunities to grow Manitoba's beef herd are there if the conditions are right. Key will be realizing the market opportunities arising from trade initiatives such as CETA, the TPP and the Canada-Korea Free Trade Agreement.
Reducing and eliminating trade barriers is extremely important to allow access on terms that are competitive with other beef exporting countries. Being part of broad multilateral trade agreements is critical to Canada so that Canada is not left behind when it comes to market access.
Other countries like Australia, United States, New Zealand, Mexico and others have strong interest in accessing markets in the Asia-Pacific region and continue to work toward establishing bilateral trade agreements in countries like Japan which have the potential effect of placing Canadian beef and cattle exports at a disadvantage.
Having access to high value export markets through both bilateral as well as the multilateral agreements is critical to the long-term wellbeing of Manitoba's and Canada's cattle industry.
Having access is important. I think we have all driven that message home. We also recognize the importance that the access has to be predictable and stable. As a priority Canada needs to ensure that trade agreements contain clear science-based technical requirements such as sound and reasonable science-based sanitary and phytosanitary requirements.
Manitoba's cattle industry is excited about the opportunities inherent in the various trade agreements but our industry needs time to both receive and respond to the market signals that these trade agreements will create.
Unlike some of the other livestock cattle are bred once a year. It takes 18 to 24 months to move a calf to market or slaughter weight. It is only with this time that we are able to actually grow our herd. Making sure that we have secure and predictable market access under these sound science-based technical requirements is the only way that our producers and our processors will have confidence in the market signals they will need to make those changes or to realize on those markets.
Equally important is to provide efficient dispute resolution mechanisms as part of the trade agreements. It is important when disputes do arise that there are mechanisms that are efficient and provide resolution before irreparable damage is done.
As has been demonstrated in our past seven or eight years under the COOL dispute, taking issues through to WTO dispute resolution processes can be very costly and time consuming.
Manitoba Beef Producers would also like to acknowledge the importance of the federal government's Market Access Secretariat and the resources they provide. They play a critical role in pursuing new trade opportunities and maintaining the existing ones that we have.
We believe the investments the federal government has made in the secretariat have been extremely valuable and have reaped huge benefits not only for the beef sector but for most if not all ag sectors.
We encourage continued support for the secretariat's work. While we in the beef industry can certainly recommend priorities and directions to our government where we see opportunities for enhanced trade, it takes dedicated ministers and departmental staff to have those critical government to government conversations to realize on the opportunities and to deal with issues.
As the beef industry we can't have those discussions with foreign government officials. We need our government to commit to the resources that are needed to have those discussions on our behalf.
In summary, Manitoba Beef Producers are very much aligned with our provincial partners and the Canadian Cattlemen's Association regarding the potential of key markets around the world. As a trade priority we would request the federal government continue to work to build reliable and secure export markets with predictable science-based technical requirements and with timely mechanisms to resolve disputes.
As noted, in the cattle industry it takes 18 to 24 months to grow a calf to market weight. The cattle industry is not an industry where we can flip a switch or add another shift to ramp up production. It takes a number of years for the sector to react to these market signals. Only with secure and reliable market access will producers and processors have the confidence and the ability to make the types of decisions they need to realize on the benefits of these new markets.
In closing, we believe Canada is able to compete if given a level playing field in this highly competitive market. We thank the government for its continued pursuit of these new trade opportunities for live cattle, beef products, genetics, and for their efforts to resolve the outstanding trade issues that have impeded our ability to grow our industry.
The beef industry welcomes ongoing collaboration with the federal government including the Market Access Secretariat all the members of the value chain as the new trade opportunities are contemplated and brought to fruition.
We believe that Manitoba Beef Producers are strongly positioned to access any new or expanded markets that are being negotiated. I can't overstate how fundamentally having access to a new federally inspected slaughter facility in Manitoba enhances our ability to capture opportunities that may arise from these new markets.
Thank you for the opportunity, and I will turn it back to the Chair.
The Deputy Chair: Thank you, gentlemen, for your presentations. We will get to questions by my colleagues shortly. I have two quick questions.
Mr. Lemon, you talked about the new processing facility in Manitoba. I come from an area of the country where we too don't have federally inspected processors now. We are very small producers so we can't claim to have the volume that you would have in Manitoba, Saskatchewan or Alberta. How did you solve the problem?
Mr. Lemon: How did we solve the problem? We had a gentleman who was very motivated.
The Deputy Chair: With deep pockets, I assume.
Mr. Lemon: It wasn't without assistance from Agriculture Canada programming. I think the individual was able to access the Slaughter Improvement Program that was available to try and bring exactly what it did: regional access to federal slaughter facilities when BSE hit and our ability to move our product out of the province was completely shut down.
The federal government under Agriculture Canada and Minister Ritz put in place a program to try and build slaughter capacity. That was seed money, I guess. He operated as a provincial slaughter facility for a number of years while he was working on the renovations and the construction required to get his federal. He just got it this past year.
The Deputy Chair: You have all mentioned the potential market in the TPP. Some of you listed different countries where you thought we could do better. I try to look at the issue in a little longer range. By 2050 in this world there will be 9 billion people. Somebody has got to feed them. They are not all going to be living in rich countries. You can rest assured a lot of them are going to be living in poor countries but we are one of the few countries in the world that has the ability to produce more than we consume.
What is the capacity or do we know what the capacity is if we get greater access to these markets both in the TPP and in the Canada-EU agreement? Can we ramp up capacity? I understand it takes a couple of years to grow a marketable animal but what is the potential, gentlemen?
Mr. Beierbach: I guess there are two parts to it. One is adding more cattle and the other is making sure that all the parts of the animal get sold. Right now part of the problem is the packing plants in Alberta at least are having an issue with getting labour to further process some of those products. There are certain products that could be sold that aren't because they don't have enough labour to process those products and get them ready to ship.
Part of that is probably based on price. If the price of those products were higher, then it would be more of a priority. The big thing is having enough labour in place to do that. The somewhat unique thing about cattle is that they can take a lot of less valuable resources or byproducts and turn them into high quality food products.
You can take some of byproducts of producing ethanol or producing potato chips, grain screenings and that type of thing to parts of the prairies where there is absolutely nothing you can do except graze animals out there and turn that grass into food.
To me there are opportunities there. The more the value of an animal increases, the more people find ways to utilize them. It is just an economic return thing. You have to get to a point where it pays before it works to haul those byproducts to where the cattle are or try to fit them into the production system.
Mr. Lowe: There are enough parts of a cow when you split it all up to feed every economic level of people. Mr. Beierbach hit on it. Our number one limitation for capacity is labour. We can't get the labour in Canada to supply the processing industry with enough people. Right now they have orders for parts of animals that they can't produce because we can't get the people. That will be our number one detriment to being able to fulfil our full capacity.
The Deputy Chair: The Temporary Foreign Workers Program was under some criticism over the past couple of years. It was not in the agriculture sector but it became an issue because of abuse of the program by people particularly in the retail sector. It is not that they shouldn't have access to it either. I am not saying that.
Has the Temporary Foreign Workers Program been able to adapt to the demands of the industry? Going back to my 9 billion people by 2050, we need to ramp up the beef industry to respond to that. I am looking for your advice and your comments about the ability of the Temporary Foreign Workers Program. If properly managed and streamlined can it respond to the demand to help us produce the product we need?
Mr. Lowe: We are looking for new Canadians. The Temporary Foreign Workers Program was a stepping stone that allowed us to fast-track immigration. That is what it amounted to. What happened with it is they knocked the numbers back. I mean you can still do it to do that but we just can't get enough. There are just not enough numbers.
In our own operation we employ Native Americans. We have an immigrated family from Ireland. We have an immigrated family from Switzerland. We have Mennonites, Mexican Mennonites and Bolivian Mennonites that are in a different category. They are Canadian. We are currently employing some Ukrainian people that we would like to get into the becoming new Canadians flow.
It costs us a lot of money and a lot of heartache trying to do it. I mean my example is these Ukrainian fellows we have here now. They all have young families back Ukraine. There is no work in Ukraine. They would rather be there. We absolutely cannot put them on a stream that will get them into Canada before their Temporary Foreign Worker visa runs out. It is a year now. They don't have time to go through the process that will get them into the immigration stream. That is going to be our capacity issue. We have the land, the people and everything else to produce the cow, but we have to get it processed.
The Deputy Chair: That was my point. You have summarized it nicely. If we are going to respond to the demand because we are one of the few countries in the world that has the capacity to do that we need to have the regulations in place to support the fast-tracking of immigration.
We have proved in the past 12 months our ability to fast-track immigration when we have to or when we want to. We need to start thinking about that strategically with respect to development of agriculture. I am going to stop taking the time and go to my colleagues. Senator Tardif, please.
Senator Tardif: Thank you very much for your presentations. You have stressed the importance of getting access to new markets, to the European Union through the CETA agreement and then to Japan through the TPP agreement.
Some of these countries and some consumers have concerns about the use of growth hormones and antibiotics in their beef. How do you see getting around the ban that some of these countries may be putting on their beef imports based on the fact that they do not want beef that has growth hormones?
Mr. Beierbach: The way I see growth hormones is that it is a way that we can produce beef more efficiently. We slightly alter the balance of hormones in cattle by using them. In that way they more efficiently turn the feed into beef. It is not that they can't be produced without them. It is just that it costs more. It uses more water and more feed. It is less efficient. It is probably detrimental to the environment not to use growth hormones, but we can definitely produce that for customers if they are willing to buy it. It is just there has to be enough of a market for producers to produce that product.
If there are only a few customers asking for that and they don't want to pay the extra that it costs to produce it, it won't get produced. With the value of beef in the European Union producers would produce that meat if there wasn't the technical barrier of the carcass wash that is kind of holding things up.
As far as antibiotics the beef industry is prudent in their use now. We are working partially to show we are doing that and partially to make sure we use only what is necessary to make the cattle healthy and keep them productive.
It is a situation where it would be unethical for you to have sick animals and not give them the medicine they need. I am not saying we won't use antibiotics to raise beef. It would be like saying we aren't going to use antibiotics on people. If they are dying you need to give them something. It is just making sure that people understand that we use them prudently and it is important to the animal that when they are sick they get treated.
Senator Tardif: Mr. Lowe, did you want to add anything?
Mr. Lowe: They are two totally different things. The hormone and no added hormones to me is an economic thing. If I get paid enough to not use hormones I will gladly quit using added hormones.
Antibiotic free is a play on words. Every single chunk of meat that hits the plate is antibiotic free. There are two things there that you have to be careful of. When they advertise antibiotic free there is the never-ever plan. This means they have never ever had antibiotics, which is completely contrary to the humane treatment of cattle. If they just say antibiotic free, all the meat is antibiotic free. I have a really hard time with retailers or with consumers asking for antibiotic free meat when it is all antibiotic free anyway. If they go on the never-ever plan, that is contradictory to the humane treatment of livestock as it would the humane treatment of people. If something gets sick it is our duty as producers to treat them.
Senator Tardif: Are you concerned that the EU may be refusing to import some of your beef because of the use of growth hormones?
Mr. Lowe: The EU will not take under EU certification anything that has had added hormones.
Senator Tardif: That is right.
Mr. Lowe: What is stopping the process right now is the way that we decontaminate, which I guess that is a bad word, or clean the carcasses at the processing facilities. We use an acid wash and the EU won't accept that even though that is the number one method in the world to make sure there are no contaminants, no E.coli or no listeriosis. The EU won't accept that, which is obviously a non-tariff trade barrier.
They are meeting in Europe right now. Once we hammer out those difficulties then it will just become a matter of price. If the EU will pay the price there is a processing plant just northeast of Calgary that is starting up. They have an EU contract and are developing the supply chain as we speak to supply cattle under an EU certification. It will just depend what the EU wants to pay.
Senator Tardif: I am glad you mentioned that because the Minister of Agriculture mentioned that today. I was curious about it. He said there would be a plant opening up near Calgary that will meet EU standards.
Mr. Lowe: It is Harmony Beef.
Senator Tardif: I was wondering what he was referring to.
Mr. Lowe: That is what it is. Now the date is August 8 when they open. They have developed a supply chain dependent on the price.
Senator Tardif: It looks like Canada and the U.S. are going to make changes to their regulations about animal feed in 2016. They will no longer allow the use of antimicrobials to promote growth. How do you view this new regulation?
Mr. Lowe: I am pretty sure we will not get to use antimicrobials as growth promotants anymore. I am not sure what they classify as antimicrobials. The only one I can think of is called Tylan, and what that does is reduces liver abscesses. I guess it promotes growth by making the liver in the animal healthier. I am sure it is one of those things that is going to come down because of public pressure but there is no validity behind it. We are going to have to do it and we are going to have to quit using it.
Senator Tardif: By the end of 2016.
Mr. Lowe: The downside of that is going to be more liver abscesses, less efficiency in the marketplace and less efficiency feeding cattle. We won't be able to feed them as hard as we do now. It is going to come at a cost to the producers.
Senator Tardif: Mr. Lemon, did you wish to add to that?
Mr. Lemon: I don't have a lot more to add. The key message is that producers in Canada produce some of the best beef in the world in very humane ways. I think we have been through the whole notion of antibiotic free.
Whatever these proposed regulatory changes, regulations or restrictions, they should have some science base behind them so that we are able to negotiate. We need to have a discussion about facts rather than have a discussion about public perception and specific interest groups and their views of the world.
We need to bring it down to the science. If the science suggests that antimicrobial is something that is going to have an impact on consumers, let's have that discussion. Let's not just assume and move forward without having a discussion on a science basis about what are the impacts. At the end of the day we are in a business. If there is a market I think you have producers here who are innovative and creative. They are some of Canada's largest small businesses if you want to think about it that way. They are in it because they believe in their product. They will sell it where they can sell it. If there is a price and a market for it you can bet they will jump at it.
The Deputy Chair: Senator Dagenais, please.
[Translation]
Senator Dagenais: Exactly, Senator Tardif noted that, by the end of 2016, labels will no longer include that famous reference, which I think was to stimulate growth. You have spoken at length about this as regards your production practices, and of course production practices will have to be adapted to this decision.
I would like to talk about the agreement concluded with the European Union. Correct me if I am wrong, but this agreement will prohibit the use of growth hormones for cattle. Do you think that removing this reference on the label, that is, to promote growth without hormones, will help your exports to Europe?
[English]
Mr. Beierbach: I would say that this won't make our exports to Europe easier. There is a difference between growth promoting hormones and antimicrobials used to promote growth. Growth hormone doesn't affect the health of the animal. Either you put it in and you gain that feed efficiency or you don't give them the implant and then they grow at a slower rate and consume more resources. It is just based on the cost of raising that beef. If that is covered by getting a higher market price then producers will produce that.
As far as the growth promoting antimicrobials are concerned it is kind of a farm-by-farm situation whether those are used or not. It is not like across the board where every place uses certain products. It depends on the situation and what they are doing. It affects whether or not they use certain products to raise the cattle.
[Translation]
Senator Dagenais: Once again, correct me if I am wrong, but there are restaurant chains like A&W and Earls that have decided to buy their beef from Australia or the United States because they claim that growth hormones have been overused.
How do you intend to adapt to this new market requirement? Once again, this has to do with hormones. Who do you think of the position taken by A&W and Earls?
There are also the Saint-Hubert restaurants in Québec which proclaim that they use chickens without hormones. In any case, I think these are marketing strategies, but I would like to hear your opinion on this.
[English]
Mr. Lowe: I have had a lot of conversations with Earls. They found what they thought would be a marketing advantage and it backfired badly. The reason it backfired wasn't because they were going antibiotic free or hormone free. It was because they insinuated that Canadian beef wasn't raised in a humane manner and the consumers said that was wrong. They immediately boycotted the restaurants, at least in Alberta. I don't know about across the rest of Canada.
We had a lot of conversations with Earls. I was all over Canada on the news talking about it. I met with the president of Earls. I spent probably six hours over two days and they realized their mistake.
As an industry we have to take some of it because we did not promote what we are already doing well enough. They saw an opportunity to go with this certified humane designation which includes never-ever on the antibiotics and hormone free.
A long story short, Earls suffered a lot of backlash from consumers. They are going to go back to Canadian and Alberta beef. We are working with them now as an industry. They want to stick with their principles. They want to be antibiotic free. They want there to be no added hormones and humanely raised. They have discovered that our Beef Code of Practice, adopted by virtually every cattle producer across the country, goes far more into humane treatment of cattle than certified human ever thought of.
On the antibiotic free thing we are talking with Earls about the difference between never-ever and therapeutic use only. It is their business. I told Mo when I first met him that the good thing about this was that he didn't go to chicken, that he was still serving beef. That is number one. They are still serving beef.
Number two is where they are going to source it in my opinion. It is a lack of understanding on retail's part of exactly how the industry operates.
We have the Canadian Roundtable for Sustainable Beef which apparently nobody had heard of till the Earls thing. There are retailers all over Canada wanting to become part of that, which to me is a wonderful thing. They will actually be part of the process of sustainability. How do we get to the sustainability criteria? They will be part of the process now so there should be no more never-ever plans.
The Deputy Chair: If it is hormone free when it hits the market, shouldn't we advertise it as hormone free?
Mr. Lowe: There is nothing that is hormone free. You can't advertise it as hormone free because it is not. What they are advertising is no added hormones.
That to me is a whole different thing. The antibiotic thing is the one that really bothers me. We will produce cattle without added hormones if the price is right.
The Deputy Chair: Shouldn't we say antibiotic free because of the time lapse between the time you stop using antibiotics and the time the animal is slaughtered?
Mr. Lowe: I had a meeting with some people from Canada Beef this morning and we were talking about a program called drug free.
The Deputy Chair: I like that, yes.
Mr. Lowe: The Earls thing has been really good. If we as an industry and if Earls works things right this could be the biggest boon forward for the industry that we have ever had. It is making us think outside the box because we don't want it to happen again and Earls doesn't want it to happen again. They lost a lot of business over those two or three days.
The Deputy Chair: I would suggest they haven't gained it back yet either.
Senator Unger: Thank you, gentlemen, for your presentations. I have a couple of questions that go back to the beginning of your presentations.
Since the U.S. is our biggest export market what are the ramifications if they don't enter the TPP? Will you just continue what you have been doing? That is one question.
I have another one. I would like to know the price differential between the so-called perfect never-ever beef and what you are selling.
Then I probably have a third quick question.
Mr. Beierbach: The way the TPP is set up, as I understand it, it won't move forward unless U.S. is part of it. If the U.S. doesn't join TPP it is really important that we get back to working on a bilateral trade agreement with Japan because that is where we would see the majority of the benefit.
If the U.S. does enter the TPP and Canada doesn't, to me that would be the absolute worst case scenario because the TPP would move forward so we would be losing on the Japanese market. Plus the U.S., our major market, and Mexico, which is number three in Canada's beef market, would both be open to the rest of the TPP countries. We would end up seeing Australia and New Zealand getting access to those markets tariff free. That would really put us in a tough spot as far as we would see a lot more competition. Plus we wouldn't have the benefits of being part of TPP in Japan. It would be lose-lose in that situation.
Senator Unger: You did bring up my third question. It has been more than six months now that our new government has been in power. Is there any reason you are aware of that they are not ratifying the TPP as quickly as possible?
Mr. Beierbach: I don't probably know enough about it to say. Other than possibly supply management there is a lot of support in any of the agriculture industries. I know in Saskatchewan that the supply management industries are in support of moving forward with TPP as well. I just know from what I have heard on the news that there might be something to do with autos and pharmaceuticals where they are maybe getting some pressure from those industries not to.
The Deputy Chair: It should be noted, though, that nobody has ratified the TPP at this point. We shouldn't be singled out by saying we haven't ratified it. Everybody is in the same boat as we are. Everybody is doing their due diligence.
Mr. Beierbach: Yes. To me it sounds like Japan is pretty close to ratifying it as are Australia and New Zealand, but you probably know as much as I do about that or more.
Mr. Lemon: I cannot comment on whether they moving fast enough, but I know that we had the opportunity two or three weeks ago to speak to the Standing Committee on International Trade specifically about TPP. During that my president was very supportive of TPP and moving forward toward ratification.
My caveat I would put is similar to Ryan Beierbach's. Let's not lose track of the bilateral efforts as well. We all watched with a bit of a grin on our faces the U.S. process that is underway down there now, but depending on how they move forward it either puts all our eggs back into the bilateral world. If it doesn't go forward we still need those trade agreements.
Mr. Lowe: I will answer your second question about the price differential. There has been a lot of research done on growth promotants. Depending on the price of barley in Western Canada we feed barley as opposed to corn. Depending on the price of barley, it is up to about $120 a head. A benefit to using a strict growth promotant implant protocol is that price of barley right now is about a $105 a head advantage to use it.
I bought a strip loin in Costco a couple weeks ago and it was $17 or $18 a kilogram. I was at a farmers' market last week and they had a strip loin that was antibiotic free, hormone free, pasture raised, and grain fed, the way they put it, which means it was fed in a feedlot with no added hormones. I don't know if it was never-ever antibiotic or not. It was $87.15 a kilogram and they weren't selling any of it.
I noticed the farmers' market was actually full of young ladies with little kids. Nobody was at the beef counter. It was dead. I went there and looked at the prices and figured out exactly why.
I mean that is what we are facing. If we are forced to go that way, in essence we are going to kill the industry or we will shrink it badly. They have done lots of research in Alberta. I don't know if you have heard of the Alberta Livestock and Meat Agency. In its own research consumers walk in the front door of the restaurant and are asked whether they would like their meat to be antibiotic and hormone free. If somebody asked me that I would say yes. Then they go to the meat counter and they buy the cheapest cut. I believe we as an industry need retail's help in explaining just what antibiotic and hormone free mean. I believe through the Canadian Roundtable for Sustainable Beef we will get that done.
Senator Unger: Do you believe that industry needs to do more to try to explain to people, more education? I don't know if there are more resources to go around with all of these different issues but certainly the public has some misconceptions.
Mr. Lowe: That is exactly why we formed the Canadian Roundtable for Sustainable Beef. It was to get everybody in the room from retailers right down to producers talking the same language.
Senator Merchant: Mr. Beierbach, you brought up this point. How long does it take to resolve some of these disputes? Let's say the last case of BSE. I was speaking last week at the Senate with a representative from Taiwan. Now you mentioned that Taiwan and Korea will not buy our beef. I think it is because of the last case of BSE. How long ago was that? How long does it take for something like this, for instance, to resolve itself?
Mr. Beierbach: That really depends on each country and their will to take care of it. February of 2015 is when we had the last case. That is pretty well a year and a half now. We don't know when they are going to resolve it for sure.
To me something like that is a non-tariff trade barrier. It doesn't really have to do with human health or the quality of the food or the safety of the food. It is just an excuse to keep our beef out of that market.
Some countries that do a lot of trading will be a little more proactive and try to move things forward because they understand that if you treat a country like that in one situation it could come back on another product to bite you. In countries where they don't export a lot to Canada there is less motivation for them to take care of it expediently.
Mr. Lemon: If I recall back to the last BSE finding the reaction was almost immediate. Some of it is those countries doing their due diligence to say, "Let's find out more about what that was.'' Some of those markets close and they reopen really quickly. Some will use it strategically in the best interests of their industries, but it really depends.
It is probably fair to say that post that finding we gained most of our access back fairly quickly, but there are those that are still stragglers. It is a difficult question to answer.
Mr. Lowe: We have met with Korea specifically all the WTO rules that we had to follow. The CFIA has concluded its investigation yet Korea won't open so it is not in our hands. It is not in WTO's hands. It is obviously their initiative.
Senator Merchant: Do you feel the Canadian government has done everything it can? Are you satisfied with what has happened on the Canadian side?
Mr. Lowe: Other than getting political there is nothing more we can do. The science is all covered.
Mr. Lemon: That goes to my point about the Market Access Secretariat and the resources it has. It is a small back office. It has lots of pressures. It represents the beef industry, the pork industry and the grains sector. It represents the whole gamut. It represents in all markets. Its ability to do more is resource limited.
I would make the argument that we need to make sure that the government has the resources to react and do the things. It is by no means a criticism of the efforts they are putting in now but they are limited by their resources.
Senator Merchant: China is a huge emerging market. I was there just after the new year. I know our trade commissioner is doing everything he can. We met with him and with the Chinese officials.
Australia has signed with China. They are ahead of us in that respect. Being that they are ahead of the pack is also very important. It goes to what you say that if we had a bigger secretariat here it could maybe help you a little more.
The Chinese also said that Canadian beef was very expensive. They showed us just the price comparisons. They showed us the very lovely packaging of the Canadian fillet. They said, "It is very, very expensive. Most of our people would not be able to afford Canadian beef.''
This brings me back to what the Chair has been saying all along, that we have to feed the world. I don't think that the world is going to be able to be fed on beef. I know you are not trying to feed everybody beef but beef is a very expensive commodity. We are going to have to think of different ways. I know we are not only thinking beef but you must be looking long term.
You said there were certain cuts and certain parts of the animal we wouldn't eat but if you could process it you could sell it. What are you thinking in macro terms?
Mr. Lowe: I listened to a presentation 25 years ago from the Alberta government. The guy there was a trade guy. I have always kept that in the back of my mind. He said there was a difference between beef and grain. With grain we lend money to another country. Then they use that money to buy our grain and we forgive their loan. With beef we don't sell it to people who can't afford to buy it.
We aren't trying. The beef industry in Canada is a very high cost producer of beef. We don't want to hit all the markets. We know we can't supply to everybody. Canadian beef by itself is a differentiated product globally, let alone the stuff within our country.
We don't want to try and push beef on everybody in the world, but as the world's population expands the middle class is also going to get bigger. Where we are looking to push the beef is into the middle class. We know we can't feed everybody.
Senator Merchant: I guess you all agree with that. There is no dispute.
Mr. Lemon: There is no dispute. If I understand your schedule you have the opportunity to tour the Centre of Excellence later this week. I had the opportunity to see it for my first time yesterday and your question reminded me of a story.
There is a piece on the carcass called the loin tail which I think traditionally we have thrown in the bucket to become ground beef because it was a piece of the carcass that was not something that North Americans would eat. They are doing work in the Centre of Excellence. They pulled it out of the fridge and they showed it to me on the counter. They are working with this product in different recipes to find ways to prepare it so that it can become a nice dinner.
There is that piece of it where we are doing the research. We as an industry have invested in trying to figure out ways to use those other cuts to bring value to all the other cuts. In North America we have got a huge preference toward a very limited number of cuts. We like our steak.
As these countries emerge there is a group there that is going to look for that western diet. They are going to look for the fillets as well but there is always going to be the other demographic that is going to look for these other products.
Any time we add value to a cut that isn't going into the ground beef bucket we can sell it for dollars on the pound instead of cents on the pound. We have invested in that and hopefully you will get a chance to see some of the good work they are doing at the Centre of Excellence tomorrow.
Senator Merchant: Because Alberta and Manitoba both have slaughter facilities does that mean that we in Saskatchewan don't hold much hope? What is happening in Saskatchewan? We raise all the beef.
Mr. Beierbach: To me the role we have to play is to have the cow-calf backgrounder operation because we have grain. One of the byproducts of grain is screenings. There is also land on which you can only raise cattle as far as producing food for people. We can use that land to produce calves that can go to Alberta or to the United States. To me that is kind of our role or our niche.
The slaughter industry is a really tough business to be in. They need to have labour. They need to have proximity to feedlots and proximity to where the meat is going to sell. In Saskatchewan we probably aren't ideally suited to that or the federally inspected plant that we have in Moose Jaw would still be operating instead of sitting idle. Rather than trying to beat a dead horse we should focus on our strong points and utilize the available resources where we can be most competitive.
The Deputy Chair: Thank you. Before we go to the next question I want to go back to a question raised by Senator Unger about the approval process. We just did a quick check. The details of the TPP were not released prior to the federal election. They have been since then and the Standing Committee on International Trade in the House of Commons started meetings on October 28.
According to the last numbers we saw they have had 179 witnesses. Minister Freeland, the Minister of International Trade, appeared before the committee to initiate the process of approval. She indicated at that time that it would probably take two years to get through the approval process. We are in the early stages. The process has started.
We shouldn't assume that anything has been delayed. As a matter of fact I would think that the work this committee is doing is part of that process so that is why we will continue and we will move to our next questions by Senator Tardif, please.
Senator Tardif: The Canadian Roundtable for Sustainable Beef participated with Alberta producers in a pilot project. I believe it was called the McDonald's Canadian Verified Sustainable Beef Pilot Project and it was scheduled to be completed by April of this year. Is it completed? What do you see as the benefits of this pilot project?
Mr. Lowe: I was the first producer that was in the room building the first set of indicators for McDonald's. It is called the McDonald's Canadian Verified Sustainable Beef Pilot Project. McDonald's wanted to set itself apart in the market, to give you a little history of how it started. McDonald's and the World Wildlife Fund started the Canadian Roundtable for Sustainable Beef. They decided they wanted to do a pilot protect.
They came to Canada because for one thing they buy all their beef in Canada. We have only two major processing facilities, one major packing plants and one processing facility that supplies their hamburger. It was a very tight loop. We had the verified beef program. We had BIXS, the Beef Info Xchange System, and the Canadian Cattlemen's Association was a willing participant. They went through this process and it officially ended on April 1 of this year.
McDonald's right off the bat said, "We want to be able to say that we are sourcing a percentage of verified sustainable beef under the criteria set out by the global roundtable in the year 2016.'' June 1 is when they are going to have their meeting in Calgary where they will announce those numbers. I don't want what they will be.
What it does for our industry is that we are the first country in the world that actually will be able to say that 182 operations went through the process. Don't quote me on the numbers but it is somewhere between 40,000 and 50,000 mother cows and somewhere around 700,000 feedlot cattle. The operations have gone through this process and that is the number of cattle that come out of it.
McDonald's can actually say everything has to be traced back. The producer has to be verified sustainable. The feedlot has to be verified sustainable. Both plants are sustainable so that is no problem. If a calf born on my place goes to a feedlot that is not in the program that calf is out of the question. It is going to be a lot smaller number that McDonald's comes out with.
The intention is that they will move the findings and the verifiers used to give the designation that the McDonald's pilot has come up with to the CRSB. The CRSB is in the process of doing that right now so that it is kind of a transition.
McDonald's just didn't spend $2 million to do this and then it all goes away. The biggest thing is to make it a transition so that we shift the whole industry in Canada. We are the only country in the world that as of June 1 will be able to say we are producing verified sustainable beef.
Senator Tardif: Do you see this third party certification as perhaps opening up new market opportunities?
Mr. Lowe: I would sure hope so. My own impression on this whole social licence sustainability thing is that as far as trade goes in the years to come you won't be at the table unless you have been verified as producing things under somebody's indicators.
We looked at the U.S. and I think the last count was that it has about 400 different certification labels that anybody can start one. What we want to do in Canada is have something that is actually credible, and it takes a little while to develop that.
Senator Tardif: Do you mean the Canadian brand?
Mr. Lowe: Yes.
Senator Unger: I have not so much a question but just a comment. You mentioned McDonald's. In my previous life as a registered nurse I had my own nursing services company. We did occupational health and safety work. The plant at Carvel in Spruce Grove was our client. At that time they had federal meat inspectors as well but our nurses would do all of their health assessments before they hired people. I saw it start in its early beginnings and I am glad to hear that it is still an ongoing business.
Senator Merchant: People's tastes change. We are a different generation. Another younger generation will be coming up so I will question them, but I have noticed that the fast food industry has moved to other options too. They are serving salads now while in developing countries meat is a luxury and people are flocking if they can afford it to McDonald's and those kinds of places. It is a real treat.
In Canada I am not sure if it is a move but there is something going on that says stay away from red meat or don't eat too much red meat. How do you deal with that?
Mr. Lowe: That is the ongoing question. Since they started this verified sustainable beef project chicken is now globally outselling beef in McDonald's. That is a big concern for us. McDonald's is a business. I am not trying to do a McDonald's advertisement but when we first started this program they had five separate billion-dollar businesses. They were all hamburgers. They also said if they couldn't make money selling hamburger they would sell whatever they have to sell.
It is up to us as an industry to make sure we keep up with our product so that people want to buy it. We can't force it on them. I am beginning to think that science is always good. It is really good to have in the background, but people get sick of equating growth promotants to environment. They don't want to do that anymore.
We to figure out a way and I think we have to do it with retail. I am going right back to the Canadian roundtable. That is what that is for, to try and take away the bad science. There is a movement out there to get rid of cattle globally, just turn them loose. We don't need to go into that. We have all the science to back us up but we have been going about trying to tell the millennials that it is good for you.
A friend of mine said the other day that we have economic, environment and social. He said, "If you talk to millennials they don't really care whether I am an economically viable operation.'' They read and hear a lot of stuff. Some of it is false. Probably most of it is false because you can find anything you want on Google. They have a grandmother that died of cancer and there might be been something to do with red meat. As soon as that happens they don't care about the environment either.
We have to work on that social licence. We have the examples of forestry and oil and they have done a horrible job. We have to do better.
The Deputy Chair: You have raised a number of issues. You have created a bit of a debate among us which is fine. The interesting thing about the TPP is the process that is happening in the House of Commons but all the other countries are watching what is going on in the United States because nothing is going to happen until we know what they are going to do.
We have one presidential candidate who is in favour of the TPP. We are not sure what the other guy wants, what he is in favour of. That is just a reference to the TPP. We are not sure what he is in favour of on other issues as well.
Nothing is going to happen until after the American election, period. The fact that we are in the process of doing our due diligence is a good thing. Hopefully this report will be weighted as part of the due diligence because we are talking to the right people. We are talking to you and we are talking to others across the country.
I thank you very much for being here. It has been very informative. Your answers were right on. You have educated us, which is part of the process, and we would like to thank you.
If a light bulb goes on when you go away from here and you say I forgot to tell them this, don't hesitate to take pen in hand or keyboard in hand and send a note to the clerk. He will share your thoughts with us and they will become part of our report. Thank you.
For our final panel this afternoon we are pleased to have with us from the Alberta Pork, Mr. Darcy Fitzgerald, Executive Director; from Manitoba Pork, Mr. Andrew Dickson, General Manager; and from HyLife, Mr. Don Janzen, President. Hylife is a Manitoba-based company that sells exceptional pork products around the world including to Japan, China and Russia. This is all written down. I thought all the pork products we produce in Canada were exceptional but somebody wanted to underscore yours.
Thank you for accepting our invitation to appear. I am going to ask you to start in a moment. Following the presentations made by our witnesses a question and answer session will take place. Each senator will be given five minutes to ask questions and receive answers before I move on to another senator.
Therefore I would ask that the questions be succinct and that our panelists also be succinct and to the point. With a panel of five senators we have been able to get in at least two rounds at every session so far, and we hope to maintain that.
Mr. Fitzgerald, the floor is yours.
Darcy Fitzgerald, Executive Director, Alberta Pork: On behalf of the Alberta Pork Producers' Development Corporation I would like to say thank you to the committee for this opportunity to present our views on the values of international trade and the implications of the agreements such as the Canada-European Union: Comprehensive Economic and Trade Agreement and the Trans-Pacific Partnership Agreement.
For more than 47 years our organization has represented the industry as a whole here in Alberta and has acted as a not-for-profit organization legislated under the provincial marketing act. We deliver programs and services that strengthen and improve our pork industry. We also represent the interests of our producers and act as their voice to government and the public.
We are funded through a mandatory but refundable levy system based on the market hogs that are produced that is very different from any other province.
We also represent about 13 per cent of the total Canadian industry when it comes to pig production. Even though we are only 13 per cent, we are happy to say we are also the home of the second largest processing facility in Canada. We also have two other federal processors. A large portion of what they produce is destined to go to export.
In addition, Alberta is also the major supplier of pigs into the B.C. market as well. Those pigs also are destined to go in most cases with the federal plant into Asian markets.
In 2015 Stats Canada had us pegged at about 3.3 million pigs. It might be slightly less than that but we will say 3.3 million pigs were produced in Alberta and about 2.8 million were processed. Of that volume of about 252,000 tonnes, 57 per cent or 144,000 tonnes of that product were sent for export at a value of just over half a billion dollars. Additionally, as you will remember, the hogs that go to B.C. represent about 35,000 tonnes as well and most of those are derived from Alberta farms.
Of that half billion dollars in exports that we see leave the country about 45 per cent or $228 million in value is captured in the Japanese market. It is a very significant market for us and approximately 52 per cent of all the exports that we see leave our province go to current members listed in the Trans-Pacific Partnership Agreement.
If we look at what might be the future for us in new members that might join TPP, our number of current exports today would go to about 99.5 per cent. TPP itself as an agreement is very significant to us as a province.
If we look at our producers and our federal facilities that ship to this highly dependent export market and if we look at new trade agreements and in particular that partnership, we have a very keen interest in where the next rounds go and what these negotiations look like.
TPP countries represent approximately 40 per cent of the world's economy and the potential for new members to come on as well add a significant amount to the overall look of the world economy.
The pork industry in Alberta has a sizable economic output. In 2014 we conducted a study that looked at what the impact was on our economy. If we look at the direct and indirect impacts it is approximately $1.6 billion and 7,000 jobs with gross revenue of about $670 million in production sales.
Both the TPP and CETA agreements really level the playing field for us. That is how we view it as an industry, especially when we look at competing with our major competitors, the U.S. and the EU. It brings all of us to the same terms and access with other traders as well in those marketplaces.
The TPP will give Canada a position to negotiate the terms, as I mentioned already, with other countries that are seeking to join the deal such as South Korea, the Philippines and Thailand. The $228 million Japanese market would be in very significantly in jeopardy, we feel, if we do not participate and are not part of the plans to move forward with the TPP.
As we look at that as a Canadian industry as well, somewhere in the neighbourhood of about $300 million for all of Canada could likely be seen in the first four years if this agreement were put into place just in the Japanese market.
Our Canadian economy and our Alberta economy are based on trade and export products. At the heart of trade are agriculture and food products which are very much needed by other countries. Not participating in this agreement would create a negative effect on our pork sector and the economic viability of our industry, resulting in cutbacks and closures of pork producers, processors and exporters.
Canada was founded on trade. It has become a significant world trader in many areas. We now have the potential through these types of agreements to greatly improve our economy by stimulating growth in many sectors and creating real opportunity, and I say real opportunity for the next generation of those in agriculture.
With that I thank you for this opportunity to speak with you.
The Deputy Chair: Thank you very much, Mr. Fitzgerald. Now we will move on to Mr. Dickson.
Andrew Dickson, General Manager, Manitoba Pork: Thank you for inviting us here today. The Manitoba pork council would like to thank the committee for this opportunity to share our views on the implications of the ratification by Canada of the CETA and the Trans-Pacific Partnership Agreement.
Our council represents the interests of all pork producers in Manitoba. We are different from other councils in that we are the only one in Canada in which indirectly the two major processing companies, HyLife and Maple Leaf, are on our board of directors as well.
Our council as it stands today was created over 20 years ago though we were actually founded in a hog commission that was formed in the 1960s. We were created under provincial farm marketing legislation to deliver programs and services which would build and develop the pork sector in the province and to represent the interests of all producers to all levels of government. We are funded by a compulsory levy on all pigs sold for slaughter in the province and all weanling pigs sold for export out of the province.
We would like to share some statistics to illustrate our dependence on exports and new trade agreements. According to Stats Canada there are about 550 farms producing over 8 million pigs, of which 4.5 million are processed in Manitoba and just over 3 million weanling and feeder pigs are exported mostly to the U.S.
Manitoba is the largest pig producing and pig exporting province in Canada with 29.6 per cent of Canadian production in 2015. The estimated value of pigs produced was $1.03 billion in 2015. We buy about 2 million tonnes of feed grains and oil seed meal ingredients or the equivalent of 20 per cent of the Manitoba crop.
Manitoba pork producers are totally dependent on foreign sales as an industry. Manitoba processes over 5 million pigs or about 20 per cent of the hogs slaughtered in Canada. We bring pigs in from Saskatchewan as well as our own. Our processing plants account for just under one-quarter or 23.2 per cent of Canada's pork exports by value in 2015.
The HyLife plant is the largest exporter of pork to Japan of all the plants in Canada. Over 250 million kilograms of Manitoba pork products were exported to 30 countries around the world for a value of $799 million in 2015. About half were fresh chilled cuts, 40 per cent frozen cuts, and the balance were cured and preserved products.
While 25 per cent was sold into the United States this has been as low as 2 per cent depending on exchange values. Japan is by far the largest and most lucrative pork market in the world. Almost half our pork products by value are sold in Japan though only one-third by volume. Sales of pork products outside of Canada account for almost 75 per cent of all sales. The sector employs about 12,000 to 13,000 jobs and is the largest part of the food processing and manufacturing sector in the province.
For our council the signing of the CETA on October 18, 2014, and the TPP on October 5, 2015, were great days for our producers. The EU agreement represents a new market in a sense which previously only accounted for 6,000 tonnes of pork products. The EU is the only important pork consuming market to which the Canadian pork industry has had little real access, with a population of 500 million consuming over 20 million tonnes of pork. The new agreement now opens up potential sales of 85,000 tonnes of pork products.
There is still a lot of work to be done to overcome some of the technical barriers to trade. There is a mission to Brussels this week by our national organization to address these issues with officials. The EU has had open access to our market for years.
On the TPP, it is potentially very lucrative for the pork industry in Manitoba. In 2014 Manitoba exported over 175 million kilograms of pork products to just seven of the twelve TPP members. This was worth $677 million to our producers. The U.S. is our major competitor in international markets though the European Union is a major factor in the frozen cuts market of Japan.
The key point of this agreement is that we will have the same access to these markets as the United States. We cannot have another blunder as we did with the South Korean FTA when we belatedly signed on to the same conditions as the U.S. negotiated. We got left behind in the tariff reduction phase-in period and lost sales in a high value market. One of our processors indicated they lost over $70 million in annual sales to one of the leading retailers in South Korea. It will take years to recover our market share in that market.
In terms of direct benefits we are focused on the potential for an increase in sales in the Japanese market as tariffs are reduced for certain cuts and retail demand increases. The Japanese gate price mechanism was designed to keep domestic pork prices high to protect domestic producers.
While pork is the main red meat in Japan it is relatively expensive compared to Canadian domestic prices. As the protective tariffs are reduced we should be able to increase sales volumes especially of lower value cuts and regain a bigger share of other cuts and processed products. One study indicated that Canada could increase its sales of pork into Japan by $300 million as the tariffs are reduced. Manitoba will have a major slice of that growth.
In the future the market in Vietnam with its 90 million people whose main red meat is pork will be a major focus for our processors. As their economy continues its rapid climb to prosperity and living standards improve, our experience is that they will increase their consumption of pork and especially among the expanding wealthier middle classes.
If the U.S. moves to complete its ratification process and Canada sits on the sidelines, Manitoba producers will be the ones who will suffer directly. The loss of the Japanese market to the U.S. would be the largest calamity to ever hit our producers. We would have to shrink the industry dramatically, with major layoffs in the processing industry in Brandon, Neepawa and Winnipeg. Producers would simply have to abandon their farms and livelihoods.
I want to end on a positive note. We have plenty of potential to grow the business with abundant land and water. Our processing sector needs another one to 1.2 million hogs to bring its current processing capacity into line with similar sized plants in the United States.
Our council is working hard to develop programs to encourage increased production of finished pigs on our farms which will in turn increase the cost efficiency of our existing processing plants. Some 40 per cent of our producers are competitive with Iowa, the lowest cost producer of pork on the planet, and another 30 per cent are within $5 per pig of the average Iowa producer.
We need some assistance programs supported in part by government and private financial institutions to address cash flow management over the hog cycle and some insurance programs to help with mortalities and margin calls.
We estimate we need in Manitoba over the next five years to rise about $160 million to $180 million in new capital investment for about 80 new finisher barns. Over the longer run we will need another $1.6 billion to start replacing the barns built in the 1990s on over 600 sites.
To give you some perspective, Iowa producers this year alone will build 130 new barns. In the United States there are plans underway to build five new plants processing about 11 million hogs. This is about half of Canada's total production.
World production of pork increases each year by about all of Canada's production. In 2014 there were reports that China reduced its sow herd by 14 million sows. That is double the total number of sows in Canada and the United States. I was just trying to give you some statistics to put some perspective on Canadian production.
That is the end of my remarks, and I will be glad to answer some questions.
The Deputy Chair: Thank you, Mr. Dickson.
Before we move on, I do want to acknowledge Mr. Janzen's generosity and hospitality to the committee in the past. The ironic part is that as I look around the table none of the five of us were on that trip. I am the longest serving member of the committee and I was either ill or preoccupied with some other Senate business at the time. I didn't go on the trip even though I have been on the committee longer than any others, but I do remember the trip and the feedback from my colleagues when they returned and how much they enjoyed your hospitality when they visited HyLife. We thank you for that in the past, and we look forward to your presentation now.
Don Janzen, President, HyLife: Thank you, and good afternoon to the members of the standing committee. We appreciate being asked to participate in this forum.
There are a couple of guys in our company, Grant Lazaruk and Guy Beaudry, who would be much better at presenting and much better at answering your questions but both of them had previous commitments so I offered to do it.
The Deputy Chair: We are stuck with the boss.
Mr. Janzen: Yes, not always good.
First I will tell you a little bit about HyLife. HyLife was founded in 1994. It was a joint venture and quickly grew to become Canada's leading pork producer producing 1.7 million pigs annually in Canada and in the U.S. HyLife's head office is La Broquerie, Manitoba, and we sell pork products around the world.
As a company we remain committed to producing safe, nutritious and high quality products. We take measures to ensure that our products meet or exceed highest industry standards within an environmentally sustainable system. We are also committed to providing a safe and rewarding work environment for our 1,800 employees.
We are also a vertically integrated company. What this means is we produce our own feed. We have feed mills all over Manitoba and in North Dakota. We have transportation fleets that deal with movement of feed and livestock. We have a construction company and a lot of our barns have been built by our construction company. We have a manure management company which looks after applying all the waste in a sustainable way. We also have a manufacturing and distribution centre and then in 2008 we bought the plant in Neepawa.
We also have some strategic partnerships and I will highlight one of them. We have a partnership in China where we with another partner out there produce about 600,000 pigs.
The next few pages show you a bit about HyLife. For those of you with handouts you can see that in 1998 we had about 50 employees and currently we are at about 1,800 employees.
The next page shows a bit about our gross revenue over a period of time. In 2006 we were at just over $100 million a year in gross revenue. This past year we were at about $650 million.
The next page shows you our export markets. You can see that our largest export market is Japan, just like Mr. Dickson and Mr. Fitzgerald were talking about. That is a market that is really important to us. It is vital to our success. The next would be China, then Canada and then the U.S. The other ones are listed in there too like Russia, Korea, Mexico and the Philippines. Of course we have been out of Russia now for the past year or so.
I won't go into detail on the next page but there are total exports to Japan from different countries. You can see that Canada is a huge supplier of pork to Japan.
On expectations and concerns of Canada agri-food stakeholders, we need market access. Canada exports 70 per cent of our pork and must maintain competitive market access. Some of the barriers that we face today, and there have been many over the years, are China delaying Canadian freezer approvals; U.S. negotiating a significantly better trade agreement with Korea than Canada did, as Mr. Dickson talked a bit about; and currently Russia restricting trade with Canada, U.S. and EU.
Currently we have the Trans-Pacific Partnership Agreement being worked on. Canada needs to be included in this and it is imperative that we are on a level playing field with our competitors, especially the U.S. Japan is our largest customer with120 million people. TPP will also open other doors to us, one of them being Vietnam with 90 million people. There of course are other countries.
We also need a sustainable workforce. HyLife has grown rapidly in rural areas in large part due to being able to access a workforce. The ability to access farm and plant workers has been significantly impaired through changes to the immigration policies at a federal level. The Manitoba unemployment rate is at 6 per cent which basically translates to very few people looking for employment.
Improvements to the production chain: Canada is a leader of chilled pork to Japan and with opportunity to expand to other countries, one of them being Korea, like I mentioned before. Our industry and HyLife work with Canada Pork International to increase market share and deliver increased shelf life product as a key point of differentiation. Increased shelf life also helps mitigate challenges like we faced in 2014 with labour disruptions associated with container movements at the ports. Our industry needs continued technology improvements also.
I am just going to talk bit about regulatory factors. The federal government is engaged in modernizing the regulatory framework of the Canadian Food Inspection Agency or CFIA. We agree directionally with the initiative however there are some challenges, probably lack of resources required to achieve the transition. CFIA is establishing a nation export service centre. This commitment was made 12 months ago and needs to be expedited. I referred to Canadian freezer approvals in China moving slowly. CFIA has not been effective in communicating industry challenges from importing countries.
Then I heard about a transfer that was given to Dr. Elham Girgis, a veterinarian at the Canadian embassy in China. That was a significant loss for us too because she was well versed in what was going on.
Resolving import issues regarding sealing of containers: We need to standardize systems for all importing countries. We saw what the U.S. did and Canada did not enforce the CFIA enforcement of Canadian label requirements.
Proper PED border biosecurity protocol: CFIA has enforced an old regulation that is not effective and puts our farms at PED risk. It devastated the U.S. industry a few years ago. It also adds additional costs of 20 cents to 47 cents per pig relative to our costs of production.
I have also attached Appendix A. I won't go into it, but it talks about the PED border biosecurity. That was written by someone from Steve's Livestock, probably one of the largest handlers of pigs in Western Canada.
Competitiveness and profitability of the Canadian agri-food sector: U.S. pork industry is modernizing by opening five new slaughter plants within the next two years. This will increase their production by over 8 per cent.
Canadian hog production is competitive mainly due to our access to foodstuffs. However the Canadian pork industry is economically challenged due to smaller economies of scale, labour challenges associated with attracting quality workers domestically and now internationally, unutilized slaughter capacity, and high construction costs for both barns and processing facilities.
Solutions: Continued slaughter improvement program: We also have a program called growing forward dollars which is very helpful. We probably need to look at enhanced and more aggressive investment tax credit programs.
Thank you.
The Deputy Chair: Thank you for your presentations. We will get to questions in a moment but I have one question for Mr. Janzen.
You are hitting on some of the challenges. The transfer of the vet at the Canadian embassy in China was a significant loss, I can imagine, but was it at her request or was it the government's initiative? You may not know that.
Mr. Janzen: I do not know that, but it was just brought to my attention by Guy Beaudry, the manager of the plant in Neepawa, that it was a loss to the industry in terms of moving concerns forward because apparently she was very well versed.
The Deputy Chair: How long ago did the transfer take place?
Mr. Janzen: I am not sure. I think it was fairly recent, though.
The Deputy Chair: I think it is worth noting that if and when Minister MacAulay is before us that we will bring this up as an issue. We hope to see him soon. It is a personnel issue, and who knows what goes on in personnel? You are the manager of a large operation. You know better than I that it is worth making sure that the minister is aware of the need.
My final question goes to all three of you. If we sign the TPP and if the markets are opened to us and if the demand is there for more product, can we produce more product? How long do we need from the time the TPP is signed to the time we are able to deliver on that increased demand?
The third part of that question is: What does that mean from an employment point of view? I won't talk about the Temporary Foreign Workers Program or the immigration program. I just want to talk about numbers to give us an idea.
Mr. Janzen: I will start and I think Mr. Fitzgerald and Mr. Dickson can add to it.
Yes, I believe we can fill that need. First of all, like we talked earlier, we need to be part of that agreement. I think we all agree on that.
The Deputy Chair: Yes.
Mr. Janzen: There are a lot of weanlings today that are exported to the U.S. I think we could come up with programs, and Mr. Dickson alluded to some of those, where we could build more finishing barns in Canada, especially in Western Canada.
There is capacity in the processing plants in pork production that are underutilized. We have a lot of land here in Western Canada, western Manitoba, Saskatchewan, and Alberta where we could build barns and utilize the fertilizer that comes out of the pigs.
The Deputy Chair: I asked a question about employment. How many jobs do you think we could generate out of that?
Mr. Janzen: I am going to give that one to Mr. Dickson. He would have a better idea.
The Deputy Chair: Come on, Mr. Dickson. No pressure.
Mr. Dickson: In the province it is not just the jobs on the farm. There are the service jobs that go with them of the veterinarians, the plumbers and the electricians. There are the jobs in the processing plants. There are the truck drivers. There are the guys who do the packaging and the transportation of the good. There is material that comes from the Brandon plant, for example. Maple Leaf goes to the plant in Winnipeg and there are more jobs in Winnipeg. Then the product goes from there out.
We sat down one day and went through all the different companies looking at who employed whom and how many people and we ended up with 13,000 in Manitoba. If we were able to get another million pigs or another 20 per cent to 25 per cent, we are probably going to create 2,000 to 3,000 jobs in the province of Manitoba alone. You will see the same thing happen because other companies in Saskatchewan and Alberta definitely for sure will have those sorts of demand as well.
The Deputy Chair: That is a significant change.
I am the only senator from the East so I have to ask this question. You continue to talk about having the industry based in Western Canada on the prairies in particular. Is there a reason we don't talk about the industry in Eastern Canada?
Mr. Fitzgerald: I guess from our perspective because we are in Western Canada we would talk about Western Canada, but if you look at where the statistics are Quebec is the largest producer of pigs in the country. Number two is a competition right now between Manitoba and Ontario.
Mr. Dickson: It is no competition.
Mr. Fitzgerald: It is no competition. You guys are taking over, okay.
The Deputy Chair: They are not in the room.
Mr. Fitzgerald: That's right.
Number 4 would be Alberta and number 5 would be Saskatchewan. Obviously there are greater numbers of pigs in Eastern Canada, in Quebec and Ontario.
If I could just go back to your question, senator, asking about if we could meet the demand, if you look now at our facilities that are in place, particularly in Manitoba and Alberta, we are very much under capacity as far as the number of pigs coming into the plant. There is a greater ability to produce pork than the number of pigs that we are actually putting into those plants. A lot of that is derived by the value of that pig. The more pigs that can go into a plant, be put into a box and shipped to export the higher paying countries like Japan, the more the value of that pork is increased. The dollars coming back to producers should also increase which sends the incentive to grow more pigs.
I don't want to be pegged on the number but I believe we ship somewhere around 4 million to 5 million pigs to the U.S. right now out of Western Canada. Those pigs are going down as weanlings, smaller pigs, to be fed out in the U.S. If the price were greater we would likely see more of those pigs staying back in Canada and being fed here, filling all the barns, having new barns in place, creating more jobs, and an export system going out.
The Deputy Chair: Thank you very much, Mr. Fitzgerald.
Senator Merchant: Thank you and welcome.
Looking at it from an ethical world lens, as our Chair often has reminded us during these hearings we are going to have to feed 9 billion people by 2050.
The pork industry is in a very good position. You said earlier that pork was the choice red meat in many countries right now. From an energy conversion point of view soybean is the cheapest way of feeding the world. Everything then is measured as against soy. I am going to give you the statistics. I think they are accurate. Eggs are 1.21 soy, chicken is 1.41 soy and pork is 1.61 soy, whereas beef is 4.51 soy.
You are in a position where the world is going to say one day that we cannot afford to raise cattle anymore if we want to feed the world. It just is not an efficient way to use energy but you are very close to the bottom so getting these trade partnerships and opening up your markets is going to be very important.
I understand that you want Canada to sign the TPP. According to our Chair again the Government of Canada is continuously working hard at it but the U.S. is the key player. If the U.S. does not sign, for the 12 countries that are about to sign I think that would present a problem. You have to also be looking outside of that plan.
What are you thinking? If the U.S. is not going to sign, what are your prospects and what are you looking to our government to do?
Mr. Dickson: A couple of things. To go back about your numbers on what is the most effective way of feeding the world, the big thing is price. If the price is high farmers across the world will increase production off their existing land base. They will bring more land into production and it will be more efficient. Rice yields can be dramatically increased in parts of the world.
The big growth in population is going to be in Africa. Africa is an untold potential in terms of agricultural development. If you have seen what countries like Kenya and so on have been able to do, it is phenomenal growth. The potential for Africa to feed itself is huge. The world will feed itself. There is nothing like price to incentivize people to do it. They will adopt new technologies and so on.
The thing about meat is that you have to be careful in terms of comparing apples with oranges. The ruminant animal eats things like grasses and so on that the human being can't eat. It converts forages and stuff like this into protein that we can eat but it is not the major meat source in the world.
The biggest source of meat is pork. The second is chicken and then we are into fish which is essentially cultivated fish now. We have essentially exhausted the ocean's supply.
We look at the pig. It converts feed at about 3.1 or 3.2 pounds per pound of gain. Chicken is in the order of 2 something or other and fish is in the order of 1.6 or 1.8 depending on what type of fish it is. Basically it is going to be pork and chicken duking it out for supplying meet in a sense on the dinner plate.
Pork is very popular in the Far East and so on. There are markets in India, of all places. You can get pork in a restaurant in Israel. There are different ways of doing it but it is not the same as us. Africa is going to be the big question. What is going to happen in Africa and how are they going to do it?
We will supply product in North America to sophisticated markets, the middle classes and so on, as pointed out by the beef guys earlier, because we sell cheap chilled pork and so on. That is what we are geared up to do. We are very good at it. We have a tremendous transportation system in place. Our plants are leading art. In fact people say to go to Europe and learn lessons. Actually the Europeans are coming and learning lessons from us.
These agreements essentially provide a level playing field for all of us. The agreements we have in place are already in place. They are not going to change. If TPP doesn't get signed then it is not the end of the world. We still have agreements in place. The issue now is: What is going to happen next?
The original trade history was to try to get everybody to do it under the WTO, under global agreements where all the countries came to the World and signed on the same agreements. That hasn't worked. The Doha Round, et cetera. has all been problematic. We have broken up into these regional trade agreements, these bilateral agreements and so on, blah blah blah.
Countries like India still have to learn how to sign agreements, how to come to terms and stick by them. Part of bringing China into the WTO was to ensure that China followed certain rules on trade.
As Mr. Janzen was pointing out they can't keep changing things. Every time you send a shipment halfway across the ocean you get a different rule by the time the container arrives. That cannot happen. There has to be some rules in the marketplace.
If TPP doesn't get signed Canada will engage in bilateral trade agreements or it will palsy up with another country like Australia or New Zealand or try to do a multilateral agreement with some of the markets like Japan and so on. It is more difficult when you bring the largest economic power on the planet, the United States, to the table. It changes the rules for everybody and we have to be careful about this.
We learned from the European agreement that the provisions of 80,000 tonnes that we got was a notional amount because the Europeans said, "We are going to be negotiating with the United States after you. We are going to give you this slice because the Americans are going to want proportionately this amount.'' That is about to happen over the next two years.
The United States in the end will sign trade agreements because that is how they make their living. They will push for it and they will follow rules. They want rules. They want the WTO to work and so on.
I was very much involved directly in the COOL case. I went to Geneva five times and all that stuff. Lastly, as was pointed out earlier in one of the presentations, staffing in the federal government levels is absolutely critical to winning in these things. You need to have a top team working.
Canada has excellent trade lawyers. They are the best in the world. One of them is about to retire. You have to start thinking about the next generation of trade lawyers because if we don't have the right trade lawyers we are going to lose.
Half the presence of U.S. companies are from their legal departments because in U.S. companies they use trade law as a tool of business. In the same way as they have a guy from the engineering department, a guy from the production department, et cetera, they have lawyers for legal battles in the United States and across the world. You are going to have to start thinking in these terms.
The Deputy Chair: As the spouse of a lawyer you may want to comment.
Senator Merchant: I was going to say as the spouse of a lawyer and three sons who are lawyers. Never mind sisters, cousins and everything. It is a very sad case. Somebody said to me "You have my condolences'' or something when I started to brag about the family.
Senator Tardif: Thank you.
You have spoken about the need for an adequate supply of workers. You seem to have an easier time of it than the beef industry. I am not sure but we heard from representatives from the beef industry this morning who were indicating the lack of workers especially in the meat processing plants. Do you have that same difficulty with meat processing for pork that you would have for beef?
Mr. Janzen: In Alberta the meat industry was competing a lot with the oil industry. I think that presented another dynamic. In Manitoba we didn't have as much of that. We saw it a bit in Saskatchewan because we also have barns in Saskatchewan and we were competing with the oil industry there.
For us it is imperative. When you have a 6 per cent unemployment rate most of those 6 per cent of the people are not really looking for work. We employ over 1,100 people in Neepawa and it is a town of probably 4,000 people. There are also indigenous people in the area. We have worked with them. We have worked hard with them.
When we bought the plant we had we had 300 employees. We still have about 300 employees originally from Neepawa. The other 700 or 800 have come in from other countries, mainly the Philippines. It is difficult to get people to move to Neepawa without bringing them in and providing an avenue for them to come into the country.
When you go to other countries to look at immigrating people, there are a lot of people out there looking for work. They are good workers. They add to the community. They are used to hard work. They are productive, so to keep that avenue open is vital for industry. I would say it is vital for the whole meat industry but I know for us as a company and I know for Maple Leaf in Manitoba that is important.
Senator Tardif: If I understand you indicated that you are able to access farm and plant workers but not without bringing others in from other countries or from the Temporary Foreign Workers Program. Is that correct?
Mr. Janzen: When we have barns in different rural areas typically in an area you might need 50 or 80 employees. They are usually relatively easy to find even though that has become a little more of an issue in the last few years. When you go to a community that is away from a large centre like Winnipeg and you have over 1,100 employees and the community only has 4,000 people in total, there is no way you can get enough people from that community.
We are scrambling right now, working with government, working with Minister Mihychuk and others in Ottawa. We have a lawyer that deals only with immigration. We are in touch with the people out there trying to create an avenue where we can bring in more immigrant workers.
Our goal is to have them become citizens of Canada. That is our goal.
Senator Tardif: I would like as well to have you perhaps expand on some of the challenges you put forward, Mr. Janzen. You indicated that CFIA has established national export service centre but the commitment was made 12 months ago and needs to be expedited. What in your view would be the value added to your company of having this service centre in operation?
Mr. Janzen: I don't know a lot about that one. Guy Beaudry talked to me about it. I never got into depth with him because we both had time commitments. I don't really know more about it than that. He said that the whole system is directionally good, what the government is doing. We just need to put more resources behind it to get it moving quicker.
I am not sure if Mr. Dickson knows anything more about that than I do.
Mr. Dickson: CFIA is a huge agency. They are reviewing a number of pieces of legislation. They started a process over three years ago to start working on different things like the Health of Animals Act to try and bring it into the 21st century.
There are also issues in terms of mandate. Instead of being focused on the agriculture department it is more toward the department of health now in terms of reporting structure. There is that sort of refocusing of how their rules and regulations are going to work. At the same time they don't want to lose the need to provide the appropriate regulation for Canada to maintain a very healthy domestic food supply and at the same time allow rules and regulations for what is essentially an exporting based business to be able to operate effectively on a cost competitive basis in the world. It is immensely complicated.
We mentioned one little rule about PEDv. This is a disease of baby pigs. It is endemic in the United States now. They lost 8 million to 10 million baby pigs in one year. We have been able to keep it out of Western Canada but the rule was essentially that if you brought a trailer down to the United States you had to wash and disinfect in the United States.
In 2014 we said, "This is crazy. They have the disease down there. Washing these trailers in the United States is going to bring the disease into Canada because their wash stations are infected.''
We had a protocol. Trailers are sealed before they come over the border because they don't have the disease when they go down there. As long as the driver keeps the door closed after chasing the pigs out, they will stay disease-free. Bring them into Canada. We will wash and disinfect in Canada where we have some rules on this thing and inspections in place.
CFIA says the rule is you have to wash it, so as of May 2 they went back to the old rule. Our first line of defence was the border. Now it has become questionable whether it is a line of defence anymore so now we are into assembly yards and we are at the farm gate. We have a three-layer approach to keeping the disease out.
I understand CFIA's position. I understand its legal position. We are not trying to be a pain on this thing, but we need someone such as the minister to come to the table and say, "We need to get this fixed in the long run''.
We have a modern pig industry in Western Canada. There are problems in Ontario. Ontario hasn't got the wash stations in place to do this properly. Quebec has managed to keep most of the disease out, but they don't export the same number of live animals into the United States we do. We have 120 trailers a week going across the border at Emerson. There were five cases. It took us ages to get those things cleaned up. We have to keep it out. If we get the disease in the West, it is not only in Manitoba. It will be in Saskatchewan. It will be in Albert. We will be short of pigs again.
Senator Tardif: The deadline of May 2, do you know if that was enforced?
Mr. Dickson: It was enforced on 12:01 that day.
Senator Tardif: No, but the change now.
Mr. Dickson: They reverted to the old rule. I was involved in this because I was the one that worked with CFIA to try to get it so we tag them at the border. We had excellent co-operation with the field staff in Winnipeg but Ottawa had a different approach to this thing. That is fine but this is how crazy it is.
We asked them: "What is the disinfectant you recommend?'' One of them was citric acid. I said, "Isn't that the stuff you put in gin and tonics?'' The veterinarian from CFIA was adamant that it would be a perfectly good disinfectant.
This is one of the most virulent diseases we have seen in the pig industry. A test tube of this stuff would infect every farm in North America. It is really hard to get rid of. We have no vaccines at the moment. There is a vaccine coming up out of VIDO in Saskatoon. Hopefully it will work. Some of the trial results are very good right now but they will be the first in North America to do this.
The Deputy Chair: I think the pork industry gets a bad rap in Ottawa from people.
Mr. Fitzgerald, you were going to tell us something.
Mr. Fitzgerald: If you don't mind, senator, I would like to speak to you as one Albertan to another Albertan.
Senator Tardif: Yes, I would appreciate that.
Mr. Fitzgerald: And so the other committee members also hear it too.
Your first question about labour is very unique to Alberta and Saskatchewan. It is that a lot of the rest of the country doesn't realize that there are a lot of Canadians who live in our provinces. They do not come here for cheap jobs. They come here for very expensive jobs. When those jobs are no longer here they go back home and they don't work at jobs that pay less.
We don't have an economy where people look at agriculture and say that is where I want to work. We rely on people from other countries who have an agriculture background to come and work for us, to start their lives here. My grandparents started that way. They emigrated from the U.S. They were agriculture workers. They came here. We have many people who have come into our country to become agricultural workers. That is how the west was started.
Today we have this fuelled economy that suddenly isn't fuelled anymore and we have all these workers with high skills who are paid for six-figure jobs. They don't go to work in food processing. They don't go to work in barns. You wouldn't take somebody who was a mechanic and ask them to become your doctor or your nurse. It is the same thing. You don't ask somebody who is a lawyer, an engineer or a welder to go and look after baby pigs.
We are almost equating that to the same thing. It takes a different mindset, a different way, a different emotion to actually work with animals. We have to protect those animals. If we think anybody can just come and have the job, it doesn't work. We rely on people with the background who want to work in agriculture and have the skills to come and do that.
Rightly or wrongly our industry is very much shrinking. People do not take part in agriculture anymore. We all eat. None of us have stopped eating but we are not working in the agriculture industry. There are many other industries to work with. We are reliant on that temporary foreign worker process. Maybe it is the name temporary foreign worker that displeases everybody. Perhaps we need a new name for the program.
Senator Tardif: Thank you for adding that information.
The Deputy Chair: Senator Dagenais, please.
[Translation]
Senator Dagenais: I will start with you, Mr. Janzen. According to Statistics Canada, unless there has been some change, over half of agri-food products are exported to the United States.
Do you think your sector will be exposed to risk due to the fluctuation of the Canadian dollar? We know that the value of the dollar fluctuates a great deal. It is about 77.46¢ these days. It has not changed much. Could this create risks for your industry?
[English]
Mr. Janzen: The currency where it is at today is great. When we were at par with the U.S. dollar, it was a challenge for our industry. Once the dollar gets down to around that 80-cent range we can be very competitive with the U.S. industry. We like the currency where it is at today.
Mr. Dickson: Just to explain, we are paid in U.S. dollars. Our formulas for our pigs are based on the national price in the United States. There is no Canadian price. Whatever the national price is in the United States that day it sets the price for pigs in Canada. It is the same in Quebec. They actually have a formula built into their marketing plan.
The national price in the United States is a combination of prices: The Eastern Cornbelt price, the Southern Minnesota-Iowa price and the Western Cornbelt price. They are all melded together into this one price and it is set in U.S. dollars. It is the same for our exports. All our exports are sold based on U.S. dollars so when their dollar goes up in a sense it is great for us.
[Translation]
Senator Dagenais: Of course, the United States. I have said it and I will repeat it now, and correct me if I am wrong, but half of our agri-food products are exported to the United States.
You also mentioned the TPP and the agreement reached with the European Union. You could diversify your export markets, which would put you in a better position. Am I correct in saying that 80 per cent of your exports are to the United States? That is your main customer, correct?
[English]
Mr. Dickson: Even though it is a high percentage, more products are actually sold to other countries. As a large buyer it is there. At one time it was the buyer of all pork products but we have worked very hard over the last 25 years to make sure that isn't the case. We have tried to diversify into these 100-plus other countries to make sure that we have that marketplace. All it takes is stopping products from crossing into the U.S. one time and we have a trade issue and we have a problem. We have looked at that a long time ago and said we need to diversify to make sure that we have many trading partners. In that way there is no one partner that holds us in some peril.
If we look at the situation in Russia, a half a billion dollars was cut off in one day. At the time of that trade embargo there were 1,000 containers of pork products on a dock and on a boat being offloaded and getting ready to come to a plant. That all had to stop. It all had to come back and find a new home and be relabelled because you can't just sell a product with a Russian label to another country. You have to go through the CFIA to make those changes and make sure you follow the right rules of those countries you are trading with.
If we put ourselves into that same situation with $3.4 billion in export trade and if we maintain an even bigger marketplace with the U.S., all it would take is that border to close and we would have no place to ship those products. We do need diversification.
Mr. Janzen: I would just like to add another thing.
I agree with Mr. Fitzgerald. When I got into the industry back in the eighties the U.S. probably imported 25 per cent. They were deficient in pork so they imported about 25 per cent of the pork supply they needed. Today they export about 25 per cent, so they have really grown.
They are an exporting country as we are, only we export 70 per cent and they export 25 per cent. They are as reliant on all those countries, China, Japan and Korea, as we are. That is why it is difficult to move product into the U.S. That is also coupled with country of origin labelling. That really took us out of some the markets and it is tough to get back into them after you have been out for so many years.
Mr. Dickson: The trade between Canada and the United States on pork is about evenly balanced most of the time. In fact Canada has a bit of a preference. We actually sell a bit more into the United States than they sell back to us. This is perfectly natural in two trading countries. You see the same thing in automobiles and that sort of thing. There is a balance between Germany and France and so on.
There are certain cuts that we don't have enough of in Canada. We import them from the United States. There are certain cuts they need that we ship down to them. The big thing to look at is dollar value. It is roughly the same.
The U.S. exports into the Canadian domestic market proportionally are huge. They probably have about 30 per cent of our domestic market, if not more. When you go to Costco, for example, a big chunk of its product is from the United States.
This is where we get into the labelling thing. All they have to do to send stuff in is put it in big containers that have "Made in the United States'' or "Product of the United States'' on the outside. When the individual packets inside are taken out and put on those little plastic trays they don't have to say "Product of the United States'' according to CFIA.
When we package stuff up in final retail form and it goes into the United States it has to say "Product of Canada'' on it. There are all kinds of labelling issues, all kinds of impact, and the dumping thing. When you're in Chicago and some store doesn't want the product that weekend, man, it is dead easy to ship it into Ontario whatever the price because you want to get rid of it. Of course the Canadian producer is going, like, "What the heck?''
[Translation]
Senator Dagenais: Of course, we are talking about production. I would like to discuss transportation infrastructure with you three. The higher the production, the more markets there are, and the more infrastructure we need.
Mr. Dickson, you mentioned among other things an increase in exports. That is important. Transporting products in a competitive timeframe, in a relatively short time and at a reasonable price, is important.
I would like you to tell us a bit more about the transportation infrastructure for your products. Earlier you mentioned I don't know how many trucks crossing the border. I imagine there are also containers, boats, et cetera, to ship goods outside Canada. I would like to hear about the transportation infrastructure you use to export your products.
[English]
Mr. Janzen: Today we probably ship about 120 or 130 containers a week. Most of that goes to western ports. Price usually dictates how many people get into it but I believe the infrastructure is there. Sometimes we have to pay more for these haulers to bring product to the West Coast. We don't do that by ourselves. We outsource all of that. Very seldom had we had issues getting enough trucks. Sometimes it is not the price that we want, but they are always there. It is the same with the ships at the ports. There are always enough cargo ships out there but the price will vary from month to month, from year to year, depending on what else they are moving.
The Deputy Chair: Before we move on to my next colleague I want to go back to a statement that was made in the opening remarks about Africa and the world will feed itself when we have those 9 billion people.
They will only feed themselves if somebody teaches them how to do that. This is a real issue. We are in the business of selling food and it is important we continue to do that. At some point somebody has to discuss how we teach people to feed themselves. If not, the social unrest that will follow hungry people will have to be dealt with by all of us. I just wanted to make a comment on that.
Senator Unger: Thank you for your presentations.
A couple of the questions that I was going to raise have already been raised but I have a follow-up to the transport trailers returning from the United States. This seems like an insane move to me as well, but at the risk of having that disease spread into Canada would you be prepared to rewash or have the drivers rewash their trailers especially to prevent the spread of that to Western Canada?
Mr. Fitzgerald: A rather smart vet who worked for CFIA a few years ago and is now the chief vet for Manitoba looked at the problem and said that we should make an amendment to the legislation. It is an emergency. We need to stop trucks. We need to ensure that trucks are being cleaned properly. I cannot say enough about the growing forward programs. They have helped our industry and I truly mean that.
We had Growing Forward 1 providing dollars that helped biosecurity. Our farmers were starting to become educated. We were looking at different ways of doing things across our country. When the first case of PED struck in Ontario we jumped to action. I can also tell you that our chief provincial vet in Alberta made use of the growing forward dollars and said, "Let's use those dollars today. Let's be a strong and vigilant and ensure we wash vehicles. Let's do things right.''
In Manitoba we had a situation where those vehicles were coming through for all of Western Canada from the U.S. The traffic drives that way. A strong statement was made by making an amendment to the legislation that said to seal those trucks at the border. "Let's all work together, government, industry and border services. Let's all make sure we have got something good here.''
In that situation we can look back and say there have only been a couple of cases. Were all those trucks completely clean? Did they carry a disease? We didn't really sample them until after they were washed, so you could say maybe they brought the disease back. If you look at where we are today and the number of cases we have had in Western Canada compared to the outbreak in the U.S., it speaks very highly of the dollars and the professional people who worked together at all levels of government, along with industry, to say, "Here is a great solution. Let's seal those trucks. Let's take them back to approved facilities.'' We have used growing forward dollars, taxpayer and industry dollars, to put together certification programs to ensure we are doing the right processes inside the wash bays. We are testing the wash bays to ensure there isn't disease in there. When these trucks go back out farmers are actually walking out off their property onto the road and looking at these trailers and saying, "Is that trailer clean? I want to look at it before anybody backs it into my property.'' We have a certification that says, "Yes, I have done all these things.'' The trailer backs up. Nobody gets into it.
It is taken out again. It travels into the U.S. Nobody gets into that trailer in the U.S. that has come from the dirty side. It comes back out again of the U.S. It is sealed and goes across the border to be recleaned. This process has worked wonderfully and we don't see a problem.
I just go back to this issue of growing forward dollars. Immensely smart people who put that together said, "Let's have a biosecurity program.'' It has truly saved our industry. It has truly changed the way our producers do things. If I could just harp one more time about that, we can make Growing Forward 3 an even better program as we go forward. It is seriously helping our industry do great things.
Anyhow the process in place today unfortunately goes back to disease issues of 30 or 40 years ago that really aren't the situation that we face today.
Mr. Janzen: I agree with Mr. Fitzgerald. Just to add a few things, as a company we introduced much higher biosecurity measures. Those trailers were all locked. We built our own wash bays to wash them internally. Now we have actually built what we call bake bays. After they are washed they go into a bake bay and the trailers get heated to about 160 degrees which will then get rid of the bacteria.
After they leave an inspector that we hired will check and swab the trailers and make sure they are clean. If they are not clean they go back in and get rewashed. We started that several years ago when PED was so prevalent in the U.S. Now we feel like we have taken a step backward when we have put all the infrastructure in place to do a good job of this.
Senator Unger: You were talking about cleaning these trailers. As a former nurse I am thinking swabbing. I was surprised but it makes sense. That is one way to determine the presence of unwanted bacteria.
Mr. Fitzgerald: Currently we actually do that surveillance program at processing plants, at assembly yards where pigs come together and in wash bays just to make sure. We are constantly looking to see if there is a problem, to the point that we actually will go in as a group at the company's cost to completely disinfect the facilities once we find a problem.
It is as vigilant to look at it. I am sorry. I didn't answer your original question. Would we rewash again? The answer is yes, those trucks that are being washed in the U.S. today because on May 2 it changed back to the original legislation to force trucks to be washed in the U.S. We are bringing those trucks and trailers back into Canada now and rewashing them again.
Now we are going out of our way in the U.S. to find a truck wash, coming back into Canada and then rewashing with the same process as we had before. It is extra time and extra money. The words we have heard are: "It's only economics. It doesn't matter. It's not about disease.'' It is economics, though.
Senator Unger: With regard to testing all of those swabs, are there extra veterinary laboratories that do this work, or how is the testing done?
Mr. Fitzgerald: We put it through the regular labs that are in place right now. We have had great help in Alberta. I can only speak for us. We have had great help through the provincial labs as well as private labs to have that testing done and to have a process in place. Our practising vets take part in that along with their technicians and staff from different facilities. We have regular sampling going on and are checking these things.
Senator Unger: I have just a quick question on chilled versus frozen pork for my own education. Frozen I understand but what is chilled pork?
Mr. Janzen: The Japanese like chilled product. They don't want it frozen. Most of it is loins. That is what they like to buy. We will cool them down. We will chill them down to 1 degree and then they go into a container that maintains the temperature all the way across the ocean. Typically the shelf life is 55 days. I think that is the minimum. We try to go beyond that so on a regular basis at the plant we check to see what the bacteria buildup is over a period of time.
If all of a sudden we are underneath that 55 days then we need to find out what it is in the plant that we are not cleaning down properly. The plant gets cleaned. It gets washed down. There are about 30 people who come in for three hours or five hours. I am not sure exactly what it is. They wash the plant and make sure that everything is spotless.
Of course it is done with hot water so it kills the bacteria. That is a prerequisite we need to be able to actually develop a product that will have the shelf life that we need to get across the ocean.
Senator Unger: I have one last very quick question. Japan seems to have a favoured nation status with regard to trading many things including pork. What about China? Are there any plans there?
Mr. Janzen: I heard from the beef industry that the Chinese tend to eat a lot of the cuts that North American will not eat. We ship a lot of product to China. They will buy the ears, the snouts, the livers, the intestines, and all those kinds of things. It is a big market and it is a market that is really important to the pork industry. There is a lot of urbanization going on. They are slowly starting to buy the more expensive cuts but they buy primarily the less expensive cuts.
Mr. Fitzgerald: We currently have a flight three days a week that comes from Shanghai to Edmonton to Houston and returns again. It is a very large cargo plane and it has no pork on it. As soon as we can get the rules changed to accept chilled pork into China I can almost guarantee that plane will be full every time it goes back.
To add to that, Canada Pork International will be opening up its office this summer and hiring staff. They have an office located in Shanghai now. They will be looking to hire staff and have it up and running this summer. We are ready to go. The frozen products are going. We are looking for that status with the Chinese to give us the ability to ship in chilled pork too which is the higher paying product.
Senator Unger: What will it take to get that flight to include pork?
Mr. Fitzgerald: It will just take the Chinese to accept that our pork is wonderful.
The Deputy Chair: Senator Dagenais has a comment.
[Translation]
Senator Dagenais: For your information, I am a member of the Canada-United States Inter-Parliamentary Group. So I travel to the United States fairly often. Last year, we attended a presentation by the president of Heinz, in which he complained about delays at the border to get their tomato paste products into Canada.
I would like to hear about border delays when you export pork products to the United States because I will be going back there this year and, if you have a recommendation for me, I can pass on the message regarding delays at the borders.
[English]
Mr. Janzen: As far as I know there are no issues moving pork into the States other than the country of origin labelling requirements. We also move a lot of product to Mexico so it needs to go through the States to get to Mexico. I have not heard of any major issues when it comes to moving product.
I have just a little FYI on that. Last fall we did set up further processing in Mexico so we employ about 100 people out there because of the product that we are moving. We were moving hams to Mexico and they were buying them from us. We felt rather than stretching our labour here in Neepawa we would move the product there and get them to further process it in Mexico.
That is a little aside. I went a little further than what you were asking but no, we haven't had issues moving product into the States.
Mr. Fitzgerald: It is a very interesting story. I will just add to it to show you the balance of trade and how things work.
In Alberta we have a federal plant that was shipping hams to Italy and the Italians said, "Why would you ship the hams all the way here? Why don't we come and invest with you in Alberta and build a prosciutto plant?'' They have done that and now we make the prosciutto in Alberta. We have this kind of moving of products all the time.
The Deputy Chair: I would suggest, Senator Dagenais, that one of the issues is for tomatoes that are going through Ontario border crossings where there is a different volume. It is not that there is not a volume in Western Canada, but if they are going across the border in Buffalo or Erie it is a long process no matter what you are carrying across the border.
Mr. Dickson: It has been brought to my attention by one of the other processors that they have run into problems at the border but not so much the Canadian side. It is the Canadian side to some extent. When you cross the border you are dealing with the American officials. One of the issues is testing. They like to make sure the label is all correct and everything. If there are problems and they turn it around and the product has to come back into Canada, CFIA gets itself into a bit of a knot. We have had problems with containers not having the right labelling on them. They were going down to the United States but it is actually Canadian product that was going down.
They have run into some problems with this thing. It is one of these administrative things that both sides of the border should just get their heads around and solve it. That is why this national commission was set up between the Prime Minister and the President was to try and resolve these sorts of issues. I don't know where that is at right now.
Senator Tardif: Mr. Dickson, you indicated in your presentation that the U.S. was building a lot of finishing farms and that you needed to renovate or build new barns in Manitoba. I am not sure what the case is in Alberta, but we heard in February of this year from the Canadian Pork Council that they were concerned there was not enough credit available to the hog industry for building construction. Do you share those concerns?
Mr. Dickson: Credit is always available if you are making a fortune but when margins are tight like they are in the hog industry it is very competitive to try and get capital made available.
One of the issues we ran into was because in Manitoba a moratorium was put in place in by a former government. It is off now. A lot of our barns started aging. When the banks lend money they base it on market appraisals of existing sales. The only sales we had were 15-year-old barns and that sort of thing.
We use the words finisher place. A finisher place is one spot in a barn where you can produce three finished pigs in a year. A finisher place would be valued at about $250. The bank could lend you 65 per cent of $250. New cost construction is about $500. They won't lend based on $500. They lend on appraised value. That is what the rules are with bank lending.
Fortunately the Farm Credit of Canada is not stuck with the rules of the Bank Act. It has come forward and says, "We are prepared to lend 65 per cent of new capital cost construction,'' which in other words is $500 per place. That means the farmer only has to find 35 per cent to build a new barn. That has been a big breakthrough.
Our hope is that if FCC can do this then the banks will figure out a way of trying to do it as well. They are not going to give up a marketplace in terms of lending long-term capital to a big industry like the hog industry in Canada.
I just point to something that was mentioned earlier. Why not Quebec and Ontario? In Quebec their agricultural land base or crop acreage is probably about the same as that of Manitoba. It is about 10 million to 11 million acres of crop land. The issue you have is manure management. You have significant issues in Quebec with manure management. You have a major phosphorous issue that you have to deal with. The Quebec government has spent a lot of money over the last 20 years trying to resolve this matter. You have algal blooms in Lake Champlain and this sort of thing.
They know they have a problem. There are limitations on how many new barns they are going to be able to build there. They will need to replace their existing stock.
In Ontario, it is the same issue. A lot of their operations are smaller compared to those of Manitoba, but they have run into a land availability issue because they have competing interests from urbanization, orchards, dairy, poultry or you name it. There is a limited land base.
In Canada the big area for any further expansion in the hog industry is going to be Western Canada. The sleeping giant is Saskatchewan because it has relatively small hog production.
The problems we run into, as Mr. Janzen mentioned earlier, are the labour issues in Saskatchewan. We need potable water for pigs and investment capital. We need people to come to the table and invest back into the industry. We are working it. We will do this, but it is going to take time.
Mr. Fitzgerald: Yes, I would say we are similar. Access to capital for new infrastructure or even renovations, as Mr. Dickson noted, is one definitely big issue for us to revitalize industry and keep it going. The other side is the working capital and the operating loans, being able to access those things. It is a problem for us as well. We have to make sure there is a continuous flow of dollars to keep the operation going.
The last few years haven't been too bad but the previous seven were quite bad. That just sent a signal to banks. I still don't think they have recovered yet. It would be nice if our provincial lending institutions as well as our federal ones would come forward and say, "We see this industry has growth potential and we can do stuff with it.'' Let's get back there. We don't have a quota. For FCC if you have quota that is something it likes to invest in, but we don't have it.
Senator Tardif: Interesting. How many new barns would we need in Alberta?
Mr. Fitzgerald: We would be the same as Mr. Dickson noted. On a percentage basis we are about a third of the size of Manitoba. We would need that same kind of thing. He estimated somewhere around $1.2 billion.
Mr. Dickson: No, pigs.
Mr. Fitzgerald: Oh, pigs. I am sorry. I am going to go back to your number just to help you out. The actual number he looked for new barns is about $1.6 billion. We would probably need a third of that to try to get ourselves back to start replacing.
The issue today is that in most businesses as you age somebody else replaces and it just keeps growing. You add a bit more to it and it just keeps growing. In our situation, we have gone stagnant. As a matter of fact we have kind of actually gone back a bit. We are just trying to keep the old barns alive.
We have another issue too. I mentioned at the end of my presentation about hope for the next generation. It really comes down to the average age of a producer. When they are sitting in their mid-fifties to early sixties and looking at an investment, there isn't somebody willing to take that on for them. There is no real incentive to invest again. It is just, "Keep it going as long as I am going to be here.''
We need to stimulate that. If there was credit available you would see more people, younger people, getting into the industry. I am not sure how young but there would be the incentive to get there and do things.
Senator Tardif: Do you have recommendations to make to government on that matter?
Mr. Fitzgerald: Mr. Dickson may have the recommendation on the dollars.
Mr. Dickson: How do I put this? If you take a small finisher barn of 2,000 places it will cost you $1 million to build it. The great thing about it is you will have $1 million in sales. When you compare that with land, land in Manitoba is probably $4,000 to $5,000 an acre. You might sell a good crop of canola at $400. When you look at the asset value to the sales in a year the pigs are like that.
We get into cash flow. This industry is all about cash flow. The problem we have run into in the hog cycles is guys literally run out of cash to pay their monthly bills. The feed truck nowadays wants a cheque before he will drop the feed off. You have to pay the staff. You have to pay the hydroelectric bills to keep the place open.
We are looking at some cash management programs. We have made some suggestions to the federal government and to the province. We think they would apply all across Canada. It would be useful and helpful to try to bring about some sort of evening out of the cash flow issues that are challenged by the hog cycle. The hog cycle is this three or four- year highs and lows. People have written Ph.D theses on how the 100 years of history of the hog cycle works and so on.
The big one was that we had the agri-stability program in place. In the last round of GF2, the federal government and the provinces cut the reference margins down from 85 per cent down to 70 per cent. It wasn't a big issue with the crop guys because they were making so much money at the time, though they are starting to think about it now. For us that program was actually a countercyclical program. It helped us cash flow-wise for the average producer.
For the larger producers, the guys who have 20,000 sows or more, this wasn't a great program because they were cut off at the $3 million level. There are different ways of turning it around a bit but not much. For industry as a whole we need to start thinking not about small farms. We need to start thinking about industries as a country. We need to think about sectors. We need to think on a more global approach as to how we are going to finance these things because our competitors are places like China.
Right now the Chinese government is actually contemplating the idea of buying crop insurance for all of China. They are just going to buy it. They will pay the whole premiums for all their farmers. That is one big program. Every insurance company in the world wants part of that business. You can imagine the size.
This is the sort of thinking we need to start doing in Canada. We are competing as a small country against very large, industrial, vertically integrated economies that think these things out on a large world-scale basis.
The European Union is huge and look at the little marketplace they gave us, 80,000 tonnes, and look at the amount they consume. Yet we are all so proud we got a bit of it and they have had full access to our market for years.
I sat in Ottawa the other day at a meeting and I was eating Danish ribs in a Canadian restaurant. It is like coals to Newcastle. On the other hand I am sure we are going to ship some stuff to Denmark.
Here is something to think about: the Arctic Ocean and climate change, right? How will that affect the pork industry? I met a guy from a Danish company who says they are looking at the sea lane between Denmark and along the Russian coast to get into the Japanese market to provide chilled pork because they can do it in the time distance. They are figuring out shall we do it this year or next year.
A boatload: This is the sort of competition we are up against. We will beat them but we have to be clever about this and we have to do it together at a large scale. We have to get away from small thinking.
Senator Tardif: Thank you for that big global picture.
The Deputy Chair: That is why you should not necessarily always think about going west to ship. The Port of Halifax is a day's sail closer to the Indian market and a good part of South China through the Suez. I am paid to tell you that and I will continue to tell you that until you say, "We have stuff going through the Port of Halifax.''
You didn't mention this but I know you will have this problem. As I mentioned to a group earlier the Port of Halifax has not had a labour stoppage since 1976. You can tell me when the Port of Vancouver had their last labour stoppage because you just have to think about last week. When times get tough we are here to help.
As there are no any other questions, thank you very much, gentlemen. Those were very good presentations. It was extremely important for us to hear from you. It was well worth the wait. Enjoy the rest of your day.
(The committee adjourned.)