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37th PARLIAMENT, 2nd SESSION

Standing Committee on Agriculture and Agri-Food

EVIDENCE

CONTENTS

Thursday, July 10, 2003

1010

The Chair (Mr. Paul Steckle (Huron—Bruce, Lib.))

Mr. John Ferraro (President, Retail Ready Inc.)

1015

The Chair

Mr. Pierre Guillemette (Co-owner, Maurice Guillemette Inc.)

1020

The Chair

Mr. Dick Proctor (Palliser, NDP)

The Chair

Mr. Dick Proctor

The Chair

Mr. Ted Haney (President, Canada Beef Export Federation)

1025

1030

1035

The Chair

Mr. Paul Meinema (President, Local 1400 (Saskatchewan), United Food & Commercial Workers International Union)

1040

The Chair

Mr. Howard Hilstrom (Selkirk—Interlake, Canadian Alliance)

1045

Mr. Ted Haney

Mr. Howard Hilstrom

Mr. Ted Haney

1050

Mr. Howard Hilstrom

Mr. Ted Haney

Mr. Howard Hilstrom

The Chair

Mr. Louis Plamondon (Bas-Richelieu—Nicolet—Bécancour, BQ)

Mr. Ted Haney

Mr. Louis Plamondon

1055

Mr. Paul Meinema

Mr. Louis Plamondon

Mr. Paul Meinema

The Chair

Mrs. Rose-Marie Ur (Lambton—Kent—Middlesex, Lib.)

Mr. Ted Haney

1100

Mrs. Rose-Marie Ur

Mr. Ted Haney

1105

Mrs. Rose-Marie Ur

Mr. Ted Haney

The Chair

Mr. Dick Proctor

Mr. Ted Haney

Mr. Dick Proctor

1110

Mr. John Ferraro

Mr. Dick Proctor

Mr. Pierre Guillemette

Mr. Dick Proctor

Mr. Pierre Guillemette

1115

The Chair

Mr. Gerry Ritz (Battlefords—Lloydminster)

Mr. Ted Haney

The Chair

Mr. Paul Meinema

Mr. Gerry Ritz

Mr. Ted Haney

1120

The Chair

Mr. Ted Haney

The Chair

Mrs. Rose-Marie Ur

1125

Mr. Ted Haney

Mrs. Rose-Marie Ur

Mr. Paul Meinema

Mrs. Rose-Marie Ur

Mr. Paul Meinema

Mrs. Rose-Marie Ur

Mr. Paul Meinema

Mrs. Rose-Marie Ur

Mr. Paul Meinema

1130

The Chair

Mr. Louis Plamondon

Mr. Pierre Guillemette

Mr. André Toutant (General Manager, Maurice Guillemette Inc.)

Mr. Louis Plamondon

Mr. André Toutant

Mr. Louis Plamondon

Mr. André Toutant

Mr. Louis Plamondon

M. André Toutant

Mr. Louis Plamondon

Mr. André Toutant

Mr. Louis Plamondon

The Chair

Mr. Dick Proctor

1135

Mr. Ted Haney

Mr. Dick Proctor

Mr. Ted Haney

Mr. Dick Proctor

Mr. Ted Haney

1140

The Chair

Mr. Dick Proctor

Mr. Paul Meinema

The Chair

Mrs. Rose-Marie Ur

Mr. Ted Haney

1145

Mrs. Rose-Marie Ur

Mr. Ted Haney

The Chair

Mr. Howard Hilstrom

1150

Mr. Ted Haney

Mr. Howard Hilstrom

Mr. Ted Haney

Mr. Howard Hilstrom

Mr. Ted Haney

Mr. Howard Hilstrom

Mr. Ted Haney

Mr. Howard Hilstrom

1155

Mr. Ted Haney

Mr. Howard Hilstrom

Mr. Ted Haney

The Chair

Mr. Louis Plamondon

The Chair

Mr. Gerry Ritz

Mr. Ted Haney

1200

Mr. Gerry Ritz

Mr. Ted Haney

Mr. Gerry Ritz

Mr. Ted Haney

The Chair

Mr. Howard Hilstrom

Mr. John Ferraro

Mr. Howard Hilstrom

The Chair

Mr. Howard Hilstrom

Mr. John Ferraro

The Chair

Mr. John Ferraro

The Chair

Mr. John Ferraro

The Chair

1205

Mr. Ted Haney

The Chair

1220

Mr. Robert Weaver (General Manager, Canadian Meat Council)

1225

1230

The Chair

Mr. Nick Jennery (President and Chief Executive Officer, Canadian Council of Grocery Distributors)

1235

1240

The Chair

Mr. Nick Jennery

The Chair

Mr. Paul Fortin (Vice-President, A & P Canada Ltd., Canadian Council of Grocery Distributors)

The Chair

Ms. Kim McKinnon (Vice-President, Canadian Council of Grocery Distributors)

The Chair

Mr. Howard Hilstrom

Mr. Robert Weaver

1245

Mr. Howard Hilstrom

Mr. Paul Fortin

Mr. Howard Hilstrom

Mr. Nick Jennery

Mr. Howard Hilstrom

Mr. Robert Weaver

Mr. Howard Hilstrom

Mr. Robert Weaver

Mr. Howard Hilstrom

Mr. Robert Weaver

1250

Mr. Howard Hilstrom

Ms. Kim McKinnon

Mr. Howard Hilstrom

Ms. Kim McKinnon

The Chair

Mr. Dick Proctor

Mr. Robert Weaver

1255

Mr. Dick Proctor

Mr. Robert Weaver

Mr. Dick Proctor

Ms. Kim McKinnon

Mr. Dick Proctor

Ms. Kim McKinnon

Mr. Dick Proctor

Ms. Kim McKinnon

Mr. Dick Proctor

Mr. Paul Fortin

Mr. Dick Proctor

Mr. Paul Fortin

1300

Mr. Dick Proctor

Mr. Paul Fortin

Mr. Dick Proctor

The Chair

Mrs. Rose-Marie Ur

Mr. Robert Weaver

Mrs. Rose-Marie Ur

Mr. Robert Weaver

Mrs. Rose-Marie Ur

Mr. Robert Weaver

Mrs. Rose-Marie Ur

1305

Mr. Paul Fortin

Mrs. Rose-Marie Ur

Mr. Paul Fortin

Mrs. Rose-Marie Ur

Mr. Paul Fortin

Mrs. Rose-Marie Ur

Mr. Paul Fortin

Mrs. Rose-Marie Ur

Mr. Paul Fortin

Mrs. Rose-Marie Ur

Mr. Paul Fortin

Mrs. Rose-Marie Ur

Mr. Paul Fortin

Mrs. Rose-Marie Ur

Mr. Robert Weaver

Mrs. Rose-Marie Ur

Mr. Robert Weaver

1310

The Chair

Mr. Gerry Ritz

Mr. Robert Weaver

Mr. Gerry Ritz

Mr. Robert Weaver

Mr. Gerry Ritz

Mr. Robert Weaver

Mr. Gerry Ritz

Mr. Robert Weaver

Mr. Gerry Ritz

Mr. Nick Jennery

Mr. Gerry Ritz

Mr. Nick Jennery

Mr. Gerry Ritz

Mr. Nick Jennery

Mr. Gerry Ritz

Mr. Nick Jennery

Mr. Gerry Ritz

Ms. Kim McKinnon

Mr. Gerry Ritz

Ms. Kim McKinnon

1315

Mr. Gerry Ritz

Ms. Kim McKinnon

Mr. Gerry Ritz

Mr. Robert Weaver

Mr. Gerry Ritz

Mr. Robert Weaver

Mr. Gerry Ritz

Mr. Robert Weaver

Mr. Gerry Ritz

The Chair

Mr. Peter Adams (Peterborough, Lib.)

Mr. Robert Weaver

Mr. Peter Adams

1320

Mr. Robert Weaver

Mr. Nick Jennery

Mr. Peter Adams

The Chair

Mr. Howard Hilstrom

Mr. Nick Jennery

1325

Mr. Howard Hilstrom

Mr. Robert Weaver

Mr. Howard Hilstrom

Mr. Robert Weaver

Mr. Howard Hilstrom

Mr. Nick Jennery

Mr. Robert Weaver

The Chair

1330

Mrs. Rose-Marie Ur

Mr. Robert Weaver

Mrs. Rose-Marie Ur

Mr. Robert Weaver

Mrs. Rose-Marie Ur

Mr. Robert Weaver

Mrs. Rose-Marie Ur

The Chair

Mr. Peter Adams

The Chair

Mr. Paul Fortin

The Chair

Ms. Kim McKinnon

The Chair

1335

Mr. Robert Weaver

The Chair

Mr. Howard Hilstrom

The Chair

Mr. Howard Hilstrom

The Chair

CANADA

Standing Committee on Agriculture and Agri-Food

NUMBER 040

2nd SESSION

37th PARLIAMENT

EVIDENCE

Thursday, July 10, 2003

[Recorded by Electronic Apparatus]

À (1010)

[English]

The Chair (Mr. Paul Steckle (Huron—Bruce, Lib.)): Ladies and gentlemen, we want to begin our meeting.

I should begin by clarifying the reasons why we're here today and why we've called people together at this time of the year when normally we don't come to the House. I think this will help our committee members, and it will also help our witnesses to focus attention on today's specific terms of reference.

In the past couple of weeks questions have surfaced as to why the price of beef to consumers remains constant while the price per pound paid to the farmer continues to drop. Questions have also surfaced that, to be frank, have suggested that certain sectors are unfairly increasing their profits at the expense of other sectors of the industry. While we looked at this issue briefly at our June 30 committee meeting, some committee members felt it would be appropriate for us to explore this issue formally, giving representatives of the retail and packing side of the industry the opportunity to provide their side of this issue.

With this in mind, I want to bring us to order for this meeting this morning. Unfortunately, the members who should be here today from the packing side of the industry are not at the table. I realize there was a very short time period for us to make changes in plans in terms of being here.

Having said that, there are people before us today—and I want to thank each one of them—from the various sectors who have shown good faith in this process and have chosen to be here today, with the same time period to make those arrangements. I thank you very much, each one of you, personally.

For those who have chosen not to be here today, there will be another time to be heard. Believe me, this committee will hear them at a certain time to be determined later today.

At this point I want to draw our attention to the witnesses we have before us today. We have Retail Ready Inc. with us from Toronto. Mr. John Ferraro, the president, is at the table and is going to be giving testimony in a moment.

We have with us, from the United Food and Commercial Workers International Union, Paul Meinema, president, Local 1400, Saskatchewan. Thank you for coming.

We have with us Guillemette Maurice Inc., Pierre Guillemette, co-owner. He's from the United Food and Commercial Workers as well, and Mr. André Toutant, executive director.

We've also brought to the table, from the Canada Beef Export Federation, Mr. Ted Haney, president.

We thank you very much for coming. We want your presentations to be very concise this morning. There are a lot of questions. We would ask you to begin now.

Are you going to go first, Mr. Ferraro, or is there another order you've set for yourselves?

Mr. John Ferraro (President, Retail Ready Inc.): I'd be happy to go first.

My name is John Ferraro. I'm the president of Retail Ready Foods.

Our mission is to innovatively manage meat industry supply chains by providing lasting value to our customer and supplier relationships. One of the difficult things right now is to provide lasting value for anybody in the beef industry. Producers, primary producers, packers, retailers, even ourselves as wholesalers have all felt some pain and some difficulty from the current BSE situation.

I made several notes, and I can cover off a few key areas.

I think it's quite obvious the pain producers are feeling, as they really have very little if any market for the products they've been in the process of generating over the last, in some cases, as long as maybe 18 months, two years. All of a sudden their market and their values and inventories have just diminished dramatically, and I think they're feeling lots of pain. I don't need to go on about that.

The packers clearly have inventory stranded around the world or on its way back from export markets they thought they could sell to and found that obviously they couldn't. They've lost in values of credits, utilization of plant capacities, and the product mix, which they now have no market for here domestically.

You made some points about questioning what is going on with retail prices, and the retailers have lots at stake as well. One of the things I really feel is very interesting is the meat case integrity. Firstly, retailers can't present dramatically fluctuating prices to consumers. Secondly, they have inventory on them. Thirdly, and most importantly, is the integrity issue. When the media is blasting and the world is telling us that our meat supply is unsafe, I think if the retailers were to turn around and drop prices dramatically overnight, the customers and the consumers would run from the counter with fears of food safety and integrity issues on the counter. I think that's one of the emotional concerns that we need to protect.

The good news is that beef demand seems to be intact. We might have had a hiccup in the first week, but I think clearly consumers are supporting the industry and continuing to eat in their normal patterns.

One of the difficult things from a retailer's perspective as well is we hear about values of animals decreasing and product backing up in freezers. And I'll say hats off to the Beef Export Federation for creating the world markets for products that we just do not consume at home. Such a great percentage of the carcass that has very little value in Canada has great value in other countries around the world, which we have developed markets for.

The products that have fallen in value and have no market value right now aren't what consumers normally buy in Canada. I think a real simple example of that is we export a lot of.... I shouldn't talk a lot about exports, as Mr. Haney will do that better than I can. However, we export a lot of fat trimmings or fatter trimmings, as Canadians eat leaner meat, and our market is mostly at retail on grinds, especially for leaner types of cuts.

You have to commend the retailers for coming out with regular and higher-fat-concentration grinds. I think that's been very supportive to clearing inventories and products that we don't normally sell in our market. You just can't turn around and create markets overnight for products that you don't normally sell. It takes a lot of time to cultivate those markets. And quite clearly, most of those products best belong in export markets around the world.

For the most part, those are the key points I wanted to cover. I can certainly expand and answer questions in the future.

This is a crisis for all of us, not only the people directly involved in the beef industry. I believe that beef is a significant portion of the Canadian domestic product, and it will impact our economy in general. I feel pretty strongly, and that's why we're here today, that we need to resolve these issues, for not only the industry, but I think for the best of all the consumers in Canada.

À (1015)

The Chair: Thank you, Mr. Ferraro.

Mr. Guillemette, do you want to go next?

[Translation]

Mr. Pierre Guillemette (Co-owner, Maurice Guillemette Inc.): Good day, gentlemen. I'm going to spare you the history of the company because I'm being asked to speed things up.

Our plant produces animal feed, and 95% of our products are shipped to the United States. Since the case of mad cow disease that occurred in Western Canada, exports of our non-comestible meats to the United States have been turned back at the border by the USDA, the FDA and the APHIS. Since 95% of our non-comestible meat volume is sold to the United States, since May 31, we've stopped all recovery in the Quebec slaughter houses, and our plant operations have obviously been closed in Saint-Grégoire.

Incidentally, they've suspended the licences for all species, both for the pork that she shipped and for chicken. All species are involved in non-comestible meat. All that is having catastrophic impact on our financial position, and here we want to give you the main reasons for this situation.

In the file, we've included the company's history and job terminations to date. This comes at a bad time in our development because we had half a million dollars in investments under way. What's happening right now is causing us enormous harm. We obviously have to carry our inventories of more than 850,000 kilograms, including 250,000 kg of beef, and, in view of the current situation, we don't really know what will happen to the beef.

Incidentally as well, the other species in our inventory are affected as well because they are assumed to be contaminated since we were handling beef in the plant, as a result of which we really don't know what in fact will happen to our entire inventory.

Since the plant is closed, we have to carry astronomical fixed costs: our freezers cost $25,000 a month, we have $4,000 in all kinds of taxes payable, and insurance represents $5,000 a month. We're currently experiencing a disastrous situation.

Another somewhat less well known effect is the effect on customer retention. Will they be loyal to us after this crisis? What about our suppliers, our employees? We've had to lay off employees who had been with us for more than 20 year. That's a disastrous situation.

In the file, we've included copies of letters sent to the federal and provincial ministers to make them aware of our case.

In conclusion, for all the aforementioned reasons, we cannot guarantee our future existence without government assistance, at least until operations return to normal. That in essence is what we're currently experiencing.

À (1020)

[English]

The Chair: Thank you very much.

Yes, Mr. Proctor.

Mr. Dick Proctor (Palliser, NDP): A point of order. Mr. Guillemette indicated that he has a brief. Is that available?

The Chair: There are insufficient copies, and we're not pointing fingers this morning, because people did not have time to have translation done. Apparently there aren't enough copies of that particular brief to go around. That's all right. We'll have others prepared. Some of the others have already been distributed and they're only in English. I've spoken to Mr. Plamondon. We understand this is a different circumstance this morning, so we—

Mr. Dick Proctor: Just a follow-up then. Will we have it before the meeting is over?

The Chair: We should have, yes.

Mr. Guillemette, you're finished? We'll leave your partner, Mr. Toutant, for later.

Now we'll move to Mr. Ted Haney from the Canada Beef Export Federation.

We'll put you in this group since you have to attend other matters outside of this country for the very purpose we're meeting this morning. Thank you for coming, Mr. Haney, and now your presentation.

Mr. Ted Haney (President, Canada Beef Export Federation): Thank you very much for inviting me to present. We are going to Mexico this afternoon with the Canadian Food Inspection Agency and the Government of Canada to join the effort in attempting to open that market, which may well be the first crack in the wall that's been isolating our industry from international trade. In the end, that is the only solution to bring prosperity back to our industry.

I'm representing the Canada Beef Export Federation, formed in 1989 with a mandate to expand and diversify exports of Canadian beef. Our members include both the Canadian cattle industry at the provincial and national levels as well as beef packers and processors.

The organization's members have been devastated by the single case of BSE and their inability to trade because of that.

The Canada Beef Export Federation has been very active during the last seven weeks in providing information to the Government of Canada and to the members of the international markets, ensuring that the unique requirements that need to be met are at least known so that they can be addressed.

We have summarized for this group our priority actions into three basic steps. The first category is the re-establishment of international markets. We encourage the Government of Canada to pursue full opening of all international markets, starting with the United States. The second priority is Mexico. The third priority is Japan, then South Korea, and Taiwan. The combined Hong Kong-China market is next. All other markets have significantly lower priority, although addressing access issues to Russia may well provide an outlet for our products in the absence of other key markets.

We are asking that any exceptions to a full market opening be based on sound science regarding the definitions of specified risk materials. We've come to be concerned that we may be asking as a nation for too little at the beginning. It's been said that each market is a loaf of bread and we need to only apply for so many slices of that loaf in the initial marketing—young animals and beef produced from young animals. In fact much of the value we produce from export markets for live animals comes from much of the rest of the loaf, because these are products that are not usually consumed in Canada.

So we believe there is valour in the attempt to gain a full and comprehensive market opening for all classifications of livestock and all products derived from that livestock, even if we don't achieve full market opening. There is valour in the attempt, rather than asking for too little and achieving all you've asked for.

We believe that the process for market opening needs to be a combined effort of political engagement, technical engagement, and industry engagement simultaneously. To that end, we've asked that for the key markets I've named, outgoing missions be initiated by the minister's office that would include both the technical advisers he requires and also industry to engage foreign regulatory bodies directly. While some of these contacts have been made electronically, by telephone, and the Canadian Food Inspection Agency, independently with Agriculture Canada--but without industry--has moved to Japan and Korea, we believe it is fundamentally stronger for these engagements at the early stages to be made at the political, technical, and industry levels simultaneously, as a team.

Given the fact that international markets and re-opening them are the first priority, all else flows from the fact that we do not have access today. Our second priority is to address stranded containers. On the first day of this crisis our members lost approximately $25 million U.S. in value of product. This is product that was exported to international destinations on May 20 but had not arrived. The majority of this $25 million in product is in fact stranded in Japan and Korea.

À (1025)

We've asked the Government of Canada, first, for an extended period of time to begin paying for storage and demurrage costs, which average about $200 a day per container. The accumulated cost of that is now $3.3 million Canadian. That's in addition to the $25 million U.S. value of the product itself, which is stranded. That's to take the pressure off our industry and our clients. It no longer encourages them to simply dump this product into the few markets that remain open for redirection or in fact to have the product incinerated in foreign markets.

Second, we've asked our government to directly lobby to allow the product to stay in market. On the front page of a national newspaper today there is a story that Japan has begun to require fresh chilled beef and products that may contain specified risk materials to be incinerated. These are the products that are held in the bonded warehouses and on container yards. This is not a positive development in the image of our industry internationally, nor is it a positive development in the level of engagement and commitment that our Japanese customers have for our industry. So we're asking very urgently now that the Government of Canada ask for the suspension of the international return and destruction orders.

Third, we're asking the Government of Canada to negotiate very directly with international regulators to allow this product that is held now to be released into the markets for sale. There is no difference in risk between the product that arrived on May 20 in Japan and the product that departed Vancouver on May 20, but the difference is that $25 million U.S. worth of product is stranded. So we're asking the Government of Canada to negotiate for the release of the stranded product in Japan and Korea particularly, and other markets as well, for sale. If that is not achievable, we're asking the Government of Canada to negotiate that this product currently stranded will be allowed for release into the markets when those individual markets reopen for Canadian beef, so that we don't end up with the terrible situation that $25 million worth of beef must be destroyed but all new exports from Canada would be accepted. That situation would be unrelated to risk. We want to avoid that.

Last, we're asking that if markets do not open in a reasonable period of time, whether that's August 1 or September 1, the Government of Canada launch a buy-back program for the stranded containers so that our export members, and in some cases our international clients, are not saddled with the cost of destruction of this product that was purchased. The last thing we need are international clients who have suffered significant economic losses by not being able to take delivery of Canadian beef and then having to pay for its destruction, while at the same time, or very soon after, we're asking for their commitment to rebuild our markets.

The last priority is market recovery. Once we have re-established entry, the federation has proposed an enhanced market development program in key markets. It varies quite dramatically by market, depending on how international consumers have become sensitized to this particular case of BSE and how the importer and distribution sectors have reacted to it. We need to do very little in Mexico. We need to do a great deal in Japan.

The additional resources required by the federation we believe in the year following the opening are $1.3 million, and we're asking the federal government, through its agricultural policy framework, to make those resources available to help rebuild our image and our market shares in Asia and Mexico, in our key markets.

Last, in addition to the $25 million U.S. that our export members, the packers and processors in Canada, lost on day one, our research has indicated that these members continued to lose significant dollars somewhere in the area of another $15 million to $20 million in the first week of operation after the crisis continued. Prices of cattle had not come down, but export and the margin differences caused extreme losses. Companies were not able to reduce their operating costs, as layoffs were delayed in the hope that markets would be opened in a very reasonable period of time.

Similar losses, another $10 million to $15 million, occurred again in the second week. Not even variable costs were being recovered during those two weeks of operations.

By week three, variable costs had been covered and there were certain contributions being made to fixed costs.

À (1030)

By week four, our members were telling us that those variable and fixed costs were being covered. And today economic analysis indicates that there are break-even or modest profits being made in the packing sector, but that the cut-out has been actually overvalued.

The value of product being put into storage is subject to speculation. An outside round may be worth $2.49 a pound wholesale on a regular basis, but should the excess production that is not able to be sold in Canada be valued at $1.30 a pound for a high-yield bonus beef for grinding, or 80¢, or 50¢? The actual cut-out value is lower than what it may appear because of the questionable value of the product being put into storage.

This is no different from the feedlots who are in discussions with their bankers and are attempting to value cattle in their inventory. Is that fat animal that's ready for slaughter worth $1,000, or is it worth $300? There's a case to be made that it could be worth either, depending on what the status of the border will be when that animal is actually ready to come to market.

So the crisis is not over, and there don't appear, by our own research, to be excessive profits. To quote Kevin Grier of the George Morris Centre, his analysis in the Canadian Cattle Buyer is that there are modest profits being made in the processing sector today, and without those profits being made our crisis in our industry would be deepened, as packers will be purchasing even fewer cattle than they are today.

With that, I would say thank you again for inviting me.

À (1035)

The Chair: Thank you, Mr. Haney.

I should say to the viewing audience across this country today that Canadians have been very faithful in the purchasing of beef products. They have not relinquished their support of the industry, and we thank them for that. It's very important that Canadians haven't lost faith in the system. We know that our system is safe, that the product we're consuming today is as safe as it was on May 15. And we encourage them to keep on doing that. We really do appreciate that.

We'll begin the questioning....

Mr. Meinema, I'm sorry; I come back to you. I apologize.

Mr. Paul Meinema (President, Local 1400 (Saskatchewan), United Food & Commercial Workers International Union): Thank you, Mr. Chair.

My name is Paul Meinema, and I am the president of Local 1400 of the United Food and Commercial Workers of Canada, in Saskatchewan. We're the largest private sector union in Saskatchewan.

I speak here today representing 1,500 UFCW members across Canada who have been affected by the mad cow disease. Let me begin by thanking you for this opportunity to appear before this committee. I appreciate that these workers will finally have a voice.

We feel that our members and workers across this country who do not belong to our union have been lost and have fallen through the cracks. As the president of a large local union, let me say this has been a very difficult time. We are dealing with long-term members who were going about their daily business, going about their daily lives, and then one day, due to nothing within their control, their futures became very bleak and uncertain. In some cases they took vacations to avoid layoffs, or their family plans for the summer came to a halt. In other cases, they weren't sure where their next pay cheque was coming from.

We have a number of members who are not qualifying for EI, whether they are new people who were working in the plant, whether they are injured, or just returning from maternity leave, like one of our members in Moose Jaw, Carrie Sanford, a single mother of three, with no vacation pay left and no EI because she is returning from maternity benefits. She's been a full-time worker in that plant for 13 years, and is now looking at going on social assistance.

We have people who have worked in these plants who were returning from injuries, who are gradual-return-to-work people, who are returning to worker's compensation rolls--another cost to the communities and to our employers.

In a city the size of Moose Jaw, 35,000 people, an agricultural city, where do these 160 people, when the plant was shut down, get work? Eighty-six people returned last week to do a small kill at this plant, only to find out this morning that their transformer blew in the plant and they are back out of work, hopefully to return by Saturday.

I'm sure you are aware, for example, that some of these large plants in Canada--and we'll take Cargill in High River, for example--take almost 15 years for such a plant to secure a stable workforce so that they can maintain the production levels they want to maintain. My information is that the IBP Lakeside plant in Brooks, even though there is work-sharing there, are losing between 10 and 15 people a day because work-sharing is not paying the bills.

This BSE crisis has affected directly and indirectly across this country 1,500 of our members working in packing houses, trucking companies, security companies, stockyards, and rendering facilities. There are certainly other members who don't belong to our union who have been affected.

In Ontario and Quebec, when the ice storm hit a few years ago, and in Manitoba with the flooding of the Red River, and certainly recently in Ontario with SARS health care and tourism workers, these were all called national emergencies. Why would this be somewhat different for our workers in these industries? These are circumstances beyond their control as well.

However, with BSE, although the government was quick to react and investigate--and by the way, a good job was done, and a lot of this work was done at the XL plant in Moose Jaw to test these cattle--the government's response to these workers has been pathetically inadequate. The failure of Jane Stewart to waive the two-week waiting period was appalling. This fund, which has billions of dollars of surplus--none of which was contributed by the government--should be used for workers in these crises. Whether SARS or BSE is the cause of unemployment is irrelevant; the fact is there are hundreds of taxpayers affected through no fault of their own, although through, in one form or another, imposed quarantines by this government.

Let me ask you why these people are treated so differently. This is a national emergency. The $460-million package of assistance announced in June has yet to be delivered. Of this $460 million, nothing has been set aside for these workers. We know the purpose of this money was for the ranchers and farmers and packers, about $50 million worth to the packers. We also know full well that a healthy industry is best for our members. However, this industry will not survive and maintain its health without these workers.

À (1040)

Finally, there have been recent discussions with respect to banning U.S. beef from Canada. We don't see this as a solution. We see this as potentially worsening the situation. Promote Canadian beef, absolutely, but to open a border, closing it won't work.

The ultimate solution for all concerned is to have the U.S. border open to Canadian beef products and not just animals. There need to be some serious discussions with Japan. However, Mexico has certainly indicated their willingness to trade with Canada. This could well be our door to South America, and maybe this has demonstrated to us that one large trading partner is not the avenue in this industry.

If product has to be sold at a reduced level, why won't we look at humanitarian needs to countries who could use this product? It would still keep packing-house workers and producers going.

In closing, I would again like to thank you for this opportunity to appear here on behalf of our members. I would urge you to extend all of your pressure and not to let these workers, an integral part of this community, fall between the cracks. Thank you.

The Chair: Thank you, Mr. Meinema. I believe that concludes our presentations.

Now we'll move to questioning. Mr. Hilstrom is first, for seven minutes.

Mr. Howard Hilstrom (Selkirk—Interlake, Canadian Alliance): Thank you, Mr. Chairman.

I don't think this country and this government understand the enormity of the financial crisis we're in. The idea from the provincial agriculture ministers, particularly Saskatchewan and Manitoba--my home province--that we should start to close the borders to U.S. beef, as Paul just mentioned, is just a really bad, stupid idea. I hope they quit talking about it.

I believe this is televised today, Mr. Chairman.

I hope your presentation gets across to those first ministers. They don't seem to understand that the Canadian beef market, all of our pricing, including at the retail stores, is based on the international price of beef. The government didn't understand this when they brought out the program, because the press release I saw said this program was designed to get the market working again. It is a physical and economic impossibility to get the market working again when you're talking about trying to make it work inside Canada by itself.

To put this into context--and Paul touched on it to a big extent--my next-door neighbours at my ranch in Manitoba are about 30 years old. They have two little kids under six years of age. The man is out working construction. His wife is out in the hayfield with a mower conditioner cutting the hay for the cattle for this farm. They run about 100 head.

My wife stopped there because they had a couple of cows that were outside the fence. She stopped to talk to this neighbour lady. The subject of BSE came up. That neighbour lady broke down crying because they can't pay the bloody bills. The line of credit and the loans are coming due very quickly here. She's out haying with two kids in the truck and he's working construction to try to keep that place going and keep food on the table. That's what we're dealing with here.

Having said that, Mr. Chairman, now my questions....

I might as well make one other point here. I'm a plain talker. I've already indicated that I don't intend to run in the next federal election. I'm speaking plainly, as I always have, since I was elected in 1997. I can't believe, Mr. Chairman, that this agriculture committee could not have had more members in attendance here today on an issue of this size. I hope the media makes a big issue out of the fact that we haven't seen fit as a committee to send even a decent number here to hear these important witnesses.

Now it's time to talk quickly, and my time will probably be up, having made these statements.

On the issue of the border openings, has the industry, any one of you, been consulted by the government as to what your part would be in implementing the international veterinarian report as to regulation changes? How far along is that in your particular industry? I'd ask each of you who have been consulted by the government on that. When will those regulations and changes be made? Can anyone answer that question? Ted, you're a better start maybe.

À (1045)

Mr. Ted Haney: Through the round-table process, industry and government did come together, and out of that some working groups were established. One of them was to deal with the implementation of specified risk material regulations, which is really the key to the international group. There has been some discussion, but at the end of the day the interaction has been limited.

The Canadian Food Inspection Agency appears poised to announce a series of SRM or BSE control program measures and surveillance measures without a lot of interaction with industry on what those may be. It may be in accordance with what the U.S. and Canada should do together, but I think we have an agreement that if the U.S. doesn't move quickly to open its border, we can't wait very long for harmonization to be achieved with the U.S. on the regulatory front. That only works if they're going to open their border. If they're not going to open their border soon, we'll probably need to move independently with SRM policies and surveillance policies. But there hasn't been a great deal of open discussion of what those might be from a Canadian perspective. We see a little bit in the press. There's been a little bit of interchange, but it's been industry presentation, government consideration. We're not deeply aware of what the actual proposal is.

Mr. Howard Hilstrom: I understand the full continental market basis here on which we operate and that we have to have regulations that are virtually identical, but Canada can put the regulations in place first and the U.S. can catch up to us for the continental basis idea. The reason I say that is because Japan is making it a condition of reopening of any of their borders that in fact the recommendations under this veterinary report be implemented. That's why it is so important in getting our borders opened again to other countries. Japan is going to have to be satisfied first.

I don't have direct conversation with Ann Veneman, the U.S. Department of Agriculture Secretary, although Stephen Harper is down there today talking to people in Washington, and it appears that the U.S. isn't going to open their border for fear of losing those Asian markets. Is that a true statement, which has been reported in the press, that the U.S. won't open until their Asian markets are secure?

Mr. Ted Haney: The U.S. has used Japan and Korea in the past as a reason why they are delaying opening their market to our products. We've come to learn that Korea has decided not to put any country of origin's certification restrictions on the U.S., so it comes back to Japan. We're exploring what Japan is requiring, but the U.S. has used that. We believe the U.S. could address that through corporate segregation protocols monitored by the USDA and still open their market to Canadian cattle for processing and Canadian beef. So the further delays in the United States seem to be based on things that aren't necessarily related to science. And there's precedence that they can open their market to our products even though Japan may not as quickly open. The U.S. faced the same situation with Uruguay. They decided to open their market to Uruguay, and have done so, while Japan has not allowed importation of products from Uruguay, requiring—

À (1050)

Mr. Howard Hilstrom: Is Canada still banning Japanese beef?

Mr. Ted Haney: Japan is not allowed today to export beef to Canada. We're told that on a recommendation of industry and after internal consideration, the Canadian Food Inspection Agency has invited Japan to apply for direct import status to Canada, and that was just very, very recently. We applaud that and believe that that should have been on offer some time ago.

Mr. Howard Hilstrom: Thank you, Mr. Chairman, for that extra time.

The Chair: Thank you.

Mr. Plamondon.

[Translation]

Mr. Louis Plamondon (Bas-Richelieu—Nicolet—Bécancour, BQ): Thank you, Mr. Chairman.

My first question is for Mr. Ted Haney. If I correctly understood your remarks, we could proceed in stages. For example, if veal were excluded from the American barrier?... Veal could easily be excluded since it is unrelated to cattle from before 1977 which were fed animal meal. You also refer to animal meats.

Est-ce qu'il y a eu des discussions à la table ronde pour procéder de cette façon, c'est-à-dire enlever des barrières au niveau de certains produits ou de certaines catégories, dont les viandes animales, par exemple? C'est en lien avec ce que M. Guillemette a dit tout à l'heure, puisqu'il est producteur de viandes animales. Have there been any discussions in that direction, and do they seem to be about to come to something?

[English]

Mr. Ted Haney: The initial discussions about only applying for a restricted range of products for initial market openings were based on the assumption that if we compromise by having a restricted range of products, that would encourage a quick opening of the market. The market didn't open quickly.

We're saying that in this environment we need to apply for a much wider range of products for fear that if we're only able to have younger animals, under 30 months, direct for slaughter—beef products that are produced from young animals—if that's the first round of approvals, it may become very difficult to subsequently gain access for other products.

It takes the pressure off, and then when you're trying to finish the rest of the agreements, it becomes very difficult because the assumption is that the crisis is over and the pressure is off.

We're recommending comprehensive openings. One example is veal. Of course, we're recommending that because they're very young animals. It should be opened, and all veal products should be allowed in as well.

Another example is the beef breeding cattle. These animals are either exported at 30 months of age or older, or after export, because they're entering a breeding program, they will be 30 months old. If we are not successful in opening markets for breeding cattle, that entire sector of our industry, which is important—it provides the genetic infrastructure for our competitiveness—will be undermined, because they must export their animals to produce the profits to continue to improve and to develop.

This will be a potential loss if we don't seek a comprehensive opening.

So these discussions were under way. But clearly the strategy has changed, and must change, because we're not in pursuit of a market opening within three weeks or one month; we're already here at seven weeks, coming to eight weeks. So we need a comprehensive opening.

[Translation]

Mr. Louis Plamondon: Mr. Paul Meinema, you mentioned support measures from employment insurance funds for workers. You said that young families or all those working in the field are in financial difficulty because of the job shortage. You also referred to people who have to go back to work after being injured, but who have no more work and thus find themselves in a situation in which they have no income.

What would be the way to draw on employment insurance? Would it be, for example, to eliminate the two-week waiting period when a similar conflict arises, as was done for the fever in Toronto, for example, where the two-week waiting period was eliminated for workers affected? They then received employment insurance immediately. Did you make that suggestion to the government or are you asking that it be done today?

À (1055)

[English]

Mr. Paul Meinema: Thank you.

We've made the request and the suggestion to the government on several occasions to have the two-week waiting period lifted. Our national director has written Jane Stewart, as well as a number of other officials in the labour movement. Certainly Mr. Proctor has asked in the House to have the two-week waiting period lifted. For whatever reason, we get the response that that's not going to occur.

So we are still looking for the two-week waiting period to be lifted, and we are looking for leeway inside of other rules in EI, where people who are not able to work because they are injured and now laid off, who basically would have to lie on their unemployment forms to say “I'm ready, willing, and able to work”.... They either have to lie or are not entitled to unemployment because they are injured and they can't work anywhere else. They were working on the basis of a return to work from a compensatable accident.

In some cases we've had success in putting those people back on workers compensation, although that's a cost again to the Workers Compensation Board and the employer.

So yes, we are looking for rules to be relaxed. We don't believe this situation is any different from SARS and a lot of these cases, and we very much want to see the two-week waiting period lifted.

[Translation]

Mr. Louis Plamondon: I'm still speaking to you, Paul. In your presentation, you referred to an international aid solution. I assume you meant that Canada would buy those surpluses of producers currently on Canadian soil in order to export them, to give them away or to sell them at low cost to developing countries or countries in crisis.

Have you made a formal request to that effect to the Canadian government? If so, did you cite cases from other areas where that might have occurred—for example, I believe we've already done that for wheat—or are you simply talking about it to the committee today?

[English]

Mr. Paul Meinema: This is the first time I've raised it with this committee on the issue of beef, but I know that Canada has done it in the past with other products, with wheat. I believe it would be a solution, temporary or not. If we have this excess beef, as suggested, that is sitting in ports elsewhere, rather than it being destroyed, if it could be purchased at a discount price from the producers and from the packing-house owners and at least distributed to countries that could use it for humanitarian needs.... I think Canada has a fairly good reputation in that area, and it would just be another step to assist the industry for now.

The Chair: Thank you, Mr. Plamondon. Your time has expired.

We are moving to Mrs. Ur.

Mrs. Rose-Marie Ur (Lambton—Kent—Middlesex, Lib.): I do thank you for coming before the committee.

Just because we're politicians, it doesn't mean we don't understand. Trust me, we do. That's why we're back here for a second time. I've been here for ten years, and I have never had to return to the House, so it just shows the genuine interest this committee has. Politics is left at the door for the most part. We're here trying to do what's right for the good of the industry, and I do appreciate you coming this morning.

I think it was Mr. Haney who said that with one large trading partner, have we learned anything? Maybe we should be expanding our horizons, looking at different venues, and you list all the other countries. It's not like you have it in one basket, but to have such a large percentage of the export market with one country is maybe proving a little bit more difficult at the present time.

Mr. Ted Haney: The Canada Beef Export Federation was formed in 1990, when 95% of our exports of beef went to the United States. We had been subjected to a number of countervail tariff investigations, there was often the threat of anti-dumping, and there was at that time the Lehman factor—frictions at the border in having products inspected and released for sale in the United States.

We were formed with the express purpose of expanding and diversifying exports. We were well on that. It seems so long ago, but it's important to note that May 2003 was our industry's record month for exports to Japan. In May 2003, 2,400 metric tonnes of beef arrived in Japan from Canada; 1,034 tonnes were released for sale, but unfortunately the remaining tonnage is still stranded in the container yards and at ports.

By 2002 our dependence on the U.S. had decreased to 72%. That's at a time when exports to the United States themselves had increased from 85,000 tonnes to 330,000 tonnes. Even though it has increased so dramatically to the U.S., our dependence went from 95% to 72%.

Our industry has set a goal—and we are still focused on that goal—to reduce our dependence on the United States to less than 50% by 2010, by increasing our exports to Asia and Mexico, from 126,000 tonnes, or $470 million, in 2002 to 292,000 tonnes, or $1.1 billion, in 2010.

We believe that's achievable once we've come through this unbelievable period of disruption and frustration, but it will require all of the teammates—government, packers and processors, producers and the associations that represent them—all working together, regulatory-wise, promotion-wise, with resource coordination to achieve that.

Before, it used to be just a profit goal. It's become now, we understand, a survival goal. So you are correct.

Á (1100)

Mrs. Rose-Marie Ur: I think we can only survive if we all work together. One person can't be out there making a massive profit while the rest are crippled at the knees, with little or no funds going to the primary producer.

You made an interesting statement in your presentation that everything should be based on science. I totally agree with that. Japan should probably be one of the most knowledgeable, other than Great Britain, since they've gone through a major crisis themselves. To be so demanding at this present time....

We've had international scientists here saying our inspection agency is second to none. You indicated that the United States may be hiding behind Japan or using Japan as a screen to divert attention from their way of looking at closing the border or keeping the borders closed.

I think one element you addressed was the hope that you could address it through Mexico, where Mexico would allow Canadian imports. I really feel that may be one toe in the door—not a foot, just a toe. Could you explore that?

Mr. Ted Haney: Access to the United States or to Mexico will do two things to us: one, provide an outlet for extremely large volumes, up to a quarter of a million metric tonnes in the next year, for exactly the cuts that are in excess production above demand in Canada--hip cuts, chuck cuts, and many of the small muscles and offal products. So it serves as a market outlet to relieve the strain to produce better cut-out values or price levels. And by allowing markets to be open again for products that are produced in excess of consumption in Canada, it allows for the overall processing volumes of our industry to really return to something more normal.

The second value, and you've talked about that, is Mexico providing economic leverage and encouraging the U.S. to open its market. By us going to the United States, and potentially in the next year, all other things remaining the same--and I hope it will not be that long--all else staying the same, we would displace 175,000 metric tonnes of U.S. beef exports in Mexico. That's a potential piece of economic damage. It's potential economic incentive for the U.S. to open their markets to normalize trade so that they don't suffer from disrupted marketing patterns from Canada. So Mexico is part of the solution.

In Japan--not that I'm an apologist by any means, nor do I speak on behalf of Japan--for the first three and a half weeks of this crisis, during the time when Japan slowly and continually hardened its positions on Canadian beef, and in its statement that they were going to consider placing country-of-origin certificate requirements on the U.S., during that first three and a half weeks, Canada did not engage with regulators in Japan.

Twice during that period, Japan asked to send their technical teams to Canada, and twice they were rejected. Only after it appeared that Canada and the United States had great momentum to an early marketing opening between the two markets, yet no engagement, no information, no interaction with Japan had been achieved, only then did Japan take steps, because of the absence of information. There was no science. So in that position, they said “If Canada and the United States are going to cut a private deal and Canadian beef is going to go into the United States in an undifferentiated fashion, we need to protect ourselves until our own scientists can review the situation”. They only returned home less than a week ago.

So we're now pushing for a decision in Japan. We understand that the Ministry of Health has all but signed off. They are flexible when there's engagement. When there's information, scientific principles can be used. Luckily, after the first three and a half to four weeks, Canada began to engage with Japan and others.

Á (1105)

Mrs. Rose-Marie Ur: I believe Dr. Brian Evans was in Japan as well.

Mr. Ted Haney: He did go to Japan last week, without industry; he went with CFIA, Agriculture Canada, and Health Canada.

It was only yesterday, last night, that one of the members debriefed industry on what the early results of that mission were. So we can now begin to help working through the Japan industry side, and encourage the opening of the market by understanding what remaining roadblocks are in place.

As we've said before, in the process of opening markets, we believe that political interaction, technical interaction, and industry interaction, all combined, coordinated and simultaneous, are much more effective than the individual efforts. But Japan hardened their position in the absence of information. Without information, scientific principles cannot be applied.

I've applauded them that they immediately sent the technical group to Canada and agreed to meet with Dr. Evans upon that technical mission's return. Now is the press to open up the markets.

The Chair: Thank you, Mr. Haney, Mrs. Ur.

Now we'll go to Mr. Proctor.

Mr. Dick Proctor: Thank you very much, Mr. Chair.

Thanks to all of the presenters this morning. I appreciate you coming on short timelines.

Let me just pick up on the point Mr. Haney.... I was aware that Japan had requested very early on to come to Canada, and the Minister of Agriculture had indicated that they were just so busy with the international team and everything else that it was not possible. I was not aware that there was a second request, that they were turned down as well. Could you just elaborate on when that occurred? Do you have any information on it?

Mr. Ted Haney: Information we obtained from Japan was that a second request was made by Minister Kamei in the few days prior to the arrival of the international inspection team. So that would have been June 3, 4, and 5, in that area.

You're right, Japanese authorities accepted very openly the first request not to send a technical team, because we were, in the first week, absolutely focused on the investigation. That was one of the agreed-upon strategic decisions in the first weeks to keep those resources focused.

By the time Minister Kamei had requested the second time, the international review team had already been established, without Japanese representation. A country that has had very limited cases has, from a regulatory perspective, reacted comprehensively well beyond where science would indicate, and is also a major client. So they were not on that mission. I think that was noted by Japan. Also, the U.S. had dispatched an audit team to Canada by that time as well, and that had become known by japan. I think those are the bases why Japan became more frustrated at that point.

Mr. Dick Proctor: Thank you.

Let me pose a question to Mr. Ferraro. It seemed to me that I heard you saying that if retailers drop the prices dramatically, that would strengthen the idea that Canadian beef could be perceived as being unsafe. I want to make sure that I have it more or less, that I'm quoting you more or less accurately. If I have done so, can you expand on it? I have some difficulty accepting the premise of your argument, as others might say.

Á (1110)

Mr. John Ferraro: There are two reasons. I want to just talk about that a little bit further, so we have a good understanding of what I said.

First of all, I think meat case integrity and maintaining the confidence of the consumer immediately was very important to the industry. We had a very big industry in a very fragile position. The thing I think we're all concerned about, certainly in the distribution sector, is what the consumers would do. If the consumers maintain confidence in the product we're producing as an industry, then that's the first step we need on the road of recovery. I believe that's happened. So I want to talk about integrity as being more important than the price aspect of it.

In terms of how pricing has moved forward from that point, Canada's market is very seasonal. Again, CBEF has done a tremendous job in finding markets that are counter-seasonal to Canada's demand patterns as well as markets that buy products that aren't necessarily consumed within Canada.

When BSE hit, our demand patterns were at a peak for barbecuing and middle meats. Almost immediately, production was halted, and a pipeline of product that would normally be depleted at that stage in the season all of a sudden had less than half the products coming next week that had been ordered. The U.S. market, which also supplies a lot of middle meats into Canada when we're at peak demand periods, was moving towards their peak demand period, being the Memorial Day weekend. In the short term, I think it created a very tight supply, holding prices very firm at packer and distribution level right to consumers on middle meats.

The rest of the products that did decline in value don't necessarily have a market in Canada. Retailers' leverage, of course, and ability to act quickly is through the feature process. I really believe that the retailers have featured a lot of products subsequent to the initial stages of BSE at very deeply discounted prices. There are examples of retailers in western Canada holding truckload sales in parking lots, selling a higher-component-of-fat type of ground beef, medium-level ground beef, at below what were typical wholesale prices nine or ten weeks ago, direct to consumers off the backs of trucks.

I think that's an example of some of the things retailers have done. The unfortunate part is there's still a lot of material going into freezers and storage at values that we don't quite understand, whether they're real or not. It's just very difficult to sell to consumers in Canada, for which they don't necessarily have a market.

I think those are the two points on price and integrity.

Mr. Dick Proctor: I'm sure my time is just about up.

Monsieur Guillemette, you indicated that you need help from the government. I think a lot of folks in the industry would also be saying the same thing. Can you indicate to the committee this morning some specifics? What kind of help do you need, and how should it be delivered?

[Translation]

Mr. Pierre Guillemette: It's hard at this point to evaluate the losses incurred, a number of industry stakeholders will not be able to survive this kind of crisis if they don't have some kind of government assistance. I'm talking about financial assistance, that goes without saying.

How much should it be, and how should we determine the losses incurred? I imagine it would be on a case-by-case basis. It's hard for me this morning to say exactly how to do it.

[English]

Mr. Dick Proctor: Are you eligible for any of the $460 million of this aid program that's been announced? Is your company eligible for any assistance out of that program?

[Translation]

Mr. Pierre Guillemette: In my opinion, what we understood from that article is that that concerned the producer breeders first of all. There's been talk about dates and production losses since the event. We belong to this industry, not as producers, but as processors. The losses incurred are quite easy to establish because production, at least at home, was nil. There was no production for the Canadian market because it virtually no longer exists. Our Canadian clientele is facing the export of the finished products. The same blockade occurs for our Canadian clientele; so we've seen the collapse of our market as a result of this case. So there's no production, which is doing us an enormous amount of harm.

Á (1115)

[English]

The Chair: Thank you, Mr. Guillemette. Thank you, Mr. Proctor.

Over to Mr. Ritz for five minutes.

Mr. Gerry Ritz (Battlefords—Lloydminster): Thank you, Mr. Chairman.

Gentlemen, thank you so much for being here today for some interesting presentations.

There's a lot of speculation out there in the media now that Canada can never return to the strength in the beef industry that we had before. I'd like your comments on that. With all of the outside factors that we've seen, all these markets that are collapsing and so on, can we ever get back to square one? Is it achievable, or are we going to have to reconfigure the whole beef industry, as is being speculated out there?

Mr. Ted Haney: There are economists who project that an expansionary phase of the economy will go on forever, and there are those who will project that a recession will go on forever. There are those, out of frustration and fear and out of personal loss, who cannot see any brightness at any horizon at this time. This is the peak or we are coming into the peak point of pessimism at this point in time. The crisis is deepening. It's becoming personal. The human costs are mounting. This is not an environment that tends to lead to dispassionate forecasts for the prospects of our industry.

We believe that our 2010 goals for increasing exports from $470 million to $1.1 billion are intact. We stand in awe at the Canadian consumers' commitment to our industry and our products. We have faith in the consumers' commitment, the importers' and distributors' and end users' retail commitment to our products in Mexico and in Asia. We will be pulled into prosperity when we gain access to these key markets.

The United States needs to make a decision. They need to open their market. The science is done. Our prosperity will be completed at that point in time.

I believe restoration of our industry is not only possible and likely, it's where we need to get to. But the crisis isn't finished yet here at home.

The Chair: Mr. Meinema wants to respond, as well.

Mr. Paul Meinema: I believe the quality of the Canadian products and the reputation of our inspection agency will probably see us through this. I think that primarily, in my opinion, the factor of the American border, outside of maybe some of the Japanese issues, is a political issue. I think that dealing with that issue in a straightforward and somewhat forceful manner will take care of it.

Two of our largest packing houses in this country have large American ownership. I don't think it's in their best interests that the product in Canada doesn't see its way to the States. I think we need to work hard, as all partners--government, industry, and labour--to assure people outside of Canada that our inspection process is more than adequate, it's probably the best in the world, and that the quality of our product and workmanship here is second to none.

Mr. Gerry Ritz: But to keep it all in perspective, it was one cow out of 2,700 that were tested that proved that our system is above reproach.

I agree with your assertion, Ted, that at this point we're into the silly season. Seven weeks in and we're starting to assess blame. We're at a point where some folks try to vilify certain parts of the industry. I don't see it that way. The packers are striving to stay alive as much as anyone.

To that end, can you explain to us or tell us what percentage of a carcass, by volume and by value, Canadians actually use? That's what the packers are basically after. Then they have to find something else for the off-cuts in order to make that carcass worth more than 35¢ or 40¢ at this point. Can you give us a bit of a rundown on that volume and value idea?

Mr. Ted Haney: Canada consumed approximately 950,000 metric tonnes of beef in 2002. Of that, approximately 300,000 tonnes were supplied by import product, so about 650,000 tonnes of Canadian beef were consumed in Canada.

Our industry produced approximately 1.3 million metric tonnes of beef. About 50% of the processed beef production in Canada was consumed in Canada.

In addition to that, additional carcass equivalent was exported in the form of live cattle. Our industry's total production is about 1.6 million tonnes, only roughly 650,000 tonnes of which were consumed in Canada. In 2002 about one-third of our production was consumed in Canada.

If we were able to exclude 100% of exports—which is not a prescription, but let's go through the math anyway—if there were no imports whatsoever, then consumption of Canadian beef in Canada could technically be increased to 950,000 tonnes. We would still have 700,000 tonnes of surplus in production.

Export markets worldwide—we had about $2.2 billion in exports, with live cattle exports at $1.1 billion, for a total of $4 billion in product exports in 2002. To put it into value terms, our industry had total sales of about $7.5 billion. So $4 billion of $7.5 billion was exported. About 60% of the value can be put onto a value of a fed animal—previous valuation on a fed animal at $1,300. It's very easy to see that somewhere in the area of $750 out of every $1,300 animal was exported in one form or another.

Á (1120)

The Chair: Mr. Ritz, your time has expired.

I wonder if Mr. Haney could expand. I did some quick math. If I understand you correctly, about 300,000 tonnes of meat are imported into Canada. If that number is correct, where does the 76,000 TRQ number come in, and where do the 65,000 supplementary quota numbers come in? That's about twice what I think we're importing now. Can you give us some sort of a rationale for those numbers?

Mr. Ted Haney: In 2002 Canada imported—rather than go from indirect numbers, I might as well give the real amounts—approximately 100,000 metric tonnes of beef from the United States. That is a NAFTA obligation where it's not subjected to any TRQs. In 2002 approximately just over 150,000 additional tonnes were imported from non-NAFTA countries, with New Zealand and Australia taking the vast majority of that additional 153,000, 154,000 tonnes.

We've committed within the WTO to provide access for approximately 76,000 tonnes. Above that level requires the issuance of supplemental permits. Half of our non-NAFTA imports in 2002 were imported under supplementary permits. So 75,000 tonnes out of 251,000 total tonnes in 2002—straight beef products, not beef equivalent of live cattle imports, just straight beef—or about 8% of non-NAFTA and about 5% of total imports were based on supplementary permits.

The Chair: Thank you.

Mrs. Ur.

Mrs. Rose-Marie Ur: Actually, that was one of the questions I was going to ask. Are the supplementary permits causing great difficulties at this time for the industry? I have an import request that dates from June 5 to June 11, companies requesting beef, and it's over 25 million pounds of extra beef into Canada.

These are questions from some of my constituents. How much beef are we planning to import into Canada under this crisis? And that's not even one month; that's half a month.

Á (1125)

Mr. Ted Haney: Our industry has continued to have full consensus that Canada needs to live up to all of its trade commitments, both within NAFTA and within the WTO. Within NAFTA we have a tariff-free trading environment and a quota-free trading environment that needs to be maintained. In 2002, Canada had a $3 billion surplus with the United States. In the last half of this year we would like to have a $1.5 billion surplus, and we'd like to have at least a $3 billion surplus in 2004 as well. So we don't want to disrupt long term the flow across the U.S. border.

With respect to supplementary permits, the cattle industry and much of the beef processing industry, although there is a diversity of opinion on the processing side.... The cattle production side has come to a consensus that supplementary permits should be suspended during the term of this crisis at least until countries that are suppliers of product under the supplementary process provide and grant access once again to Canadian beef.

If we're all good traders, if we're all based on science, then Australia and New Zealand, based on the scientific review, the results of which have been presented to Australia and New Zealand, should open their markets to Canadian beef, providing momentum to engage in Canadian products in all other markets around the world. If they will withhold decisions to grant access to their markets, which would be based on strategic trade considerations, then once again there will be questions about why, at the time of this crisis, Canada should continue to grant the issuance of supplementary permits.

We would like to ensure that the demand for beef in Canada can be filled, where possible, by Canadian beef during the time of this crisis.

Mrs. Rose-Marie Ur: Mr. Meinema, you indicated that you felt it was improper of Ms. Stewart not to waive the two-week period for the EI program for people who have been displaced because of the BSE crisis. With that same thinking, has the union also asked their workers not to remit union dues during this time of crisis?

Mr. Paul Meinema: I think the issues are totally unrelated.

Mrs. Rose-Marie Ur: How are they unrelated?

Mr. Paul Meinema: I am here at the cost of the unions who represent these workers. However, I guess the same could be asked of you. Are you going to deduct taxes from their EI?

Let me go on to say that these people do not pay dues while they're in this crisis. If that's the measure, that doesn't abdicate the federal government's responsibility now to relook at the situation. These workers don't have a lot of places to go. As I said earlier, it takes these packing houses many years to secure a workforce. In High River—this is my guesstimate—when I look at the turnover that occurred in that plant, it's taken 15 years to get a stable workforce.

Mrs. Rose-Marie Ur: Why is that? I don't understand why it takes 15 years.

Mr. Paul Meinema: Because these jobs are tough jobs. The industry went through a correction phase a number of years ago with the rates of pay. They're not what they used to be. There are corrections being made in that area.

Mrs. Rose-Marie Ur: What is the salary?

Mr. Paul Meinema: To start in the beef plant in High River would be about $10 an hour and it would top out around $16 an hour for production workers.

There is a layoff now of about 500 people. Primarily those people will come from Calgary, about a 40-minute drive. The community of High River is about 10,000 people. Out of 1,800 people in that plant...there aren't 1,800 jobs in High River, and if there were jobs for these people in Calgary, I would suggest that they wouldn't be driving the 40 minutes to High River.

Medicine Hat supplies probably one-third of the workforce to the IBP plant in Brooks. They're suffering the same situation. Brooks is a little bit different because they haven't got the housing to support that plant at this point, but people are coming in from Medicine Hat and so on. When it becomes work-sharing and they are paying that much money for gasoline for a 40-minute drive and so on, it is no longer economical for them to continue working there.

The same is said for the uncertainty of the XL plant in Moose Jaw. If the workers knew that two weeks from now they would be going back to work and would be fine, they could look at finding something in Moose Jaw, whatever it may be, to get them over the hump. But the uncertainty is that we don't know when those people are going back to work.

These jobs are highly skilled on the kill floor. These people have a lot of knife experience, and they have to know what they're doing to provide a good quality product for the world, as well as not injuring themselves or other workers in these plants. But they can't sit there forever and determine when they are going back to work.

Á (1130)

The Chair: Thank you, Mrs. Ur.

Mr. Plamondon.

[Translation]

Mr. Louis Plamondon: Thank you, Mr. Chairman.

I'd like to come back to you, Mr Guillemette. If I understood correctly, you said that your industry recovers offal from the slaughter houses, that is to say the hearts, lungs, livers of various animals, beef as well as pork and chicken. You add value to those products, which you freeze and 95% of which you export to the United States. You have a number of clients in the United States.

Can you name three or four for us, to give us an idea of the kind of customers you have in the United States?

Mr. Pierre Guillemette: I'm going to ask André to answer that question because he's responsible for marketing.

Mr. André Toutant (General Manager, Maurice Guillemette Inc.): In the United States, we're currently doing business with major customers such as Nestle, Del Monte and Mars. They all have cat and dog food manufacturing divisions. So we market and sell our products directly to them.

Mr. Louis Plamondon: What you produce is exclusively for animal food, isn't it?

Mr. André Toutant: Exclusively.

Mr. Louis Plamondon: It's a plant that has been in existence for a number of years. You have some 40 employees, roughly 20 of whom have already been dismissed in view of the fact that you have been unable to produce at all since the mad cow incidents that everything is closed.

Mr. André Toutant: Yes.

Mr. Louis Plamondon: You said that had caused you to stock nearly one million kilograms of food and that the hydro cost was $25,000 a month to maintain that frozen inventory. So you necessarily will not be able to last long if you have to pay out that amount every month without there being any production. No production is going to the United States at this time.

M. André Toutant: We were collecting products from the slaughter houses, and we stopped all product collection. We halted our operations completely because we were exporting 95% of our volume. So we can't continue collecting products in order to stock them without knowing whether we'll then be able to export them.

Mr. Louis Plamondon: So the fact that you've stopped your operations also affects the slaughter houses and the trucking industry which transports those products, as well as your own employees and executives.

I would like to talk about what you hope to obtain by filing your report here today. My colleague Dick spoke about it a moment ago in terms of figures, but I would like to talk about it in terms of form.

Do you expect a subsidy? A subsidy is always ideal, but could a kind of bridge financing enable you to avoid closing? If you obtain financial assistance from the government, a temporary no-interest or very-low-interest loan without having to repay any principal or interest during the crisis, would that be sufficient, or do you need a little more in order to avoid closing?

Mr. André Toutant: I believe any assistance is always welcome, but the criteria for whether that should be a subsidy, direct assistance or a loan remain to be determined. The actual situation must be evaluated together with others.

Mr. Louis Plamondon: On a case-by-case basis.

Mr. André Toutant: Yes, precisely.

Mr. Louis Plamondon: Thank you.

That's fine, Mr. Chairman.

[English]

The Chair: Okay. We'll move to Mr. Proctor.

Mr. Dick Proctor: Thank you again, Mr. Chair.

Mr. Haney, back to you. I read the story in the paper this morning with the same chagrin and horror that you did about this incineration of cattle or Canadian beef products in Japan, and I guess the question that leaps to mind is why hasn't this been addressed before now? Why didn't the government or the industry or whomever take some steps to make sure that didn't happen?

Á (1135)

Mr. Ted Haney: I can't speak on behalf of the Government of Canada. There are many priorities, and they've paid attention very closely to the launch of the disaster assistance program directed primarily toward feedlots. I think our focus on this particular issue has been that in the last two to three weeks we've started to see some response within government that this issue needs to be addressed. Unfortunately, timing of the problem has gone a little faster than the timing of the solution.

We were told by one of the members who were on the trip to Japan that they advocated strongly that these products held in container yards and bonded warehouses would at least be allowed to stay there or be allowed entrance to the country. That was last week. But it appears the Japan government has asked that these products be dealt with either by return or destruction.

There are only two classes of products, though, that have been ordered for destruction or return, and that's fresh chilled beef held in container yards and not allowed to be frozen--they have products timed out now--and also products that may contain specified risk materials.

The second one is of more concern. The first one we knew was a depreciable asset; it has a shelf life, especially when it's held in containers and container yards. Containers are great, but they do not have the temperature control that major cold storage facilities do. It's the weak part of our cold chain. That product would go off. But the products that are suited to or may have possibly contained specified risk materials are more of a concern, because that's an action that's taken before clarification of policy and before Canada itself has been able to take a position on what are specified risk materials in food. So the order is getting a little bit mixed up right now.

Mr. Dick Proctor: Just one quick question. What percentage of live cattle versus beef products do we export normally, excluding this crisis, in a given year? Do you know the answer to that?

Mr. Ted Haney: Well, in 2002--which wasn't exactly normal, because the drought caused a surge of yearlings and calves to go south--we processed about 3.5 million animals in Canada and exported about 1.6 million animals. In a normal year, we process about 3.5 million cattle and we would export about a million. So processing to exporting is typically about 3.5 to one as the ratio. Last year was odd because the drought caused an entire calf crop to move south.

Mr. Dick Proctor: In your opening remarks you referred to being in the early stages of this crisis. I guess the question I had was did you think on May 20 that on July 10 you'd still be referring to this as the early stages of this crisis, or did you think, as a lot of us did, that it would be over by now?

Mr. Ted Haney: I am inherently an optimist, and that aspect of my personality asked me to believe that there was going to be a quick resolution. That said, I unfortunately believed that the process would bog down at some critical phase that I didn't know at that point. We didn't now where the bumps in the road were going to be, but I was sure that bumps would show up. Initially, we had high hopes that within two weeks there would be an opening. That seemed a bit overly optimistic, even from my perspective.

I had hoped that by now we would have seen movement, especially in the United States. While one export market, Japan, was being used as a source of delay in the United States, another export market, Mexico, will probably become the reason why the U.S. will open. So one market was the excuse to delay, and another market the encouragement to open. It's strange how these things tend to work.

Á (1140)

The Chair: A short one?

Mr. Dick Proctor: Yes, to Mr. Meinema.

The government declined to waive the two-week waiting period. We thought they should have, you thought they should have, but they didn't. Were there other things, however, that the government might have done that could have been more proactive in this situation?

I'm very cognizant of what you're saying about how long it takes to get a trained and highly skilled workforce in place at a plant in Moose Jaw or High River or Brooks, Alberta, where there are not a lot of other opportunities for employment. And I know that perhaps particularly more so in the Alberta plants, there are a lot of people who work in those plants who don't have strong language skills in either of Canada's two official languages, and there was talk about the need for English as a second language program.

Could the government have been more proactive to try to keep people there? Beyond the job-sharing and other things they may have put in place, was there more that could have been done?

Mr. Paul Meinema: I believe there was a lot more that could have been done, and probably the basis of that would have been to look at the labour, the workers in those plants, as a partner in this situation. To that extent, yes, with the two plants, particularly the two large plants, IBP and Lakeside, and the High River plant, any kind of unemployment program for education, primarily English as a second language, would have benefited those people, would have kept them paid and benefited those people when they got back to the workplace, or in a worst-case scenario, to get a job elsewhere.

I think, as I said in my statement, that the workers were a group of people who fell between the cracks. They weren't looked at as a priority here or as players in this industry, and they just fell between the cracks.

The Chair: Thank you, Mr. Meinema, Mr. Proctor.

We'll move to Mrs. Ur.

Mrs. Rose-Marie Ur: One quick question. The minister had come out originally with the interest-free loan program for the primary producer, and then the compensation program. I've had feedback from my area, southwestern Ontario, that three or four weeks ago, halfway through the crisis, the interest-free loan was the way to go for farmers who are experiencing difficulties--it would help with their input costs--and to have the compensation program start now, before the borders were open, was the wrong way to go. That indeed turned around, where the markets have dropped in price, and they feel it's because of the compensation package put out before the borders being opened. I just want your viewpoint on that.

Mr. Ted Haney: I would have to preface any comments by saying the Canadian Cattlemen's Association has been the industry lead on domestic compensation from the first day until today, and will continue to take the lead on that.

That said, industry believes that the addition of debt to operations that were in loss positions was not part of this solution, especially for feedlots, which is where the first crisis occurred. The crisis is only beginning to unfold to those who have yearlings on grass, and the crisis is only coming to the awareness of those cow-calf producers who today have calf at side but are looking toward weaning and knowing that unless the market situation changes the crisis will hit them square as well. So for feedlots, the best belief and analysis of industry was that this first program did not meet the needs.

I believe that the industry had asked for a more aggressive disaster relief or disaster compensation program, without the step down of support the farther the price went down. The reason government went with that was to encourage a higher platform of prices. Even though that encouragement was put into the structure of the disaster relief program, supply of cattle and beef products derived from cattle simply overwhelmed demand that was available within Canada, causing the collapse in prices of live cattle and of products that are not easily sold within Canada. So even with that encouragement structured right into the program, supply simply overwhelmed demand, leading to the collapse.

With respect to the unique circumstances of individual producers or specific regions, I'm not an expert in that; I'd have to defer back to the Canadian Cattlemen's Association to discuss the dynamics and their research.

Á (1145)

Mrs. Rose-Marie Ur: They've appeared quite often, and they've been excellent in presentations.

It's interesting, that last statement you made that there was an overwhelming supply of beef. I had the opportunity to shop last week when I was in my riding, and beef prices certainly haven't dropped in the stores. Yet retailers are having problems sourcing product. There was a news article on Global this past Monday indicating that retailers are having problems getting enough product. I find that quite interesting, with your statement.

Mr. Ted Haney: Canada processes, on average, 3.5 million cattle a year. Of that production, 60% is exported. So 40% of the beef derived from the slaughter programs domestically, the cattle that are processed, is exported.

In addition to that, all the beef derived from cattle that are exported for slaughter of course automatically is for export. So in 2002, a total of 70% of our total production was exported. That supply is still here in Canada. That ability to supply is still here. The surge in supply is cattle to packing plants. Even if Canadian packing plants would move to full capacity utilization, between 65,000 and 70,000 per week, that capacity is not equal to the supply of cattle ready to be shipped for processing, because we supply beyond that, because we're exporting cattle.

There's a classic example of supply overwhelming demand, or even capacity in this particular case. So at that point of transformation is where the primary price declines occurred.

Secondly, if you're shopping in Canada for rib-eyes, New Yorks, strip loins, T-bones, and even top butt sirloins, these products together make up only about 20% of the carcass weight, but after you take out trim and everything else, only about 15% of the meat products sold are made up of these. For these products we've not yet met full Canadian demand at the processing levels, between 30,000 and 40,000 animals per week being processed. That 15% of the meat that's produced from the carcass goes primarily to people's barbecues.

The 85% of the rest of the carcass, which is out of the hip, out of the chuck, all the thin meats--the plate, the flank, the shank, in addition to all the trim that even comes off the rib and the loin--that is in surplus right now. I've seen in retail myself tenderloins--which is an odd one, because in fact we're surplus in tenderloins--have dropped.... I did some shopping myself--not that I do that all the time--and tenderloins were at half-price...still expensive, but at half-price. I could buy outside rounds, which I did, two of them, full outside rounds, for $2.50 a pound. That's really cheap. So those cuts are down.

This is a glorious summer, and it's a glorious barbecue season, and Canada, very unfortunately, can't balance production. For every animal, for every 1,000 pounds, only 150 pounds are barbecue-able items in a regular fashion. We still haven't met demand for those, but we're surplus in the others. So that's the oversupply.

It's the 80% to 85% of the carcass that's in surplus for the Canadian market that's caused great financial strain on everybody. That's the core reason right there why cattle prices have fallen, in addition to having way more cattle available for sale than are actually capable of being processed.

People aren't marketing cattle these days. They're getting in line to get their cattle processed. The price is virtually secondary, the supply of cattle is so much in excess of the ability to get them processed at this time. All market definitions are so corrupted by the distortions because of our lack of access to export markets that there is no sanity at all. There's no sense to be made from any of it. It is very, very disrupted.

The Chair: Thank you, Mr. Haney, Mr. Ritz.

Mr. Hilstrom, please.

Mr. Howard Hilstrom: Thank you, Mr. Chairman.

Well, that gets to the nub of the issue here. The original press release by Minister Vanclief, I repeat, was to get the market working again. That's why $460 million was put out there. Was that a reasonable program plan? Did it have any chance of success on day one, the day it was decided, Mr. Haney?

Á (1150)

Mr. Ted Haney: Yes, under the assumption that markets will open soon, and I think Minister Vanclief was very public regarding the content of his communications with Secretary Veneman at the time, saying that the likelihood of a quick market opening was very high, based on science after the very first investigation was completed. But that time has come and gone.

The Canadian industry has recommended adjustments to this first phase of compensation, changing the grids and the percentage allocations, and it has suggested that we are quickly moving into a phase two, where yearlings are being affected; they need to move off grass. We haven't talked about that very much, but in those operations that are dedicated to yearling production, when the grass is gone, it's gone. It's designed to have those cattle moving off mid-July to August 1.

At phase three, when the calf starts to get weaned and moves into the market, if we don't have access then, the economic cost to our industry is way beyond the level of support available now, many times larger. That needs to be considered now, in case we don't have access.

Mr. Howard Hilstrom: That's exactly right.

I have a report here from a fellow up in Moosehorn, Manitoba. Do you know what he's doing? We have a bit of a drought on the go there, plus he has too many cattle because he can't market them. He has taken a big tractor and he's pushing over poplar trees, and the cows are eating the leaves, along with what they can scrounge out of the deep sloughs. That's the situation we're in here.

The target of this program is to kill 900,000 head. How many cattle have been slaughtered to this minute, the last you've heard?

If anybody else has an answer to this, indicate to the chair and answer, but Mr. Haney is the one closest to this, apparently.

How many have been killed to date?

Mr. Ted Haney: The information I'm working from is based on CanFax reporting, which is a division of the Canadian Cattlemen's Association. They reported that last week a total of 47,000 head were processed, and a rough average of the previous six weeks was between 30,000 and 35,000 animals.

So we've seen an increase in numbers of cattle processed, but we're still dealing with about 225,000 cattle over the seven weeks, as an approximate number. It could be up around 250,000. I don't have the absolute details, but 47,000 animals were processed last week, which showed the first increase of processing numbers.

Mr. Howard Hilstrom: For the meat that can't be sold, is there enough storage capacity to store these 900,000 head that aren't consumed in Canada?

Mr. Ted Haney: Storage capacity has been a real constraint, and the temporary suspension of supplementary import permits in part is to address that, to ensure that what frozen storage capacity is available, is available for the excess production.

Mr. Howard Hilstrom: Be careful you don't slip into what the government line is on all this, Ted, and I'll tell you why. When people get those supplementary permits, they have those permits for two months down the road. That beef is going to be coming in from New Zealand and Australia because it was contracted for delivery in two months. So you can end all supplementary permits today, but that beef that is contracted is still going to come in. Is that not true, or can we tell Australia and New Zealand not to send us any of that supplementary permit beef that is contracted for?

Mr. Ted Haney: I think cancellation of supplementary permits already issued would be heroic and may not be consistent with our legal undertakings within the WTO, and I'm not sure that's ever been recommended from an industry perspective. But it may well be the case—

Mr. Howard Hilstrom: No, it absolutely shouldn't be done, and it is dead wrong to do that, but I'm pointing out that this program is not working; it will not work. As I say, even the consumption and the storage capacity in this country isn't enough to make this program get rid of 900,000 head of cattle. So why does the industry and the government continue to say that this problem is going to be solved by this $460 million program? It's not.

I guess we can leave that for a minute.

Á (1155)

Mr. Ted Haney: Mr. Chair, I think the only real solution in fact is resumption of trade. Everything else is moderating the depth of the crisis to some degree, either a little bit or more, but the only way to address the crisis itself is through resumption of trade. That's been reiterated at every meeting I have ever been at, from every association that has made a presentation to any government department at either the federal or provincial level.

Mr. Howard Hilstrom: Exactly, and here's the second part of the problem that this industry is facing, and you touched on it earlier, Ted. It's a partial opening of the borders to muscle cuts and this sort of thing. Will our packing industry and our whole beef industry—not the retail side, but the packing industry and the primary producers—be competitive in the international marketplace if we can only export muscle cuts and certain cuts? Will we be competitive and be able to retain the industry as it is?

Mr. Ted Haney: Our industry has produced about $160 per animal from the sale of variety meats—that's organ meats, tripe, intestines, as well as some muscles that are not ordinarily consumed in Canada. These are unique values. If we have a restricted opening, my belief is that about half of that would not be able to be produced, about $80 an animal. So yes, we need to be able to trade in variety meats. We need to be able to also trade in rendered products. In order to save rendered products for feeding, to have it legally available for feeding and for export, we may need to take some steps, as indicated by the international report, being cautious that we don't go too far so as to once again introduce new costs. But we need to be able to produce value from rendered products, from tallow. We need to be able to produce products from offal products and variety meats in order to be truly competitive in the long run. So a more comprehensive opening is required.

Products from older animals, both in terms of trim and value-added products, although it's been a relatively small percentage of our exports, are an important component of our exports and meet specific needs in international markets. Again, that source of revenue is required in order for us to remain truly competitive in international markets. That all adds value back to the animal.

The Chair: Thank you, Mr. Hilstrom.

Mr. Plamondon.

[Translation]

Mr. Louis Plamondon: That's fine.

[English]

The Chair: No questions?

A short question, Mr. Ritz.

Mr. Gerry Ritz: Thank you, Mr. Chair.

Gentlemen, a lot of what I've seen in the beef exporters' presentation here today talks about diplomatic portions of...you're going to send the industry, you're going to send government officials, plus diplomats, and so on. I think that's probably the right way to go. Ted, I know you're off to Mexico directly. Is there a long-term plan, even in the next week—if you want to call that long term—that sees you going to Japan and Korea and our other trading partners with that same group of representatives? Are we going to see that happen? We saw a small group go to Japan, but it wasn't a complete group like you're sending. I agree that's the way to go. Have you seen a travel schedule that you're going to go to other places than just Mexico?

Mr. Ted Haney: We have received for the first time a commitment from the Government of Canada to provide daily updates of all planned activities with respect to market opening—activities planned by government—whether or not they're initially made available for participation of industry, so that we can enter into discussions with timelines sufficient that we can make plans to go and cooperate.

Part of the reason we are going into Mexico is because we were not able to go to Japan and Korea, understanding that that didn't allow for us to coordinate properly with industry to provide information to our regulators and to also help engineer an industry poll for our product and encouragement to the host market's regulatory bodies to create a more accepting environment for the actual technical negotiations. I think the point was made after that mission left without industry, and I think the point was received, so that we were actually approved to be part of the mission to Mexico. I expect to be part of future missions going to Taiwan, Hong Kong, and China, and to the return visit back to Japan and Korea.

Â (1200)

Mr. Gerry Ritz: But there are no timeframes slated for those others yet?

Mr. Ted Haney: Not at this point in time.

Mr. Gerry Ritz: I wonder why. This is a crisis. We need to be going there tomorrow.

Mr. Ted Haney: We've said that multi-tasking is not a bad thing to do at this point in time. Sequential activities—complete one task before you go to the next—ensure that all available resources are on the task of the day. But I think multi-tasking or laying out multiple agendas and pursuing them simultaneously is important. That is also part of Mexico. While Dr. Evans and the rest of the mission was in Japan, the early work for allowing this group to go down to Mexico was being done, but that was a specific process-based policy that was developed at the point of departure. Now we're able to go to the next market within one week. We need to travel intensively to Taiwan, Hong Kong, China, and others soon.

The Chair: Mr. Hilstrom, a short question.

Mr. Howard Hilstrom: I asked the CFIA about resources in our first conference call, and the answer was “Oh, yes, we've got plenty of resources, we're doing everything”. Obviously, with that Japan issue, requesting to come over, they didn't have enough resources.

Mr. Ferraro, the packing plants yesterday paid feedlot owners 35¢ a pound for live animals. They took it and they killed it. Loblaws or whatever company you want to use that you represent, how much did they pay for the top grade carcass from the packing plant? How much a pound did they pay for that?

Mr. John Ferraro: I'm not up to speed on current market cut-outs as of today. The market has been declining fairly--

Mr. Howard Hilstrom: You can ask others to come up to the mike there, who are representatives.

The Chair: They'll be at the table in the next round.

Mr. Howard Hilstrom: Okay, you've got another one coming up here?

Okay, well, if you can't answer that, then that's fine. Thank you.

Mr. John Ferraro: Let's just say that the markets can decline quickly.

The Chair: If I might ask the concluding question or questions, I have two I'd like to ask.

Mr. Ferraro, on the issue of not having access to certain types of beef, particularly ground beef, hamburger meat, one of my constituents who regularly does business with your company--and speaks very highly of your company, by the way--was unable last week to access boxed meat to be used for hamburger. It seems rather strange to me that you can't access enough hamburger meat these days when in fact we were just told a moment ago that this is what we have so much surplus of.

Can you explain to this group and to those people back home and in all of our ridings what is going on? Why can't you access hamburger meat at this time?

Mr. John Ferraro: Let me just start by letting you know that as far as raw materials, our operation warehouses fresh perishable beef in Mississauga. We service about 500 independently owned customers across Ontario, and we make it our utmost priority to ensure accurate supply of product on a weekly basis to all our customers.

In normal times, unfortunately, in our industry you either have too much or not enough product available. These are not normal times. It's been very difficult to forecast draws and requirements of our customers in advance, and it's also been very difficult to forecast the availability from our suppliers. The products that have been more difficult to find have been the leaner, 90% lean type of ground beef, or raw material for ground beef. The fat trimmings are readily available. So I think that may be possibly some of the difference.

The Chair: But would you agree that the arguments that have been made, and the statements made this morning, would lead all of us to believe that there should be adequate ground beef material in this country to supply Mr. Ferraro and his business to supply the customers who are asking for this product?

Mr. John Ferraro: I'd have to agree that the consumer demand and the customer demand for beef products in Canada is as healthy as it ever was, and I expect it through the summer months to continue to grow, as it does in a typical year.

The Chair: Well, I'm going to allow you to work on getting access, working on that, because I'm sure that Canadians will now know, from what we've heard this morning, that there should be adequate product in this country.

One question, and I know it's a very sensitive question: where might any of you gentlemen suggest we went wrong and what went wrong in terms of us not inviting the Japanese to be part of our international panel? Why did we not engage the Japanese, knowing the sensitivity of Japan and its issue with BSE? When they had indicated and expressed the will to be at the table, why did we not invite them? What would be your interpretation of that? Since we don't have the CFIA here and we don't have the department here, what might be your interpretation of that?

Â (1205)

Mr. Ted Haney: We've matured as an industry and I believe we've matured as a country in the last month. We were operating, I think, under assumptions that we've inherited over the last couple of decades as to the games in the U.S.: if we just get all the information and the interaction there, working closely with our friends, get the solution, get that market open, everybody is going to fall in behind like little ducklings behind mother duck. That assumption may well have been appropriate 10 years ago, 15 years ago, but today it no longer is. So I think we've matured.

The industry asked government--and it was appropriate--to have the priority placed on engagement with the United States, but priority and exclusive engagement aren't the same thing, and that's unfortunately what happened.

I have to also acknowledge that when the results of the isolation of Japan became known, Minister Vanclief called Minister Komai again and responded to the realization that engagement had been unduly delayed and invited the technical team in Japan, sent it quickly. We have now returned with the technical visit--yes, without industry, but we did go back. That in itself is inherently positive.

Minister Komai is scheduled to visit Minister Vanclief on Saturday here. That level of engagement I know is assisting to tear down the constraints we're facing in Japan. It was a difference between priority and exclusive dedication toward opening the market in the Untied States. Japan, Korea, and Mexico have become forces that need to be acknowledged independent of the United States in the dynamics of import markets, export markets, and the interrelatedness of the world trade in beef. Not only prices are derived, but now there are interrelationships of political power, and each of those sovereign nations requires direct attention and respect from the beginning of any crisis or at the beginning of any opportunity.

I think that's what happened. It was assumptions that we built up to be known as inalienable truths over the previous decades, which in fact have now changed. A legacy of this is that we will always view our international markets as being both more precious and more precarious than we assumed them to be in the past. They have been a source of profitability and prosperity, and they will continue to be, but our attention to them will never again be taken for granted.

The Chair: Thank you very much.

We want to conclude this portion of our investigation this morning. I want to thank you, Mr. Haney, for coming to the table this morning; you, Mr. Meinema, for bringing the union perspective, the employee perspective to the table; and you, Mr. Ferraro, for bringing your perspective on hamburger. Thank you for appearing.

To our friends in Quebec, we understand your dilemma. You've brought a new dimension we hadn't looked at before, and we're pleased you could come to the table. Mr. Guillemette and Mr. Toutant, thank you very much for coming.

Thanks to all of you for taking time out of a busy schedule to come at such short notice. It's very much appreciated. And your words this morning are very encouraging, given that we are seeking information. Thank you very much.

We will suspend for just a few moments while our new people take their place at the table--perhaps a washroom break and then we will resume here in about ten minutes.

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The Chair: We're back.

We're happy to have you people at the table. In my conversations with Ms. McKinnon—I can tell you we've been dialoguing for a couple of days, and at one point it looked like we weren't going to have someone from your organization here. We feel it's very important that the retail chain end of the industry is present at some point in our deliberations as we try to get to the bottom of this, to help Canadians understand what's happening in the industry. We wanted to also have the packers here today, but none of the packers has consented or was willing to take the time to be here on short notice, as you did.

I want it noted that you people did make the effort after considerable difficulty. I realize how difficult it is—for all of us—to get plane tickets on such short notice and to have your presentations ready. So we thank you for that.

We must get on with the meeting. From the Canadian Meat Council we have Mr. Robert Weaver, the general manager. From the Canadian Council of Grocery Distributors we have with us Nick Jennery, president and chief executive officer; Kim McKinnon, vice-president; and Paul Fortin, vice-president of A & P Canada Limited. So we have with us now the retail end of things, and we're ready to hear your presentations.

Are you first, Mr. Weaver, or have you determined how you're going to do this?

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Mr. Robert Weaver (General Manager, Canadian Meat Council): We haven't discussed that, but I will go first.

Good morning. Thank you for the opportunity to come and talk to you. At least, I'm thanking you ahead of time because I have some feeling that I might not be thanking you at the end of it. But good morning anyway.

The Canadian Meat Council is the trade association that represents federally inspected packers and processors of red meat, so we have both the processors and the packers. Consequently, this trade association represents some of the beef companies you have heard of, such as Cargill, Lakeside-IBP, Excel, St. Helen's, Better Beef, Delft Blue, Bellivo, in Quebec, and Levinoff as well. As I mentioned before, we also represent companies that purchase and use beef.

I have prepared some figures on the cattle slaughter because I thought from what Mr. Steckle told me when he phoned that you'd be interested in that. These are recorded on the front page of this little report I distributed.

Before the crisis, the beef slaughter numbers were about 70,000 a week—these are approximate figures—and that's something like 100% capacity for their plant. At the outset of the crisis, the numbers decreased to 30,000 per week. The packers cut that back because their exports were cut off and there was beef stacked up in the market and backed up. So they cut it right back to 30%, which is about 43% of their capacity. They increased it again to 46,000 three weeks ago. That's the date when the government announced the support programs for the producers of cattle and the small support program for the packing sector to get rid of certain products. Right now they're operating at 46,000.

In terms of the financial effect on our industry sector, it's estimated that the packing sector got a hit of $50 million in the first three weeks of this crisis alone, and they were the ones who absorbed that. This is product that was shipped out and could not be sold—the losses of their exports, the losses of the sales of the various organ meats that you heard referred to in the previous presentation. Of course, after a number of weeks trying to cut the amount of the losses or the costs, there were layoffs incurred across the country, and we still have quite a few layoffs.

I'll give you an indication of one type of problem that's going on in the veal sector, for example. There's a company that produces veal from mainly dairy calves out of Quebec and Ontario. At the moment, they're having their dairy calves slaughtered by another company, Levinoff, in Quebec. They're actually freezing all the meat, not being able to export it, as they have usually done, and they're just stacking it up and stacking it up, hoping these borders will be open soon for shipments.

I'd like to make a comment about the government support programs. This information was reviewed with all those packer plants yesterday on a conference call across the country. It was reported that the government support program for cattle is only in operation so far in Alberta and Saskatchewan. Our packers report that there are no support cheques going out in either Ontario or Quebec at the present time, only Alberta and Saskatchewan, and that program announcement was made just three weeks ago. In fact, we don't have application forms or really a written version of the support program. The packers have not been given that.

Stocks of meat are building up. As Ted Haney mentioned, to a great degree Canadians consume the more expensive cuts—that's what they like—and the industry exports a lot of other material, like offal, liver, heart, tripe, kidney casings, and tendons. These products are exported by Canada as well as by the United States.

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To a great degree, the sales of these organ meats and byproducts were built up over the years, and they contribute a great deal to the revenue that's brought into the industry. The industry would not operate profitably without those sales.

Mr. Steckle mentioned on the phone two days ago that he wanted to talk about the domestic beef crisis, so I've prepared some information on that. This starts to be described on page 3.

The meat supply system in Canada consists of about a three-week supply of inventory. The government support programs came in three weeks ago, but they still are not being administered in Ontario or Quebec. This is about the time now when the prices in Ontario and Quebec will fall, because when you talk about cheap cattle, it took a certain amount of time for this to have an effect. The price of cattle didn't just fall to 20% or something the first day the crisis started. It takes time. And we're told that some of the retailers won't even cut beef until it's about 18 days old, so there is a time gap.

In the west part of the country, the prices began to fall faster. I think personally that it has to do with that government support program that was started into administration three weeks ago out there. Their prices have fallen for lower-price cuts mainly. As has been previously mentioned, there is still a great demand for the high-price cuts. In fact, in some places it's claimed there's a shortage of them. These are what the industry refers to as middle meats, or ones associated with the loin area. Those prices have stayed up until fairly recently, and they're beginning to fall in western Canada now.

In western Canada, you can buy the other cuts, like rounds and so on, at very cheap prices. Ground beef, for example, is available at even less than a dollar a pound. In Ontario, the price falls everybody has been looking for have just started to come down.

I did what you did, Rose-Marie: I went out and checked the stores myself a week ago, and I, too, was surprised that they had not come down--but they're doing it now. This is not only being reflected in store prices, mainly for the cheaper cuts and ground beef, where there are sales and features of beef being put on by the retailers now--and my friends from the CCGD will probably show you that in their presentation, although I haven't seen their presentation--but it's also happening in the restaurant trade.

You can find at Hunt Club and Merivale a Nickels restaurant that started to feature, a few days ago, a ten-ounce rib-eye steak for $9.99. Grillman's on Prince of Wales has a 12-ounce rib steak for $11.99. This is starting to come through.

As far as the price of ground beef goes, and the availability of it, we have never received any phone calls at the Canadian Meat Council about any shortage of this material. Not only that, but the main producer of that material would be either Lakeside Packers in Brooks or Levinoff in Quebec from the dairy cows. For example, if you use the 85% lean ground or trim, they're selling now at lower prices than the imported product from Australia, New Zealand, or Uruguay. The imported product itself has fallen from about $1.20 a pound to about $1.07, and the Canadian domestic product is selling for less than that.

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The tariff rate quota was brought up in the earlier sessions, and I guess it will be here again. One thing I could say about our organization, since we are beef packers as well as processors—I don't have the authority to advise you to get rid of the supplementary quota. A lot of our members use that quota. We have taken, more or less, a balanced approach.

There was a large meeting of the tariff rate quota committee held a number of weeks ago. They decided to make a recommendation at that time to just hold the line and not take such actions as cutting that all off. As Minister Vanclief has said numerous times at his press conferences and in speeches, you don't open up markets for exports by shutting down the borders.

We believe the key to this whole thing is just to get the ability to export back again. We have recommended that we start with Mexico because they are not beholden, if you know what I mean, to Japan and Taiwan, as is the United States. Mexico, we believe, would be the right kind of market to start with because they take those organ meats and so on that are not consumed in large quantities in either Canada or the United States. That's what they're after. It would be a good market for us to start with and it would open things up here.

I'll leave it at that.

The Chair: Mr. Jennery.

Mr. Nick Jennery (President and Chief Executive Officer, Canadian Council of Grocery Distributors): Thank you, Mr. Chairman.

I will be brief because I know you want to allocate most of your time to questions.

By way of introduction, let me just say that the Canadian Council of Grocery Distributors, which is the organization we represent, is a not-for-profit trade association representing the major grocery chains in Canada as well as the food service distributors. These are typically Loblaws, A & P, and Safeway, as well as a number of smaller regional chains, such as Thrifty's or those types of companies. In total, we represent about 80% of the volume of product that gets distributed from coast to coast, and our industry has approximately $64 billion in sales on the retail side and approximately $11 billion on the food service side. We also employ a large number of people, directly about 380,000 people, and about 500,000-and-change if you look at some of the periphery departments.

I have with me here today Kim McKinnon, CCGD's vice-president, who has been the point person since day one on the whole BSE crisis. When that happened, within two hours we downed tools and allocated a dedicated resource to that. She has been in constant contact with all the members, so she can explain to you, should the need arise, what our members' position is on BSE.

Frankly, we have focused on reassuring the public on the safety of the supply chain. I personally did 118 media interviews in the first four days. Kim did more than that. I think a good job was done by all to reassure the Canadian public on it. That was our first and foremost priority.

Also here is Paul Fortin, who is vice-president of fresh foods and merchandising for A & P. Among Paul's responsibilities includes the procurement and merchandising of meat for A & P, and he's been in the business for 38 years, so he's well versed in all of the trade practices. He's seen it all.

I wish to comment in a couple of minutes on really four key points: the retail support for the beef industry; retail prices of beef; current market practices; and then finally a quick comment on public consumption.

How do our members participate in the beef industry? Over a 52-week period we typically sell about $2 billion worth of fresh beef, totalling about 222 million kilograms. We advertise beef in our in-store flyers weekly, and examples have been given to you in the package that has been distributed to the member companies.

We also support the Beef Information Centre, which is the marketing arm of the industry. We've included their recent brochure, which we have distributed in all of our stores. That's not because of this crisis; it's just a matter of practice.

Since May 20, as I've mentioned, we have given hundreds of media interviews, essentially helping the flow of information to the public, because we find the public ask their retailers almost as much as they ask government and regulatory authorities, if not more.

We also participated in every one of the BSE daily updates with CFIA until they were discontinued June 20. And I should say, while we're talking a lot about retail, our food service members are also highly impacted by issues such as the border closing. When I say food service, I'm talking about companies such as SYSCO and Gordon Food Service, which are hotel, restaurant, and institutional distributors.

Getting to the facts about retail grocery prices and promotions.... Frankly, beef is a highly promoted product in a grocery store. If you don't have a price-competitive and quality beef department, you just can't be a successful full-line retailer. It's a well-proven fact. We do plan our merchandising and our advertising about four to six weeks in advance, sometimes a little longer. This is a trade practice that's been ingrained for a number of years, where product is sold pretty much at cost and sometimes below cost. So when you hear about loss leaders, that's what we're referring to. By way of context, we do about 1,000 price changes a week, because that's the nature of the business and it reflects on the competitiveness of the industry.

We have about three to four weeks of inventory in our pipeline, and right now with some companies the inventory tends to be a little on the higher side because there is some uncertainty in securing price and quantity under current conditions when you're looking for featuring something in August or thereabouts.

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I would just say, for the committee's reference, that sales on beef versus a year ago in general have been pretty much stable in terms of tonnage. Since the BSE crisis, what consumers have started to see and will continue to see more and more is some greater depth in promotional activity and frequency, particularly in the next few weeks.

I have examples right across the country: every single major chain where you've got hamburger or ground meat at 99¢ where it's typically $1.89, $1.99. You have examples here of “buy one roast, get one free”. You have tenderloins at pretty much half price. That's an unprecedented situation that you see. I could go on and on with the examples, but I think you get the gist of it.

Inventory is moving through the pipeline. Some lower prices are being passed on to the retailer, and they are taking advantage of that. Frankly, it's used to entice consumers into the store. That consumer is about an $8,000-a-year customer, and anything you can do to lure a customer to the store, retailers aren't shy about doing that.

I have some quick comments on questions that have been raised on the import of U.S. beef. Some retailers, not all, buy U.S. beef because some cuts are in short supply. This is part of the market dynamic, and not because of the BSE crisis. We're in barbecue season now, and there's a strong demand for centre cuts, for instance.

Certainly when you're looking at price at the retail level, farmgate or feedlot pricing is not the only input cost. You have labour, which is our second-highest input cost in the retail side. You have your normal overhead packaging. You have things like rendering, which has now seen a significant upcharge. However, price discounting will continue to be extremely aggressive, both now and as the weeks unfold.

I would just say that when you're looking at price discounting--and we've had lots and lots of experience in this--as you put a feature price on, you get to the point where consumers start to pantry-load or freeze large quantities of product more than they normally would, which is seen as a drop in sales in the immediate future. So when you look at the tonnage and sales over the year, you're not further ahead, but what you perhaps have done is secure a loyal consumer. So that's some of the nature of it.

As my final comment, I would just say that we continue to support the beef industry. Frankly, it's just good practice. It's an inherent part of what we do. We are focusing on the consumer and on promotional activity. We're a 1% to 2% business out there. There are very fast market reactions when somebody has a hot price. I would certainly encourage all to focus on opening up the border, because therein lies the solution to essentially a volume issue.

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The Chair: Thank you, Mr. Jennery.

Are you next, Mr. Fortin?

Mr. Nick Jennery: Mr. Chairman, I would just say we have kept our opening remarks short because I know you have some specific questions, which--

The Chair: Sure.

You may want to have just a comment. If not, that's fine. We'll enter into questioning.

What about Ms. McKinnon?

Mr. Paul Fortin (Vice-President, A & P Canada Ltd., Canadian Council of Grocery Distributors): We still have some concerns to going forward, in the sense that what would happen if the border reopened tomorrow? What will it do to the cost of meat today? It might double overnight.

We have concern also over what will happen this fall. See, now it's 900,000 cattle, which is about 210,000 that have been slaughtered so far. Almost 700,000 will be slaughtered shortly, and what will happen to refill the pipelines? I'm talking about the feedlots for October and November demand.

We also have concern that these cattle are in the feed now and are gaining weight every day. And the average weight last week was over 800 pounds. That means the portions are getting bigger and bigger. The customers do not really want bigger portions; they want smaller portions.

I guess the retailers are trying to help the crisis, as they did in 1998, when it was pork that was in crisis. We have to rely on domestic markets. I hope we learn out of this, as the pork industry has learned, to work more closely with the retailers in order to promote all the cuts, not only the ones we train Canadians to get accustomed to.

Another thing, as a suggestion, we're looking at only discounting meat, but should we be looking at a national major media campaign promotion? We're about to change seasons now. See, the middle cuts are very popular, but pretty soon, come the end of August, we're moving to the end cuts, which we were talking about as a surplus out there now. Should we have a media campaign--television, radio, anything--to promote Canadian beef?

With that, I will answer all your questions as best I can. Thank you.

The Chair: Thank you.

Ms. McKinnon.

Ms. Kim McKinnon (Vice-President, Canadian Council of Grocery Distributors): I'm here just to answer the questions, if there are any directed to me.

The Chair: Thank you.

Mr. Hilstrom.

Mr. Howard Hilstrom: Thank you, Mr. Chairman.

I think we've heard pretty clearly that there is only one solution to this economic crisis we're in and that's to get those borders open. I assume the industry, primarily before the retail side, does not want to attempt to retool to meet a new reality. They want to know what the new reality is going to be, i.e. if you can only export certain cuts or whatever. We don't want to go grinding a whole bunch more hamburger for use in Canada when in fact the people want to grind it themselves in Asia. Is that true, that industry does not want to retool at this point in the crisis?

Mr. Robert Weaver: At the beginning of the crisis I think a lot of people were hopeful it would be over in three or four weeks, at least by now. Everybody was working very hard on the science part, doing the investigation, bringing in all those cattle and slaughtering them, arranging where they were slaughtered, and doing the testing. People thought that at the end of that, if it went successfully, the borders would be open, but as you know, of course, they aren't open yet.

On the page of figures I showed you, when they dropped the output to 30,000 per week and they were still losing money hand over fist, many of them went to the government and asked for some sort of a help program, and that's why the government promised to give some sort of funding to get rid of some of those organ meats and cheap trim and that kind of thing. That's what kept them open. At that stage I heard some talk from some of the beef packers that they might just have to close completely.

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Mr. Howard Hilstrom: I want to assure each and every one of the presenters here that you're among friends here. Nobody is going to attack you or your industries or anything here. The information you have brought us here today is vital for us to have a full understanding, because we're going to be making recommendations to the minister after this.

Mr. Fortin, you're saying to promote all cuts, and I agree with that. We heard that as Canada's domestic price from the packers and the retail has gone down a little bit—whatever figure was used by Mr. Jennery—Australia and New Zealand have cut their prices. Is this what's going to happen here, that as Canada's price goes down a little bit to promote more consumption, in fact Australia, New Zealand, and Argentina, those grass-fed places, are going to undercut us still? Is that going to happen? Has it happened, and has it happened to date?

Mr. Paul Fortin: Well, I cannot speak for the other retailers, but most of the retailers in Ontario all have Canadian beef programs—all the major chains. That means now they have to support the Canadian beef industry.

Is that going to happen with Australia and New Zealand? I cannot really answer that question.

Mr. Howard Hilstrom: Mr. Jennery, I guess it was your comment that the imported meat is selling for less. Didn't you say something like that?

Mr. Nick Jennery: No. Sorry. Let me just clarify. As the beef category is a highly promoted category, features are often sold at cost or sometimes below cost. That was my point.

Mr. Howard Hilstrom: Yes. Well, it's just that I know that in Canada, because of our production, our weather, and everything else, we're not competitive on the grass-fed market, other than right now in a crisis situation; we are competitive because as ranchers, if we could get about 50% or 60% of the price of an animal, you'd be getting lots of beef coming in.

Rick Paskal—and I think you ladies and guys know him—told me the feedlot boys were getting 35¢ a pound yesterday. How does that translate now? They get 35¢. I guess the government is going to give them a subsidy to help get them up to 70¢ or so for the feedlot men. What happens at the packers' and the retail levels of this pricing mechanism? Could you just describe that to us?

Mr. Robert Weaver: The government support program that's going to the packers really is just to render and get out of the way some of these cuts that used to be sold mainly in the export market, and the trim, so that the whole system doesn't block itself up. Agriculture Canada consulted with the packer people and asked, what is the main feature of your problem that would stop you from operating, and the packers told them that's what it was.

They've lost all of the income from all those products, which were formerly exported and sold, but at least they have a way of getting some of it out of the way so that they can keep operating to supply the muscle cuts.

Mr. Howard Hilstrom: So what's happening to that rendering is it's getting buried, I guess.

Mr. Robert Weaver: It's being rendered, and it can be used for hog feed and chicken feed and fish.

Mr. Howard Hilstrom: That's still happening, then, is it? I guess we'll need the CFIA here next week, hopefully.

Mr. Robert Weaver: The rendering sector is in quite a lot of chaos right at the moment.

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Mr. Howard Hilstrom: Yes. They can't use it in pet food, and they can't use it in.... I don't even know about fish. And I know Rothsay's won't take it for rendering for pig and chicken feed either. So I don't know if any of that rendered material is going there.

When the consumers understand that in fact a lot of this meat that's 100% edible is in fact being destroyed, what's the consumer going to think about that? Do you have any idea? Kim, do you have any idea?

It's going to be pretty disappointing when you think of the hungry people, not only around the world, but in Canada here. Harvey Dann, from Manitoba, had a one-dollar beef sale down at the Forks in Winnipeg, and there were real poor people coming in there and taking meat at a dollar per pound and doggone glad to get it. Their diet improvement by having more protein was just incredible.

Canadians are asking, is this going to happen, or is it going to get thrown into landfill? Is it going to be sold cheap enough and moved to get through this crisis, that in fact most of it--not most of it, but some of it--gets consumed by those who can consume it?

Ms. Kim McKinnon: From a Canadian consumer point of view, first of all, they're definitely supporting the industry, because their demand has remained high throughout all of this. I think that's saved a lot of what could have even been a worse disaster. Canadian consumers are confident in the beef industry, so they're doing their part.

Now, to suggest that we could encourage them through marketing programs to buy more beef if the beef pricing were cheaper, I think that's true in a short-term, temporary, band-aid solution. At the end of the day, there are only 21 meal consumption occasions during a week. In your home, for example, how many days a week do you eat beef?

Mr. Howard Hilstrom: That's a poor question to ask me, because I run a pretty big ranch, and we eat a lot.

Ms. Kim McKinnon: Okay, so you're seven. There are many homes now that are zero, that are vegetarian, and then there's the average home, which might be twice a week.

Now, even if you could buy hamburger for 99 cents a pound, would you serve it to your family once or twice more a week? Maybe for a little while, but it's not sustainable. You're probably more likely to put it in your freezer and pull it out in a couple of weeks and take beef off your shopping list for next week. So you've still got a problem there.

Some people may consume more, but it's unlikely. And then perhaps the next part of the equation is if there are seven dinner occasions during the week, if you're eating one more beef, what are you not eating? What's the product you're replacing with that beef consumption? So then you're opening up a whole new can of worms, so to speak.

The Chair: Thank you.

We'll move to Mr. Proctor.

Mr. Dick Proctor: Thanks very much, and thanks to all of the presenters.

I'd like to begin with Mr. Weaver. Well before this BSE incident happened on May 20, this committee heard from, I think, CFIA folks talking about the wide variety of rules and regulations there are in Canada around meat inspection at the moment. I'm assuming that once this crisis ends we will want to take a long hard look at meat inspection and how it's done, with a view, I would assume, to have more uniform rules and regulations. I wonder if you could speak to that a little bit. That's part of what your organization does, right?

Mr. Robert Weaver: Yes.

We have lived with the Meat Inspection Act and the Meat Hygiene Manual of Procedures, both thick manuals, and I have never heard any of our members try to push the Food Inspection Agency away and ask for less regulation. In fact, it's the opposite; they ask for more.

But we know there's going to be a revision of the manual and the act in terms of BSE. It's already started, and there are going to be changes to what they call specified risk material—SRMs is the common phrase now. That's going to be changed. We have been consulting with the agency on what the changes might be, and there has been a certain amount of consultation taking place with the United States as well. What we do here, according to the people at the American Meat Institute and the Food Inspection Agency, they will likely have to do too, they think.

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Mr. Dick Proctor: Yes, because of the continental herd, as Premier Calvert referred to it, the fact that it is a totally integrated market.

You said you were not aware that any abattoir—I know that wasn't your word but let me use it—has pushed away or resisted the CFIA. But in fact there are different levels, and some of the really small abattoirs...basically, as I understand it, you can sell meat that's only occasionally inspected by a meat inspector, depending on what province you're in. Is that correct?

Mr. Robert Weaver: Yes, that's true.

A number of years ago a study was started into what was referred to as a national meat code, because people on this committee, actually, asked what the differences were between the provinces and the federal system. At that particular time, no one had that information. So they did a study and they found out what the information was. It was demonstrated that the provincial meat inspection systems were all different, and they were also different from the federal system.

At that time, as now, unless you were federally inspected you couldn't ship meat across provincial borders, and you couldn't ship it across any other border to export it either. Since that time, the HACCP programs have come into play in our industry. It's almost completely run on HACCP at the federally inspected level and not at the provincial or municipal or no inspection system levels. So the difference now between the systems is far greater than it was five or six years ago.

There has been some discussion and impetus given to having one system of inspection because of this BSE case in a provincial plant in one solitary cow. There are problems associated with that. I'm told there are 3,000 small operations that fall outside of the federal system. That's a big problem to handle, to be able to provide the resources to do that.

But the federal system handles 95% to 96% of all of the meat that's produced in the country with pork and beef.

Mr. Dick Proctor: Thank you.

Ms. McKinnon, over to you. Mr. Jennery indicated that there were daily updates by CFIA until June 20. Have they been completely abandoned now, or are there weekly updates, or have there been any updates since June 20?

Ms. Kim McKinnon: We were tapped in on a daily basis to CFIA up until that point, and then once the technical part of the investigation—

Mr. Dick Proctor: The testing, you mean?

Ms. Kim McKinnon: The testing. Once the testing was through and it was determined that they had gone as far as they could down all the different paths of investigation, the daily meetings were suspended. Now we get our updates through tapping into any press conference that happens and that is available to everybody.

Mr. Dick Proctor: Okay. So that was the rationale for ending it on June 20.

Ms. Kim McKinnon: Yes.

Mr. Dick Proctor: Mr. Fortin, do you find that an increasing number of consumers at this point in time since the crisis want to know if the product they're looking at is Canadian, or is it about the same as it ever was?

Mr. Paul Fortin: I think it's about the same, because we've been promoting Canadian beef for years. We haven't changed our strategy.

Mr. Dick Proctor: This is A & P you're talking about.

Mr. Paul Fortin: Yes, and as I said, in Ontario, all the major retailers have been promoting Canadian beef for years. They all have their own program. We haven't seen any decline in beef. As a matter of fact, we had a two-week sale last week and this week. We have exceeded what we thought we would sell. As a matter of fact, we were in short supply. We had to replace our feature by another one, which is causing us even more loss.

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Mr. Dick Proctor: Right.

You expressed a little bit of a reservation about what would happen if the border were to open tomorrow--whether the price of beef would double. I guess you're talking about consumer resistance at that point.

Mr. Paul Fortin: No, I'm not talking about consumer resistance.

As we speak now, I'm pretty sure all the retailers are trying to get some costs for August, the middle of August, to secure some product as a hot feature. We all know that the beef pricing is coming down now. It's just starting to come down. At this point we have a hard time to get a cost. The packers are reluctant to give us a cost, because they don't know what's going to happen overnight. They haven't bought the cattle yet. If they buy cattle and give us a cost, and the border reopens tomorrow morning, the price will go up; it might double in price, and they'll be locked in.

They are not afraid to book quantity, if you want to book quantity, but they don't really want to give us the cost. But we have to work three or four weeks ahead: we have to build up the flyers, have pictures taken, we have to print the flyers. That was my concern.

Mr. Dick Proctor: I appreciate it. Thanks.

The Chair: Mrs. Ur.

Mrs. Rose-Marie Ur: Thank you for making your presentations this afternoon.

Mr. Weaver, in your presentation you had indicated that cattle slaughter, with your numbers, was at the outset of the crisis at 30,000 cattle, which was about 43%, and it's up to 46,000 now. Did that happen after the compensation program came out? What timeframe were we working at when that turned around?

Mr. Robert Weaver: That's what triggered it, about three weeks ago, yesterday or today. At that time, some of the beef slaughter plants were wondering if they shouldn't just shut down completely.

In a normal operation, the way they determine what they put out is based on the demand in the market. Also, their pricing structure and revenue fluctuates, because we operate in a free market, not with supply management. Sometimes they make money and sometimes they lose money. When they're losing money, they tend to cut back in the number of cattle they put through, because it reduces the amount of money they lose. This is an extreme case of that, what we're experiencing right now. So they would have stayed at 30,000 a week, or even lowered it, if the government compensation program had not come in.

Mrs. Rose-Marie Ur: You sat through the previous presenters, so you know that I had asked the same question of one of my constituents who is in the industry, and he had suggested that perhaps the compensation program should not have come into play until after the borders were open. So this really indicates what he was talking about.

Mr. Robert Weaver: I think the compensation program was a fairly short-term program to try to get over an unbearable stage of the crisis. It was effective to a certain degree.

Mrs. Rose-Marie Ur: If you check on their website, the Ontario Ministry of Agriculture and Food has their application forms up, who is administering the program for Ontario, so that's coming down the tube as well.

Mr. Robert Weaver: We wondered why they took so long. Minister Helen Johns is having a meeting in Guelph on Friday, tomorrow, all morning long, and I assume that's what it's about, the applications and so on.

Mrs. Rose-Marie Ur: Or maybe she's reviewing the report they were supposed to do for her.

Mr. Jennery indicated in his opening remarks that we need a national media campaign. Was it you, sir, who indicated that, or Mr. Fortin? Okay.

With that being said, looking at the Canadian Meat Council's presentation here, only 13% of meat is the select meat that people use on their barbecues, so the other 87% is the problem we have an abundance of. You're talking about a national campaign. I don't think we need a national campaign on steaks and sirloins and T-bones. Perhaps you should do a selling feature on how great hamburger can be. I'm a hamburger lover, that's why I say that. I shouldn't say that here, but I have a daughter-in-law who'd love stuffed meatloaf over having a steak.

If you're going to do a national campaign, you should do it on the products you have an abundance of.

· (1305)

Mr. Paul Fortin: Exactly. As soon as the cost of ground beef came down, we had a feature on lean ground beef across the province, and that was done about three weeks ago. I'm talking about a national campaign.

Everything is seasonal in the beef industry. Now we are in the middle cuts, which means it's the steaks; it's the barbecue season. When September comes it will change. People are still eating steaks, but they are moving more to the roast category. Vegetables come out in August; then it's pot roast. That's what I mean when I say the industry has a lot to.... It's time to promote it. I mean a campaign. There could be recipes to show how good Canadian beef is.

As I said, any kind of campaign will help to promote beef. Retail is not the only solution. Retail is one portion of it. Another way is to educate consumers on preparation and selection, what they have to do with that meat, when to use it and with what. This is what I mean by a national campaign. I think that will help, with pricing, to move some of the product in Canada.

Mrs. Rose-Marie Ur: A & P moved out of the area where I live. They've taken their store out of Strathroy, so our nearest one is in London. We did deal with them when we were in the vegetable business, so I've had quite a bit of contact.

What packers do you deal with for your meat?

Mr. Paul Fortin: We deal with some in Ontario and some in the west.

Mrs. Rose-Marie Ur: When you have deals, do you have contracts with these packers, or is it whomever you decide this week you're going to source from?

Mr. Paul Fortin: We can buy where we want every week.

Mrs. Rose-Marie Ur: Much like you did with vegetables.

Mr. Paul Fortin: That's right.

Mrs. Rose-Marie Ur: There's no guarantee that you would buy the product.

Mr. Paul Fortin: Having said that, we have suppliers we can rely on every week, but we also buy from other suppliers across the country.

Mrs. Rose-Marie Ur: You also indicated that you're a little bit leery; if the borders are open, the prices will go up. I find that interesting, because when we're having this great difficulty, this crisis, the prices haven't dropped in the store, but the minute the prices go up, the market will go up. It's much like the gasoline prices. There's never any inventory when the prices are going up, but when the prices are going down we've got to get rid of this big inventory. There's almost a correlation here. I know it's not an edible correlation, but the marketing part of it....

Mr. Paul Fortin: Well, as I said, the price of beef never really came down until recently, I'd say last week. We're buying meat three or four weeks ahead. We buy our regular business weekly. This is just the base of our business. All our features are bought four or five weeks ahead.

I responded to Mr. Proctor earlier. I'm concerned that if we try to secure some meat for August now, we cannot get a firm cost; we cannot get a cost. If we want to promote something—I will take a number out of my head, 99¢—I have to know what my cost is before we put it in our flyers.

As we speak today, the packers are ready to secure the quantity, but they're not ready to give us a cost, because this is their main concern too.

Mrs. Rose-Marie Ur: But do you think that's fair business play?

Mr. Paul Fortin: Well, it's not like regular business. We've never had this crisis before. This is a brand-new business. Beef has been pretty stable over the years. We could negotiate a cost for six weeks down the road, and even the market will vary a little bit. You win, you lose, and it's okay. Now it's a little bit different. Now you have cattle that will sell next week for about 35¢, and it could go up to 70¢ if tomorrow morning the border is opened.

Mrs. Rose-Marie Ur: You may have not experienced it in the beef industry, but a few years ago we certainly experienced it in the hog industry, and you certainly didn't see the prices go down. The packers were doing very well, buying hogs at 20¢ a pound, and bacon and ham didn't go down in the stores then either. So I'm not overly sympathetic sometimes with packers and processors because they've had some really good times at the peril of our primary producers.

Mr. Robert Weaver: Could I just comment on that?

Mrs. Rose-Marie Ur: You certainly can.

Mr. Robert Weaver: Considering the cycles, the very people you're talking about who happen to be on the good side of that cycle are operating in the red right now, with very high hog prices, and they're not able to get the revenue from the pork to cover their costs. So it happens.

· (1310)

The Chair: Now we'll go to Mr. Ritz.

Mr. Gerry Ritz: Thank you, Mr. Chairman.

Ladies and gentlemen, thank you so much for being here today.

The more we hear in these discussions and the longer this crisis drags out, we find a real ripple effect. I mean, no one was even considering that the cuts are getting larger in the beef that isn't being processed. We've done less than a quarter, 25%, of our inventory out there, and of course the inventory isn't a static target; it's growing. I think there's a lot of beef coming into the feedlots that isn't happening. So we're going to face these larger cuts and some of the problems you outlined for months to come, until all of that is cleaned out of the system, and that won't happen until our borders are open and we're moving volumes again.

As organizations, do you have counterparts in some of our trading countries that you're discussing this with? Are you working with Mexico now, which is supposedly a hot market? Are there counterpart groups like yours in Mexico that you folks can talk to in promoting Canadian beef? Is that being done?

Mr. Robert Weaver: There is a meat association in Mexico. We have not kept in very close contact with them. But the one that we do communicate with the most is the American Meat Institute in Washington, and we've kept in very close contact with them throughout this process, to try to make sure they know what is taking place from day to day in the investigation, because to a great extent they are people who buy a lot of Canadian beef. So we did that, and we've also kept in contact with them on the specified risk material changes that will take place, although we don't know exactly the detail of what's going to take place there yet.

Mr. Gerry Ritz: Are those recommendations then flowing through to the minister so that we know what we're dealing with when we're talking to this American market? I'll just stay with Mr. Weaver for a second.

Mr. Robert Weaver: It does, through the Food Inspection Agency, and they're also dealing with it at Health Canada.

Mr. Gerry Ritz: Okay, and the message is getting through as to what we need to do to get that American market open in dealing with your counterparts down there.

Mr. Robert Weaver: I think at this stage it's not really scientific—

Mr. Gerry Ritz: No, it's not.

Mr. Robert Weaver: It has left that level; it's political and international, and maybe marketing competition. It's on a different level.

Mr. Gerry Ritz: Thank you.

Mr. Nick Jennery: Certainly from our standpoint we stay very close to our counterparts in other countries, but it's primarily restricted to the food safety side. If there's one aspect that the retailers have stayed focused on, it's...we know we're in the consumer trust business, and with all the innuendoes that were out there, the unanswered questions, we had an open book. The Americans always participated, for instance, in all of our calls. We shared readily all of our information. This is the one area of the business that is non-proprietary, because we know there's a halo effect both ways. So there is a natural cooperation from that standpoint, but it's really on food safety.

Mr. Gerry Ritz: Yes, well, the genesis of this really is food safety. So the message from your group to the American group is getting through, that our supply is safe?

Mr. Nick Jennery: Yes, absolutely.

Mr. Gerry Ritz: Are they reciprocating and saying yes, we understand that and we want to get back in business?

Mr. Nick Jennery: They hear it firsthand. They're on our same calls.

Mr. Gerry Ritz: We have four or five consumer groups and different groups in the States now saying we need that border open, and that may be because of some of the work you folks are doing. How do we ramp that up? I mean, we're putting pressure on from the outside. How do we put pressure on from the inside? The American market is key because that's the volume. Is there anything we can do? Is there anything you can do? What do we need to do better?

Mr. Nick Jennery: That's the big question.

Mr. Gerry Ritz: I was hoping you had the answer because I don't.

Ms. Kim McKinnon: I think the exporters were saying it takes a combined effort at the political level, the association level, and the retail level. We all need to be making a strong effort. For example, we're in lockstep with our counterparts in the U.S., the food manufacturing institutes. Their opinion of this is, get the borders open; there but for the grace of God go I.

Mr. Gerry Ritz: That's great. And to that end, I'm wondering why there aren't the daily chats with the CFIA any more. Is the round table continuing? We need to reinvent that and get a combined message going through. Is there enough dialogue and discussion between industry, government, and retail?

Ms. Kim McKinnon: The dialogue was sufficient at a certain point. Now it moves to the next stage. You don't want to do so much communicating back and forth...the people need to be free to act and make it happen. So I hope at this point a certain part of the dialogue has stopped, and I hope the key people are putting the pressure on Washington and moving now to make it happen.

· (1315)

Mr. Gerry Ritz: You hope they are?

Ms. Kim McKinnon: Well, we depend on you guys to do that.

Mr. Gerry Ritz: Okay.

Just following up on one other point Mr. Weaver made earlier, in my area we don't have access to major packers. We have Moose Jaw, XL and so on, but that doesn't get my beef done, for my neighbour, for me, for my brother-in-law, that type of thing. After this is over—and HACCP has been a concern to a lot of those small abattoirs--and there is no history of contamination or anything like that, to any degree, or any safety concerns, who is going to be left? Will those small abattoirs still be operating, or are they going to be lost in the backlash from this, in the side-bar peripheral damage from this? Where do I take my cow to have it done up for my mom and dad?

Mr. Robert Weaver: According to Canadian law, you're able to produce beef for your own personal consumption but not for sale--

Mr. Gerry Ritz: But I have to have it processed somewhere.

Mr. Robert Weaver: --otherwise, it has to be inspected.

As to how many outfits go bankrupt or close down as a result of this, we haven't had time to spend on that subject yet, so I don't have an answer for you.

Mr. Gerry Ritz: I'm talking more about regulatory burden. I mean, their overhead costs are lower, but I'm talking more of a regulatory burden, an overabundance of HACCP-type programs that are going to see these folks squeezed out because they can't meet that criterion without spending huge amounts of money.

Were do I go? Do I just start buying my beef over the counter, then? I simply sell it, as I do the majority of it, and then buy over the counter, like everybody else, and I will no longer be able to use my own beef? Do you see that out there?

Mr. Robert Weaver: HACCP is an internationally recognized standard for food inspection now. It's coming forward in many different areas, including cattle on farm and hogs on farm. Your friend there, Mr. Hilstrom, would know that. And it's going to go further. It's not going to go away. It's going to be used more and more. If those food safety systems or standards are good enough or are necessary for the majority of the meat production or vegetables or whatever in the country, then I think they should be good enough for all, and there should be one standard of food safety in the country.

Mr. Gerry Ritz: It's economies of scale, then, that start to take effect.

The Chair: Mr. Ritz, that's the end of the questioning.

Mr. Adams, thank you for coming and sitting in. Mr. Adams is chairman of another committee.

Mr. Peter Adams (Peterborough, Lib.): Thank you, Mr. Chair.

I do apologize, I missed your presentation. Thank you for the material you have provided. I may in fact be covering ground you've already covered, and if so, just say so.

First of all, I've been impressed by the ramifications of this change and of this thing that occurred in the west. I represent an Ontario riding. Through the farm community, obviously, cow-calf operators in my riding, truckers now in my riding--retailers I haven't heard from yet.... You may have answered this, but I wondered where it applies in the plants and in the stores where layoff can be directly related to this particular crisis. Has the first two weeks of EI been waived, the same way it was waived for people who suffered from the SARS problems in Toronto? You know, if you're put in quarantine in Toronto and you couldn't go to work, you got the first two weeks of EI. In any of your areas, do you know whether that has been waived, and whether the first two weeks of EI are available to people who are obviously laid off and are eligible as a result of this particular problem?

Mr. Robert Weaver: It's my understanding that for the packer plants, the employment insurance conditions were not changed from what they usually are.

Mr. Peter Adams: Most of us tend to deal with the farm community, and it isn't something that relates to farmers, but there are people in the agrifood business, and I think it's something we should look at. We acted very quickly, within a week or two of the SARS crisis, to waive the first two weeks. This is something your organizations might think on, and we certainly should.

I heard you talking to Rose-Marie about the prices and what's going to happen when the border reopens. One of the positive sides to this, I think, is that the general public has some idea of the extent of the industry you represent, the extraordinary extent of it, and how well organized it is from the farm to the store, the numbers of people, the different types of people who are involved. I think that's a useful thing. Now, I know it's not a very pleasant way to be exposed to the general public, but it really is terrific, the ramifications of it and the economic impact.

For example, I mentioned truckers in my riding, who now phone me, and I talk about them and the work they do in the riding, and this kind of thing. So the ripples are extraordinary. I think there's an opportunity there to show that it's a well-organized industry, that food is very, very safe.

In terms of the pick-up, because it is so widespread, because of the build-up of cattle in the system and the calves and so on, how quickly do you think the industry will respond when the border opens? Say the border opened tomorrow. Would there be people still having problems for a month, two months, or what? After the border opens, how long will it take for all that pyramid to be back to normal?

· (1320)

Mr. Robert Weaver: It's a very difficult question to answer, because they've never done this before. As I showed on these pages, they scaled down from 70,000 cattle to less than half of that in a week, and then they brought it back up by 16,000 from Friday to the following Monday--at that rate. So there are certain adjustments it's possible for them to make.

Getting back up to the 70,000 again entails many of the things you were referring to, like finding people and making sure they're trained and brought off layoffs, if that's what happened to them. It's difficult, but that's their business.

Mr. Nick Jennery: Just to be clear, from the retailers' standpoint, beef sales are strong, and they have remained strong. What you see at the retail level is some changing in pricing and some changing in availability of cuts, and that will continue as this whole crisis works its way through.

Any layoffs that we have in our industry are not related to this crisis. We're in a naturally competitive environment. It's 1% to 2% after tax, and people are going under and people are flourishing. That's the normal evolution of our industry.

I would just say that our whole focus is on consumer safety and promoting that, if there's one message that we push out there, and rightly so. Our customers come into the stores and they don't think twice about it, for the most part.

One of the things we have done, though, as an industry, is we've partnered with the University of Guelph, with a food safety net, and that also includes a 1-800 number that's available, bilingual, across the country, allowing consumers access to scientists, to nutritionists, to home economists. We find that as these issues get reported in the media and get questioned, consumers want to know. We've seen huge spikes in not only the sophistication of the questioning, but also in the sheer volume of the questioning. So we would continue to do that.

Mr. Peter Adams: Thank you, Mr. Jennery. I do appreciate your response. Again, my apologies for arriving during your presentation.

The Chair: Thank you, Mr. Adams.

Mr. Hilstrom.

Mr. Howard Hilstrom: Thank you, Mr. Chairman.

When we're talking about the retail level, I think there are many factors, as Kim has pointed out, as to why people buy beef or buy whatever else in the store, but price is one of the key components of that decision-making process. I would like to be assured by the retail community that price won't be a prohibiting factor in this and that in fact the price of beef will be kept at the extreme competitive level while we're in the midst of this crisis.

I can't believe that in a national crisis, as this is--we're talking $30 million a day, roughly, economic activity--that the pork producers and the chicken producers are going to be coming into your stores complaining that the price of beef is down because there's too much supply. If they do, I think it has a reflection on national unity in this country, as opposed to anything else.

When Helen Johns, the minister in Ontario, made her comment that in fact Ontario should stop western beef from coming in, has that continued to play at all down here? She talks about narrowing markets, narrowing market access in this. Have you had any contact with the Ontario government as to what they're talking about?

Mr. Nick Jennery: Our sense, on a marketing standpoint, is the words “Canadian” and “regional” resonate quite well with consumers: you can look at the Atlantic beef industry that's just sort of sprung up in recent years. So there's a certain loyalty and resonance around that.

We have never supported that we should promote Ontario beef. You won't see that with any Canadian retailer. You will see that we sell Canadian beef, as opposed to something regional. Nobody's taking advantage of that, because what you're implying is the quality is different, and that serves nobody's purpose. So as a retail community from coast to coast, that's something we absolutely support.

· (1325)

Mr. Howard Hilstrom: That's good.

Of your associations here, is McDonald's of Canada one of your members? Anybody here?

Mr. Robert Weaver: One of our members is Caravelle Foods, and they produce all of the hamburger patties for McDonald's. We checked what was going on with them yesterday and they told us that whereas they had started to use some imported meat about a year and a half ago, on May 20 they cut it off, and they have switched back and are using only Canadian domestic beef now, which should help the demand.

Mr. Howard Hilstrom: I have a letter here. It says “Dear McDonald's Customer”, and it's from Bill Johnson, chairman, president, and chief executive officer. It says “McDonald's in Canada proudly serves 100% pure beef”—which is fine—“sourced primarily from Canada, to the more than three million customers....” It says the source is primarily from Canada. It says “As we have done for the past number of years, the remainder of our beef supply is sourced from Australia and New Zealand.” I think there's a pretty big argument about just how much of the beef that's put through McDonald's is in fact Canadian beef. I would be very pleased if you're telling me, Mr. Weaver, that in fact McDonald's has followed Dairy Queen of Canada in using 100% Canadian beef in this time of national economic emergency. You'd say they are 100% now.

Mr. Robert Weaver: That change that I referred to is what's in that letter, where they started to use Oceanic beef, it's called, from Australia or New Zealand. They told me yesterday they had switched back as of May 20. If you want to take some time to talk directly with them, I could have them call you and explain what they're doing. I'm sure they wouldn't mind.

Mr. Howard Hilstrom: I've talked to our local McDonald's operators, and every bigger town has them. It's good to hear, because if the borders don't open up very, very quickly, I think you're going to hear the words “national economic emergency” repeated more and more, for the simple reason that we're already in one and it's going to get more intense as time moves along. So big corporations and individuals, small ma and pa operations—everybody is going to have to pull together as Canadians to get this industry moving again.

I think those are pretty well my questions, Mr. Chair.

Mr. Nick Jennery: Mr. Chairman, if I could, I think there was a key point there about pricing and staying competitive. For the sort of pricing that we reference where you have tenderloin at $11.99 a pound instead of $20—unprecedented—nobody told these retailers to do that; this is the market in play.

We're a very transparent industry, and I would certainly encourage the committee to look at the flyers. We're happy to facilitate that. It's there. We're very accountable to the public and to this committee. You'll continue to see aggressive pricing long after this crisis passes. I feel very, very confident that you'll see that.

Mr. Robert Weaver: So the message there is that what you were looking for is happening. It's just a little later than you might have wanted.

The Chair: Thank you, Mr. Hilstrom.

Just before I go to the next questioner, another one of our Canadian agencies is promoting New Zealand and Australian beef, and that's M&M Meat Shops. I realize they're great Canadian entrepreneurs, but a recent flyer was promoting entirely a particular kind of cut, New Zealand and Australian Oceanic beef. I think they should take a lesson from what McDonald's is doing, if in fact McDonald's is doing that, and that we all convert, those of us who are Canadian, at least, and use Canadian beef during this period of time.

Mrs. Ur.

· (1330)

Mrs. Rose-Marie Ur: Just a quick question. When the Canada Beef Export Federation presented here earlier this morning they listed off all the trading nations they were dealing with, and one was Taiwan. I've had some experience with Taiwan, having been there a few times.

Would you know, Mr. Weaver, the number of pounds of beef that is exported to Taiwan? I know they have 22 million-plus people, but when I've been there at various times I've seen very little beef, and what I saw I certainly didn't recognize as beef that we have here in Canada.

Mr. Robert Weaver: They're taking more and more each year. As a matter of fact, it's considered to be one of the most opportune country markets for Canada, and Japan is as well, as Ted mentioned.

Mrs. Rose-Marie Ur: What cuts would they be taking?

Mr. Robert Weaver: I don't have the names of the cuts. I could get it for you, but—

Mrs. Rose-Marie Ur: I just find that interesting because a lot of their food makeup...I didn't see a lot of beef being used, so I just wondered.

Mr. Robert Weaver: One comment I'd like to make is that I have in my office a graph that shows the surplus or deficit that Canada has in export-import or trade with all the various countries around the world, and two of the countries for which Canada has the largest deficits are Taiwan and Japan. So I would think this country should have a little bit of convincing power with Japan and Taiwan, as well as Mexico, because they have surpluses with us.

Mrs. Rose-Marie Ur: Right.

The Chair: Any more questions?

Mr. Adams.

Mr. Peter Adams: If I could, Mr. Chair.

First of all, I was interested in your response to the comment about the Minister of Agriculture's remarks here in Ontario. I want to say that we respect those remarks and the business about beef from other areas coming in. In Peterborough, where I'm from, the immediate reaction was revulsion to such a statement, and there was great concern about it. So it's not the sort of thing that had any support in Ontario. On the other hand, your reply was fairly careful, because you said you carefully promote Canadian beef.

I have no objection myself to commercial rivalry between the regions of the country. I really don't. I can't help, Mr. Chair, but notice the western bias in this Beef Information Centre booklet, which we have here, because it advertises Alberta beef and western beef and things like this, and this is something I'm quite accustomed to seeing in Peterborough, to which I respond, by the way, particularly in the summer, well, Alberta beef may be the thing to get. I shouldn't say that on television with my farmers watching. I just wanted to say that I think modest regional rivalry in any of our businesses is not a bad thing and it's not a divisive thing.

I do want to repeat that the remarks of the Minister of Agriculture for Ontario were received with disbelief in Ontario.

Thank you, Mr. Chair.

The Chair: I think it's fair to say Canadians appreciate Canadian beef, regardless of which part of the country it comes from, and we'll continue to eat Canadian beef.

I would be remiss if I didn't ask Mr. Fortin, since he represents A & P, one of the large distributors of food products in this country, particularly meat, do you buy beef by the side? Do you buy carcass beef?

Mr. Paul Fortin: No, we don't. Today we buy primal or sub-primal cuts. It's still done, but on a very small scale. They call that a cattle pack, which the retailer might decide to buy. In general, it's all primal or sub-primal. That's the way you get your features.

The Chair: What about you, Ms. McKinnon? Do you know anybody within your chain of companies you represent...? I know in smaller outlets, at retail places, they're still buying carcass beef.

Ms. Kim McKinnon: I do know that some of our western members such as Safeway are in fact beef processors, so yes, they do.

The Chair: Can you indicate to this meeting what the price of beef was a week ago, carcass side beef? What would a retailer have to pay for that carcass side of beef?

Ms. Kim McKinnon: Do you know, Paul?

Mr. Paul Fortin: I don't have the answer for this.

The Chair: I wonder if you could get the answer for us, because I know that carcass of beef by the side was 91¢ to the farmer--less the deductions, of course, so the farmer got less than that. That's real beef.

I guess one of the primary reasons for calling this meeting was to distinguish where the margins are. And we understand that there's offal and all of these other products that can't be moved, and I guess we understand the $50 million going into the packing house industry to rid some of the freezer storage space to make room for other beef.

I guess when the farm community, the primary producers, saw the price of beef drop 20¢ or thereabouts--a little more than that, in fact--the very week the government came out with its program to the farmers, they saw that as a gouging mechanism. And I have to be here to represent and tell their story, because they're not here today to tell that story. But they perceive that. If the packing house industry has a better story to tell, then they ought to be making that story known to Canadians, particularly the farming community. It doesn't matter so much to the consumers, because consumers are paying their price. We haven't heard anyone here suggesting that we should be dropping prices dramatically in the stores. I don't think that's necessary. Consumers know what a product is worth, and they're prepared to pay for that.

I realize that farmers are only one segment of this, but there's a further story to tell, because beyond this issue, once the border is opened, there's going to be no money out there in the farm sector to buy these calves this fall. And where are they going to go? They're going to go south, and there won't be any meat here a year from now for the packing houses.

So there's a whole story to tell here. This is only one part of a chapter that we're talking about today. And I think Canadian consumers ought to know that. This is a serious issue. This industry is in dire trouble, not only from your level, from the packing houses right down to the retail outlet. We know there are small margins, but we also know that there's somebody making a considerable amount of money right now.

We just want to know, has any money started flowing to the packing houses, other than the $50 million?

· (1335)

Mr. Robert Weaver: None, and they don't have the application forms either.

One thing I did indicate in my little write-up here is that the packers told me that the break-even level for all of the packing industry in the country is about 65,000 cattle a week. Below that, they're in the red. And they're at 46,000 now, so there's still a lot of indecision about what's going to happen.

The Chair: We quite understand that there's a story, but we haven't heard that story. That's why we wanted the packing house people here today. I'm sorry they weren't here today. I do want to express my appreciation from the committee to you, Mr. Weaver, for being here on their behalf, but sometime we want to meet with these people. I believe they have their story to tell, and it should be told.

Ms. McKinnon, do you have a comment to make?

Thank you for appearing.

Yes, Mr. Hilstrom.

Mr. Howard Hilstrom: On that same vein, I think that pre-May 20, in fact the real grade price was $1.85 per pound for--

The Chair: It was $1.8460.

Mr. Howard Hilstrom: $1.8460. So I would suggest that rather than letting us do our calculations between 35¢ and $1.85 and start figuring out some of this pricing, where the money is going into whose pockets at what rate, in fact the industry should get back to us with some solid figuring on this and just explain to the satisfaction of producers and others that in fact there is no massive profit-taking going on. I don't really believe there is, but because the industry isn't functioning the way it normally does, the costs are much higher. But it's an important point for us to be considering, no doubt about it.

The Chair: I don't want to belabour this issue, but we did drop, from May 9, from $1.8460 to 91¢, and that's less than 50% of what we were at, at that time. There's reason to believe that some questions haven't been answered, and we need to have the answers to those.

We want to thank you for coming today and being part of this and helping us understand better from your perspective your industry and your viewpoints, and on short notice. We thank you very much for being here today.

Thank you very much.

I would ask the committee to remain for just a few minutes while we conclude, while we perhaps go in camera for a few minutes, and then we'll adjourn the meeting.

We'll suspend for a few moments and clear the room.

[Proceedings continue in camera]