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37th PARLIAMENT, 3rd SESSION

Standing Committee on Agriculture and Agri-Food

EVIDENCE

CONTENTS

Monday, February 23, 2004

1540

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

Mr. Scott Zies (Co-Chair, Alliance for Fair Trade in Beef)

Mr. Wayne Holland (Co-Chair, Alliance for Fair Trade in Beef)

1545

The Chair

Mr. Howard Hilstrom (Selkirk—Interlake, CPC)

The Chair

Mr. Howard Hilstrom

1550

Mr. Scott Zies

Mr. Howard Hilstrom

Mr. Scott Zies

Mr. Howard Hilstrom

Mr. Scott Zies

Mr. Howard Hilstrom

Mr. Scott Zies

Mr. Howard Hilstrom

Mr. Scott Zies

Mr. Howard Hilstrom

Mr. Wayne Holland

Mr. Howard Hilstrom

1555

Mr. Scott Zies

Mr. Howard Hilstrom

The Chair

Mr. Scott Zies

The Chair

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

Mr. Scott Zies

1600

Mr. Louis Plamondon

Mr. Scott Zies

The Chair

Hon. David Kilgour (Edmonton Southeast, Lib.)

Mr. Scott Zies

1605

Hon. David Kilgour

Mr. Scott Zies

Hon. David Kilgour

The Chair

Hon. David Kilgour

Mr. Scott Zies

Hon. David Kilgour

Mr. Scott Zies

1610

Hon. David Kilgour

Mr. Wayne Holland

The Chair

Mr. Rick Borotsik (Brandon—Souris, CPC)

Mr. Scott Zies

Mr. Rick Borotsik

Mr. Scott Zies

Mr. Rick Borotsik

Mr. Scott Zies

Mr. Rick Borotsik

Mr. Scott Zies

Mr. Rick Borotsik

Mr. Scott Zies

Mr. Rick Borotsik

Mr. Scott Zies

Mr. Rick Borotsik

Mr. Scott Zies

Mr. Rick Borotsik

Mr. Scott Zies

Mr. Rick Borotsik

Mr. Scott Zies

Mr. Rick Borotsik

1615

Mr. Scott Zies

Mr. Rick Borotsik

Mr. Scott Zies

Mr. Rick Borotsik

Mr. Wayne Holland

Mr. Rick Borotsik

Mr. Wayne Holland

Mr. Rick Borotsik

Mr. Wayne Holland

Mr. Rick Borotsik

Mr. Scott Zies

The Chair

Mr. Gerry Ritz (Battlefords—Lloydminster, CPC)

The Chair

Mr. Gerry Ritz

Mr. Scott Zies

Mr. Gerry Ritz

Mr. Scott Zies

Mr. Gerry Ritz

Mr. Scott Zies

The Chair

Mr. Louis Plamondon

Mr. Scott Zies

1620

The Chair

Ms. Pauline Picard (Drummond, BQ)

Mr. Scott Zies

Ms. Pauline Picard

Mr. Scott Zies

Ms. Pauline Picard

Mr. Scott Zies

Ms. Pauline Picard

Mr. Scott Zies

Ms. Pauline Picard

Mr. Scott Zies

Ms. Pauline Picard

Mr. Scott Zies

The Chair

Mr. Larry McCormick (Hastings—Frontenac—Lennox and Addington, Lib.)

1625

Mr. Wayne Holland

Mr. Larry McCormick

Mr. Scott Zies

Mr. Larry McCormick

Mr. Scott Zies

Mr. Larry McCormick

Mr. Scott Zies

Mr. Larry McCormick

Mr. Scott Zies

The Chair

Mr. Gilbert Barrette (Témiscamingue, Lib.)

Mr. Wayne Holland

Mr. Gilbert Barrette

Mr. Wayne Holland

Mr. Gilbert Barrette

Mr. Wayne Holland

The Chair

1630

Hon. Wayne Easter (Malpeque, Lib.)

Mr. Garry Breitkreuz (Yorkton—Melville, CPC)

Mr. Wayne Holland

The Chair

Hon. Wayne Easter

Mr. Scott Zies

1635

Hon. Wayne Easter

Mr. Scott Zies

The Chair

Mr. Scott Zies

The Chair

Mr. Scott Zies

Mr. Rick Borotsik

Mr. Scott Zies

The Chair

Mr. Larry McCormick

The Chair

1645

Mr. Jim Laws (Executive Director, Canadian Meat Council)

The Chair

Mr. Louis Plamondon

The Chair

Mr. Jim Laws

Mr. Louis Plamondon

Mr. Jim Laws

1650

1655

1700

The Chair

Mr. Lorne Goldstein (Secretary Treasurer, Better Beef Limited)

The Chair

Mr. Brian Read (General Manager, Levinoff Meats Limited)

The Chair

Mr. Howard Hilstrom

Mr. Jim Laws

Mr. Howard Hilstrom

Mr. Jim Laws

Mr. Howard Hilstrom

Mr. Jim Laws

Mr. Howard Hilstrom

Mr. Brian Read

Mr. Howard Hilstrom

1705

Mr. Jim Laws

Mr. Brian Read

Mr. Howard Hilstrom

Mr. Brian Read

Mr. Howard Hilstrom

Mr. Brian Read

Mr. Howard Hilstrom

Mr. Brian Read

Mr. Howard Hilstrom

Mr. Brian Read

Mr. Howard Hilstrom

Mr. Brian Read

Mr. Howard Hilstrom

Mr. Brian Read

Mr. Howard Hilstrom

The Chair

Mr. Lorne Goldstein

1710

The Chair

Mr. Louis Plamondon

The Chair

Mr. Louis Plamondon

Mr. Jim Laws

Mr. Louis Plamondon

Mr. Lorne Goldstein

Mr. Louis Plamondon

The Chair

Mr. Lorne Goldstein

The Chair

Mr. Louis Plamondon

The Chair

Mr. Lorne Goldstein

1715

The Chair

Mr. Lorne Goldstein

The Chair

Mr. Louis Plamondon

Mr. Brian Read

Mr. Lorne Goldstein

Mr. Louis Plamondon

The Chair

Ms. Pauline Picard

Mr. Brian Read

Ms. Pauline Picard

The Chair

Mr. Lorne Goldstein

1720

The Chair

Mr. Lorne Goldstein

The Chair

Hon. David Kilgour

Mr. Lorne Goldstein

Mr. Bennie Dejonge (President, Better Beef Limited)

Hon. David Kilgour

The Chair

Mr. Howard Hilstrom

The Chair

Mr. Howard Hilstrom

The Chair

1725

Mr. Howard Hilstrom

The Chair

Mr. Howard Hilstrom

The Chair

Mr. Howard Hilstrom

The Chair

Hon. David Kilgour

Mr. Jim Laws

Hon. David Kilgour

The Chair

Mr. Howard Hilstrom

The Chair

Mr. Howard Hilstrom

Mr. Louis Plamondon

The Chair

Hon. David Kilgour

Mr. Howard Hilstrom

The Chair

Mr. Howard Hilstrom

The Chair

Mr. Howard Hilstrom

The Chair

Mr. Howard Hilstrom

The Chair

Mr. Howard Hilstrom

The Chair

Mr. Howard Hilstrom

The Chair

Mr. Howard Hilstrom

The Chair

Mr. Howard Hilstrom

The Chair

Mr. Jim Laws

1730

The Chair

Hon. David Kilgour

Mr. Jim Laws

Hon. David Kilgour

Mr. Jim Laws

The Chair

Mr. Rick Borotsik

Mr. Lorne Goldstein

Mr. Rick Borotsik

Mr. Bennie Dejonge

The Chair

Mr. Bennie Dejonge

The Chair

Mr. Rick Borotsik

Mr. Bennie Dejonge

1735

Mr. Rick Borotsik

Mr. Bennie Dejonge

Mr. Rick Borotsik

Mr. Brian Read

Mr. Rick Borotsik

Mr. Brian Read

Mr. Rick Borotsik

Mr. Brian Read

Mr. Rick Borotsik

Mr. Brian Read

Mr. Rick Borotsik

Mr. Brian Read

Mr. Rick Borotsik

Mr. Brian Read

Mr. Rick Borotsik

Mr. Brian Read

Mr. Rick Borotsik

Mr. Brian Read

Mr. Rick Borotsik

Mr. Brian Read

Mr. Rick Borotsik

Mr. Brian Read

Mr. Rick Borotsik

Mr. Bennie Dejonge

Mr. Rick Borotsik

Mr. Jim Laws

Mr. Rick Borotsik

Mr. Jim Laws

Mr. Rick Borotsik

Mr. Jim Laws

1740

The Chair

Ms. Pauline Picard

Mr. Brian Read

Mr. Howard Hilstrom

Mr. Brian Read

Mr. Howard Hilstrom

The Chair

Mr. Brian Read

The Chair

Hon. Dan McTeague (Pickering—Ajax—Uxbridge, Lib.)

1745

Mr. Brian Read

Hon. Dan McTeague

Mr. Bennie Dejonge

Hon. Dan McTeague

Mr. Bennie Dejonge

Hon. Dan McTeague

Mr. Lorne Goldstein

Hon. Dan McTeague

Mr. Lorne Goldstein

Hon. Dan McTeague

Mr. Bennie Dejonge

Hon. Dan McTeague

Mr. Lorne Goldstein

Hon. Dan McTeague

Mr. Lorne Goldstein

Hon. Dan McTeague

Mr. Brian Read

Hon. Dan McTeague

1750

Mr. Brian Read

Hon. Dan McTeague

Mr. Brian Read

Hon. Dan McTeague

The Chair

Mr. Lorne Goldstein

The Chair

Mr. Jim Laws

The Chair

Mr. Rick Borotsik

Mr. Jim Laws

Mr. Rick Borotsik

Mr. Jim Laws

Mr. Rick Borotsik

1755

Mr. Jim Laws

Mr. Rick Borotsik

Mr. Jim Laws

Mr. Rick Borotsik

Mr. Jim Laws

Mr. Rick Borotsik

Mr. Jim Laws

The Chair

Mr. Howard Hilstrom

Mr. Brian Read

Mr. Howard Hilstrom

Mr. Brian Read

The Chair

Mr. Larry McCormick

Mr. Jim Laws

Mr. Larry McCormick

1800

Mr. Lorne Goldstein

Mr. Larry McCormick

Mr. Brian Read

Mr. Larry McCormick

Mr. Brian Read

Mr. Larry McCormick

Mr. Brian Read

Mr. Larry McCormick

Mr. Brian Read

Mr. Larry McCormick

Mr. Brian Read

Mr. Larry McCormick

The Chair

Mr. Brian Read

Mr. Larry McCormick

Mr. Brian Read

Mr. Larry McCormick

Mr. Brian Read

1805

The Chair

Mr. Brian Read

Mr. Larry McCormick

Mr. Brian Read

Hon. David Kilgour

The Chair

Mr. Howard Hilstrom

The Chair

Mr. Howard Hilstrom

Mr. Brian Read

Mr. Howard Hilstrom

Mr. Brian Read

Mr. Howard Hilstrom

Mr. Brian Read

Mr. Howard Hilstrom

Mr. Brian Read

Mr. Howard Hilstrom

Mr. Brian Read

1810

Mr. Howard Hilstrom

Mr. Brian Read

The Chair

Mr. Lorne Goldstein

The Chair

Mr. Gilbert Barrette

Mr. Brian Read

Mr. Lorne Goldstein

Mr. Gilbert Barrette

1815

Mr. Brian Read

Mr. Gilbert Barrette

Mr. Brian Read

The Chair

Mr. Brian Read

The Chair

Mr. Scott Zies

1820

The Chair

Mr. Lorne Goldstein

The Chair

Mr. Howard Hilstrom

The Chair

Mr. Howard Hilstrom

Mr. Brian Read

Mr. Howard Hilstrom

Mr. Brian Read

The Chair

Hon. Wayne Easter

1825

The Chair

Hon. Wayne Easter

Mr. Bennie Dejonge

Mr. Lorne Goldstein

The Chair

Mr. Rick Borotsik

Mr. Lorne Goldstein

1830

Mr. Rick Borotsik

Mr. Lorne Goldstein

Mr. Rick Borotsik

Mr. Lorne Goldstein

The Chair

Hon. Mark Eyking (Sydney—Victoria, Lib.)

Mr. Brian Read

Hon. Mark Eyking

Mr. Brian Read

Hon. Mark Eyking

Mr. Brian Read

Hon. Mark Eyking

Mr. Brian Read

Hon. Mark Eyking

Mr. Brian Read

Hon. Mark Eyking

Mr. Brian Read

Hon. Mark Eyking

Mr. Brian Read

Hon. Mark Eyking

Mr. Brian Read

Hon. Mark Eyking

Mr. Brian Read

Hon. Mark Eyking

Mr. Brian Read

The Chair

Mr. Jim Laws

1835

Hon. Mark Eyking

Mr. Jim Laws

Hon. Mark Eyking

Mr. Jim Laws

The Chair

Mr. Bennie Dejonge

1840

The Chair

Mr. Bennie Dejonge

The Chair

Mr. Bennie Dejonge

The Chair

Mr. Bennie Dejonge

The Chair

Mr. Lorne Goldstein

The Chair

Mr. Lorne Goldstein

The Chair

Mr. Brian Read

The Chair

Mr. Brian Read

The Chair

Mr. Brian Read

The Chair

Mr. Brian Read

The Chair

CANADA

Standing Committee on Agriculture and Agri-Food

NUMBER 004

3rd SESSION

37th PARLIAMENT

EVIDENCE

Monday, February 23, 2004

[Recorded by Electronic Apparatus]

¹ (1540)

[English]

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

Today we want to continue the further study of the BSE issue and the various players involved in this whole industry.

First, we have with us, from the Alliance for Fair Trade in Beef, Scott Zies, co-chair, and Wayne Holland, co-chair. This is an industry that is in the further processing part of the industry. We want to hear from them. They will go on until 4:30. Then we will have a two-hour meeting with the packers, from 4:30 until 6:30. That is the format.

Gentlemen, following your presentation we will have questions, beginning with the opposition, then going back and forth from opposition to government.

You may begin. Scott, you're on.

Mr. Scott Zies (Co-Chair, Alliance for Fair Trade in Beef): Thanks, Paul.

Ladies and gentlemen, thank you for the opportunity to meet with you today. My name is Scott Zies. My colleague Wayne and I co-chair the Alliance for Fair Trade in Beef, which represents the interests of the value-added processors in Canada.

Our members are meat purveyors, which have a long history in the Canadian beef industry, dating back to the early 1900s. Many started as local butcher shops and evolved into wholesale meat purveyors of all sizes. We buy the basic primal cuts of beef from beef packers around the world and further process these into value-added products you enjoy when you go to a restaurant or products you pick up at your local supermarket.

We're no strangers to adversity in the beef industry. We have lived and persevered through many challenges and crises over the years. But once you think you've seen it all, something like the situation in which we find ourselves today rears its ugly head.

We're quite dismayed with the current state of affairs in the Canadian beef industry. On the surface we all seem to want the same thing: unobstructed trade for our businesses and profitability for all players in order to stay in the beef industry for the long term. But in reality this is not the case. Talk is cheap, and emerging behaviours clearly indicate that our industry has been divided and almost conquered.

From our standpoint, we need access to the appropriate raw beef materials in order to manufacture finished products according to the recipes our customers demand. Since May 20, 2003, we have shown unparalleled support for the Canadian beef industry. Between May 20 and September 1 we made changes to our recipes where possible and as a result bought all Canadian beef that had been made available to us, both from the fed cattle and culled cows. We also reluctantly agreed to the suspension of supplemental import permits as a temporary measure to help show support for the Canadian industry. At that time the cattlemen and packers promised us that a wall of Canadian meat was imminent from both the fed and cow sectors and that we would have all the meat we needed. We gave our word regarding imports and stuck to it. The wall of meat never materialized, and the cow kill stayed low.

Around the beginning of September the U.S. and Mexican borders opened to 30-month and younger Canadian beef products. That was good news for the fed cattle packing industry. But now they did not need us any more. It was around this time that the entire industry agreed to a revised supplemental import policy as a temporary measure, as outlined in the recommendations put forward to Ministers Vanclief and Pettigrew in the ad hoc beef committee report. Canadian shipments of 30-month and younger beef quickly increased to our reopened export markets. This only intensified when December 23 rolled around and BSE hit the U.S.A. At that time, with our new government in place, industry was asked by Ministers Speller and Peterson to reconfirm our industry consensus on the import policy recommendations. We did so and resubmitted the consensus report to the ministers as requested. As of today, six months from the start of this process, we have had no response from either minister except to say they are too busy to meet with us.

So here we sit today, 40 weeks tomorrow since May 20. The U.S. border is still closed to live cattle. Cow kills remain at levels lower than last year. Fed cattle meat products are being freely exported at world market prices. Inaction on the part of the government regarding a fair import policy leaves us with no guarantee of a meat supply for this summer, and we cannot export any of our finished products if we have Canadian cow meat in our plants. This combination of circumstances and self-interested government intervention has resulted in an industry of have and have nots. No one in this room can assure us of a meat supply in the months to come. Yes, we are awash in cattle, but the cattlemen can't provide us with any meat. Yes, the packers are running flat out, but not to supply to the domestic market. No, we can't source all of the required meat products without a reasonable import policy.

Our industry, which was built on the premise of “our word is our bond”, is faltering. Selfish interests are prevailing and preventing the crisis from abating. We're allowing wedges to be driven between us, and it's our own fault. We have been divided, and our days are numbered. It is in tough times like these that leaders sometimes emerge. We're still waiting.

I now would like to pass the mike over to our co-chair, Wayne Holland.

Mr. Wayne Holland (Co-Chair, Alliance for Fair Trade in Beef): Thank you.

Ladies and gentlemen, I too would like to thank you for allowing us to speak today. I represent the western side of the AFTB, making sure that there is some cross-country representation for our group of value-added processors.

The issue we are facing today, although greatly increased by BSE, really started in the seventies. Decades ago, small purveyors or meat processors provided products to the restaurant and deli sector. It was a lot simpler then. Beef was graded A, B, C, and utility. A-rated beef cuts had a market in the high-end restaurant and retail sector in the form of cuts. Trimmings and utility, primarily cow beef, went mainly for grinding. B and C meats became a niche market as technology and further processing, be it marinating or cooking techniques, created products that found a growing market--namely, convenience foods. This market was driven by the Canadian consumer, not just the traditional “what was available” scenario.

The further processing market became so successful it outstripped what the Canadian primary beef industry could supply. The export market for Canadian live cattle and primary beef was also growing. It was easier for the primary supply to go south than to be kept and processed in Canada.

Enter the Oceanic suppliers, with comparable product and a willingness to supply the quantity, quality, and price required to match the growth of the Canadian consumer demand.

The Canadian consumer profile has continued to change dramatically. A major and growing sector of Canadian consumers want convenience, quality, price, and consistency in everything. For years our organization has made presentations at many Canadian beef industry functions to plead our case and to show the primary industry what we need to move Canadian beef through our Canadian market. While task forces were formed and committees were launched, very little ever got solved. One thing became very evident, that the Canadian primary beef industry was ignoring a major market, the Canadian consumer.

May 20 arrived and everything changed. Apparently there were lots of Canadian cattle available for the Canadian consumer. The problem was, and still continues to be, that the Canadian consumer does not use live cattle.

Many of our customers, in an effort to help the Canadian producers, asked for their recipes and formulas to be switched to Canadian beef. The primary industry was unable to supply the demand. The quality and consistency of product were deplorable. There were days when we were told that packing plants were closed even after they had accepted our purchase orders. Several further processors had to contact customers and ask that we switch back to Oceanic beef or they would be out of stock.

This went on for most of the summer and fall of 2003, and will not be disputed by the packers.

Last summer, several of our members began to work with the primary industry on reformulating products to work with high-grade materials to substitute for Oceanic beef. There were many projects and products in the works. Retailers in the QSR sector were consulted, and they agreed to support us. Prices were developed. Quotes were initiated. Then came September, with a partial opening of the U.S. border, and all of the products went south. The projects, the quotes to customers--practically all had to be terminated.

I would like to conclude with a warning. The Canadian beef industry is in complete turmoil. And that's the entire industry, not just the primary sector. Clearly, leadership has to step forward and take command. There's a freight train of beef problems headed down the track because nobody is in control of the train.

Thank you.

¹ (1545)

The Chair: Thank you very much, gentlemen.

Some of the statements you've made have given us some reason to ask questions, and we trust that from those questions we will have some answers. Certainly from that will emerge leadership, we trust.

Mr. Hilstrom is first to speak this afternoon, for seven minutes.

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

The Chair: I'm going to be very prompt on the time, because we do want everyone to be able to speak today.

Mr. Howard Hilstrom: Thank you, Mr. Chairman. I will be very prompt, because we want everyone to be able to speak.

The complete turmoil statement, Mr. Holland, I would have to agree with you on. We had Minister Speller here at the committee last week, and I asked him seriously about the structure of the effort to get the borders reopened and the leadership, who is in charge. He gave half a statement that he was in charge, but then we've got the Minister of Health in charge of a part, the Prime Minister in charge of this, and the trade minister. The leadership question you raise is clearly there. We need to have that in place, and we'll keep pressing the government for that.

Concerning the other statement, Mr. Zies, you talked about a wall of meat that was supposed to be there. I am in cattle ranching myself, I run about 300 cows, so we know who we're talking to here. Concerning the wall of meat, is it, in your opinion, a lack of animals or a lack of slaughter capacity that means that meat hasn't left the ranch and has arrived at your door? Which is it?

¹ (1550)

Mr. Scott Zies: We are awash in cattle. The comments we've received since May 20 concerning a wall of meat have primarily come from the cattlemen. The animals are there, but there is an inability to slaughter that many animals.

Mr. Howard Hilstrom: So it is a slaughter capacity that is lacking in this country, and the reliance on U.S. slaughter capacity is what was taking up these extra animals. Then, of course, it allowed your industry to import from offshore. That's how it works.

Mr. Scott Zies: Right.

Mr. Howard Hilstrom: So we have a lack of slaughter capacity, I'd have to agree with that, but from the ranchers' perspective, with those cows, that wall of meat, do you know what they want to pay me at the auction mart where I deliver my cows? It is anywhere from zero, if the cow's a little bit skinny, to five, maybe ten cents for these cull cows, the manufacturing beef type of cow. There are a mess of those out there. If nobody will pay a farmer or rancher for them, why deliver it there, so the slaughterhouse can get rich, so that you guys can take a big profit? The primary producer is being asked to farm and produce cattle for no money. What is your comment on that scenario? Do you feel you're paying full price for the beef you do get?

Mr. Scott Zies: It is important that we make a distinction between fed cattle and cows, for one thing. In many instances--

Mr. Howard Hilstrom: Do you buy fed cows, or do you buy manufacturing beef, or both?

Mr. Scott Zies: We buy the beef from both types of animals. With the cows, we have bought all the product that's been made available to us from May 20, and we continue to buy it. We have bought for years. We're paying fair market prices for the meat from those animals. I can't speak to livestock prices, but I can tell you that we have paid fair market prices for cow meat, meat from animals over 30 months old, through this period.

Mr. Howard Hilstrom: Would you name the companies to which you pay fair market price?

Mr. Scott Zies: Our members would deal with the major cow packers in Canada, which would include XL Meats. We happen to buy a lot of meat from Levinoff, because we're in Eastern Canada, but there are really three, XL, IBP-Lakeside Packers , which kills a few cows, and Levinoff.

Mr. Howard Hilstrom: I asked that question because this hearing will of course go on to others, and as we get each presenter before us, we want to have facts on the table and move up or move down; we're really moving down the economic food chain.

You said you were working with the Canadian Cattlemen's Association, Wayne. What was its perspective on guaranteeing you that supply of beef? What was it telling you?

Mr. Wayne Holland: There are several issues. Part of the problem with the Canadian cattle industry is that they actually don't know where their market is or where the cattle go after they leave the ranch. What I am trying to do is educate them on that. When you talk about manufacturing beef, you seem to talk about cull cows in the same sentence. In reality, that's not true. Oceanic beef is a step above that and a step below the high grade product, and that's what we're working with. So with utility beef, you have either to bring the quality up or to work on the pricing of the higher quality beef. That's what it is for the sandwich shops of the world and so on, the people of the emerging convenience foods that are growing. That's what we are working with. We go to the Canadian industry meetings and tell them what our problems are, sizing, consistency, and so on, but so far I haven't seen anything come through the market that way.

Mr. Howard Hilstrom: Can you give us accurate figures on the prices that have to be paid for manufacturing beef from Australia, to use that as an example--I know you get it from many other places--and what you would have to pay in Canada here? If you had a contract to buy the right kind of beef from Australia, what would you have to pay compared to the right kind of beef from a North American source?

¹ (1555)

Mr. Scott Zies: Right now, for cow meat from animals over thirty months old, grinding beef for manufacturing, we would pay more for the oceanic product, and that's been so for quite some time.

Mr. Howard Hilstrom: The bottom line is that the cattlemen really want to ship those older cows, and this summer we're going to have a lot of grass cattle out there too. I suppose that once they get to be two years of age, they would be a similar product to what Australia would ship you. I'm not suggesting that we in Canada can raise that type of animal as cheaply as they can in Australia, or the countries that produce grass-fed, but--

The Chair: Your time is up, Mr. Hilstrom.

Do you want to comment on that, Mr. Zies?

Mr. Scott Zies: I've heard this a lot in the past through some of these hearings and what not. I keep hearing about cheap imports, with a comparison made to the actual market prices for Canadian beef. We do take offence at that, because our experience has shown that when you compare apples to apples, products which offer a fair comparison, the cheap import argument is a fallacy. We're paying as much for imported manufacturing beef from Uruguay, New Zealand, and Australia, we're paying as much or a premium for that product compared with what we would pay today for a Canadian product. That's a fact of life today, and that's the way it's been for several weeks.

The Chair: Thank you, Mr. Zies.

Mr. Plamondon.

[Translation]

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

I'm having some trouble understanding your statement. While everyone maintains that closing the US border has resulted in a beef surplus in Canada and a shortage of markets for our product, you're telling us today that there's a shortage of beef and that we need a permit to import more beef.

How do you explain this apparent contradiction? Are you buying only specific cuts of beef, or is it that you consider Canadian beef not up to par?

[English]

Mr. Scott Zies: Again I think we have to qualify what type of meat we're talking about. From May 20 to September 1 all export markets were closed. The packers did their best as the number of animals killed in a given week varied, but nothing was sure at that time. The kill numbers were very sporadic, and the meat supply was not consistent, particularly through that period when the border to the U.S. was closed. It was also at that time that our members switched to Canadian beef in support of the industry. That's our first preference, to buy Canadian beef. So for that period of time--and I think it's important we keep in perspective what periods of time we're talking about--the packers did their best to kill as many as possible, both fed and cows, and we bought every pound of meat that was made available.

That dramatically changed in early September, when the U.S. border opened. Now you have a world market opened up to Mexico and the U.S. for fed cattle meat products, and the fed packers move their meat to the U.S. and Mexico, which they have historically done. I don't have a problem with exporting, it's the nature of the business, and for the most part, the Canadian industry has been built on exports. We traditionally export 70% of our meat production, so this is nothing new. It's just that we moved from all export markets being closed, all the meat being consumed in Canada, to now, when some of the industry can export, and rightly so, and it changes the availability of meat supply. All through this period cow kills have remained lower than last year. We heard presentations by the cattlemen about the large numbers of cows that needed to be dealt with at some time in the future, but the kill numbers never increased. So either the cows aren't coming to market, for whatever reason, or the plants that are killing cows are running flat out and killing as many as they can. So maybe it is a matter of slaughter capacity, or maybe that's just one of the factors in the mix.

º (1600)

[Translation]

Mr. Louis Plamondon: You say that a special committee tabled a report to two ministers—if memory serves me well, Minister Pettigrew and the Minister of Agriculture at the time, Mr. Vanclief. You stated at the beginning of your presentation in reference to this report that the department had failed to listen to your recommendations, that the government took no steps to help you and appeared indifferent to your plight.

You came down very hard on the government, undoubtedly for good reason. Nevertheless, could you share with us the overall recommendations formulated in this report and the reasons given to you by the government for failing to take any follow-up action?

[English]

Mr. Scott Zies: Let me just start off again by saying that our first preference is to buy Canadian beef. It always has been and always will be.

The ad hoc beef and veal industry committee was a committee started back in the early nineties by then Agriculture Minister Goodale when we had ourselves in a position much like today, with the exception of the fact that the borders were not closed, when we were very divided as an industry. He put us back in a room and said “Come up with your own solutions and we'll listen”. This is where the original supplemental beef permit policy came from. That's where it originated, back in the early nineties.

BSE and May 20 rolled around. We were asked by Ministers Vanclief and Pettigrew, at the time, to revisit what the import policy should be, because we agreed that we would suspend them as a show of support in the industry while all the export markets were closed. The U.S. market opened again in September. We had a new government later that year. We were asked again by Ministers Speller and Peterson to re-evaluate the situation at that time with regard to supplemental permits.

I just want to make something crystal clear here on supplemental permit policy, because I think there's a misunderstanding of what they are. For a supplemental permit to ever be considered to be issued, whoever is making the application has to check with every meat packer in the country who produces those types of products. So depending on what responses come back from the meat packers who've been asked, that's where the determination is made whether a supplemental permit would be issued or not.

From where we sit, it's really very non-threatening. Again our goal is to buy Canadian beef. There are certain items that are not and never will be substitutable. Those are the cases where we would apply for a supplemental permit, because we need a certain type of item that we can't buy here.

In this process we check with every packer who's involved or who wishes to be involved. If they have the product, and it's available, and it meets the criteria set out by the recommendations in the report, no supplemental permit will be issued. If they cannot supply, or choose not to supply, or just don't want to respond, if it's because they're exporting freely or whatever, whatever reason they have, then the issuance of the supplemental permit would be considered. That's the system.

So this is our dilemma in terms of inaction on the part of the government. We were asked to do this report with the industry; we didn't do this in isolation. This was an ad hoc beef committee report that had representatives from every sector of the beef industry. We achieved consensus the first time around. We achieved consensus the second time around. We re-evaluated in December after the U.S. BSE incident, and our new government asked us to. We reported back, and we never heard anything. I think the frustration on our part is that we haven't heard anything. We were asked to do the report. We did it. We achieved industry consensus time and time again. And we're sitting here in February trying to make meat deals for the summer with no guarantee of meat supply and no good reason that our supplemental permit policy has not changed. That's the frustrating part. And that's why we're here today.

The Chair: Thank you very much.

I'll move to Mr. Kilgour, seven minutes.

Hon. David Kilgour (Edmonton Southeast, Lib.): Well, you haven't heard anything back. When was the report filed?

Mr. Scott Zies: The original report to Ministers Vanclief and Pettigrew was filed last August or September 2003.

º (1605)

Hon. David Kilgour: You attempted to find out what was happening and you didn't get any answers, I take it.

Mr. Scott Zies: Right. We had numerous conversations with the offices of both ministers and we were misled all along the way. The only response we got back was a letter from Mr. Peterson's office saying that he was too busy to meet with us, but we could meet with somebody on his staff, which we have not done. Last week was the first acknowledgement that this committee ever existed.

Hon. David Kilgour: Well, it's dismaying. The whole of what you're saying is just dismaying.

Mr. Chairman, did you see this article from last week's Gazette? Perhaps I could read a paragraph:

If you're craving a Subway steak sandwich, you had better run, not walk, to your local franchise. You might already find a sign in the window telling you that Subway is temporarily out of steak. The fast-food chain recently mailed the sign to its 1,850 Canadian outlets, which have been drawing on stockpiled beef since the case of mad cow disease.

Can I file that, Mr. Chair?

The Chair: You may, Mr. Kilgour.

Hon. David Kilgour: The problem is...do you think the meat packers are making extra profits of, according to this sheet I have, $227 million since October 6? Or maybe you don't want to comment on that.

Mr. Scott Zies: Again, we're not in the packing business, and hopefully I've made somewhat clear where we stand in the marketplace.

In terms of questions like that, I think we can talk to what we paid for the meat. We buy our raw materials from the packers, yes, and we know what we pay on a weekly basis. We study these numbers on an ongoing basis for forecasting purposes.

I'm not 100% sure what you're asking us.

Hon. David Kilgour: Well, you probably don't want to make a comment on that anyway.

There was a thing on the news last night that our Canadian live herd is up to 15 million head. People can't sell their heifers or their calves, and they can't sell their finished products. What you're asking us to do, and I understand completely why you're doing it, is to give permits to bring in beef from other countries when our own farmers are committing suicide, as we heard last week.

What can we responsibly do to accommodate your very, very important concern?

Mr. Scott Zies: Again, I have to go back to our first preference as a source, which is Canadian meat. The Canadian cattlemen and the packers are not committed to our domestic market. They built their industry based on exports. Yes, with BSE the export market opportunities have been challenged, but that's a fact of life. I don't think anybody has a problem with that. It's just the way the industry evolved. But we find ourselves here today with tons and tons of live animals around, and that really doesn't do us any good, from where we sit.

The other fact is that those animals have to move through a very integral part of our industry, which is the packers. They take those animals, convert them into products, and we buy.

So what can we do? I don't know what else we can do. We've bought every pound of meat made available to us. Unless you're willing to consider restricting exports to keep that meat at home, I'm not sure what else we can do.

What I do know is that for our members who produce products like those you talked about for Subway and those types of companies, they need a specific piece of meat to do that. If our packers don't make it, or are not willing to make it, or would rather export it, that's where our demand stays the same. We still need that meat, so let us at least have a process in place. Right now there's no process in place. We don't have a supplemental permit policy. There are no supplementals under any circumstance. At least give us the opportunity to talk to the packers, show them what we're looking for, and have them respond.

Cattle farmers make up the big bottleneck in this thing. I know they have trouble comprehending this, but we'd be more than willing to channel those requests for supplemental permits through the regional cattle associations so that they can see what we're asking for. Let it go through the motions with foreign affairs and let them see the responses back from the packers, just to lay it all on the table.

You know, it's not rocket science. We need specific cuts. We're asking the industry...and if they can't provide it, or choose not to, that's fine. This is historically the way it's been. The supplemental process has been in place since the early nineties. The industry developed it together, and it worked.

º (1610)

Hon. David Kilgour: Do the packers have no sense of decency? Are they prepared to have everybody who wants to eat beef in Canada go without because they want to export to Mexico or the U.S.? Is that the nub of the problem?

Mr. Wayne Holland: It's difficult to comment on what the packers are doing.

What I can tell you is that every customer that's working with us on launching any type of beef project whatsoever, similar to what you just mentioned, wants to know what our contingency plan is. If we have another problem in Canada or we can't supply and its Oceanic, that's fine with them. If you have quota, then they're ready to do business. As we said, our first choice is Canadian beef. That's what we want. But we need a backup plan, and all this is is a backup plan. Whether it comes from Oceania or we have a backup plan that brings it out of the U.S. for 30-month and under, it doesn't matter. It still doesn't help the Canadian beef industry. That's what they're after. Things like that are earth-shattering to a company, when they have to put a sign on the door saying they don't have anything to sell. They're not going to do it again.

The Chair: Thank you, Mr. Holland and Mr. Kilgour.

We'll move to Mr. Borotsik for five minutes.

Mr. Rick Borotsik (Brandon—Souris, CPC): Thank you. I'm going to share my time with Mr. Ritz.

I have three quick questions. Let me understand this. You buy beef from a packing plant. You process it and add value to it, and it goes back into the domestic market to consumers. You said that on May 20 you switched to Canadian beef because you wanted to support the Canadian industry. After May 20 there was a lot of beef and no export market. You didn't switch because of the price, did you? You just switched because you support Canadian industry.

Mr. Scott Zies: The meat was good value at the time, too.

Mr. Rick Borotsik: Price, quality, and supply were constant then, so you switched to Canadian beef because of the price.

Mr. Scott Zies: The availability situation changed, so--

Mr. Rick Borotsik: Was the price better for Canadian product than for Oceanic? You said it was. In fact, you said Canadian beef sometimes was cheaper than Oceanic.

Mr. Scott Zies: I think it depends on what particular meat products you're looking for. The prices vary all over the place. The meat was good value at the time, but the biggest difference was that meat was now available for the Canadian market.

Mr. Rick Borotsik: After May 20 that meat had no place to go, so it was available to you. Was the price better than it was previously?

Mr. Scott Zies: Yes.

Mr. Rick Borotsik: It was. So you then switched to Canadian beef because you wanted to support the industry. Is that it?

Mr. Scott Zies: That was a big part of it in terms of--

Mr. Rick Borotsik: You said your first preference is always Canadian beef. But you also told us that there hasn't been a constant supply and constant quality and the price has been higher for Canadian beef than for Oceanic.

Mr. Scott Zies: Historically, it has been, and it is the case today. I think you do have to separate fed cattle products and cow meat.

Mr. Rick Borotsik: After September the markets opened again, and that supply no longer was available to you. So now the supplementary imports are important to you. Is that correct?

Mr. Scott Zies: Yes.

Mr. Rick Borotsik: In your presentation you said, and I quote, “Selfish interests are prevailing”. It's not from the producers, I can assure you. There's no selfishness in the producers, because they are not receiving a hell of a lot for their product right now. Whose selfish interests are prevailing?

Mr. Scott Zies: We feel that it's partially the producers and partially the packers, because--

Mr. Rick Borotsik: It's 11¢ a cow and 60¢ for fed cattle right now, and you're saying it's the producers' selfish interests?

Mr. Scott Zies: I'm saying selfish interests in terms of a supplementary import policy.

We haven't been consulted in this whole process. We sat here and made our presentation six months ago, and we have received no feedback. The government is making its decisions by consulting with the industry. The only two parts of the industry they're consulting with--

Mr. Rick Borotsik: Let's assume the producers are selfish interests. I disagree with you. Are there any other selfish interests out there?

º (1615)

Mr. Scott Zies: There are the packers. I'm not saying selfish interest in the price of animals or anything. I'm saying that the Canadian cattlemen and the beef packers have an interest in their own segments of the industry, and they really don't care what happens in our end of the industry. That's what I'm getting at in terms of selfish interests. Our interests are selfish too. We don't feel that we've been consulted in this whole process. The consulting that has been done in the industry has been with the cattlemen and the packers.

Mr. Rick Borotsik: One last question. If you paid the going market price for the beef that's now being exported into the States and Mexico, could you get access to that product?

Mr. Scott Zies: I think you should ask the packers that.

Mr. Rick Borotsik: No, I'm asking you. You're the ones who are looking for the product, and if it's not domestic, it's going to be offshore. If you paid the price they're now receiving for their American market for the boxed beef, could you then get that product?

Mr. Wayne Holland: It's not being offered. It's going directly to the Americans.

Mr. Rick Borotsik: Have you offered that price?

Mr. Wayne Holland: The problem is that we are the customer, and we're assuming--

Mr. Rick Borotsik: So are the Americans, so are the Mexicans.

Mr. Wayne Holland: I agree. So the customer has to fight? Is that how we're going to push beef through the industry, we have to fight to get it, we have to compete with other world markets we have no access to?

Mr. Rick Borotsik: Okay, but you're not prepared to pay the price?

Mr. Scott Zies: If you paid the world market price for beef, you'd get it.

The Chair: Gerry.

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

The Chair: We're just about out of time.

Mr. Gerry Ritz: I've just got one quick question here. In your presentation and a couple of times today you've alluded to the fact that some beef items are just not available in Canada and never will be. You're talking raw meat right off the hoof? As far as I know, a cow is a cow.

Mr. Scott Zies: We don't buy cows. We buy meat products from those animals and reprocess them.

Mr. Gerry Ritz: But you're saying it's not available at all. Could you give me a list of what you cannot get in Canada?

Mr. Scott Zies: There's a list in the appendix of that ad hoc beef committee report, and it includes items like New Zealand bull cuts that are used primarily in the deli business.

Mr. Gerry Ritz: That's not a raw product, it's already started to be processed.

Mr. Scott Zies: No, it's a raw piece of meat, a primal cut.

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

Mr. Plamondon is in again.

[Translation]

Mr. Louis Plamondon: My question is along the same lines as Rick's comment. You say you prefer Canadian beef, but that you purchase beef on the international market when you can't get it for a set price. Based on Rick's question and the answer you provided, it seems to me that by turning to the international market, you're contributing to lower Canadian prices. In some respect, you are cheap payers. As long as you can get Canadian beef at low prices, you buy it, but when the price drops, however slightly, you look to the international market.

At a time of massive surpluses, does the department not question the timeliness of issuing additional import permits, given the anger producers are likely to experience? You state in your report that you have the backing of the entire industry. Does that include all Canadian beef producers?

[English]

Mr. Scott Zies: The Canadian Cattlemen's Association was part of that process.

One of the comments you made is that we have a huge surplus in Canada, and I think you're referring to a huge surplus of meat, but since May 20 we have not had a huge surplus of meat in this country. Every pound of meat was sold. We have a huge surplus of cattle, we don't have a huge surplus of meat. The meat has moved quite nicely through the system, given what we've been through, but I agree that we have a huge cattle problem. We don't have a meat problem at this point in time. The packing plants are running flat out for their export markets, with as many cows as they can put through, and the meat's not going into the freezer, not being stored some more, it is being consumed. We don't have a surplus meat problem in Canada.

º (1620)

The Chair: Do you want to jump in Ms. Picard?

[Translation]

Ms. Pauline Picard (Drummond, BQ): Do you buy Quebec beef?

[English]

Mr. Scott Zies: Yes.

[Translation]

Ms. Pauline Picard: Do you buy beef strictly from federally licensed slaughterhouses?

[English]

Mr. Scott Zies: Yes.

[Translation]

Ms. Pauline Picard: Unless I'm mistaken, there is only one slaughterhouse in Quebec.

[English]

Mr. Scott Zies: You're probably right; that's Levinoff Meats.

[Translation]

Ms. Pauline Picard: There's something I do not understand. Earlier, you said the biggest problem was the shortage of live animals, but you also said the problem was the shortage of slaughterhouses to process the animals.

Which is it?

[English]

Mr. Scott Zies: I think the problem for us and everybody in this room is the lack of means to get this surplus of cattle slaughtered. The slaughter capacity is not sufficient for these huge numbers of cattle that are backed up when you have limited export opportunities, particularly for the live cattle, because a big part of this industry was shipping live cattle to the U.S., or wherever else they went. Until that happens....

[Translation]

Ms. Pauline Picard: I've heard that animals from the US are brought into Canada, in particularly into Quebec, and slaughtered in our facilities, specifically in the Quebec slaughterhouse you mentioned earlier that also happens to be located in my riding.

Do you ever buy this beef from the US?

[English]

Mr. Scott Zies: What period of time would you be talking about?

[Translation]

Ms. Pauline Picard: As far as I know, we've always imported beef from the US, among other reasons, to supply restaurants like McDonald's. I haven't researched this matter thoroughly, but I believe McDonald franchisees are required to buy US beef.

Is that in fact the case?

[English]

Mr. Scott Zies: No.

There's another problem out there now, too. Our export markets to the U.S. and Mexico are open for products from under-30-month-old meat from the packers. The same rule applies for U.S. beef coming up to Canada for 30-month and younger meat.

The problem is that the Americans have no segregation process in place, so there is no U.S. beef coming up here at this time. They don't have the process, or don't really want the process. That's a dilemma for our members, because the people we represent, these value-added processors across Canada, imported a lot of meat from the United States--for the restaurant business, for some retail business, some high-end U.S. beef. And that has stopped, too.

That's put additional pressure in terms of meat supply. Not only have we effectively cut off any option for supplemental permits from offshore, we've virtually eliminated any imports of beef out of the U.S.--and live animals, for that matter.

So yes, we are buyers of that meat. And yes, we are buyers of meat from that plant in Quebec. If part of your question was whether there were some live animals coming up into Quebec that were slaughtered, I'm not sure. If they were, and that was happening through that federal establishment, I guess we were buying that meat too.

The Chair: With the end of that line of questioning, we must move to Mr. McCormick.

Perhaps, Mr. McCormick, you could share a couple of minutes with Mr. Barrette. He has asked to get in on this discussion.

Mr. Larry McCormick (Hastings—Frontenac—Lennox and Addington, Lib.): Thank you, Mr. Chair.

We haven't much time, but to go back to those TRQs again, I hate to go over the story time after time, but I remember well when the chicken producers came to us in this country, and McDonald's, I don't mind saying--I'm a fan of the founder of McDonald's--went to the bureaucrats in this town and said they needed more chicken; it couldn't be provided there. They issued the TRQs. No minister even knew about it. This type of thing happens.

It sounds to me that we could have a solution here if we could get everybody working together, being part of the solution, not just part of the problem. If we could process our cows and bulls in this country, which we don't have a capacity for...and it's not your top end, but how much of the need of your members could be met? We have a huge backlog of cows and bulls. Approximately what percentage of your needs could be met if this were available?

º (1625)

Mr. Wayne Holland: All of our grinding needs would be met, obviously.

Mr. Larry McCormick: Okay. I just have one other question here.

Is Maple Leaf Consumer Foods of Burlington the same company as Schneider, Kitchener--that's Maple Leaf, McCain? It's on your appendix here. There I have a little bit of challenge. That company controls the price of all hot dogs in North America, one way or another.

So your members can be part of this solution. Yes, the federal government and provincial government should be part of it too.

I'm getting phone calls at home from people who see these cows lining up, and there's no sign of a solution. I think it's partly that we do need to get together. The Canadian cattlemen have the opportunity here. You tell us that you could access this meat today, if you wanted to pay the price.

Mr. Scott Zies: Which meat is that?

Mr. Larry McCormick: Well, when you asked the question about.... You could buy the meat from the packers.

Mr. Scott Zies: Okay, that meat you're talking about there is fed cattle only, right? That's the only meat that's being exported. It doesn't help at all with the cow problem. So if what we're proposing here is that if somehow we come up with some increased slaughter capacity for cows, we could use a big percentage of that, maybe half. I'm just guessing. The dilemma in that is a large part of those meat products that come from those cows are going to be cuts of beef instead of beef that's traditionally ground up for burgers and what not. What do we do with that?

Mr. Larry McCormick: As my last question, what's the approximate value of your sales of your members per year? They could be part of this and they could have started on this yesterday. Maple Leaf Foods--what's the value of their sales per year, approximately?

Mr. Scott Zies: I would guess at $2 billion or $3 billion.

Mr. Larry McCormick: About $2 billion or $3 billion. I think, again, we could work together on this.

Mr. Scott Zies: For sure.

The Chair: Monsieur Barrette, a question or two?

[Translation]

Mr. Gilbert Barrette (Témiscamingue, Lib.): Thank you, Mr. Chairman. I would also like to thank my colleagues for giving me this opportunity.

I'd like to ask two questions, in the hopes of getting a better grasp of the situation. Are you saying that the slaughterhouses are operating at full capacity and their output is being shipped elsewhere, or is it more a case of slaughterhouses not having enough beef to process...?

[English]

Mr. Wayne Holland: I think they're controlling the amount that gets slaughtered. I'm not sure who's in control of that. They are not working at capacity. What's happening is that what they are slaughtering is going down south. It's not coming into our markets. So they are not at capacity.

The reason why I know they're not at capacity is because, as I stated in my presentation, we have had major shortages where they actually shut down their plants. I don't know what the reason is. What I can tell you is that we got shorted, and I ended up having to use Oceanic or actually bring it in from Montreal. So here I am out in Vancouver, and I can't get product out of Alberta. I have to either bring it in Oceanic, find it in the States, or bring it in from Montreal.

[Translation]

Mr. Gilbert Barrette: Are you one of their customers?

[English]

Mr. Wayne Holland: Absolutely. I buy from them now. I buy from these packers out in the west. I buy from Tyson, Cargill. I buy from everyone out there.

[Translation]

Mr. Gilbert Barrette: I don't understand. You claim to be a customer and to be willing to buy beef, whereas they say they're not operating at full capacity.

[English]

Mr. Wayne Holland: I don't understand either. That's why we're here.

The Chair: Okay. We'll conclude with our last questioner. Do you want to finish? One short question, because we're almost out of time.

Do you want on now? No, it's Mr. Breitkreuz's turn next.

º (1630)

Hon. Wayne Easter (Malpeque, Lib.): We'll share. Go ahead, Garry.

Mr. Garry Breitkreuz (Yorkton—Melville, CPC): You have given us an excellent presentation. I am extremely frustrated, because there's this real sense of urgency to finding a solution to what's going on here. We're fiddling while Rome burns.

You have made one statement that I think I would like you to conclude with the answer to. You have said that there needs to be somebody showing some real leadership here. To me, that's one thing that you could point out to us. Where could this leadership come from? What would that leadership be doing? What guidelines would you give to them? Where should they go from here? If you had the power to immediately implement that, if you could wave a magic wand, where and how should this all be resolved?

I think, in listening to you, that there are probably some branches of the beef industry that would like to keep the turmoil going, because they're making profits. As you say, they're not working at capacity. I find that unbelievable, given the fact that we would like to get as much beef moving off our farms and ranches as possible. So where's this leadership going to come from? What's it going to do?

Please be honest and frank.

Mr. Wayne Holland: Clearly, it has to come from the government. It has to have someone who has the ability to draw the data and the analysis from all ends of the industry, from the consumer all the way to the producer. You've got to tie it together.

It's a bigger problem. Like I said, it's a freight train out of control. This is a large problem. It's a short-term problem, which is the tremendous number of culled cows you have now. The under-30-month is not as big an issue because at least it's moving, but you have this huge problem in the field. No one has really got control of it.

You also have an issue where--and I guess this goes back to the producers and it goes back to who is running the ship right at the moment, and we have to talk about that--a tactical decision was made to hold back some of the cows for slaughter, in the hope, this desperate hope, that the U.S. border was going to open. I think we have to take that mentality off the table. I think we have to react as an industry and as a government that the border is closed. When it opens, then it's a bonus.

The Chair: Mr. Easter.

Hon. Wayne Easter: Thank you, Mr. Chair.

I can tell you one thing, if there is one absolute truth here, it's the fact that primary producers out there are facing financial ruin in the current situation. That's an absolute fact, and it's one of the reasons for the hearings. But I do hear what you're saying. I do disagree with your point, though, that there's an industry-wide consensus calling on the government to restore supplemental import permits. I certainly haven't heard that from anyone, but I've heard it from a lot of producers to not allow them in.

Maybe there is a reason to allow them in, and I've listened to your arguments today, but you're saying in your brief as well that Canadian beef packers cannot supply the required raw material to your industry. Then there are two things. First, what does the packing industry have to do? And I think we have to find out, in terms of a carcass cut on the international.... The packing industry is certainly moving some of these low-grade products elsewhere in the world. So what does the packing industry have to do, but what specifically would you have the Canadian primary producer do to meet your needs? I still don't know exactly what you're asking them to do. Is it the blend you're looking for of low-end product with high-end product? What exactly is it?

I do know there is a lot of aged beef out there that isn't being slaughtered right now, and it's not even really aged. Some of it's 28 months, claimed to be over 30 months because of the tooth test, and so on. There is an awful lot of that kind of beef in our area that can't find a home, can't find a slaughter plant to kill the product. That might meet part of your needs.

What specifically are you asking for from the industry?

Mr. Scott Zies: I would suggest that we need to continue to work together instead of driving wedges between each sector, and if we work under the scenario that the border is not going to open to live cattle then we have to do something to increase the slaughter capacity for culled cows. But if this faint hope of the border opening at any time is going to be held out there as a carrot for everybody, then I think you have two opposing factors at play here. Why would any packing house make any capital investment in increasing slaughter capacity if at some point here in the near future it looks likely that the border is going to be open?

So I think, as Wayne said earlier, we have to acknowledge the fact that--and maybe this is where the leadership thing comes in, too--this border may remain closed for a period of time. So what are we going to do together as an industry to deal with it, and if the--

º (1635)

Hon. Wayne Easter: If I could interrupt, even if the border does open, it still makes sense to utilize our own slaughter capacity to meet some of the value-added processing industry. In the long term, wouldn't it still make sense?

Mr. Scott Zies: Which, historically, has happened to the degree they want it to. But again, if the borders are open and it's truly the market forces that are allowed to play without any intervention, that meat is going to go where they get the best return, and nobody has a problem with that.

The Chair: We must adjourn this segment of our meeting this afternoon, but before we do, I want to ask you something one more time. You have indicated this afternoon that you do wish to buy Canadian product, that it is your desire to buy Canadian product. Give us clearly, what are the disadvantages of buying foreign product? Is it guarantee of supply that is not assured as it is by buying domestic? Is it how you pay for this product? Give us some idea as to what are the advantages of buying Canadian, other than the fact that we're Canadian and we want to do the Canadian thing.

Mr. Scott Zies: The disadvantages of buying offshore meat?

The Chair: Yes.

Mr. Scott Zies: If the Canadian meat is available in the right products we're looking for, then why would we buy offshore meat? You have to pay for the product at the price. It's not half the price.

Mr. Rick Borotsik: At the price. Not half-price, at the price.

Mr. Scott Zies: You have to pay for the meat ahead of time. It has a shipping time of six to ten weeks. The meat is paid for, basically, when it ships, so you have to have that much meat. If you're buying forward to cover the commitments you've made, you have all that money tied up on all that ten weeks of meat at any given point in time. You have to go through all the motions of the import process, delivery times--all those things. So there's a lot of inconvenience in buying imported meat, and we wouldn't be doing it unless we had to.

The advantages of buying the Canadian meat when it's available and right is that it's there regionally, the meat's a day away. I can call Levinoff and the meat will be there tomorrow morning. That's nice sometimes as production schedules change or your customer wants to have a special.

The Chair: Thank you very much.

To Mr. Zies and Mr. Holland, we thank you for appearing today. You've helped us with the process we are going through of trying to determine what factors are at play here. So thank you for appearing, and we look forward to seeing you again sometime.

That brings to a close this portion of our meeting. Before we call to the table the packing industry, we'll suspend the meeting for five minutes.

º (1638)

º (1643)

The Chair: Order. I want to welcome our guests this afternoon and thank them for coming.

I do want to say at the outset that I am disappointed, profoundly so, and want to express my regret this afternoon that representatives of certain packers who had been invited here today chose not to come, for whatever reason. They were given the same notice as those who are appearing here today.

Mr. Larry McCormick: On a point of order, Mr. Chair, who are those other packers?

The Chair: Mr. McCormick, please allow the chair to continue. When I'm finished with my remarks, if you have further comments to make, I will hear you then.

From time to time, the committee has called people before its members to hear certain testimony. Last August we asked certain packers to appear. A number of packers did show, and we're pleased that they did. But the two companies that were asked to come today, Tyson and Cargill, have failed to show. I profoundly and deeply regret that I have to say this gives me a lot of difficulty.

That set aside, I think it is fair to say that seldom has our committee met where witnesses called have been asked to give an understanding of an industry's operations from both a producer's standpoint and a consumer's perspective. Today we are asking you to justify a number of actions that we believe have led to huge profit-taking on the back of an industry that is on the verge of bankruptcy and collapse. The captive consumer audience, because of its commitment to our Canadian beef, has been compelled to pay high prices for beef products, for the most part without questioning the justification. In short, we need some explanations for these anomalies.

This afternoon, to help us to understand this industry better and answer some of the questions I have raised and others will raise in the course of this meeting, we want to welcome, from the Canadian Meat Council, Jim Laws, executive director. From Better Beef Limited we have Bennie Dejonge, president, and Lorne Goldstein. We also have Brian Read here this afternoon.

Thank you, gentlemen, for appearing. We look forward to your testimony, and then we will go to a question period. This session will last for two hours.

You may begin, Mr. Laws, for the Meat Council.

º (1645)

Mr. Jim Laws (Executive Director, Canadian Meat Council): Thank you very much, and good afternoon, ladies and gentlemen. My name is Jim Laws. I'm a relatively new executive director with the Canadian Meat Council here in Ottawa.

[Translation]

I'll be giving my presentation in English, but if you have any questions in French, I'll be happy to field them. I didn't have time to get my text translated.

[English]

I'll give you a presentation with enough background so we can understand what's happening in the industry right across Canada for all packers.

The Canadian Meat Council represents the federally inspected packers and processors of red meat in Canada. Our major beef-packer members include companies such as Cargill in High River, Alberta; Lakeside IBP Tyson in Brooks, Alberta; Excel Foods in Edmonton, Alberta; St. Helen's Meat Packers in Toronto; Better Beef in Guelph, Ontario; Delft Blue in Cambridge, Ontario; Bellivo Transformation in Ste-Angèle-de-Prémont, Quebec; and Levinoff Meat Products in Montreal.

Of course, all the plants we represent are federally inspected and have invested heavily in order to comply with strict federal regulations. We support a single federally inspected food system for all Canada.

As a little bit more background, we employ full-time quality control managers at the plant. A federal veterinarian and inspection staff are present at all times during slaughter.

The Chair: Excuse me, Mr. Laws. The presentation is being given in English, and I don't believe there's a French translation. It's being given to translation now. We are prepared to continue, but there is a ruling here that it's to be presented in both languages. This presentation is only being done in one. I know the language is done, but the video is in only one language.

Are you prepared to continue? I don't want someone at the end of this meeting or part way through give us difficulty. Are you prepared to proceed?

[Translation]

Mr. Louis Plamondon: Thank you for being so kind as to point that out to me. I'll turn a blind eye this one time.

[English]

The Chair: Okay. Thank you very much, Mr. Plamondon and Ms. Picard, for your cooperation.

Mr. Laws, you may continue.

[Translation]

Mr. Jim Laws: Thank you. We weren't told that this was a requirement of the committee. I apologize.

Mr. Louis Plamondon: The reason is that in theory, this is a bilingual country. But it doesn't matter. We also know that it's really a unilingual country.

[English]

Mr. Jim Laws: Recent interventions to improve food safety have cost each plant about $1.5 million.

I want to explain the market. Of course you probably all know this, but the market for cattle and beef in Canada is a competitive free market, and prior to the closure of international borders with the discovery of one case of BSE in Canada, the market really was a fully integrated market with the United States of live cattle, beef, and veal.

Of course, there are different markets in Canada. There's a feeder cattle market for young feeder cattle. Farmers and ranchers sell animals six to twelve months of age, averaging 600 pounds live weight, to feedlot operators who feed and fatten cattle for slaughter.

The second market is the slaughter cattle market, in which feedlot operators sell young cattle, typically age 18 to 24 months, to the packers at an average live weight of 1,300 pounds, and it's from these animals that most of the prime cuts are obtained.

The third market is for dairy cows and beef breeding cows classified as Canada D1 through Canada D5, cows typically over the age of 30 months. Most of the meat from these animals goes to stewing beef and ground hamburger and further processing.

Veal calves, of course, are a separate industry altogether. It is indeed a fourth market, where producers sell veal calves, age 18 to 20 weeks, to the packers at an average live weight of 525 pounds.

In the market today, overall the markets are functioning. Fat cattle and cows are being actively bid on and purchased. Meat is being sold by packers, and the plants are operating at near capacity.

How do packers market beef in Canada? We don't sell directly to consumers. We sell to retailers, to further processors who make sausages and luncheon meats, and so on. We sell to restaurants. We sell to food service distributors and wholesalers. We are only one part of the chain. The major retailers in Canada only purchase meat from federally inspected plants so that they can move meat between provinces. These plants are HACCP accredited--hazard analysis and critical control points accredited--and retailers are assured of the highest consistent quality from internationally recognized slaughterhouses for their Canadian customers.

I drew up a little chart here just to show you. The cow-calf farmers sell to the packer, but they also sell to the feedlot, depending what they're selling. The packer sells to further processors and to all these other people--again, restaurant distributors, retailers--as do the further processors, who eventually sell to the consumers.

How do the packers in Canada market beef and veal? Well, consumers at retail purchase about 50% of the beef and veal packed and consumed in Canada. The remaining 50% is sold to further processors and food service. Retailers typically buy the cuts the customers are looking for, and the market moves all the time, continually, to meet demand for quality, grade, price, and location, and it's based entirely on free enterprise.

So what happened? We've lost major export markets. The entire Canadian industry, from the farm right through the packer side, was scaled to the international market. It has been that way for several years. When we look at live animals and beef, that entire market represented 70% of the entire Canadian production, prior to May 2003. When an international market was slammed shut to us, havoc was created in the marketplace and huge numbers of live cattle were backed up.

What happened to us? Beef was stranded in the pipeline. We had over $12 million worth of Canadian beef and beef products stranded in Japan and Korea, our largest markets, right after the announcement of a single case of BSE in May 2003. It cost us a lot of money to keep this product in frozen containers overseas, and demurrage and destruction of the product are additional costs. We estimate that these costs are totalling now $18 million.

Nine months later, as of February 13, we got a report from the embassy in Korea. We still had 691 tonnes of beef stranded in Korea; 510 are in container yards, and 181 are in bonded warehouses. We have to clear those out before they'll allow us to even get any new stuff in.

The financial loss to the packer sector is estimated at $50 million during the first weeks of the crisis; that's the pre-BSE value of cattle plus devaluation of inventory, because we had commitments and we had purchased product. The situation resulted in unfortunate layoffs in various packer locations across the country as the operations try to reduce their cost. This is a serious situation.

º (1650)

The other important thing is that since the export markets were closed to us, the huge amounts of products that were being sold to overseas markets are having to be kept in Canada and rendered. A lot of Canadians don't realize this, but products such as tongues, kidney, tripe, feet, and tails, which are highly valued in Japan and Korea, our two major markets, are now sent to rendering or into significantly lower-valued export markets.

In fact, one of the packers gave me an example to use today, of something called short ribs. They are in such demand in Korea that they took the entire North American production into that one country. Now short ribs are sold as trim, which ends up in hamburger, and we all know that the price of hamburger at retail has been very low. We're currently only getting 20% of the value of short ribs that we were getting prior to May 2003.

The Canadian Beef Export Federation information that we have tables up the information, and we're getting approximately $192 less per animal than we used to get for these extra body parts that have a lot more value in Korea and Japan.

This is one of three tables that I have up here. I'll just use an example of something. The first one here, yoshinoya plate, which is a thin muscle that was selling at $29.70 per head overseas, is worth $9 in Canada. A tongue that was worth $18.78 over there is worth $1.05 here. You add all this stuff up, and you go down the next page and the next page--$192.71 per head, and that's real. It's just that it doesn't have as much value in Canada as it had before.

The reality is that it took our members a long, long time to develop these markets. A lot of time and effort was spent to develop these markets overseas, and now that the doors have slammed shut in those markets, those markets are being filled by Australia, New Zealand, and Brazil. They're happy to do that, and we're back at ground zero.

Even if the borders were to open up again tomorrow, we'd have a lot of work to do to get these things back. One of our members has stated an example where they've been working with this particular customer in Japan since 1980, and they've lost that business. It's a serious situation.

Another reality is that our packer members gave away in May about 1.5 million pounds of meat to food banks across the country.

There's rendering credit loss. We've lost a credit. We used to get a credit for the stuff that's sent off to render. Now we pay about 7¢ to 10¢ per kilogram to have these waste materials sent off, and it's costing us $200 per load for blood. So in some areas, the cost to send materials away has now changed, up to $40 a head.

The exchange rate price has been very significant. Canadian boneless beef is now moving to the United States and has since September 2003. We all know the Canadian dollar has strengthened significantly, and even with the opening of these markets now, we're getting a lot less. In fact, the price has gone down in the States since the discovery of BSE in December in one animal as well, but now there's a 20% difference in the exchange rate compared to the same time last year.

This is a chart I stole off the Internet. You can see that it's significant. We're not getting the same in terms of Canadian dollars for the meat we're sending across to the United States. All Canadian exporters are faced with this situation, but it's certainly a reality for our members.

Another issue that was brought to my attention was that prior to BSE we were working on some type of equivalency in terms of grades, and now we have the triple-A grade in Canada. They're not giving us the same equivalency in the United States, so they're able to get some triple-A in the United States. They're not paying us as much as if we could have got equivalency on the so-called choice grade.

The previous speaker spoke about slaughter capacity. The industry has the capacity to process approximately 70,000 cattle per week, and immediately after the BSE discovery in May, slaughter numbers went down to about 30,000 per week and then crept up to about 45,000. It was at the request of the beef round-table industry committee and this standing committee that Canadian packers were asked to get slaughter back up to capacity. We're now back up to more than 65,000 cattle per week being slaughtered.

This is a chart that I took from Agriculture Canada, “Beef supply at a glance”. This is only the Canadian-fed slaughter. It doesn't show the cows. But as you can see, there was quite a dip in May and June, and it's gotten back up there.

º (1655)

Investment in plant and equipment is a huge business. You just can't go and decide you're going to shut one of these plants down overnight. It's a tough business. Our members in the beef packing alone have estimated $800 million invested in capital and equipment. In addition, they employ over 10,000 people working in slaughterhouses across Canada. I can tell you--I was at the Guelph plant last month--it's tough work, it's cold, it's repetitive, and if you're going to get people to keep working in that environment, you have to compensate them well. It's not a pleasant environment. A recent study showed that there's a spin-off effect of six jobs created for every one job created in the packer sector.

There isn't just one factor. As you all know, since July 2003 Canada has required the removal of specified risk materials at slaughter from all cattle 30 months and older, the skull, brain, trigeminal ganglia, eyes, tonsils, and spinal cord, and the distal ilium portion of the small intestine of cattle of all ages. So those have to be segregated on the kill floor. The cattle have to be separated through dentition. This adds extra cost to the process, but ensuring the safety of Canadian beef is a top priority for us as packers in Canada, and we will not compromise.

The veal industry is an entirely different situation, but it is an example of how integrated this market is. There are plants in Quebec and there are plants in Ontario. They own the barns, they own the animals, or they contract out to farmers, and they own the slaughter packing facilities on both sides of the border. So when this thing occurred, these guys experienced several different problems. The market forced the price of veal way down. They have higher inventories in their freezers. One fellow gives the example of how he had so many calves in the system he couldn't process them. He would normally truck them down to some plant he had in the northern States. He couldn't. When they're ready, they have to go; they're no longer classified as veal once they get to a certain age. And the barns are designed for a certain size animal. He had to pay some contract slaughterhouses to do it for him, and that cost him a lot of extra money. That's just one example.

Another example is one of our Quebec members. Since the discovery of BSE in the United States, we can no longer import these young animals into Canada. He can't fill his barns in Canada with young Holstein calves. He's paying twice as much in Canada now as he paid for animals prior to this. It's an interesting situation, but it's a real problem for him. So that just gives a very concrete example of what's happening in the veal industry.

New investments will be required in the future, and we have to comply with more stringent animal tracing regulations that are coming. Packers will have to invest a great deal of money in the future for updating information technology, hardware and software, at various locations, and we will do that. Plant upgrades are ongoing, building and equipment, so we can keep in business and stay competitive, and we're going to have to spend more money to stay competitive. And the markets remain very uncertain, of course, with an entire industry that has been sized for export and a North American market. If we don't regain our export market soon, some corrections may be in order, and we don't know what that situation will be.

That's the end of my presentation today.

» (1700)

The Chair: Okay.

We move to Mr. Goldstein. Are you speaking or is Mr. Dejonge? You have no formal presentation?

Mr. Lorne Goldstein (Secretary Treasurer, Better Beef Limited): No, we do not, sir.

The Chair: Okay.

What about Mr. Read with Levinoff? Do you have a presentation?

Mr. Brian Read (General Manager, Levinoff Meats Limited): Mr. Chair, I could just hold and answer questions as well.

The Chair: Okay, fine. Then we'll move right into the questioning portion of our meeting.

Mr. Hilstrom.

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

I guess the most important question is what's your best educated guess as to when the borders are going to open to live cattle shipments? Jim, I guess that would be to you.

Mr. Jim Laws: Your guess would be as good as mine. I have no real guess for that. I hear the Agriculture Canada officials and the people at the embassy are down there in Washington on a regular basis. They're trying to work out some common rules we can all play by. The Canadian Meat Council certainly supports our looking.... This is North America. We need a common set of rules on both sides of the border, because this has really been a fully integrated market for years and years.

Mr. Howard Hilstrom: Are we moving at an appropriate speed to reach that point?

Mr. Jim Laws: We of course would like that to happen as soon as possible.

Mr. Howard Hilstrom: And what about animals over 30 months of age? When are we liable to start exporting the meat from them?

Mr. Jim Laws: Again, I really wish I could tell you the answer to that question.

Mr. Howard Hilstrom: Has your industry not done any analysis about when that might happen? Because the crucial part of this is how we're going to correct to the new reality. If you guys aren't even analyzing what the future will be like....

Oh, we have an answer from Brian Read. I appreciate that.

Mr. Brian Read: Those are valuable questions. If you could just instruct us on how we could include science and politics to open this border, we would like that advice, because we have been working on it since May 20. The Canadian Meat Council, the Cattlemen's Association...in conjunction have sent numerous letters down to the United States, in harmonization.

So that's what we need. We need to be able to get science and politics on the same page.

Mr. Howard Hilstrom: That brings us to the science on BSE, which is very questionable at best. About the only thing that seems to be 100% positive is that if you feed rendered material that's infected back to cattle, you're going to spread BSE. After that, the science on this whole thing gets pretty iffy.

In terms of the general impression we're getting here with regard to the leadership and the government's inaction in giving indicators to the industry--for instance, their assessment that the borders won't open for x amount of time--do you feel that the leadership in the government here is sufficient to give that kind of information out so that business decisions can be made?

» (1705)

Mr. Jim Laws: I'll say quickly that certainly the officials at Agriculture Canada have kept us informed. On a weekly basis we have a conference call with them, and they've been very open with us. They've been very cooperative, sending us, on a very regular basis, as much information as I suppose they can.

Mr. Brian Read: As a past president of the Canadian Meat Council and as current chair of the council's beef committee, I have nothing but.... I've never been down such a disaster, so I can't criticize and say we should have gone this way or that. But, boy, let me tell you, I thank the late minister Vanclief...or the “past” minister Vanclief; he's still alive, God bless him. He was able to get off the bull, and then Minister Speller jumped on it. He was no sooner in the chair, just four weeks, when we were on our way to Korea, Japan, and Washington.

I'd also like to thank Agriculture Canada, Health Canada, DFAIT, and CFIA, because we communicate daily, if necessary.

Mr. Howard Hilstrom: But what were the results of that travel to Korea and Japan and Washington? Were there any concrete results, or was it just talk, talk, talk?

Mr. Brian Read: Well, in terms of Korea, it was kind of disappointing in that the agriculture minister of this country showed up there and they were more concerned about talking about stranded containers.

We went on to Japan. They have moved, and are looking at 100% testing. We know that science does not protect our consumer. The removal of SRMs does. They're now looking at a more validated system rather than harmonized. So we've agreed to put a CVO, or a past CVO, on the ground in Japan.

In Washington--

Mr. Howard Hilstrom: Mr. Read, the borders are not open.

Mr. Brian Read: That's right.

Mr. Howard Hilstrom: And nobody can tell us when they will be. Then we end up with a situation....

You wonder why we cattlemen--and I'm one of them--are very suspicious about what's going on, and the lack of leadership here, when we end up with Mr. Ted Haney.... You know who he is.

Mr. Brian Read: Yes.

Mr. Howard Hilstrom: He's with the Beef Export Federation. That man is running for the Liberals in the city of Calgary in the election coming up. How can we expect anybody from the beef industry to be fighting for changes when in fact their main interest is trying to keep the Liberals in power?

What do you say to that?

Mr. Brian Read: To this date, sir....

You're suggesting that I vote Liberal?

Mr. Howard Hilstrom: No, I'm not suggesting that whatsoever.

Mr. Read, I just said that you were over in Japan, you had all these meetings, and nothing concrete came out of them. Nobody is telling us when the border will be open. Nobody is saying that it might be open in a month or a year.

That's what the problem is. Everybody is saying what a great job is being done by the government, but we don't have any concrete information coming out that says, “Here, Mr. Industry, you need to increase your kill capacity by 1,000 head or 10,000 head a week.” Where is that information?

Mr. Brian Read: The waters have been muddy since May 20 for both the further processors and the primary processors in this country. We were starting to see our way through that until December 23, when the Americans announced their BSE, and that brought the emotion back to our industry. That's where we're at. We, as a primary processor, along with cattlemen and the packing industry, are nervous about putting capital dollars into our building in case the border opens tomorrow and there are not cattle to kill.

Mr. Howard Hilstrom: Why would you say in case it opens? You have no idea whether it is going to open or not.

Mr. Brian Read: That's correct.

Mr. Howard Hilstrom: This correction in the livestock industry in Canada cannot wait. It's happening right now. I'll tell you folks sitting at the table now that over this past weekend I shot two cows myself on our ranch. That's happening right across the industry. We can't wait for you guys to correct the killing capacity. We heard that there isn't sufficient capacity here. Is there enough coming on line to supply these value-added people?

The Chair: Your time has run out.

Mr. Goldstein, do you want to respond to that?

Mr. Lorne Goldstein: Yes, sir.

I want to declare before we start that I am apolitical. We hear what you're saying, and never before in this industry have I seen such a calamity as on May 20. It is important that we reiterate the position CFIA has taken. It has got involved, it has stuck its neck out, it has gone to bat for the industry.

You're talking about the culled cow. Our plant, Better Beef in Guelph, is a Canadian-owned plant. We have declared ourselves a youthful plant, which means we do not knowingly kill cattle over 30 months. We have never had a change in the lexicon in this country about SRM, over thirty months, and UTMs, such as has happened over the last six months. We believe ithe whole marketing of these cows, in which we are not involved at all, has changed, and has changed permanently. We have standards in this country that prohibit us from doing this today, we're not allowed to do it, but if we make an effort, your leadership is active, and we have CFIA lead the charge, which I know it is very capable of, to change that and allow more of the plants to kill the cows, that might be of some help.

» (1710)

The Chair: Thank you, Mr. Goldstein.

Mr. Plamondon.

[Translation]

Mr. Louis Plamondon: This afternoon, while glancing at some briefing notes prepared for us by the Library of Parliament, I came across a startling pronouncement. The document notes that according to a Government of Quebec study on the cattle and beef industry, gross margins obtained from beef production at the province's slaughterhouses, which were high by historical standards, soared from a range of $2 to $2.50 per kilogram to $3.75 per kilogram in late August, or by more than 50 per cent from levels achieved in the same period in 2002. This exceptional performance was sustained throughout the summer of 2003.

How do you explain this huge increase in gross margins at Canadian slaughterhouses?

[English]

The Chair: Who is going to respond to the question?

Mr. Louis Plamondon: Do you have this paper in English? Do you understand, or do you prefer to read the paper?

[Translation]

Mr. Jim Laws: Are you referring to the gross margins of slaughterhouses? I haven't seen the figures.

Mr. Louis Plamondon: The English version of the briefing notes is available at the Library of Parliament. I'm referring to question 4 on page 7.

[English]

Mr. Lorne Goldstein: I'm sorry, sir, I wasn't provided with this beforehand.

Mr. Louis Plamondon: Page 7, question 4.

The Chair: We apologize. It seems the committee has been presented with material that hasn't been given to our witnesses.

Mr. Lorne Goldstein: I'm not sure what I'm looking at, sir. I apologize.

The Chair: Okay.

Mr. Plamondon, will you clarify the page and what he should be looking for?

Mr. Louis Plamondon: Question 4, page 7.

[Translation]

Did you show it to him?

[English]

The Chair: I don't know what he's got.

Mr. Lorne Goldstein: I don't know how to respond to that, because it talks about Quebec slaughterhouses, provincial slaughterhouses. I would be very happy to respond if we could see a full copy of the report.

» (1715)

The Chair: Okay.

Would you agree, then, to respond to that not at this meeting, but at a future time?

Mr. Lorne Goldstein: If we can, sure.

The Chair: Mr. Plamondon, can you go on to the next question? We'll get that information for you.

[Translation]

Mr. Louis Plamondon: I was also surprised to read in these briefing notes that Tyson Foods in the United States had manipulated the cattle market to the tune of $70 billion. As a result, the company was slapped with a $1.3 billion fine.

Could you explain to the committee how this company was able to manipulate the US market this way? Could such manipulation happen here in Canada?

[English]

Mr. Brian Read: That just came out in the press, I think, last week. I'm not aware of any such actions in this country, and I don't understand fully what they did.

Mr. Lorne Goldstein: I don't think any of us have seen the details of that, sir.

[Translation]

Mr. Louis Plamondon: Fine then, I'll wait for the next round, unless Pauline has a question.

[English]

The Chair: Ms. Picard.

[Translation]

Ms. Pauline Picard: Thank you, Mr. Chairman.

The representatives of the processing industry told us earlier -- echoing the sentiment of others as well -- that to solve the bulk of the problem in Canada, our slaughterhouses need to ramp up their capacity.

Do you agree with that statement?

[English]

Mr. Brian Read: I can tell you that currently in Quebec we're slaughtering cull cows and bulls. At this point we only have one day's slaughter ahead of us, which is about 800 cows, and everything that has come for sale we've put through the system. So we don't at this point see a backlog of cows in Quebec, in the eastern part of Canada, and we're buying from Ontario out to the Maritimes. We have 200 acres of property where our plant is, and we're only currently using 25 of them, so we do have room to expand our operation as well if necessary.

[Translation]

Ms. Pauline Picard: I see.

[English]

The Chair: Your time is almost up.

I think this question can be answered here. Mr. Goldstein, would you care to answer that question as to how it relates to you? You can't speak on behalf of Quebec, we understand that, but can you relate your own situation with gross returns and margin differential between May and September? It talks about late August and about the period of 2002 and how this performance was maintained through the summer of 2003. Give us an overview of where this picture has gone. Because out there people are believing there's high profiteering, and I think this would answer Mr. Plamondon's question. Even though we can't relate it to the Quebec situation, I think it would be relative.

Mr. Lorne Goldstein: I think I can only speak on behalf of our company; you're right.

» (1720)

The Chair: That's right. That's all we're asking.

Mr. Lorne Goldstein: Unfortunately, I can't speak on behalf of the industry. I can tell you that in May we faced a disaster. We have 1,200 employees employed at our plant in Guelph. We got a phone call that all the borders were closed. We had about $4 million or $5 million worth of product on the water, and we had containers being shipped, and what was really important was we had inventory in freezers that we didn't know what to do with.

Our reaction was that we laid off everyone at our plant, and that got national notice. We realized very quickly that in order to stay in business—and we were talking about survival—we had to set some market prices for cattle in Ontario. No one was killing cattle in the country. What we did first—and I'm quite happy to provide anyone with the records on that—was fulfill all our obligations. We had cattle bought ahead. We even had some American cattle bought. There were, I think, about five or six loads that we had bought. We honoured these commitments, because, as you know, that's what you have to do.

We came out and decided to try to attempt to value this inventory on the information we had at the time, and it was very sketchy. Our losses in May and June were horrendous. In July and August, we did make some money, and in September and October, yes.

The question you have to ask yourself, though, is how you value your inventory. We are a private company. If you valued the inventory at what the markets were before the BSE crisis, you made an awful lot of money. But if you value it on what the expectations are and take off the carrying costs and the value of keeping an office in Japan that cost us about $10,000 a week to keep operating, the question is out.

I've been told by some people in Japan that this is a seven-year deal, that the story will only be told on this at the end of seven years, when you're BSE-free.

As a result of this crisis, we have determined that we're going to stay in business. As a result of this crisis, we are leading the way. Mr. Steckle, I think I talked to you before the last meeting in August. I wasn't able to be here, and I apologize to the committee if I insulted anyone. The reason was Mr. Dejonge and I were in Brazil looking at a brand-new tagging system that's going to allow gate-to-plate identification.

That is what is going to separate this industry, ladies and gentlemen: that we can show how fine our product is. You ask me, were there big profits? I'm telling you, sir, we have to put up plants that will have absolutely no return. If we don't put these plants up, this industry will be gone.

In 1985 or 1986, this industry was 100% Canadian-owned. We're proud to be Canadian; we're proud to have 1,200 employees here. But I'm telling you there's a reason why there's about 25% Canadian ownership today. It's because there really haven't been the profits in the industry.

I hope I've given you some insight on that, sir.

The Chair: Thank you very much, Mr. Goldstein.

We'll move to Mr. Kilgour for our line of questioning.

Hon. David Kilgour: Mr. Goldstein, this may not be aimed at you as much as it is at Tyson.

A voice: They don't invite me to their boardroom, sir.

Hon. David Kilgour: I want to know, in the interests of candour, whether you saw the judgment last week in Chicago, where Tyson was found guilty of illegally manipulating the cattle market. The impact of the manipulation was found to be in the order of U.S. $70 billion. Tyson was fined U.S. $1.2 billion in damages.

Can you tell us, though, how a packer might manipulate the market in Canada?

Mr. Lorne Goldstein: I have not seen it; I'm sorry, sir.

Mr. Bennie Dejonge (President, Better Beef Limited): I don't think anybody has a big enough market share to manipulate the whole market, unless there's collusion.

Hon. David Kilgour: That's the problem, though.

Mr. Chairman, I would like to seek unanimous consent from colleagues to waive the 48-hour notice period for a motion to the effect that Lakeside Packers, a division of Tyson Foods of Brooks, Alberta, Cargill Foods of High River, Alberta, and XL Meats of Calgary, Alberta, and Moose Jaw, Saskatchewan, having been invited to appear before the Standing Committee of Agriculture and Agri-Food today, on Monday, February 23, and having failed to appear, this committee send for these companies and persons, and their papers and records, by summons, and that the summons be for the first available hearing date to be defined by this committee.

The Chair: There's a point of order first.

Mr. Howard Hilstrom: My point of order is that this is not an appropriate agenda item to bring up during the presentation and hearings by this committee. As a result, it should not be put forward to this committee.

The Chair: I can accept the point of order, but I have to put the question to you: do you accept...?

I need unanimous support for this to become a motion that will carry—

Mr. Howard Hilstrom: There are only twenty—

The Chair: There are two things here. There's a point of order that you have raised, which I accept. But I also have a motion before the committee, and I cannot receive that motion and deal with it today unless I have unanimous consent to do so.

So I'm asking you, are you giving me unanimous consent to deal with it today? If you are, then we will deal with it. If we're not getting unanimous consent, then it must wait 48 hours.

» (1725)

Mr. Howard Hilstrom: There is not going to be unanimous consent because this was sprung on us without previous notice. We have these rules in place for—

The Chair: You have answered the question—

Mr. Howard Hilstrom: Mr. Chairman, I'm speaking.

The Chair: You have answered the question.

Mr. Howard Hilstrom: No, I haven't.

The Chair: I'm not going to give you any more time because you have indicated you are not going to give unanimous consent. That's all we need.

Moving on to our questioner, Mr. Kilgour.

Hon. David Kilgour: The George Morris Centre--would you think that's a credible organization?

Mr. Jim Laws: Yes.

Hon. David Kilgour: I gather this is a statement by the George Morris Centre—which you've probably seen—talking about packers' profits from October 6 to February 16. I'll give it to you, and we invite your comments on it.

Basically, the extra profit of packers—which they tell how they calculate and which I'm sure you've seen—is about $227 million between October 6 and February 16.

Can this be an exhibit, Mr. Chair?

The Chair: Absolutely.

Mr. Howard Hilstrom: I have a point of order, Mr. Chairman, relating to what has just happened here.

The Chair: You have a right to put exhibits before the meeting, and I've accepted that exhibit. There's no question about that.

Mr. Howard Hilstrom: I have a point of order.

[Translation]

Mr. Louis Plamondon The interpretation wasn't working when the exhibit was being tabled.

Briefly, sir, can you tell me about this exhibit?

[English]

The Chair: Mr. Kilgour, would you clarify to Mr. Plamondon what the exhibit was that you put before the committee?

Hon. David Kilgour: I'm sorry.

Can I give him your copy? We'll get—

Mr. Howard Hilstrom: On the same point of order, Mr. Chairman, I want to see that exhibit before it's put in.

The Chair: You have a right to see it.

Mr. Howard Hilstrom: I would like to see it, but it's not being offered. I would like to see the first one also.

The Chair: That is the only exhibit we have before the committee.

Mr. Howard Hilstrom: No, Mr. Chairman, he entered one in already. There's one before, with the last presenters—and I'd like to see it too.

The Chair: Okay, you'll get that.

Mr. Howard Hilstrom: Right now, I'd like to see it, because it's happening during this committee meeting.

I'd ask the clerk to deliver a copy to me.

The Chair: We'll get it to you.

Mr. Howard Hilstrom: I have a point of order, Mr. Chairman, on these exhibits being presented by Mr. Kilgour. I object to their being put in, because they're in English only. I want them in English and French, or else we're just circumventing the rules of this committee.

Some hon. members: Oh, oh!

Mr. Howard Hilstrom: It shouldn't be tolerated.

Rule on that: should it be in English and French, or not? I want a ruling.

The Chair: I will ask Mr. Plamondon.

Are you objecting to this, Mr. Plamondon?

Mr. Howard Hilstrom: Mr. Chairman, I am a member of this committee and a member of the House of Commons. I am a member of Parliament, and I have as much right as Mr. Louis Plamondon has to object to this entry. You did not ask whether Mr. Plamondon objects to my objection.

You rule on it.

The Chair: I'm going to rule that we're going to allow that to stand. If he puts it in a French–

Mr. Howard Hilstrom: Whether it's in English or French, it doesn't matter.

The Chair: –version, I'll accept that as well. I think we're wasting valuable time, because our witnesses are here today.

Mr. Howard Hilstrom: That's because you, Mr. Chairman, are breaking all the rules in this committee. I won't stand for it.

The Chair: Mr. Hilstrom, I'm ruling and that is my ruling.

Mr. Goldstein, Mr. Dejonge, is anyone ready to prepare to speak to the presentation?

Mr. Laws.

Mr. Jim Laws: Well, again, we didn't get a chance to see this sheet beforehand, but I have been to speak to the fellows at George Morris Centre. They have a model they've worked on. They've told us they have these sources of information, but they haven't given us the source of them. I do respect them, but I'm really not convinced that they have the actual price.

They have perhaps some wholesale asking prices, but everybody knows that everybody publishes wholesale asking prices. When you buy a large volume of meat, depending on where it's going and on what quality it is, whatever, that's not the final determined price of what the packer sells.

I'm not totally confident in the model they're using. I've never seen this particular spreadsheet here. I'd love to comment.

The industry is working on it. The Americans have a boxed beef report that is required by USDA. It's reported on. The packers all send in information. That's being worked on in Canada, on a voluntary basis. It's being developed collectively. It's not quite there yet with agreed upon information sent in. It would be coordinated by an independent third party so that the prices wouldn't be known; individual prices wouldn't be known to anybody.

» (1730)

The Chair: Okay.

Mr. Kilgour, one more question.

Hon. David Kilgour: The Canadian Boxed Beef Report for February 16 is the most recent report available. The report, Mr. Chair, indicates that profit margins for the industry were reported to be $350 a head last week, compared to about $120 a head at this time last year.

Our cattle farmers are going under. We've heard talk of suicides, and I'm sure you've heard it as well. Our consumer prices remain nearly the same. How do you justify these kinds of margins that you're currently making on the backs of farmers and consumers?

Mr. Jim Laws: Again, I would say that I have been to the George Morris Centre in Guelph. I've discussed the model. I've asked to get copies.

Hon. David Kilgour: You don't need to repeat yourself, sir.

Mr. Jim Laws: I don't, again, have all the details of what model they're using. I don't know the gross margin they're talking about. Have they taken into consideration all the extra expenses we have as packers now? I'm not convinced they do in that model.

The Chair: Your time has expired, Mr. Kilgour.

Mr. Borotsik.

Mr. Rick Borotsik: Thank you, Mr. Chairman.

First of all, Mr. Goldstein, you had indicated, and I agree, on May 20 you obviously had some difficulties when this hit. You also said you don't really know what the value is because you don't know the value inventory, whether it should be valued at pre-May 20 inventory amounts or post-May 20 amounts.

As an editorial comment, I can assure you that the value of the herds out there are equally up in the air. There are a lot of producers who have less value to their inventory right now, post-May 20, than they had pre-May 20. Believe me, producers out there are equally in difficulty. You want to stay in business and say you can stay in business. A lot of those producers cannot stay in business. That's why we're here today.

I thank you all for being here, by the way. I wish we had the other processors.

You heard the previous presenters, the value-added processors. I'd like your comments. They said they cannot access Canadian beef and would like to open up additional, supplemental, import permits. Do you agree, first of all, that the supplemental import permit should be opened?

Secondly, can you tell me why it is they can't access Canadian beef? You're the plants. Why can't you supply them? They're a market. You're the plant. We have the cattle. Why can't you supply them with the product?

Mr. Lorne Goldstein: First of all, in the way the present inspection system exists today in Canada–and I'm talking specifically about killing over 30 months, youthful plants and non-youthful plants–we can't kill the cows. We're not allowed to kill the cows. We're not in the market to look at where these cows are.

If there's a problem in Ontario, we're quite willing to step up, as long as we don't create a bigger disaster by jeopardizing the youthful licence of our plant.

Mr. Rick Borotsik: Yes, but looking at their list, it's not only cows they're worried about. There are other products they're looking for offshore that they say cannot be accessed from your plants. It's not just cows.

Mr. Bennie Dejonge: That's absolutely correct. I'm listening to what the farmers or the producers are asking for--

The Chair: Can you speak up, Mr. Dejonge? We can't hear you.

Mr. Bennie Dejonge: It's my English.

The Chair: No, it's not your English. You're doing fine.

Mr. Rick Borotsik: Come on, I have four more questions.

Mr. Bennie Dejonge: Both sides of the fence are right. We as a company decided the export market, such as the United States, is important to us. So we're classified as a youthful plant. We are not allowed to kill cattle 30 months and older.

» (1735)

Mr. Rick Borotsik: I understand that, but there's product that these processors are looking for that's 30 months and younger too. I have the lists. Why can't they access that meat from your plant? Why are you selling to the U.S and Mexican markets and not to the Canadian processors?

Mr. Bennie Dejonge: Take my word for it, for anybody who has the money, I have the beef.

Mr. Rick Borotsik: That's what I was looking for. Thank you.

Should supplemental import permits be allowed?

Mr. Brian Read: I'll field that. In all fairness, I think there has to be a confidence developed with supply from Canadian beef. We expected big numbers of cows coming out of the west. They didn't come for economic reasons. You gentlemen decided to let them bear another calf. Those--

Mr. Rick Borotsik: But 11 cents a pound isn't enough for that animal. That's why the cows have been kept back.

Mr. Brian Read: But now you have a program in place. Are they starting to roll now?

Mr. Rick Borotsik: The program is not quite there.

He's talking about the $320 program.

Mr. Brian Read: Yes, the $320.

Mr. Rick Borotsik: But don't blame it on the producer.

Mr. Brian Read: That's the reason why the cows never came. There wasn't a supply in Canada of culled cows. That's all I can talk for, gentlemen, not steers--

Mr. Rick Borotsik: Yes, you're the cow guy.

Mr. Brian Read: I'm the cow guy, yes. That's one of the reasons why the cows didn't come out of the west.

Mr. Rick Borotsik: All right. If you paid higher prices, do you think the cows would come?

Mr. Brian Read: I'm wondering how much of it is emotional.

Mr. Rick Borotsik: Trust me, the emotion is shooting the cow and getting nothing for it as opposed to getting value for it.

Mr. Brian Read: We're talking about dollars and cents you're getting paid for the cow. Your calf business this fall did very well, did it not? It was lucrative. Let's not say very well, but lucrative under the conditions. Is “lucrative” a fair word?

Mr. Rick Borotsik: It was fair enough.

Mr. Brian Read: We expected the cows to roll in the west. They didn't come because according to the word we got--I'm sorry, from CCA--they were held back to breed, which made economic sense.

So we're expecting to see those animals in May or in March or April.

Mr. Rick Borotsik: The last time you guys were here you told me you had freezers full of inventory. Is that still correct? Do you have freezers full of inventory?

Mr. Brian Read: I currently have three freezers.

Mr. Rick Borotsik: I just heard from the value-added processors that there's no surplus of beef. Can you please tell me who's right on this one? I would suspect that if there are freezers full of inventory.... In fact, you told me you were accessing as much freezer space as you could across the country, and if those freezers are full I would consider that a surplus. I just heard there's no surplus beef. Can you tell me who's right and who's wrong?

Mr. Brian Read: I'll show you my inventory, sir. I have three freezers.

Mr. Rick Borotsik: So there is a surplus. Why can't they pay...? Bennie.

Mr. Bennie Dejonge: There is a surplus of beef, no question about it, but it's not the stuff he wants. For what he needs there is no surplus.

Mr. Rick Borotsik: I also heard the comment that self-interests are prevailing. That's what I heard from the last presenters. No, in fact the term used was it's selfish interests that are prevailing. I heard it wasn't the value-added processors who were the selfish interest. I heard that perhaps it was the producers, and I have some question about that. Is that selfish interest prevailing in the packers at the present time?

Mr. Jim Laws: I want to say that all the packers are in business to be in business. For any business in Canada their main mandate is to stay in business, and packers can't afford to bid more for cattle than they can get from total revenue on the other side of the equation.

Mr. Rick Borotsik: The last question I have is on your statement that there's $193 left per animal right now. You can make $193 less per animal right now because of all of the reduced value in your commodity.

Can you tell me how much less per animal you're paying for that raw material?

Mr. Jim Laws: It's certainly a free market, and the packers take that into consideration when they--

Mr. Rick Borotsik: No, you're making $193 less per animal. You told me that. You showed that. How much less per animal now on average are you paying as the packer to the producer? How much less per animal are you paying now on average than you did prior to May 20?

Mr. Jim Laws: I believe that just recently fat steers and heifers sold for about $85 live a pound. What was the high last time before that? It was about $1.15 at the most, $1.04, depending on what the range was. There are also more rendering costs. The Canadian dollar has gone up considerably. So we're getting less for that in terms of--

» (1740)

The Chair: The debate ends there with you. It goes to Ms. Picard.

[Translation]

Ms. Pauline Picard: Thank you, Mr. Chairman.

I'd like you to answer a very simple question. My colleague and I live in a region that accounts for 40 per cent of Canada's overall dairy production. Clearly, our producers are experiencing a great many problems with culled cows at the present time. Many of our young producers are on the verge of bankruptcy because the significant sums of money set aside at year's end to invest and to buy... I don't need to explain all of this to you.

How do you explain the fact that the price of cattle and culled cows has dropped, while retail prices, for example, the price of ground beef, have remained steady? Which sector of the industry is benefiting from the fact that producers are being paid less while consumer continue to pay the same retail prices? Do you have a clear explanation for me?

[English]

Mr. Brian Read: I can only take you through to the end of the production line. I can't speak for retail, nor can I speak for how much it costs to produce the product beyond the raw material. We are concerned with our supply. We need the supply of animals to keep our plants running. There's no doubt about that. But if you figure it out, May 20 they were receiving...when the border was open to cull cows in the dairy sector they were receiving approximately $600, say $700, a cow. The average dairy herd in Canada is how many cows? Is it 50 cows? What's the average herd for a dairy farm?

I think it is important, Mr. Chair, that I walk this down. Say it's 48 cows. So the annual cull is 16%. That's how many cows a year would be culled out of that herd. That would be four, three...say eight. That would be eight cows a year coming out of the average dairy farm across this country. Say they were getting $700 prior to May 20. Currently they're receiving, out of the eastern Canada market, gentlemen, approximately $200 a head from the packing industry and $320 from the federal government and provincial programs. That's a difference of $180, I believe, on eight heads. You're talking $1,600 for that net income to that farm. I don't know if that's so bad. If $1,600 makes a difference in a year's business, you have to question its validity. I hope it's viable because we do need that livestock.

As far as the prices we're selling the commodity for are concerned, the industry was forced to break into people's inventory. The Alliance for Fair Trade didn't mention it, but the only way we could keep that product moving was to displace and let them hold Oceanic product. We sold it at depressed prices. We are still selling it at depressed prices. We're trying to hedge it up in towards Oceanic values so that we can put it back on the buy, which we were able to do two weeks ago. We did bring them up six cents. We're not all enemies here.

We should be collaborating to make this thing sustainable. I'm not willing to play the political split here. We have an industry that I believe is sustainable, and that's where we should be moving to. Let's try to sustain this, not have a me-you thing.

I had to make my point clear on the average cull. When you look at the breeding herds, I believe the average breeding herd, breeding stock--and I'll let the professionals down here talk--across the country is 38, or is it more? It's just a statistic I read, and it's like the George Morris statistics; I'm not sure how valuable they are.

Mr. Howard Hilstrom: Thirty-eight is not a commercial farm.

Mr. Brian Read: No, but is that the average breeding stock, 38?

Mr. Howard Hilstrom: The number of animals on a farm? Sure. In the United States it's about 47.

The Chair: This is Ms. Picard's round.

Mr. Brian Read: Sorry, Ms. Picard. Did I answer your question? I'm sorry, I was just going to lead into the next....

I apologize, Mr. Chair. Thank you for correcting me.

The Chair: Okay, we'll move on to Mr. McTeague.

Hon. Dan McTeague (Pickering—Ajax—Uxbridge, Lib.): Thank you, Mr. Chair, and thank you, witnesses, for being here today.

I'm replacing Rose-Marie Ur, the vice-chair of this committee. I thank her for that. It's a very fortunate opportunity for me. Although I am certainly not as conversant in this industry as most of my colleagues here, there are many similarities to the work I've done in the past on the Competition Act.

Gentlemen, I wanted to find out, particularly from you, Mr. Read, and you, Mr. Dejonge—you can both answer the same question—if you both operate feedlots and slaughterhouses.

» (1745)

Mr. Brian Read: We don't. We buy everything on an open market. We have traditional auctions. We have no feedlots.

Hon. Dan McTeague: That was just so I'd have a better illustration. The angle I'm going to take on this is more on the downstream of the industry. You're up almost in the middle part of that.

The concern that is often raised is that in the case of Mr. Dejonge and his company, and other larger companies, we may see situations where you buy product from independents as well. Is that correct?

Mr. Bennie Dejonge: Yes.

Hon. Dan McTeague: How are the prices you establish paid to independents? How do you do that? It's an open bid process at the stockyard, I take it?

Mr. Bennie Dejonge: Yes.

Hon. Dan McTeague: I'm doing this not just for the benefit of television, but to come to a point that I think is very important, that they are done by an open auction system. Is it possible among all of you here to have a closed bid system, where the bids are sealed, as we see in other industries? You'd bid on a particular cow, a particular height, age, weight, etc., and the bid would be sealed--it wouldn't be open--so this person over there wouldn't see the price you're paying for it.

What I'm driving at is that in the case of your company, sir, it's pretty clear you are a vertically integrated company. You're often competing against the independents, since you have your own feedlots, for price.

Mr. Lorne Goldstein: May I put in a perspective? We have approximately 3% to 5% of our total slaughter on feed, just a very small amount.

Hon. Dan McTeague: I understand, but in a particular regional market it may be higher than that. You're talking nationally. Is that correct?

Mr. Lorne Goldstein: No. Of the cattle we slaughter, we have on feed approximately 3% to 4% of those.

Hon. Dan McTeague: What I'm driving at here is that you have some farmers, cattle producers, who literally are losing their shirts. I think we all understand that; it's been recognized time and again.

What I wanted to find out is if it's possible, under the set of circumstances, that one of the things contributing to the depressed prices may also be that because you're in a vertically integrated company, you are able to go beyond the question of packaging. You're able to somehow influence the prices upwards, something that of course leaves the independents in a situation where they may only get, say, $500 for a cow, and you may be able to offer your cow for $200 and cross-subsidize the loss at the feedlot with what you're doing at the packaging level.

Is that possible? Are you aware of that happening?

Mr. Bennie Dejonge: I'm not sure I understand the question.

Hon. Dan McTeague: Does cross-subsidization exist in your industry? You compete against independents. You have your own feedlots and you purchase from certain independents. Is that correct?

Say, for instance, you had 99% of the market and that other person had 1% of the market, but all he does, as a farmer, is bring a cow to market. You drop the price to $200, but it takes him $500 to turn a profit. You can drop the price because you're making money at the packaging level. That's what we call classical cross-subsidization in a vertically integrated type of industry.

You're vertically integrated. You produce the cow and you slaughter the cow. The independent doesn't slaughter the cow; he has to sell to you because you're the only means by which he can get his product to market.

What I'm asking is, does cross-subsidization exist in your industry? Would it help in an auction-type setting to have sealed, enclosed bids when you're bidding on cattle?

Mr. Lorne Goldstein: I want to make sure we set the record straight again. We don't have more than 3% of our total kill on feed in a year. So it's a very small amount of what you call vertical integration. We do not own any farms. We do not have any feed mills. We don't do that.

Hon. Dan McTeague: Are there any other players in the industry who do?

Mr. Lorne Goldstein: I can't answer that.

Hon. Dan McTeague: Are you aware of any?

Mr. Brian Read: Not that I'm aware of. We're only in the cull cow business. It's only 4% of the slaughter, and that's all our plant does. But I would say 80% are sold through public auction. It's a real social gathering.

Hon. Dan McTeague: What I'm driving at here is the ability for someone to strategically depress the prices paid for cattle. I appreciate the fact that you're not as big a player as some of the other ones may be, but despite the Competition Bureau's opinion, which was expressed here a few weeks ago, I think there is a very strong case for it to become involved under section 78. This doesn't deal with you directly. You're not aware of any cross-subsidization, I understand that, but how would it affect your industry if tomorrow there were a federal or municipal or provincial mandate that requested that you have sealed bids on cows you purchase at the stockyards?

» (1750)

Mr. Brian Read: I'm not sure. I'd have to study it, but if you're looking at a guaranteed buying price, if you're willing to take the commodity out of the business, then buy our product too, and then we'll process the animal. That's the way this could work successfully, having government run the thing. Is that what you're asking?

Hon. Dan McTeague: No. I'm saying in the situation here, is it possible? I've heard from farmers in the northern part of my riding, which I'm about to lose, that there has been the classic squeeze on some of the farmers as they bring their product to the packagers at the feedlots and that the squeeze is exacerbating a very difficult situation. I'm not assuming that is your companies, but it's clear to me the problem is that you have a narrowing of options. There are a lot of cattle out there. The problem is that very few people are processing, and even fewer at the downstream level.

You said a little earlier that you were dealing with the retail industry. Is the Schneider and Maple Leaf merger going to affect your industry at all? And does the current condition of the grocery industry in Canada, with two dominant players controlling 60% or 70% of the retail product to consumers, have an impact on your price?

Mr. Brian Read: I don't think so.

Hon. Dan McTeague: Thank you.

The Chair: Mr. Goldstein.

Mr. Lorne Goldstein: Mr. McTeague, it is up to the producers to decide how they want to sell. We take raw material and transform it. We're selling labour, and we sell it around the world, which is a much smaller world today than it was in May. If they want to sell it in a different fashion, we have no problem with that, but it is up to them to decide.

The Chair: Mr. Laws, do you want to expand on that?

Mr. Jim Laws: I'm about 90% certain that in western Canada a lot of cattle are sold through sealed bids at feedlots and there is a certain day--I think it is a Wednesday--when the packers are invited in. There are sealed bids, and a lot of cattle moves that way. That is my understanding, but I can certainly find more information for you.

The Chair: We will move to the other side. Mr. Borotsik.

Mr. Rick Borotsik: I have one question.

In fairness, it really doesn't matter to the packing industry how many cattle are out there. We have heard right now that there are 15 million--record stock numbers for cattle in Canada. That may increase to 16 million or it could be 17 million. It doesn't really matter to you as long as you have access to the cattle. That's a fair statement, I would suspect. It does matter to the people who produce cattle if they can't sell them and get a profit on them and feed them, which is the problem we have now.

Mr. Laws, at the end of your presentation you said if the border doesn't open, some corrections may be in order. I'm not thinking of the packing plants' corrections; as I just said, it doesn't matter to you how many cattle are out there. What kinds of corrections do you foresee being put into place to rationalize this industry?

Mr. Jim Laws: The market for live animals and meat was based on the entire North American market. If we're running at near capacity and we can't put up plant and equipment tomorrow, obviously it has to be on the supply side. There are going to be some corrections. It was scaled for years and years. There are all kinds of movement. It's very integrated in all the industry. Look at the situation: many of the packers in Canada now own processing plants on both sides of the border, and they had their supply and demand scaled to wherever they could move things. Farmers also had access to packers on both sides of the border.

Mr. Rick Borotsik: It's a simple supply and demand model, isn't it? If the supply is too extensive for the demand, the supply has to be reduced. But do you have any thoughts as to how that rationalization of the industry can take place?

Mr. Jim Laws: Well, we would certainly hope it wouldn't have to happen. We hope they will be able to come to some kind of agreement and that live animals will be able to move across the border.

Mr. Rick Borotsik: No, no, Mr. Laws, you said if the border doesn't open some corrections may be in order. Let's assume the border is not opening for a while. We just heard from one of the presenters that it may well be four or five years. I don't want to go there, but let's assume it is. What kinds of corrections, in your mind, should there be put in place to rationalize the industry?

» (1755)

Mr. Jim Laws: What would likely happen then, obviously, is that through supply and demand it will reduce itself. Absolutely, the number of live animals will go down because farmers won't be able to afford.... It's a terrible situation we're in right now. We realize that.

Mr. Rick Borotsik: Yes, we understand that.

I'd like to go back to another question that I don't think was quite answered for me. Should we open up some supplemental import permits in order to satisfy our value-added processors? Should they be increased?

Mr. Jim Laws: Should they be increased or should they be--

Mr. Rick Borotsik: Should there be more beef allowed?

Mr. Jim Laws: The Canadian Meat Council has in the past supported that when we cannot supply certain cuts of meat.... I understand there's some so-called grass-fed virgin bulls from New Zealand that have meat of a certain quality, characteristic, that we can't get in Canada and that we have supported. Yes, our members need that because many of our members are also meat processors.

I think there's a situation now with one of our members who needs, for instance, beef hearts. They just need more beef hearts. If you're only slaughtering and supplying so many, even at capacity.... They like the characteristic to come from that particular meat in a certain application they are using as well.

Mr. Rick Borotsik: Okay. What about normal cuts of beef that we can get out of our cows and out of our own fats?

Mr. Jim Laws: It has been the process first, as the previous presenters mentioned. They would first come to the packers and say, listen, can you supply this? We'd been given a chance to answer yes or no. That's been the way it has worked in the past. We have been in good communication with the people at the foreign affairs department who issue these permits, and they have consulted with us.

The Chair: Howard.

Mr. Howard Hilstrom: Thanks, Mr. Chairman.

Are there any plants of any significant size in Ontario or Quebec that are killing animals of over 30 months of age? I've heard--and of course you get talking coffee talk here and you don't know whether it's true or not--of culled cows being shipped out to XL Foods in Calgary from Ontario and Quebec to be killed out there. So my question is about the slaughter capacity for over 30-months-of-age animals in Ontario and Quebec. Is there that capacity there? Do you have the names of those plants?

Mr. Brian Read: I guess I'll answer it.

You're absolutely right. There are cows being bought out of Ontario. That's why Jim's opening statement says there is a market. It is functioning; we are moving livestock across the country.

I'm from Quebec. The plant is Levinoff Meats Limited. Currently, as we speak today, we have about 900 animals standing in front of us, which is one day's slaughter. That's all we have. We don't have a big surplus standing in front of us. Prior to the Christmas holidays we had three days in front of us, but that was all cleaned up by year-end. So there is not--

Mr. Howard Hilstrom: Over 30 months of age?

Mr. Brian Read: They are all over 30 months. That's all we have.

The capacity is there. We're not falling over cows, let's put it that way. And if you need more capacity, we'll make that available. Our family-owned company agreed to double its capacity. We've done that. And we'll double it again if we have to.

The Chair: Mr. McCormick.

Mr. Larry McCormick: Thank you very much, Mr. Chair.

Mr. Laws, I realize you're the hired person to deliver the message, but certainly a real insult to any producer I've met across this country is when you say the price of hamburger is low today. I don't know where you shop or where your chef shops, or whatever, but I've been in four provinces in the last three weeks and I don't think very many Canadians would say the price of hamburger is low.

In fact, I just want to ask you about this. Retailers have told us that in the last three or four weeks the price has gone up on the product to the stores. At the same time, the price has gone down to the producer, Mr. Chair.

Mr. Jim Laws: Well, as a consumer myself, I can tell you that every Saturday morning my daughter and I go shopping to give my wife a break, and I've seen lots of sales here in Ottawa, at Loeb and Loblaws. That's from my standpoint.

I was on my way to Charlottetown last week to speak in front of the P.E.I. Standing Committee on Agriculture. I had to turn back because of the storm, but the Canadian Council of Grocery Distributors were doing a presentation with us--and I saw their presentation. They have data to show that there have been lots of specials at retail stores across the country.

I didn't show you my presentation, but I have some Stats Canada data and I have some copies of flyers that we scanned in just a few weeks ago from--

Mr. Larry McCormick: Oh, there have been specials, but I'm talking about the prices day in and day out. There's a big difference between specials, or a loss leader, which is another challenge because then you're putting some smaller store out of business....

Mr. Chair, some of the strongest language I've ever heard, which is tied in with all this, was by a member from New Brunswick, who is sitting in the audience, when he was chair of this committee and we had the wholesalers in front of us. He said, “It's pretty scary, isn't it, that two of the wholesalers control more than 50% of the groceries in Canada?”

Mr. Laws, you're here today, but we don't have the packers and the processors here today. It's unfortunate. So you're the spokesperson for these people from the west.

What percentage of the market do XL, Tyson, and Cargill have for fat cattle or young cattle in Canada? They have most of the market, but I just wonder whether you can....

¼ (1800)

Mr. Lorne Goldstein: About 70%.

Mr. Larry McCormick: They certainly must control quite a bit in the United States if they've been found guilty and charged in excess of $1 billion. I'm sure they're going to take that to court, and that will go on for many years.

Mr. Read, I had the opportunity of talking to you here earlier. I appreciate the fact that your company is buying culled cows and that they're going west and there is a competitive market, but I want to clarify.

I don't think I ever told you, but I did truck and I did consign to your company a long time ago.

Let's go to a sales barn in eastern Ontario tomorrow. There are very few buyers there for a cow, but if a person bought all the cows there, how many places are there in Ontario to ship that culled cow? Are you the only place where they could take it to be processed?

Mr. Brian Read: Currently under the guidelines for us to allow exports to the United States and Mexico, we are the only cull cow plant in eastern Canada.

And that's a good point you bring up, Larry--Mr. McCormick, sorry.

Mr. Larry McCormick: I've been called a lot worse, so go ahead with Larry.

Mr. Brian Read: That should send this group a message of how difficult the beef industry in Canada has been. I mean the closures in the packing industry across this country. As early as January of last year we had one close that was 40 years in business. We can't call it poor management. They weren't there to kill.

I think that answers your question.

As a family-owned company, we'll do whatever it takes to process the product before we get into herd rationalization. Our taxpayers don't deserve that.

Mr. Larry McCormick: Mr. Read, I have to ask this question because of the pain in our communities and families. What was the price paid last week? I could check the local weeklies, but how much was paid for these culled cows?

Mr. Brian Read: The received approximately $200 from the plants and $320 from the government. I'll come back to an earlier comment--

Mr. Larry McCormick: How much a pound is that? Just keep it simple for me.

Mr. Brian Read: I'm giving you a total dollar for the animal.

Mr. Larry McCormick: Is that 10 cents a pound or--

Mr. Brian Read: We paid 28 cents, plus you have $320 from the federal government.

But I come back, Mr. McCormick--and please, let me come back again. The average dairy herd in eastern Canada, we agree in this room, is 48 animals. Cull 8 of those a year and the difference between what you were receiving prior to May 20, 2003, and after is $200. So you're looking at a loss of income of approximately $1,600 a year to the average dairy farmer in eastern Canada. So, Mr. McCormick, please.

Mr. Larry McCormick: Mr. Read, I think the federal government just--

The Chair: Are you finished, Mr. Read?

Mr. Brian Read: Sure.

Mr. Larry McCormick: Actually, Mr. Chair, I think the federal and provincial governments should work with Mr. Read's company.

I just want to clarify the price one more time, because I can't expect your company to invest any further in your industry unless we can guarantee that we're going to have a market of animals for you. As you mentioned--or somebody did--when the border opens up they're going to be gone to the U.S.

In the last two months, what was the average price paid for those cows?

Mr. Brian Read: We were down as low as 13 cents prior to the holidays because we had a big, fat run coming, a traditional cull in the dairy industry because the grass was snowed over. Now we're back up to 28 cents. We have two buyers in the ring.

Mr. Larry McCormick: But there are a lot of cows that are going to come on the market in the next two or three years, the old beef cows, for example.

Mr. Brian Read: That's the number we have to look at. I think we have to understand what the plan is to do with these live cows in the industry. I think between us we can react to it, Mr. McCormick, but first we have to see it.

Mr. McCormick, we had alluded to the Alliance for Fair Trade in Beef....

Can I do that, Mr. Chair?

¼ (1805)

The Chair: Yes.

Mr. Brian Read: Mr. Kilgour mentioned Safeway possibly running out of beef.

Mr. Larry McCormick: Subway.

Mr. Brian Read: I'm sorry, Subway. Thank you for the correction.

I have to question where it was manufactured. I'm wondering if their risk is because it couldn't get into Canada.

Hon. David Kilgour: Actually that's a good point. It's raised in the articles.

The Chair: Before we go on to the next speaker, I want to point out to all members here that any documents shown as exhibits to our witnesses today will be done in both languages before they're circulated. I want everyone to understand that it is not our intent to circulate documents in only one language at this table. For the benefit of the people here, I have agreed to accept documents in one language for the purpose of this meeting today only.

We'll move on to the opposition. Mr. Borotsik, do you have any more questions?

Mr. Hilstrom, you're not wearing thin on questions, are you?

Mr. Howard Hilstrom: Well, we can talk about the beef industry for quite some time.

The Chair: Let's keep it to the beef industry and not get the political science involved.

Mr. Howard Hilstrom: The political thing is a mess too--we can't get those borders opened.

Farmers are getting together--and I'll talk about Manitoba and Saskatchewan--to talk about forming co-ops in order to have a kill plant for animals over 30 months of age. If they were to kill 200 a week, would they have any chance of success in a competitive marketplace in Canada?

Mr. Brian Read: In a competitive marketplace they would not survive. As we alluded to before about the closures of the beef industry, these were well-managed long-term beef plants. In the long term you may invest $10 million to $30 million to open one of these plants and you may be successful for two years, but then what do you do with the buildings? That's our concern.

Mr. Howard Hilstrom: You mentioned that roughly 65,000 animals a week are being killed now--that's in Canada, I guess. How many of those animals are over 30 months of age and how many are under 30 months of age?

Mr. Brian Read: Currently we're killing about 8,000 that are over 30 months of age.

Mr. Howard Hilstrom: That's 8,000 over 30 months of age in all of Canada.

Mr. Brian Read: That's the current number. That number is subject to change again, if we can come outside of this bubble and get a clear picture.

Mr. Howard Hilstrom: Under the present scenario, obviously there's going to be a significant contraction of the breeding beef herd in Canada over the next three or four years if the borders aren't opened up. Would you agree with that statement? If we don't have any more access to exports than we do right now with boxed beef, will the Canadian herd not have to be significantly reduced?

Mr. Brian Read: Expectations will have to change drastically. The two options are to reduce the herd or increase the population by 18 million.

Mr. Howard Hilstrom: Beef exports have been a big earner of hard foreign currency for this country in the past. If we significantly reduce our breeding herd, there will be fewer young calves to be fed in feed lots and then exported as boxed beef. So is there a possibility that Canada will run short of young animals to be slaughtered and exported as boxed beef, as this national herd of breeding cows shrinks?

Mr. Brian Read: At this point, I don't know if that's a road this room can afford to go down, because you mentioned what it contributes to the GDP. I don't think we can afford to let this industry go down. I think this industry has to grapple with itself, and as leaders at the political level and the industry level, you people also have to grapple with this. Get these borders opened under a science. That's where our efforts should go.

¼ (1810)

Mr. Howard Hilstrom: I won't talk about the dairy industry because it operates a little differently, but the basic cow-calf operator has always followed a roughly seven-year cycle of prices going up and then down to the low point, and then the herd rebuilding. That's all been thrown askew now. That is why a lot our questioning today is about what you and the industry can tell the beef producers about the future that will help them make decisions. Right now it seems to simply be: “Sell your calves for whatever you can get for them, sell your cull cows for whatever you can get for them, and try to get as much government subsidy as you can. Then see if you're still in business.” That's the scenario that's playing out, isn't it? Is that accurately described?

Mr. Brian Read: I think that's some of the emotion that we definitely have out there. Some of that is created because we don't communicate well beyond the national association levels to say, “Hey, there is a program out there for the cull cows.”

We support the program because we do believe this is a sustainable industry. I think a lot of the emotion came back in on December 23, when Secretary Veneman announced she was going to delay her decision on cattle under 30 months of age crossing the border. That reared all of this back up again. So we know we're that close to them, to our American counterparts, our allies, thank God, but now we've just got to keep pushing forward.

I understand that this week we have our chief veterinary officer going down to meet with their chief veterinary officer, so they can move the science together.

What we need from you people is, how do we get the politics and the science to come together? I heard an old scenario that whether it's right or not, you can buy science.

I'll stop.

The Chair: We're out of time here.

We'll move to Mr. Goldstein, who I promised could get in.

Mr. Lorne Goldstein: I think I heard you ask, if I heard you correctly, as I tried to, what message do we want to send to the cow-calf industry today?

The message is very clear to us. On May 20 this industry turned, and we will never be the same again. We have to develop a product that is world recognized for food safety, world recognized for being the best, or for its quality. We have quality producers out there, but we must have mandatory tagging; we must have on-farm asset; and we must have the guts—I was going to use a different word, but I won't—to follow through and police the cheaters.

There are 99% of the people out there who are doing a good job. The 1% is why we're here today. The 1%—and I'm not trying to lay any blame on anyone. But we, as an industry, have recognized the changes that have to be made. We have to change our plants; we have to change our identification systems. The cow-calf people have to know that if they don't buy in, they won't be there.

That's the message I would appreciate you folks taking back to your ridings.

The Chair: Thank you, Mr. Goldstein. I think we all agree on that point at this meeting.

Mr. Barrette.

Mr. Gilbert Barrette: Thank you, Mr. Chair.

I'd like to know, from any one of you, if you could increase your slaughter capacity to answer the needs of at least your predecessors, the Alliance for Fair Trade in Beef.

Mr. Brian Read: The answer is we have doubled our capacity in the last eight months, as we committed to doing back in August. We could bump it up another 35% very quickly. So the answer to your question is, yes, we will.

Mr. Lorne Goldstein: We could increase our capacity, but as I tried to explain before—and I guess I wasn't very clear—if we do it under the present rules today, we risk the whole export market. We have not done that. So if we can renegotiate the terms with the Americans to allow us to do it, we'd be very pleased to participate.

Mr. Gilbert Barrette: Thank you.

I have another concern. It is about the price on the shelf. You heard quite a few questions today about the same thing. We cannot explain to customers how come the producers receive maybe 15¢, or 10¢, or 20¢ a pound, and last year you used to receive around 60¢ or 50¢ a pound. You go to the grocery store and you pay about the same price. That's hard to explain and understand.

¼ (1815)

Mr. Brian Read: Are you talking mainly about the product over 30 months of age? Is that what you're talking about?

Mr. Gilbert Barrette: Ground beef, or even a steak, or whatever, in the grocery store.

Mr. Brian Read: I can only talk from our side of the business about what we've done. We have sold meat, and we continue to sell meat, below the Oceanic value. We're taking 22 items out of the cow itself that are basically going to rendering. Your question is twofold. You're asking why the producer isn't getting paid more; then why you're paying the same money at the retailer. I can only talk for the producer's side of it, because we don't sell to retail. I can only talk for what we do as a company.

On that cow carcass I think we really owe it to our farmers to educate them to say, this isn't what's being saved any more. The meat recovery system is $1.2 million—I'm talking about the live buy now. The mountain chain tripe...they all brought a good return to that cow, which allowed us to pay up for it. Those are gone. They are all going into rendering. There's no recovery. There are 22 items that we used to save that we don't save any more. Our selling price of meat on the lean side of the business is approximately 20¢ less than the Oceanic price—on the lean meats versus the fat meats.

The Chair: At this time I would exercise my prudence. I think it was important for us to hear this.

I would like Mr. Zies to come to the table. I would ask you, Mr. Read—you have just stated that you are selling beef below Oceanic prices—would Mr. Zies make you an offer this time? I have no idea—

Mr. Brian Read: Mr. Chair, in all fairness to Mr. Zies, I have left an offer on his voice mail as of Friday night, and he has agreed to come back to me tomorrow morning.

The Chair: Because there are many people watching the show and who will be watching for some time, at the end of this day we want some clarity on this issue, because there are all kinds of innuendoes, stories—some truths, some fiction—out there.

Mr. Zies, you have a moment to.... Make it count.

Mr. Scott Zies: I think it's important that we keep the context of pricing. We have to get it into some fashion where we can measure it at any given point in time. Yes, Brian, the meat prices have changed. At certain points in time your products in particular maybe were cheaper than Oceanic. In the current scenario now they are about the same. That's fine. We've also bought all the meat we've been offered. I've said that before.

The one thing we can talk to.... I can't talk to the specific things in the packing industry, but I do know that our members buy the products you guys produce. I think what everybody in this room needs is some sort of barometer to use at any point in time to determine how prices reflect what's going on in the marketplace.

The George Morris Centre brought forward some information, and for the most part, in the part of the industry we're in, the pricing on those finished products the packers produce is for the products we buy. For the most part, they are in the ballpark of what we pay for them on a weekly basis. That's how those reports at the George Morris Centre are generated, as are other reports in industry. There are other barometers out there, such as current market reports on any item.

There is some merit in that information, because it takes a snapshot of beef pricing on any particular item at any point in time. I guess you can marry that with what the actual live prices are doing at any point in time. You can get a reflection of what, in their opinion, is going on in the marketplace in terms of margins and whatnot. That's what they talk to in those reports.

We look at them all the time, as I said before, to help in our forecasting of where our business is going, depending on what's going on with the packers and the meat supply and everything else.

I think it is important; otherwise, it's going to be “here's what I think the price is”, and “here's what Brian thinks the price is”. It doesn't really mean anything to you folks. I think you need to establish the prices, and I think there is some information out there, if you are going to use it, that has some integrity and that we all can use. The prices are all set every week.

Pick a barometer out there, whether it's that report or something else—or we have a new one developed by somebody who knows how to do it—and there's a snapshot for any given week since May 20. That would be useful. I think that is what you would like to see. Up to this point, we can all say whatever we want, but we need something to anchor ourselves to in terms of beef pricing.

¼ (1820)

The Chair: Thank you, Mr. Zies. You can stay at the table.

Mr. Barrette, do you have another question?

Mr. Lorne Goldstein: Mr. Chair, Mr. Dejonge and I have been chatting here, and thank you for allowing us to talk quietly. We would like to formally invite your committee to come to our plant to see what's going on in a packing house today and what we're trying to achieve. I know you folks are very busy, and, unfortunately, we're about 600 kilometres away, but I think you might find it useful to see what we're going through on a day-to-day basis to produce the beef that your electorate is consuming.

The Chair: I will take that offer to the committee in the very near future, in fact at Wednesday's meeting.

Mr. Howard Hilstrom: Mr. Chair, may I ask a question?

The Chair: I want to get to my Liberal colleagues who haven't spoken yet.

I'll allow you time for a short one.

Mr. Howard Hilstrom: It's because of what Mr. Goldstein brought up. Are you expecting any more regulations to come down from the CFIA in regard to the packing plant industry, or have you been told everything that is going to need to be done in order to continue to export to wherever?

Mr. Read, maybe you'd like to respond.

Mr. Brian Read: At this point the answer to your question is no, we're not done. The big one is the feed topic, what SRMs will or will not have to come out of animal feed. The Canadian Meat Council's position as we speak today is that we support no change to the ruminant feed program, but we do support increased surveillance and possible licensing of using the product so that there are no mistakes and the product does not get fed to ruminants. That's our position today. We will also harmonize with our trading partner.

Mr. Howard Hilstrom: On the farm where I come from we have fuel that doesn't have any tax on it and it's coloured purple, and then you have this other fuel that has tax on it and it's a different colour. Maybe this feed material should be coloured differently.

Mr. Brian Read: That's a great suggestion.

The Chair: That's very positive, Mr. Hilstrom.

Let's move over to the other side to see if we can pick up something positive over here.

I'm going to go to Mr. Easter.

Hon. Wayne Easter: It's nice to see Howard positive, instead of just attacking us, for a change.

First of all, thank you for being here, because we are missing a large segment of the meat packing industry.

I hope Mr. Kilgour's motion is considered as notice, Mr. Chairman, so that we can deal with it at the next meeting.

I have two questions, three really. The first is on our ability to deal with the United States in terms of trying to get the border open.

I do wish, Howard, we would stop playing politics in this country, because I think the government.... I've been there. I've been down to talk to Attorney General Ashcroft. Every minister of the crown, in the last year, has been to talk to their counterparts in the United States. Vanclief and Speller have been down. As you know, the CFIA has been down. You've been down.

But we're dealing with a situation in the U.S. that is clearly not based in science; it is based in politics. We have to recognize that even if the President is on side, it still doesn't mean it's going to get done, because of the way their system operates. Their Congress and Senate are playing politics with this issue. That's sad, because I think we're all losing as beef producers in North America. It is an integrated market.

But having said that, and I appreciate constructive criticism, is there anything, from your perspective, that the Canadian government should be doing relative to the U.S. that we're not now doing?

I personally believe we should be playing a little more hardball than we are, because, for the Americans, the only thing they understand is hardball.

I find it amazingly strange that they'll basically–and this is not proper language either, Mr. Chair–kiss Saudi Arabia's ass. We export more crude oil to the United States than does Saudi Arabia, to say nothing of our natural gas. That's not to say we should cut it off, but the Americans should understand how valuable a natural resource producer Canada is to the American's industrial heartland. They don't understand that; it's clear they don't. They're isolated.

But from a critical constructive criticism point of view, I don't mind you telling us if we're not doing something that we should be doing. Is there anything we should be doing in that regard, from your perspective, that we're not now doing?

Secondly, Mr. Chair, on pricing, I find it remarkably strange on this aged beef. I do have a concern on the dental testing or the teeth testing. Producers who keep good records tell me they will have animals sometimes that are really only 26 months old that are getting targeted as aged beef, because usually there's some breed, Simmental, etc., that they may run into that problem with.

But for that product, and you know the pricing end, the producer gets virtually nothing for it. I think you said earlier that it was $200 for some of the culled cows, but a very low price. Where does this beef go? Does it go into the retail system? What's the spread in terms of pricing here?

I'm of the belief that somebody's getting ripped off, and it's likely the producer. Why can't we bring that spread closer together? Is there any way of ensuring that for this aged beef, when it goes in the market--it's perfectly good beef; in our area, it's a lot of Holstein beef--we can get more out of the marketplace for that?

This is my last question, Mr. Chair.

Do you have a concern about the concentration in the retail sector? I think part of all our problems is the concentration in the retail sector. There are damn few buyers out there for your product now.

¼ (1825)

The Chair: It's a four-minute question and a one-minute answer.

Hon. Wayne Easter: No, a four-minute answer.

Mr. Bennie Dejonge: If you're talking about the Canadian animal...it's 26 months old. They are very few and far between. There is the odd one.

I can't speak for anybody else, but if an animal comes to us like that, we pay the farmer exactly the same price as the other ones. We don't deduct for it. But some farmers, or some producers, have a habit of sending me 100 cattle and 98 happen to be a mistake. Now he has a problem.

Are we concerned about the retail getting a major piece of the action? As far as I'm concerned, as far as we're concerned, we're treating the whole thing very responsibly. We're not concerned about that.

Mr. Lorne Goldstein: On the third question, about the U.S., right now I would encourage you to give CFIA as much help as you can. They're responsible, they're great, they've led the way on this. We would like the opportunity to go home to think about it and maybe come back to Mr. Steckle if we've got some ideas, but I want you to know--and I'm not doing it because they might be in the room here--how they've led us through this myriad of problems. They've really been great.

As far as the retailers go, I had the opportunity of meeting with some very senior people in May. Each one said, we will support the beef industry; we will not back away because of a potential health problem.

The Chair: Thank you very much.

Mr. Borotsik for a very short question, and then Mr. Eyking.

Mr. Rick Borotsik: Some of our export markets have said to Canadian producers that they will not accept their product unless it's all tested for BSE. Do you believe export markets will open up if we test every animal for BSE? Second, is it physically possible for us to test every animal, in your opinion? You're the slaughter plants.

Mr. Lorne Goldstein: We have developed our business plans based on science all the way through. I believe we should trust the science. Of course, it's physically possible to test every animal, but then you get into the problem of what you do if you find one.

¼ (1830)

Mr. Rick Borotsik: That's why there are tests.

Mr. Lorne Goldstein: Do you bring it into your plant? I'm not trying to hide it--

Mr. Rick Borotsik: I understand.

Mr. Lorne Goldstein: Do you condemn the whole plant? We've come up with some protocols for testing that make sense. We're way ahead of the United States. I'm preaching to the converted, but we have to go back and prove the age of our cattle with proper ear tags. We must have an on-farm system so none of this mixing of feed can happen, so that we can stand up here and be proud.

The Chair: Mr. Eyking.

Hon. Mark Eyking (Sydney—Victoria, Lib.): Thank you, Mr. Chairman.

I don't really think the Canadian public wants to subsidize agriculture. They'd like to see it a viable industry and, when they buy food products, that a fair share is going to the producer, and even the retailer and the processor. We have a concentration of processors, we have a concentration of retailers in this country--it's different in the United States. But we have a fragmented group of farmers. They're all individuals. In order for a system to work well, everybody must have an equal stake. We seem to have a thing that works in the milk industry and a lot of the poultry industry, where they all seem to make a living. The consumer seems to be happy with it; it doesn't seem to be a problem. We don't have to subsidize it as a government. What if we had a system in place, to start off with the domestic products, where the beef producer would receive his cost of production and you guys put your margins down, as with the milk? Could you guys survive?

Mr. Brian Read: Only if you put the same type of program that you're putting into the livestock into the packing industry. If you put in a guaranteed buying price for livestock, you need to put in a guaranteed buying price for the meat, just as you do currently with the poultry and the dairy industry in this country.

Hon. Mark Eyking: Why would you need that?

Mr. Brian Read: Because it's traded as a commodity. You heard the Alliance for Fair Trade talk about the price of Oceanic beef, how they have to maintain their competitiveness domestically. We're talking domestically, correct?

Hon. Mark Eyking: Even if you talk internationally, could you compete? If the beef producer received his cost of production for cull cows, whatever is on the go, could you sell on the international market at those prices and process them?

Mr. Brian Read: You suggested dairy seems to survive without subsidization.

Hon. Mark Eyking: Right.

Mr. Brian Read: Maybe you could just explain to the group how supply management works.

Hon. Mark Eyking: You don't know?

Mr. Brian Read: I think I do. That's why I'm saying they're guaranteed a sale price as well. So we're good to go.

Hon. Mark Eyking: I'll explain it quickly, I guess. It costs a farmer so much to produce a litre of milk at his farm gate. That's what he receives. They go by graphs or whatever on how they produce it, how much it costs for feed, for replacement heifers, or what not. So they ask for that chunk. Whoever processes that milk has a cost to produce that litre of milk. They put their chunk in. Then the retailer puts his in, whatever sells. So the board sits down, sees that everybody has their chunk, and away you go. So why wouldn't it work in your industry, with all the meat you sell in Ontario or what not, that the farmers would get their cost of production?

Mr. Brian Read: Sure, and we'd get a chunk from manufacturing.

Hon. Mark Eyking: That's right.

Do you think the retail price would be much higher for meat products?

Mr. Brian Read: Over time, sure, I believe it would.

Hon. Mark Eyking: How much higher?

Mr. Brian Read: At least 16%.

Hon. Mark Eyking: Because of what reason?

Mr. Brian Read: Because of the number of livestock we have and the number of people in this country.

Hon. Mark Eyking: Would you entertain an idea like that, sitting down and looking at it?

Mr. Brian Read: I really would. It would take the commodity out of the business. That's what you'd do.

The Chair: I think we have come down to the point....

Yes, Mr. Laws.

Mr. Jim Laws: I think if you were to ask the entire meat processing industry...many of them are scaled to export. They have millions and millions of dollars invested in plants and equipment. I don't believe you would find full support for that from all of them.

¼ (1835)

Hon. Mark Eyking: For you guys?

Mr. Jim Laws: There are many processors in Canada who are geared to the export market.

It's a hypothetical question. You'd have to block the borders; you'd have to block imports. You'd have to do all kinds of things.

Hon. Mark Eyking: Oh, I don't know. Look at the Essos and the Ultramars of the world. They have accepted a certain price for oil, to assist them, right? Why can't the Cargills and the Tysons of the world accept a certain price for beef from producers? They're big enough. They're international.

Mr. Jim Laws: If you were to compensate them for all their investment in plant equipment and impose it on them, I'm sure their answer would be that they would not be interested in that system.

The Chair: I think we must cut that part of this debate off.

Before we close, I want to say as the chair and as a representative from Ontario, I have reams and reams of paper. I have people who write me stories.

And Mr. Goldstein, Mr. Dejonge, you are the dominant player in Ontario. I think we would agree with that. You said that today. I want you to take this for what it's worth, because I get this everyday. I want to read from a particular person who will not put his name on paper--for the right reasons.

He feels that your operation is so large, so controlling and dominant, you have so many buyers out there buying at the sales barns, if one doesn't buy, the other one will. If Peter buys, fine. If he's out of the ring, somebody else buys.

And because there's been a disagreement, perhaps someone feels someone has cheated someone--and I'm only going by what I'm getting here at the table--Peter walks out of the ring and the other buyer is left to buy, and the price drops seven or eight cents. Nevertheless, the cattle end up in your yard anyway, because another one of your buyers has bought those cattle. But the farmer goes home with seven or eight cents less for those cattle than he would have if Peter had been in the ring. People are selling their cattle under someone else's name so that their cattle can end up finding a buyer, which they wouldn't have if you weren't there.

I'm just wondering what you can do to change the culture. What can you do to change the perception out there that somehow there is manipulation, that somehow there is control?

I guess with the story last week about Tyson being charged, and now being found guilty.... We don't want that kind of thing. We appreciate your being there, but I get this everyday. People are calling me saying please don't use my name. In fact, some won't give their name.

Maybe you're not aware of it. If you're not aware of it, I think you should be made aware of it. We have to, as a committee, bring everything to the table. There's an industry out there that's being lost. We're losing a community of people. It doesn't just affect farmers; it affects our villages, our hamlets, our towns, our schools, our churches. Everything is affected by this...machinery dealers, everyone.

How do you respond to that? I'm prepared to elaborate on a broader basis more privately, but I think this has to be said.

Mr. Bennie Dejonge: I agree that maybe we're a dominant player in Ontario. I've heard this talk before. All of this, from my perspective, is hearsay, innuendo, and I can't deal with that. But rest assured, we are well aware that without the producer we cannot function. It's definitely not in our interest to make the farmer or the producer go bankrupt. It is in our interest to make the producer make a lot of money, or help him. It is in our interest that producers should be producing the right kind of product.

And please, I beg you, forget about the innuendo. I cannot answer that. I cannot see why I should lose sleep at night over anonymous letters. I have a major, major problem with that.

You invite me to come to a meeting and I come to your meeting. Whatever question you throw at me I'm going to give you an honest answer, the best way I know. It may not be...but it's going to be what I think.

¼ (1840)

The Chair: That's fair, and I appreciate that, but how do those farmers who feel they've been treated this way talk to Bennie Dejonge? How do they speak to Lorne Goldstein about this matter without the feeling that there may be some repercussions, that there may be some getting back on this issue? How do I get my farmer friend to come and speak to you about this matter?

Mr. Bennie Dejonge: I believe my telephone number is listed in the phone book. I come to the plant. I never in my life have locked my office door yet. So he may walk in any time he wants. If he has a concern, and if the man is over 21, he should also be man enough to pick it up, rather than.... Look, I'm not going to talk about you to her because that's not right.

The Chair: I'm only raising these issues because they come to me constantly.

Mr. Bennie Dejonge: They shouldn't. So give them the proper answer. If the man has a problem, come to us.

The Chair: But he doesn't feel it's in his interest to do that because he can't ship his cattle. He has no place to go with them. He's now using another name to get those cattle into the ring so they can be bought and so he can get paid. How do I answer that?

I guess we'll leave that for now. Obviously a time has to come when those people have to talk to you about that. Is that correct?

Mr. Bennie Dejonge: Absolutely.

The Chair: Okay. Let's go to one more question.

The Government of Canada and the provinces together put about $50 million into the beef processing industry early last July or August to help you people rid your freezers of perhaps unwanted or lesser-valued cuts so that you could continue processing high-quality and high-priced beef products. How did that money impact in a positive way? How did the government get value for that $50 million spent?

I don't know how much you got. I'm not interested in that. I'm only interested in how that impacted in a positive way for the government and for consumers.

Mr. Lorne Goldstein: First of all, let me set the record straight on that. To this day, for the sake of better beef, approximately only half of the promised money has been paid.

The Chair: Okay. Farmers will tell you that too.

Mr. Lorne Goldstein: Let's set the record straight on that.

As far as it helping us, they asked us to go ahead and take a risk and kill cattle with no markets. That money certainly helped out to keep our plants operational, and we're thankful for it.

The Chair: Thank you, Mr. Goldstein.

Mr. Read, any comments from you?

Mr. Brian Read: Well, it's the same scenario. It gave us the confidence to ramp up our numbers, to get our people off unemployment and bring them back to work. We didn't have that many out. We did sustain it. But it allowed us to move forward with some sort of confidence and build up that freezer inventory and forward price for our customer price.

The Chair: Mr. Goldstein says 50% of the money has arrived. How much has arrived at your doorstep?

Mr. Brian Read: In our company we've received it. Of course, it's because of our volume. As I say, we're only 4% of the slaughter.

The Chair: You've received it all?

Mr. Brian Read: We have.

The Chair: Okay.

And of course you don't receive any.

A voice: Jim didn't get any.

The Chair: This has been a worthwhile effort this afternoon, and I do want to thank you for appearing. I thank you very much for your honesty, your candidness, and for your presentations. For that I give you 100%.

We may have to bring you back again, and we will look at the offer to come to your plant to see this operation on a day-to-day basis.

Mr. Read, do you have any comment?

Mr. Brian Read: Mr. Chair, we'd like to thank this committee for hearing us. I think we had a very candid, open discussion here this afternoon. I think it's imperative that it continue. You're welcome to look at the over 30-month plant as well in Quebec.

We want to be part of the solution. I think we have to work together to get our way through this thing. I don't think we should go down the road of rationalization. We don't want to hear that. Let's eat our way through it if we have to. Job one is to reopen that border.

The Chair: Thank you very much, and thank you, committee members.

The meeting stands adjourned.