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37th PARLIAMENT, 2nd SESSION

Standing Committee on Agriculture and Agri-Food

EVIDENCE

CONTENTS

Monday, August 11, 2003

1005

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

1010

Mr. Andrew Marsland (A/Assistant Deputy Minister, Market and Industry Services Branch, Department of Agriculture and Agri-Food)

1015

Mr. Robert Carberry (Vice-President, Programs, Canadian Food Inspection Agency)

1020

The Chair

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

Mr. Gilles Lavoie (Senior Director General, Operations, Market and Industry Services Branch, Department of Agriculture and Agri-Food)

Mr. Howard Hilstrom

Mr. Gilles Lavoie

Mr. Howard Hilstrom

Mr. Gilles Lavoie

Mr. Howard Hilstrom

Mr. Gilles Lavoie

Mr. Howard Hilstrom

Mr. Gilles Lavoie

Mr. Howard Hilstrom

Mr. Gilles Lavoie

Mr. Howard Hilstrom

Mr. Andrew Marsland

Mr. Howard Hilstrom

Mr. Andrew Marsland

Mr. Howard Hilstrom

Mr. Gilles Lavoie

1025

Mr. Howard Hilstrom

Mr. Gilles Lavoie

Mr. Howard Hilstrom

Mr. Gilles Lavoie

The Chair

Mr. Rick Borotsik (Brandon—Souris, PC)

Mr. Gilles Lavoie

1030

Mr. Rick Borotsik

Mr. Gilles Lavoie

Mr. Rick Borotsik

Mr. Gilles Lavoie

Mr. Rick Borotsik

Mr. Gilles Lavoie

Mr. Rick Borotsik

Mr. Gilles Lavoie

Mr. Rick Borotsik

Mr. Gilles Lavoie

Mr. Rick Borotsik

Mr. Gilles Lavoie

Mr. Rick Borotsik

Mr. Gilles Lavoie

Mr. Rick Borotsik

Mr. Robert Carberry

Mr. Rick Borotsik

Mr. Robert Carberry

Mr. Rick Borotsik

Mr. Robert Carberry

Mr. Rick Borotsik

Mr. Gilles Lavoie

Mr. Rick Borotsik

The Chair

Mr. Rick Borotsik

The Chair

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

1035

Mr. Claudio Valle (Director, Technical Barriers and Regulations, Department of Foreign Affairs and International Trade)

Mr. Mark Eyking

Mr. Claudio Valle

Mr. Mark Eyking

Mr. Claudio Valle

Mr. Mark Eyking

The Chair

Mr. Mark Eyking

Mr. Claudio Valle

Mr. Mark Eyking

1040

The Chair

Mr. Dick Proctor (Palliser, NDP)

Mr. Robert Carberry

Mr. Dick Proctor

Mr. Robert Carberry

Mr. Dick Proctor

Mr. Robert Carberry

Mr. Dick Proctor

Mr. Robert Carberry

Mr. Dick Proctor

Mr. Robert Carberry

Mr. Dick Proctor

Mr. Robert Carberry

Mr. Dick Proctor

Mr. Robert Carberry

Mr. Dick Proctor

Mr. Robert Carberry

Mr. Dick Proctor

Mr. Robert Carberry

Mr. Dick Proctor

Mr. Robert Carberry

Mr. Dick Proctor

1045

Mr. Robert Carberry

Mr. Dick Proctor

Mr. Robert Carberry

Mr. Dick Proctor

Mr. Robert Carberry

Mr. Dick Proctor

Mr. Andrew Marsland

Mr. Dick Proctor

The Chair

Mr. Rick Casson (Lethbridge, Canadian Alliance)

Mr. Gilles Lavoie

1050

Mr. Rick Casson

Mr. Gilles Lavoie

The Chair

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

Mr. Gilles Lavoie

Mr. Larry McCormick

1055

Mr. Gilles Lavoie

Mr. Larry McCormick

The Chair

Mr. Larry McCormick

The Chair

Mr. Rick Borotsik

The Chair

Mr. Rick Borotsik

The Chair

Mr. Rick Borotsik

The Chair

Mr. Rick Borotsik

The Chair

1100

Mr. Rick Borotsik

The Chair

Mr. Robert Bielak (President, St. Helen's Meat Packers)

The Chair

Mr. Garnett Altwasser (Chief Executive Officer, Lakeside Packers)

The Chair

Mr. Garnett Altwasser

1110

1115

The Chair

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

1120

The Chair

Mr. Brian Nilsson (Co-Chief Executive Officer, Nilsson Brothers)

1125

1130

The Chair

Mr. Jim Holmes (President, Carmen Meats Inc.)

1135

The Chair

Mr. Robert Bielak

1140

The Chair

Mr. Stan Eby (Vice-president, Canadian Cattlemen's Association)

1145

The Chair

Mr. Rick Borotsik

The Chair

Mr. Rick Borotsik

The Chair

Mr. Rick Borotsik

Mr. Garnett Altwasser

1150

Mr. Rick Borotsik

Mr. Robert Bielak

Mr. Rick Borotsik

Mr. Garnett Altwasser

Mr. Rick Borotsik

Mr. Garnett Altwasser

Mr. Rick Borotsik

Mr. Garnett Altwasser

Mr. Rick Borotsik

Mr. Garnett Altwasser

Mr. Rick Borotsik

Mr. Garnett Altwasser

Mr. Rick Borotsik

Mr. Garnett Altwasser

Mr. Rick Borotsik

Mr. Garnett Altwasser

Mr. Rick Borotsik

Mr. Garnett Altwasser

Mr. Rick Borotsik

Mr. Inky Mark (Dauphin—Swan River)

Mr. Stan Eby

The Chair

Mr. Dick Proctor

The Chair

Mr. Rick Borotsik

Mr. Brian Nilsson

Mr. Rick Borotsik

1155

Mr. Brian Nilsson

Mr. Rick Borotsik

Mr. Brian Nilsson

The Chair

Mr. Dick Proctor

Mr. Brian Nilsson

Mr. Dick Proctor

Mr. Brian Nilsson

Mr. Dick Proctor

Mr. Brian Nilsson

Mr. Dick Proctor

Mr. Garnett Altwasser

Mr. Dick Proctor

Mr. Brian Read

Mr. Garnett Altwasser

Mr. Dick Proctor

Mr. Brian Read

Mr. Dick Proctor

Mr. Brian Read

Mr. Dick Proctor

Mr. Stan Eby

1200

Mr. Dick Proctor

The Vice-Chair (Mr. Howard Hilstrom)

Mr. Brian Nilsson

The Vice-Chair (Mr. Howard Hilstrom)

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

Mr. Brian Nilsson

Mrs. Rose-Marie Ur

Mr. Brian Nilsson

Mr. Jim Holmes

Mrs. Rose-Marie Ur

Mr. Jim Holmes

Mrs. Rose-Marie Ur

Mr. Garnett Altwasser

Mrs. Rose-Marie Ur

Mr. Garnett Altwasser

Mrs. Rose-Marie Ur

Mr. Garnett Altwasser

1205

Mrs. Rose-Marie Ur

Mr. Garnett Altwasser

The Chair

Mr. Howard Hilstrom

Mr. Garnett Altwasser

Mr. Howard Hilstrom

Mr. Garnett Altwasser

Mr. Howard Hilstrom

Mr. Stan Eby

Mr. Howard Hilstrom

Mr. Stan Eby

1210

Mr. Howard Hilstrom

Mr. Stan Eby

Mr. Howard Hilstrom

Mr. Stan Eby

Mr. Howard Hilstrom

Mr. Stan Eby

Mr. Howard Hilstrom

Mr. Stan Eby

Mr. Howard Hilstrom

Mr. Stan Eby

Mr. Howard Hilstrom

Mr. Brian Nilsson

The Chair

Mr. Rick Borotsik

Mr. Stan Eby

Mr. Rick Borotsik

Mr. Stan Eby

Mr. Rick Borotsik

Mr. Stan Eby

Mr. Rick Borotsik

Mr. Stan Eby

Mr. Rick Borotsik

Mr. Stan Eby

Mr. Rick Borotsik

Mr. Stan Eby

Mr. Rick Borotsik

Mr. Brian Nilsson

Mr. Rick Borotsik

1215

Mr. Brian Nilsson

Mr. Rick Borotsik

Mr. Brian Nilsson

Mr. Rick Borotsik

Mr. Jim Holmes

Mr. Rick Borotsik

Mr. Jim Holmes

Mr. Rick Borotsik

Mr. Garnett Altwasser

Mr. Rick Borotsik

Mr. Garnett Altwasser

The Chair

Mr. Brian Nilsson

The Chair

1220

Mr. Brian Nilsson

The Chair

Mr. Stan Eby

The Chair

Mr. Bob Speller (Haldimand—Norfolk—Brant, Lib.)

Mr. Brian Nilsson

Mr. Bob Speller

Mr. Brian Read

1225

The Chair

Mr. Garnett Altwasser

The Chair

Robert Bielak

Mr. Bob Speller

The Chair

Mr. Dick Proctor

Mr. Garnett Altwasser

Mr. Dick Proctor

Mr. Garnett Altwasser

Mr. Dick Proctor

Mr. Brian Nilsson

1230

Mr. Dick Proctor

Mr. Brian Read

Mr. Dick Proctor

Mr. Brian Nilsson

The Chair

Mr. Gerry Ritz (Battlefords—Lloydminster)

Mr. Stan Eby

Mr. Gerry Ritz

Mr. Stan Eby

Mr. Gerry Ritz

Mr. Stan Eby

Mr. Gerry Ritz

Mr. Stan Eby

Mr. Gerry Ritz

Mr. Stan Eby

Mr. Gerry Ritz

The Chair

Mr. Howard Hilstrom

1235

Mr. Garnett Altwasser

Mr. Howard Hilstrom

Mr. Brian Nilsson

The Chair

1240

Mr. Larry McCormick

Mr. Brian Read

Mr. Larry McCormick

Mr. Brian Read

Mr. Larry McCormick

Mr. Brian Read

Mr. Garnett Altwasser

1245

Mr. Larry McCormick

The Chair

Mr. Inky Mark

Mr. Stan Eby

Mr. Inky Mark

Mr. Stan Eby

Mr. Inky Mark

Mr. Stan Eby

The Chair

Mr. Rick Borotsik

Mr. Garnett Altwasser

Mr. Rick Borotsik

Mr. Brian Nilsson

1250

Mr. Rick Borotsik

The Chair

Mr. Rick Casson

Mr. Brian Read

Mr. Rick Casson

Mr. Brian Nilsson

Mr. Rick Casson

Mr. Brian Nilsson

Mr. Rick Casson

Mr. Brian Nilsson

Mr. Rick Casson

Mr. Brian Nilsson

Mr. Rick Casson

Mr. Garnett Altwasser

Mr. Rick Casson

Mr. Garnett Altwasser

Mr. Rick Casson

Mr. Stan Eby

1255

The Chair

Mrs. Rose-Marie Ur

Mr. Garnett Altwasser

Mrs. Rose-Marie Ur

Mr. Garnett Altwasser

Mrs. Rose-Marie Ur

Mr. Garnett Altwasser

Mr. Brian Nilsson

1300

Mrs. Rose-Marie Ur

Mr. Brian Nilsson

The Chair

Mr. Rick Borotsik

The Chair

Mr. Monte Solberg (Medicine Hat)

Mr. Brian Read

Mr. Garnett Altwasser

1305

The Chair

Mr. Monte Solberg

Mr. Brian Nilsson

The Chair

Mr. Garry Breitkreuz (Yorkton—Melville, Canadian Alliance)

Mr. Brian Nilsson

The Chair

Mr. Stan Eby

1310

The Chair

Mr. Rick Borotsik

Mr. Brian Nilsson

Mr. Rick Borotsik

Mr. Brian Nilsson

Mr. Rick Borotsik

Mr. Garnett Altwasser

Mr. Rick Borotsik

Mr. Garnett Altwasser

Mr. Brian Read

Mr. Rick Borotsik

Mr. Brian Read

Mr. Rick Borotsik

Mr. Stan Eby

Mr. Rick Borotsik

The Chair

Mr. Inky Mark

Mr. Brian Nilsson

Mr. Inky Mark

Mr. Brian Nilsson

1315

Mr. Inky Mark

Mr. Brian Nilsson

The Chair

Mr. John Maloney (Erie—Lincoln, Lib.)

The Chair

Mr. Larry McCormick

Mr. Garnett Altwasser

Mr. Larry McCormick

Mr. Garnett Altwasser

Mr. Larry McCormick

Mr. Brian Read

Mr. Larry McCormick

The Chair

Mr. Howard Hilstrom

Mr. Garnett Altwasser

Mr. Howard Hilstrom

1320

Mr. Brian Read

Mr. Howard Hilstrom

The Chair

Mr. Brian Nilsson

The Chair

1325

Mr. Brian Nilsson

The Chair

Mr. Robert Bielak

The Chair

Mr. Brian Read

The Chair

Mr. Garnett Altwasser

1330

The Chair

Mr. Jim Holmes

The Chair

Mr. Robert Bielak

The Chair

Mr. Gerry Ritz

Mr. Gilles Lavoie

Mr. Gerry Ritz

Mr. Gilles Lavoie

Mr. Gerry Ritz

Mr. Gilles Lavoie

Mr. Gerry Ritz

Mr. Gilles Lavoie

Mr. Gerry Ritz

Mr. Gilles Lavoie

Mr. Gerry Ritz

The Chair

Mr. Howard Hilstrom

Mr. Gilles Lavoie

Mr. Howard Hilstrom

1340

Mr. Gilles Lavoie

Mr. Howard Hilstrom

The Chair

Mr. Rick Borotsik

Mr. Gilles Lavoie

Mr. Rick Borotsik

Mr. Gilles Lavoie

Mr. Rick Borotsik

Mr. Andrew Marsland

Mr. Rick Borotsik

Mr. Andrew Marsland

Mr. Rick Borotsik

Mr. Andrew Marsland

Mr. Rick Borotsik

1345

Mr. Gilles Lavoie

Mr. Rick Borotsik

Mr. Gilles Lavoie

The Chair

Mr. Inky Mark

Mr. Gilles Lavoie

Mr. Inky Mark

Mr. Gilles Lavoie

The Chair

Mr. John Maloney

Mr. Gilles Lavoie

1350

Mr. John Maloney

Mr. Gilles Lavoie

Mr. John Maloney

The Chair

Mr. Dick Proctor

Mr. Robert Carberry

Mr. Dick Proctor

Mr. Robert Carberry

Mr. Dick Proctor

Mr. Gilles Lavoie

Mr. Dick Proctor

Mr. Gilles Lavoie

Mr. Dick Proctor

Mr. Andrew Marsland

Mr. Dick Proctor

Mr. Andrew Marsland

1355

Mr. Dick Proctor

Mr. Gilles Lavoie

Mr. Dick Proctor

Mr. Gilles Lavoie

Mr. Dick Proctor

The Chair

Mr. Claude Duplain (Portneuf, Lib.)

Mr. Gilles Lavoie

Mr. Claude Duplain

Mr. Gilles Lavoie

Mr. Claude Duplain

Mr. Gilles Lavoie

1400

Mr. Claude Duplain

Mr. Gilles Lavoie

Mr. Claude Duplain

The Chair

Mr. Rick Borotsik

The Chair

Mr. Rick Borotsik

The Chair

Mrs. Rose-Marie Ur

Mr. Rick Borotsik

The Chair

Mr. Rick Borotsik

The Chair

Mr. Rick Borotsik

The Chair

Mr. Larry McCormick

The Chair

Mr. Rick Borotsik

The Chair

CANADA

Standing Committee on Agriculture and Agri-Food

NUMBER 041

2nd SESSION

37th PARLIAMENT

EVIDENCE

Monday, August 11, 2003

[Recorded by Electronic Apparatus]

À (1005)

[English]

The Chair (Mr. Paul Steckle (Huron—Bruce, Lib.)): Ladies and gentlemen, let me call this meeting to order.

Might I say, just to preface with some opening comments, we've come together again today to discuss this issue and to further seek some further clarification in some of the areas of industry that have not, before today, come to the table.

I want to thank those who have come today and who have made it possible to be here, because without your presence we couldn't have a meeting. It's always difficult for a committee to call together its witnesses and its particular committee members at this time of the year because of the circumstances of people travelling and being on summer vacation, but I think in the last 48 or 72 hours we've seen some encouraging signs in this industry. While it's only a silver lining, perhaps, I believe the door has begun to open, and we may see some further advancements in the terms of acceptance of Canadian beef in other parts of the country in the very near future.

As a committee, we have a duty to explore all avenues of the industry, and we've attempted to do that this summer. This is our third emergency meeting. The beef industry perhaps will have changed forever because of what happened three months ago, and it is our intention to bring to the table all the information possible so that we can make recommendations in terms of how the industry functions and what kind of an industry we have from this time forward.

As I mentioned a moment ago, most of the sectors within this industry have come to the table with the exception, until today, of the packing and slaughterhouse industry. I had attempted at our earlier meeting a month ago to have them here. Because of short notice, no one was able to come. I must tell you that I'm extremely pleased with those who have consented to be here today to bring their message to the table, but it is with displeasure that I tell you we don't have anyone here from the slaughter business and from the packing houses from Ontario....

Is there someone here? Okay, there is someone here. I appreciate that. I was told there wasn't anyone here.

So I'm pleased about that, but there is a lot of misinformation out there, we believe. There is a lot of information that I think needs to be gathered before we can make a final report, and we hope what we hear today will help us to do that, to deal with this industry in a positive and enlightened way.

We have four hours in which to conduct this meeting, although we're not limited to four hours. We feel most of the work can be done in that time, but if we need to, we will continue the meeting. At the end of the day, hopefully we can have the answers we're looking for.

We want to bring to the table first the departments, then we're going to have the packing industry come to the table, and then we'll bring back the departments following that to sort of summarize some of the things we've heard, and perhaps questions can be raised again to the departments over some of the matters discussed earlier in the meeting.

With those few comments, I'm going to bring the meeting now to order and call on our witnesses. I'm pleased to say we have with us this morning, from the Department of Foreign Affairs and International Trade, Mr. Claudio Valle, director of technical barriers and regulations; and Andrew Moroz, director of trade controls policy.

I understand you have no presentation to make but you're simply at the table to give response to questions.

From the Department of Agriculture and Agri-Food we have Andrew Marsland, assistant deputy minister, market and industry services branch; and of course Gilles Lavoie, senior director general of operations, market and industry services branch. Of course we have Mr. Robert Carberry here as well. He's not listed in your program, but Mr. Carberry is no stranger. He has been at most meeting we've conducted....

I apologize; Mr. Carberry is here with the CFIA. He will be here this morning also giving a presentation before we get into the question period.

I must tell you, because we have a fairly full house of committee members today, I will be keeping a very close eye on the time this morning. If we cooperate, we may have second chances; if not, I will have to intervene. I trust you will mind the chair's notice of warning so that you may continue to allow others to speak as well. We want everyone to have a chance today.

Mr. Marsland, you're first.

À (1010)

Mr. Andrew Marsland (Assistant Deputy Minister, Market and Industry Services Branch, Department of Agriculture and Agri-Food): Thank you, Mr. Chair.

[Translation]

Mr. Chair, as the committee knows, the United States announced Friday a partial lift of the restrictions they imposed on May 20 this year. If you will allow me, I am going to give the committee a brief description of this announcement as well as of the steps for the next weeks.

[English]

The announcement by the United States last Friday regarding the reopening of the U.S. border to boneless beef and other products is a very important first step in getting markets reopened to Canadian beef and livestock, both in North America and internationally. Importantly, this represents the first time ever that a non-BSE country has agreed to re-establish trade with a country that has reported a case of BSE.

The announcement itself essentially has three parts. Effective last Friday, August 8, 2003, the U.S. will lift restrictions on the importation of hunter-harvested wild ruminant products intended for personal use. Secondly, effective the same day, the U.S. will begin to accept applications for import permits for the following products: boneless sheep and goat meat from animals under 12 months of age; boneless bovine meat from cattle under 30 months of age; boneless veal from calves under 36 weeks of age; fresh and frozen liver; vaccines for veterinary medicine for non-ruminant use; and pet products and feed ingredients that contain processed animal protein in tallow of non-ruminant sources. Finally, the U.S. indicated that an expedited rule-making process will begin immediately for the importation of live ruminants and ruminant products.

In terms of the permitting process for boneless beef and other products, work has already begun between the Canadian Food Inspection Agency and the United States Department of Agriculture to work out the outstanding details of this. Mr. Carberry can provide more details on that work if required.

The fallout from the discovery of a single case of BSE in Alberta has demonstrated in the clearest possible terms the inadequacy of the way in which the world reacts to the expression of very low levels of BSE within a country. Consequently, Canada, the United States, and Mexico will be acting in concert to urge the Office international des épizooties to begin the process of reviewing the approach the international community is currently taking towards countries with reported cases of BSE.

Our objective is to bring the international approach into closer alignment with the state of science today, with a resulting enhanced understanding of the nature of the risk presented to public and animal health.

[Translation]

The announcement made by the United States last Friday is an important first step but there is of course a lot of work still to be done. The most important thing is to look for ways to re-establish cattle trade with the United States.

[English]

Prior to May 20 this year, the beef industry in North America was truly integrated, with both beef products and live cattle crossing the border in response to market signals. The resulting vibrant industry benefited producers and businesses on both sides of the border.

With the partial reopening of the border announced on Friday, Canada and the United States can begin to resume an important trading relationship in certain beef and ruminant products, but until the border opens for live cattle, we cannot have a truly integrated market with the concomitant benefits. Together with industry we will therefore work urgently towards a resumption of trade in cattle.

We'll also continue to press our other trading partners to reopen their borders to Canadian exports. Working with industry, we will do this through continued advocacy, including technical missions, to press our trading partners to accept the science and begin to reopen their markets.

A key part of that advocacy will be continuing to explain the aggressive measures that Canada has taken over the years to reduce the risk of a single case. An important part of the response to the single case of BSE has been the introduction of the requirement to remove specified risk materials from all the cattle. Again, Mr. Carberry can provide more details of that announcement if required.

In terms of the BSE recovery program, when Minister Vanclief and his provincial counterparts announced the program in June, they indicated that they would immediately begin to review next steps once the border reopened. That process has begun. The government will make an announcement of the next steps in relation to the program in the coming days.

Mr. Chairman, that concludes my opening remarks. My colleague Mr. Carberry has a few comments to add.

À (1015)

Mr. Robert Carberry (Vice-President, Programs, Canadian Food Inspection Agency): Thank you.

Good morning. My name is Robert Carberry, and I'm vice-president of programs at the Canadian Food Inspection Agency. I'm please to have yet again the opportunity to speak to this committee.

As you are undoubtedly aware, and as Andrew has indicated, the Prime Minister announced this past Friday that the United States has recognized the safety of Canadian beef and cattle and initiated a phase three opening of the border. I will address this matter shortly, but I would like to begin with an update on actions that have been taken since our last presentation.

Since the single case of BSE was confirmed on May 20, 2003, the Canadian Food Inspection Agency and Health Canada have been working in their technical capacity to review BSE-related policies to identify what type of additional measures should be implemented within Canada.

Canada is no longer BSE-free, and its circumstances have changed. Although scientific evidence clearly indicates that the risk of BSE in Canada is minimal, the Government of Canada will continue to take appropriate science-based action on BSE policies and preventative measures that enhance public health and safety. These policies will be based on sound science through cooperation with Canadian industry, trading partners, and in consideration of international standards.

As a result, the Government of Canada announced on July 18, 2003, that it would amend the food and drug regulations and the health of animal regulations. The amendments deal with the removal of specified-risk materials from carcasses at slaughter, providing an effective means of keeping BSE infectivity out of the human food supply. Specified-risk materials, or SRMs, are tissues such as the brain and spinal cord that in BSE-infected cattle contain the agent that may transmit the disease.

Amendments establish a definition for SRM, and allow for the removal of, and prohibition of the sale, import, or export of, SRM for use in food for human consumption. The effective date for implementation of these regulations is August 23, 2003. However, the SRM removal policy is already in effect in federally regulated establishments.

It is important to note that the Canadian Food Inspection Agency and Health Canada engaged the provinces and territories, including chief medical officers of health, and industry representatives in discussing the implications of the new SRM policy. We acknowledge your support and cooperation as we work together to address the challenges posed by BSE. We are still working closely with the provinces and territories as we move to full implementation. Compliance with the new policy will be closely monitored through on-site inspections, and this will be done in cooperation with provincial and territorial authorities.

These precautionary measures will make the Canadian system even stronger, and will provide an additional safeguard against the possibility of bovine tissues with high infectivity potential from entering the food supply. These measures take into account current sound science as well as the recommendations of the international team that reviewed the CFIA's BSE investigation. Those recommendations support the options already under consideration by the federal government.

These amendments are the first of several measures intended to strengthen Canada's BSE safeguards. Consultations with the provinces, territories, industry, and our trading partners continue on other measures. These measures include enhancing surveillance, reviewing controls on animal feeds, and examining animal traceability systems, and are currently being examined in consultation with the scientific community, other government organizations, international trading partners, the provinces, and industry.

Canada wants to be certain that BSE policy changes are appropriate, defensible, and properly implemented. This is a complex process that requires an appropriate amount of time to implement the changes properly. We have taken action on the first recommendations relating to SRMs, which directly affect the risk to human health.

In conclusion, the Government of Canada has taken a major step in further protecting Canada's food supply and the health of Canadians with these measures. The federal government remains committed to taking all of the necessary steps to ensure that Canada's food safety system remains among the best in the world.

Now that a program that would see the resumption of trade has been outlined by the U.S.A., the CFIA has already begun to work closely with the U.S.A. technical authorities to provide any necessary certification for product movement. In fact, we were in discussion with them only hours after the U.S. announcement on Friday.

In the upcoming weeks, the USDA will begin issuing permits enabling the importation of boneless Canadian beef, with the exception of ground beef, from cattle under 30 months of age. This is an important first step towards restoration of an integrated North American beef industry.

Mr. Chairman, this has been a brief summary of the actions we have taken at the CFIA regarding BSE since our last meeting. I welcome any questions the committee may have.

Thank you.

À (1020)

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

We will begin the question period.

Mr. Hilstrom, you have seven minutes. When you reach six, I'll give you the signal for one more minute.

Mr. Howard Hilstrom (Selkirk—Interlake, Canadian Alliance): Thank you, Mr. Chairman. I wouldn't run over my time.

Welcome, gentlemen. My first question is for Mr. Marsland.

Based on your analysis, or the department's, the government's analysis, of live prices paid, slaughter packing plant costs, and retail prices, do you believe excessive profit is being made by the slaughter plants?

Mr. Gilles Lavoie (Senior Director General, Operations, Market and Industry Services Branch, Department of Agriculture and Agri-Food): I guess you would have the opportunity, surely, to ask the same question of the packers--

Mr. Howard Hilstrom: Just a minute now, Mr. Lavoie. This is a government program that is putting taxpayer dollars into a feedlot program that then the slaughter plants bid down on. Are you in charge of monitoring this program and watching how it's working? Are you in charge of that?

Mr. Gilles Lavoie: Yes, we have--

Mr. Howard Hilstrom: Okay, so your reports then must indicate what is happening in that plan. Are there reports on your desk that say there is unconscionable profiteering going on in the slaughter plant?

Mr. Gilles Lavoie: No, there is no such report. The packers have to balance the entire carcass in terms of returns. For some of the cuts, such as the cuts that seem to be in high demand during this period of the year, we have not seen significant reduction in prices. For other parts there has been some reduction, particularly for ground beef. Whether or not the result of that is too much profit, we cannot say.

Mr. Howard Hilstrom: Okay. The program is designed to remove a backlog of 900,000 fat cattle. Can you tell us how many fat cattle have actually been slaughtered under this recovery program?

Mr. Gilles Lavoie: I do have the data somewhere....

Mr. Howard Hilstrom: And how much money--

Mr. Gilles Lavoie: It's about 100,000, I believe, but I will have to check. I can come back to it.

Mr. Howard Hilstrom: Well, you see, this is it. It doesn't sound to me like anybody in government is monitoring this $460 million of taxpayer money that went out there. As a result, you can't answer whether or not there's been any misuse of the money.

Have you had any cases where you've alleged that any criteria of the program was broken by either the feedlot people, the slaughter plant people, or the retailers? Has anybody breached any of the criteria, to your knowledge?

Mr. Gilles Lavoie: No, not to my knowledge.

Mr. Howard Hilstrom: Okay. So the program is working, then, and that's where it's at.

The more important question here, getting on, because I don't.... We'll ask the packers how much profiteering there is, if any.

On this expedited rules process for importing live cattle into the United States in particular, and probably Mexico--of course, for the dairy industry, it's every country around the world--you're working urgently, Mr. Marsland? What is the target date to have live cattle moving, or is that an impossible thing to answer?

Mr. Andrew Marsland: I guess our target date is as soon as possible. There are regulatory processes in the United States to go through.

Mr. Howard Hilstrom: So you can't say the first of September.

Mr. Andrew Marsland: I can't. It's not an issue under our control.

Mr. Howard Hilstrom: Right now every cow-calf operator and every backgrounder is losing money big time. There's no government programs for the cow-calf operators or the backgrounders.

Seeing as how it's going to be a long time, a unspecified time in the future, before cow-calf operators will return to profitability, which will be based on the export market of live cattle and the export of finished beef, what government program is being announced to help mitigate the financial disaster that's on our cow-calf operators right now?

Mr. Gilles Lavoie: Mr. Chair, no specific program has been announced so far. Obviously, the current safety net program, the Canadian agriculture income subsidization program, is a program that we believe is relatively well adapted to this situation. We will have to monitor the situation very closely here. The bulk of sales of feeder calves will happen in the coming months. We will see how the market does react to the situation created by the announcement made on Friday by the U.S.

À (1025)

Mr. Howard Hilstrom: The bills are already coming in for putting up hay and putting up feed this summer. These cow-calf operators are all bankrupt because there's no cashflow. Mr. Marsland just said it's an unknown, undetermined future when this is going to happen, and now you're saying a couple of months. Well, if it's a couple of months, a cow-calf man can hang on, but that's not likely to be. How is that family supposed to send their child to university? How are they supposed to pay the bills to the small-business owner in our small communities? How is that supposed to happen without some government help? Why is there no program for the cow-calf operator? Why are you not putting in one right now?

Mr. Gilles Lavoie: As I said, there has been no program announced so far specific to cow-calf or feeder cattle. We'll see how the prices in terms of feeder calves react to the new situation. The bulk of the sales are normally toward the end of September, October, November. It's something that will be monitored closely. We are going to monitor it with the industry. The beef round table will continue to be active to make sure that we have all the proper information in this regard, and also see how well the current program may respond to that.

Mr. Howard Hilstrom: Thank you.

You mentioned the agriculture policy framework. The government said that they were going to send me, the farmer and rancher, my reference margin so that I can go to my banker and tell him how much money I can expect to get out of that agriculture policy framework. Why haven't I received my reference margin yet so I can go to my banker?

Mr. Gilles Lavoie: As you know, we have some provinces still to sign in order for it to be fully operative. We're working on that. This issue was discussed again last Friday by all provincial ministers to make sure that we expedite the process in order to make the possibility of interim payment happen as soon as possible.

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

Mr. Borotsik, seven minutes.

Mr. Rick Borotsik (Brandon—Souris, PC): Thank you, Mr. Chairman, and let me first of all thank you for striking this very important meeting that certainly, if nothing else, addresses the urgency and the desperation that's out there in most of our areas across Canada.

Thank you for being here. I've talked to most of you ad infinitum over the last numbers of months, and I do appreciate the job you're doing, but there are a lot of unknowns out there. I should tell you right now, there's a lot of desperation, and a lot of it, as Mr. Hilstrom has said, in particularly those areas that haven't been covered by any of the government programs--the cow-calf operators and the backgrounders.

What we saw on Friday was a really, really good first small step, but I don't want you to forget, and I know you haven't, that there's still a whole bunch of hurt out there.

I have a couple of questions.

To Mr. Marsland, you said in your presentation that the government will make an announcement in the next few days on programs, updated programs, programs that have been changed or modified to go beyond what we did for the first program that was put in place by the government. Can you expand on that at all? Forget about the announcements. Is there anything in there? Are you working on programs to look after the hurt, and the cow-calf operators particularly?

Better yet, as another question, three provinces have come to the table, Manitoba, Alberta, and just recently Saskatchewan. Have you analyzed those programs? Is there any way that the government should be involved in the kinds of programs that have been put on the table with those three provinces?

Mr. Gilles Lavoie: Mr. Chairman, there have been some discussions obviously on this given situation. As the agreement and the announcement of the program on June 18 indicated, upon the news of opening the border the minister will try to communicate immediately, to look at what else has to be done, depending on the situation prevalent at the time the border opened. Of course, in June, no one knew exactly when this was going to happen.

As indicated, Mr. Vanclief already had a conference call with his colleagues this past Friday. There will be others in the coming weeks, no doubt about that. Similarly, officers are working on analyzing the situation and seeing what has to be done. As indicated earlier, the beef round table will also--

À (1030)

Mr. Rick Borotsik: Are those senior officials looking at expanding the programs to include those people who have not taken advantage, or couldn't take advantage, of the program currently?

Mr. Gilles Lavoie: We will analyze the current situation and see which groups of farmers are in need of what, and what could be done, and what will be recommended.

Mr. Rick Borotsik: There is a large group of producers out there who do need assistance, and I want that to be identified.

Mr. Gilles Lavoie: Yes. One of the elements that we will have to look at is to which extent the new program answers the needs of these particular farmers.

Mr. Rick Borotsik: I had also heard when we had our conference call last Friday, and perhaps you can confirm this for me, that the slaughter program currently, where there's the covering of the differential between the benchmark price of pre-May 20, will come to a close, to an end. Originally, it was August 31. Did I hear right when the minister said August 17 will be the final delivery that will fall under that program?

Mr. Gilles Lavoie: The program...most cattlemen normally will price and sell their cattle for delivery within 14 days. Then the slaughter...that will be covered up to the end of August, but this implies that most of these cattle will have been priced up to 14 days before.

Mr. Rick Borotsik: So anything priced by the 17th and sold will still be covered into August 31?

Mr. Gilles Lavoie: Yes.

Mr. Rick Borotsik: Is there money left in that program? The minister also set off some alarm bells when he said that....

Okay, first of all answer me this: How much money has been spent on that program? Will there be enough money? Because I've had producers who sold cattle in Manitoba come up to me and say, “Listen, I'm nervous. If I sell my cattle now, am I going to be covered 14 days or 15 days or 30 days from now, even though I sell them now?” Can I go back and tell my producers, yes, if you sold them under the program you'll get your money?

Mr. Gilles Lavoie: Yes. You know, there were three triggers to delay the program, the opening of the border...August 31, as you indicated, or that all cattle that were on feed, the fat cattle on feed on May 20, will have gone through slaughterhouses. It's happened that the first trigger seems to be the opening of the border.

Yes, we will be relatively squeezed in terms of dollars. We are monitoring again the situation again very closely, and the minister indicated that this--

Mr. Rick Borotsik: How much--

Mr. Gilles Lavoie: --will not terminate the program.

Mr. Rick Borotsik: Okay. So you're saying that my producers who have sold now will get paid.

Mr. Gilles Lavoie: Yes.

Mr. Rick Borotsik: Thank you.

Mr. Carberry, live cattle; we've heard about it. That's absolutely vital for Manitoba, as 90% of what we produce in Manitoba goes straight to the border without hitting a plant in Manitoba.

I have two questions. Number one, you say that the program outlined by the USDA includes live cattle. I know you can't give me a date, but do you have specifics that CFIA in Canada can comply with to open that border for live cattle?

Mr. Robert Carberry: No, we don't yet.

Mr. Rick Borotsik: What's the process, then? Please help me.

Mr. Robert Carberry: In terms of the process, we started it with a conference call with the U.S. authorities on Friday night. I got an e-mail out to the Canadian industry over the weekend saying that we would have a call with the Canadian industry about the measures put in place by the U.S., about their relaxation of measures. We will collect the issues and the questions on their minds and we will have either a conference call or a meeting with the USDA on Thursday of this week.

Mr. Rick Borotsik: My suggestion would be an eyeball-to-eyeball meeting. That would be my suggestion, Mr. Carberry.

Mr. Robert Carberry: That's our preference as well, as long as they can put the people together, because we do need to see people in the U.S. from several departments.

Mr. Rick Borotsik: Okay.

The program is going to stop, obviously, August 17. Does anybody in the administration in the government now have any answers for me as to how Manitoba cattle can access kill space in Canada right now? Our problem is that we don't have the ability to access a lot of that. Is there an equitability program that you're looking at, or it is just everybody for themselves?

Mr. Gilles Lavoie: Some of the programs announced by Alberta and Manitoba in terms of feeding, helping with the feeding, was intended to help exactly this case--to allow slaughter at a later date, while the farmers can benefit from the dollars from it immediately.

Mr. Rick Borotsik: Mr. Chair, just 30 more seconds, if I can?

The Chair: No, sorry.

Mr. Rick Borotsik: I'll come back to it.

The Chair: Mr. Eyking.

Mr. Mark Eyking (Sydney—Victoria, Lib.): Thank you, Mr. Chairman, and thanks for having this meeting.

I have a trade question, probably for Andrew Moroz. Since we're not allowed to ship live cattle down to the U.S., it's not only hurting the beef industry; the dairy industry is also heavily affected. I'd like to ask a question about the U.S. and Japanese relationship, about what's going on.

How much impact is Japan having on the U.S. by not allowing those live cattle to go across? Is there a plan in place such that the U.S. is thinking of having designated areas for U.S. beef only, so that wouldn't interfere with the trade between the U.S. and Japan? And if that happens, would that make it easier for us shipping stuff down?

I guess the question is to you, Mr. Valle.

À (1035)

Mr. Claudio Valle (Director, Technical Barriers and Regulations, Department of Foreign Affairs and International Trade): The Japan dimension has been an evolving one. The Japanese were always concerned about not having Canadian products transit through the U.S. route. They finally conceded this point to the U.S. about two weeks ago, when they indicated that they would be prepared to accept some U.S. certification program akin to what the U.S. already has in their school feeding program, which is limited to U.S. beef only. So there is already a capacity to separate product there, and they're using that provision.

The system that is being set up is one that is extremely tight and complicated. People have to apply to service under this program. They have to submit to regular auditing systems, so companies need to have separate dedicated lines that can segregate products from Canada versus product from the U.S. and other non-BSE sources.

So they had further discussions last week in the U.S., and the Japanese, last Friday morning in fact, concurred that they were comfortable that this system provided for the segregation they were seeking.

In terms of more access into Japan, the Japanese are still very adamant that Canada needs to do a lot more in terms of responding to the recommendations of the international panel report before they allow Canadian products into that market.

Mr. Mark Eyking: The influence of Japan, is that one of the reasons why live cattle are not allowed across the border?

Mr. Claudio Valle: No, I don't think so.

Mr. Mark Eyking: It's not part of the decision.

Mr. Claudio Valle: No, that has to do with the regulatory program into the U.S., the fact that the U.S. has made the big leap of faith right now of even allowing meat. Before, no non-BSE country had ever allowed product in from a BSE country. So it's a big step. I think we have to realize that. A number of legal considerations have to be taken into account, and therefore we need one of the elements that Andrew also mentioned, that we're going to work with like-minded countries to change some of the rules in the OIE so that countries that have had one or two cases are not treated in the same sort of way that countries in Europe are, where they've had in excess of 100,000 cases. So there is a need to work to change the standard. The U.S. wants to change the standard.

One other thing transpired during the past three weeks. When the U.S. was examining its own regulatory system, they started to think about how they themselves would want to be treated in the event they had one case. So they're keen to change the standards now, because if they have one case, they don't want their trade to come to a crashing halt as well. So it was somewhat their own self-serving interests that brought this thing along.

Mr. Mark Eyking: Is that it?

The Chair: You have more time.

Mr. Mark Eyking: Okay.

Just out of curiosity, how much influence did the non-agriculture community, such as the big-game hunters, have on the U.S. decision on Friday? Do you think they had any impact at all?

Mr. Claudio Valle: I can't speculate on that, but I think they probably lobbied the White House as hard as anybody else.

Mr. Mark Eyking: Okay.

Thank you.

À (1040)

The Chair: Thank you, Mr. Eyking.

We'll move to Mr. Proctor.

Mr. Dick Proctor (Palliser, NDP): Thank you very much, Mr. Chair.

Thanks, everybody, for coming.

To the CFIA, we currently test about one-tenth of 1% of our animals for BSE. Now that this is the second case that has been uncovered in Canada in the last 10 years, are there plans by the association, by the inspection agency, to increase the number of animals that we test?

Mr. Robert Carberry: Yes. Actually, we're in policy development on that right now, in collaboration with Health Canada and Agriculture and Agri-Food Canada.

As you correctly mention, our status has changed since we found this one animal. What we had to demonstrate before is different from what we have to demonstrate now. In fact, according to the current OIE standards, we need to demonstrate that the prevalence of the disease is one in a million or less.

That means we have to do more sampling, so we're gearing up for that now. We have the lab capacity, through our TSE network that we have out there, to do the work; it's a matter of putting the final touches on it right now.

You will probably appreciate that over the last few months there hasn't been a lot of cattle to sample anyway, but we are gearing up to do the surveillance exercise over the upcoming period of time.

Mr. Dick Proctor: So we currently test just over 3,000, or we did before the BSE outbreak, out of roughly 3 million slaughtered. What will the number likely move to?

Mr. Robert Carberry: Depending on exactly how we can get to these animals, because some of them are higher risk and will give us more statistical significance, we're looking at numbers between 25,000 and 70,000, somewhere in that range, depending on how we can get it. That's where the policy discussions are right now--how we can get to those populations.

Mr. Dick Proctor: Is this random testing, or will you primarily be doing animals that are over 30 months of age? How will you gear it?

Mr. Robert Carberry: We will be focusing on the highest-risk population, dead or diseased animals. The second category will be a statistical looking at animals over 30 months of age. Those are the types of things we're looking at.

Mr. Dick Proctor: Okay.

Mr. Robert Carberry: How exactly that breaks down in terms of samples is what we're putting the final touches on.

Mr. Dick Proctor: So you're talking about roughly a ninefold or tenfold increase in the number of animals tested every year. Am I getting that right, from 3,000 to 27,000 or 30,000?

Mr. Robert Carberry: Depending; as I say, it's going to move up from 3,500 to somewhere between 25,000 and 65,000.

Mr. Dick Proctor: And where do you test those animals?

Mr. Robert Carberry: We have both federal and provincial labs that can carry out these tests. We had this network established before the initial finding of BSE, so we'll be doing it through accredited facilities, or federal facilities.

Mr. Dick Proctor: Is it the prion test that you're basically going to be doing, whereby once the animal tests negative the meat is still usable?

Mr. Robert Carberry: Under both sampling or testing regimes, which is the rapid test and the amino chemistry test, we could construct those in such a way that the meat would still be usable under both.

Mr. Dick Proctor: Okay.

Another area, of course, is the animal feed. There was some talk initially about banning all animal-to-animal feed. Are you contemplating changes in that area as well?

Mr. Robert Carberry: Yes, we are. We have a range of options there as well. The options range from simply enforcing our existing ban, through the use of more inspection resources to have higher levels of assurance, up to and including what you just mentioned. In between there is potential removal of SRMs from all animal feed. We're looking at a series of options right now in that regard as well.

Mr. Dick Proctor: Could you hazard a guess as to the likelihood of banning all animal-to-animal feed?

Mr. Robert Carberry: I wouldn't want to hazard a guess on that right now.

Mr. Dick Proctor: There was, as indicated, a lot of talk in June that the announcement by the federal government was imminent. Obviously, it hasn't happened heretofore. Has it largely been an economic decision from other people, such as renderers and others who would be dramatically affected, in terms of why this hasn't occurred?

Mr. Robert Carberry: We'll make a science-based decision, but there are a number of factors impacting on this, such as industry's ability to put it in place. The policy is only as good as its ability to be implemented, obviously, so we need to work through those kinds of factors. As well, there are the trading partners' reactions and those kinds of things. So they are all being taken into consideration, but the ultimate decision will be a science-based one that can be implemented properly within the country.

Mr. Dick Proctor: How regularly are rendering plants inspected in Canada?

À (1045)

Mr. Robert Carberry: I don't have an answer on that for you, sir.

Mr. Dick Proctor: The USDA says that they inspect all of their plants at least once on an annual basis. Would we be at that number?

Mr. Robert Carberry: I can find out for you.

Mr. Dick Proctor: I have one other question on a different area, on the restrictions on live animals being exported to the United States. There is a story today out of Alberta that says that part of our problem is that we don't have enough meat-packing plants. It seems to me that this whole argument is a lot like shipping raw logs somewhere and buying back the imported lumber.

Is there consideration being given to another packing plant, perhaps along the Manitoba-Saskatchewan border, that would allow us to do more processing and find more jobs in this country? If they want boxed beef, we could give them a lot more.

Mr. Robert Carberry: I could only respond to that from the technical side in terms of the requirements that the plant would have to meet. We have an equivalency agreement with the U.S. They would want to see that the establishment meets the necessary standards. That would be the role we would play in it.

So I'm not aware of any current requests in front of us, but if we do get one, I can assure you we'll take a look at the plant on an expedited basis.

Mr. Dick Proctor: Is there anything from Agriculture Canada on that matter?

Mr. Andrew Marsland: No, I don't think so. I think it's perhaps a question you may want to ask the packing companies.

Mr. Dick Proctor: Yes.

Thanks, Mr. Chair.

The Chair: We'll move to Mr. Casson, for five minutes.

Mr. Rick Casson (Lethbridge, Canadian Alliance): Thank you, Mr. Chairman.

Gentlemen, I keep hearing the statement that the border's open. The border's not open. The border's partially open. It's open a crack.

With the U.S. being able to control the flow through the permit system, they have full control over how much beef will go down there. To assume that there's a certain quantity that will go I think is a large leap. I think we'll have to see how this thing pans out before we can get any kind of an idea of how much beef is going to go across that line.

When the program for the slaughter cattle was initially put in place, it was said that it was going to deal with 950,000 head of cattle that were on feed at that time. The money was going to be put into the feedlot industry, and that was going to kick the whole industry, the whole chain, into gear. The feedlots would sell, those cattle would be slaughtered, the cattle would come off the grass and into the feedlots.

That's not happening. The number in feedlots is down. Until the border's open, until live cattle are going back and forth, these feedlot operators are not going to be buying cattle to put in their feedlots. You have to understand why that would be. There has been some work done in the past on trying to improve.

You say we had an integrated system. We didn't have an integrated system. We had a partially integrated system. We would allow live U.S. cattle into Canada only between October and April. So there were all kinds of hindrances and all kinds of things in our country that were stopping us from having a fully integrated system.

A couple of questions. You say the program's going to end on August 17, two weeks before September 1. That's assuming any beef goes across the border on September 1. Until live cattle are included in this border being open, I don't think you can consider it an open border.

How can we say that the program's going to stop when only a small portion of the beef that we produce is going to be allowed to go across? An open border, to me, is an open border, as it was before May 20. Until that happens, how can we possibly...?

The money that went into this program has not gotten the trucks rolling. The trucking industry is decimated. The cow-calf, that's who...and the phone calls have changed to our offices in the last month. The feedlot people aren't calling, the barley growers are calling, the cow-calf people are calling, the subsidiary businesses that are involved are calling.

We were told on Friday that there's no money left in this program. So what are the plans of this government to take us to the next step? Because when all these animals are backing up, backing up, backing up further into the system, it's stalled. Until we talk about live cattle going across that border, I don't think the program should end.

So I don't know what your plans are to carry on with the program, with the hurt that's still out there.

That's to whoever can answer that.

Mr. Gilles Lavoie: Yes, it is surely one of the various considerations the ministers will have to take into account. The program as worded says that it will end as per the three triggers that I mentioned before. Obviously, at the same time, they said that the ministers will sit down--it was a conference call, and there may be other conference calls--to consider the situation to see if something else needs to be done. The consideration that you just outlined will surely be part of such considerations.

À (1050)

Mr. Rick Casson: The fact is, when the program was announced, it was intended to handle all the cattle that were on feed. Just talking to some of the big operators, their feedlots are still two-thirds full and the money's gone. When the system was put in place, it was flawed. It didn't have a floor price in it, and when the bottom fell out and it got down to 30¢ for fat cattle, that money was chewed up really quickly.

Some of the other things that have been brought into the system to try to stir competition in the marketplace, like the program that was announced in Alberta to deal with the 100,000 head, these were all short-term, partial fixes here. I have to have an answer--everybody around this table has to have an answer--when a cow-calf operator phones me and asks me what he's going to do when the snow starts blowing November 1 and there's no grass left.

Mr. Gilles Lavoie: As I mentioned before, this is one of the various considerations. Hopefully there will be some direction or a better reading of this situation sometime in the early fall, in such a way that the cow-calf producer can take the best decision for them, knowing exactly what is the situation.

I know we are fully cognizant that it is urgent, and that for the cow-calf producer October and November are critical months.

The Chair: Mr. McCormick.

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

Thanks to the witnesses for being here, and hello to our colleagues. All political parties have been working very hard on this, and I'm glad to see that up to this point--and I say this to Canadians across this country--politics have stayed out of this, and we're working together.

Again, I want to say that I do appreciate the work of Ag Canada and CFIA. Canadians have great confidence in our industry and in our best food in the world, because I understand the consumption of beef is up to what it was before the disaster struck.

At the same time, I just want to clarify something with regard to a question asked by another colleague of Ag Canada.

I just want to ask whether it is your jurisdiction, sir, to study whether there is or was any excessive profit being earned or taken advantage of by wholesalers, retailers, or packers. I'm just not knowledgeable about whether or not it's your job to clarify that, sir.

Mr. Gilles Lavoie: Of course we have not interfered whatever with some other jurisdiction, but what we have done is monitor the situation. A lot of people have written or sent comments to the effect that their impression was that the low prices paid to cattlemen were not transferred to the consumers. But we have not carried out an investigation; we've captured information as it was made available.

Mr. Larry McCormick: Thank you.

Mr. Chair, one of the times we were sitting here in this room since the House broke on June 30 I expressed my concern about this program. I agree with my colleagues around the table and opposite that we don't have enough money in this program. It hasn't helped enough.

My colleague from the west just spoke, from Alberta, I believe, and he asked what will be there when the snow flies. I'd even like to make it a month sooner. I'd like to move it up to the end of September. I mean, our producers have to be assured....

And I realize this is a political question for you as officials, but you tell me that things are being studied. Is a program being studied for animals of more than 30 months of age? And is there talk going on that we will continue this program past this, and yet there were 950,000 animals in the slot when this started? I missed the approximate number of how many are still there in the system at this time, sir.

À (1055)

Mr. Gilles Lavoie: The number of animals, the 900,000 that's been mentioned, is the estimation by CanFax of the number of animals on feed as of the end of May that would normally be slaughtered before November.

The program was to terminate the day the U.S. border opened. The limit on all animals on feed was just in case, a precautionary measure in case the border was to remain closed for a very long period of time. Up to August 2, slightly more than 500,000 cattle were slaughtered, between May 20 and August 2. Out of that, 454,000 in fat cattle in federally licensed establishments, if the 500,000 included provincially registered at one...and 31,000 non-fat cattle in federally inspected establishments. In general, we assume that the provincial establishments slaughter around 5% of the federal number.

There has been significant movement over the last couple of weeks. The fat cattle have moved in excess of 50,000 a week, at 56,000, and at around 4,000 of non-fat cattle--this is in federal establishments--and the slaughter of veal calves has not dropped significantly. They have continued to be slaughtered as they come ready for the market.

Mr. Larry McCormick: Thank you.

One other thing, Mr. Chair, just for clarification. If my colleague from Alberta gets the opportunity to mention this later, would he happen to know how many cattle the gentleman from Picture Butte has still in his feedlot? The last time we sat in the room, he had 90,000, and I'm just curious about how many he would have there today.

The Chair: That's the end of questions, sorry. Your time has expired.

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

The Chair: That's all the questions for this group at this time, but they are coming back again.

Mr. Rick Borotsik: Just for a point of information, we have two and a half hours for the next group, which is the plant processors. If it doesn't take that long, can we again get access to these people?

The Chair: We have an hour and a half.

Mr. Rick Borotsik: It says on my agenda 11 a.m. to 1:30 p.m.

The Chair: I'm sorry, that's....

Mr. Rick Borotsik: Is it 11 a.m. to 1:30 p.m.?

The Chair: Yes.

Mr. Rick Borotsik: That's two and a half hours. If they don't take the full time, can we--

The Chair: Bring them back sooner? Yes.

Á (1100)

Mr. Rick Borotsik: That's good. Thank you.

The Chair: We have to follow our timeline here, because people have made commitments and they have air flights and one thing and another.

Gentlemen, thank you very much for appearing. We look forward to hearing from you again later this afternoon.

We would ask that the next group move to the table as quickly as possible.

Á (1101)

Á (1105)

The Chair: Order, please.

We now have before us the packer side of the industry as well as a representative of the Canadian Cattlemen's Association. Mr. Stan Eby is here as vice-president of the association.

We also have with us, from Lakeside Packers, Mr. Altwasser.

Thank you for coming. We've met you before, not on this particular issue, but we've met you before.

Brian Read is here representing Levinoff Meats Limited. We also have Brian Nilsson representing Nilsson Brothers, as co-chief executive officer, and Jim Holmes representing Carman Meats, as president.

Thank you, gentlemen, for coming to the table this morning.

We have with us also a latecomer, a representative of St. Helen's Meat Packers. Thank you for coming. I apologize, because your name wasn't on the list. I have no idea why you weren't informed, if you weren't.

Mr. Robert Bielak (President, St. Helen's Meat Packers): Well, initially I wasn't planning on coming, but I decided to come.

The Chair: Okay. I apologize for that. We're happy to have you here with us. We're glad that someone from Ontario has chosen to come and represent that part of the industry.

We want to hear from all of you. I have Mr. Altwasser listed first, if you want to go in that order. There will be a fairly extensive line of questioning. We will be limiting these questions to five minutes. When we begin the questioning, Mr. Borotsik will be the first one to ask a question.

Mr. Altwasser.

Mr. Garnett Altwasser (Chief Executive Officer, Lakeside Packers): Thank you, Mr. Chairman.

How long do we have for a presentation?

The Chair: Well, we want you to do your presentation as succinctly as possible. We normally like to limit this to eight or nine minutes, and less if possible.

Mr. Garnett Altwasser: Just cut me off if I go on too long.

We appreciate the opportunity to appear before the standing committee. I've met a few of you over the crisis, and some of you prior to that.

We're located at Brooks, Alberta, a small town two hours east of Calgary. Under normal circumstances we would process a million cattle a year. That means we would slaughter and kill a million cattle a year. In our feedlot we would grow and finish 200,000 fat cattle. So it's an integrated operation and a feedlot operation that expanded into the meat-packing business.

We started it in 1966, and in 1994 we sold Lakeside to an American company called IBP. In 2001, IBP was sold to Tyson Foods, so our company now is a wholly owned Canadian subsidiary of Tyson.

I don't think I have to tell any of you here about how devastating the news was on May 20 and about the havoc it's caused in our business. It struck our plant especially hard, because we had been the largest exporter of red meat or beef out of this country into the United States, and also the largest exporter into Asia.

Initially, when the industry came to a stalemate and there was no price discovery on cattle and/or meat, our volumes declined considerably. In our plant, the cut-out has dropped to unprecedented low levels, and likewise has the price of live cattle.

We've worked very closely with some of the cattle feeders, some of whom have appeared here before. I have to tell you that what Rick did across Canada in pushing product at desperation low prices got a lot of meat moving and really heightened the awareness to get product moving in this country. That was one of the things that showed us that price will move product, that Canadians do have an appetite for beef. As has been said here before, the price will move product.

Through that whole period...and I guess you might characterize a business such as ours as a margin business. That is, we buy and we sell. We produce in the plant about 400 products of raw material, of cattle, and we produce all these other products and try to generate a profit in between. But you'd characterize the business there as being extremely uncertain, working from hour to hour, from day to day, not knowing what to do, whether a person should be killing or not killing, or increasing or decreasing volume, and trying to minimize the associated risks.

I'll just give you some idea of what it was like in that time. Through the month of June we figured out we had from $20 million to $25 million of products stranded in other parts of the world that were in various forms, that were in containers, on the water, in bonded warehouses. This was product that could not be moved into the normal trade into the country to which it was exported.

For one product alone, we had 70 containers of gelatin bone. We make gelatin bone that gets exported into Asia, and all that product had to come back and be destroyed.

We're putting away product in freezers. We have freezers contracted from Vancouver Island to east of Montreal. We have that industry pretty well chock full of product. We don't know what its value is, but we don't have the guts to throw it away and we don't have the guts to render it. Our conscience hasn't allowed us to do that, although at some point in time we may need to do that.

With the movement on the border, our concern now is that from the initial regulations we've seen, we're not sure whether that product can go into the United States. So that is a very large overhang on the market; maybe we did make a mistake, and maybe we should have rendered it. Offal products have been rendered. With regard to meat meal, we run our own rendering plant, and meat meal is being hauled to landfill. Again, that is a dead loss, a crime. There's no return.

In June we operated at 45% capacity. Currently we're operating at about 72% capacity. We've lost about 300 people out of a workforce of 2,500.

Á (1110)

As you may know, the Honourable Jane Stewart was in Brooks to announce a work-sharing program that's been supportive of the people and given them some sense of assurance that while they took the hurt on income, there was a way of hopefully getting through to better times.

Our people in Brooks are really critical to us. It's taken us four years to ramp the processing floor up to production because of the lack of people. We hire people all the way from Newfoundland. We send recruiters to Newfoundland and we send recruiters to B.C. We have a population there now, and it's really critical. If we lose those people, we will not be able to process the amount of cattle necessary to get some flow through for the next turn of cattle.

In terms of our costs and the drop we've suffered, if we put a number to it, compared to our sister U.S. plants--we have good comparisons internally--we would be disadvantaged at about $100 a head. And we are the largest employer in southern Alberta. We're not only the largest employer in Brooks, we're also the largest employer in Medicine Hat, where 600 people come from each day.

One of the things that has helped us and has started to put a little bit of a base under the market is the fact that supplementary permits have been cut off. While that has been a bone of contention from a cattle standpoint and from our position in the processing industry, that's really, really helped. Price is getting that done in any event, so it's helping shore up the trim market.

We are, just this weekend and today, trying to determine what the partial opening of the U.S. border will mean to us and the ability to process more cattle. It has to help. I mean, we've been in the penalty box so bad, that's going to help. It's surely not the whole answer, but it's going to allow us to take that carcass apart and have some of the products move south. That in itself will get more cattle moving through the system.

There was a question asked about feedlot. Our feedlot has a 75,000-head capacity, of which we get almost three full turns a year, and we're down to about 35,000 cattle. We don't know what to do either. The worst thing about this is the uncertainty, going out and taking a position, because if you buy more feeder cattle you still have the risk that you can take a big haircut on those cattle as well. But for the processing industry to continue, we're going to need to get these cattle on feed or we're going to move down the chain at some point in time and kill unfinished cattle, cattle that have not gone through the feedlot, because as an industry we have more cattle in the country this year than a year ago.

One of the things we do need to talk about at some point in time is cows, and the growing number of worthless cows, spent range cows, that are out there. I'm afraid that will make the young cattle problem small.

Á (1115)

The Chair: Thank you, Mr. Altwasser.

Now we move to Mr. Read from Levinoff Meats in Quebec.

Mr. Brian Read (General Manager, Levinoff Meats Limited): Thank you, Mr. Chair. And I'd like to be called Brian. I still have my dad, thank God, and he's called Mr. Read.

Before I get into my company itself, I'd just like to make a brief comment on the announcement last Friday. I'd like to thank, to date, Minister Vanclief's office for his continuous communication; the CFIA and their organization for ongoing daily briefings and updates; and Health Canada.

Levinoff Meats-Colbex is a family-owned company. We've been in business for 45 years. We employ approximately 350 direct employees, all union. We have accredited HACCP programs. We have three intervention systems installed in our operations to ensure food safety for our consumers. We produce cows and bulls. That's what we do. So our main production is the lean meats and the fat meats.

I'll just walk through my briefing here. The lean meats to date are selling approximately, if not closer to, 50% below the value of year to date. And understand that the market we're looking at last year was a depressed market due to the droughts. We had massive droughts in Colorado as well as the west coast, through Alberta--northern Alberta, I believe, Garnett.

There's a lot more I could say, but that's where we are today. We're still approximately 50% below last year's value to this year's. We're also dealing with the dollar. The American dollar has weakened by 30¢. I know we'd like to say it's the Canadian strengthening, but I think it's the other way.

On the fat side of the business, your fifties and sixties, as we alluded to, the freezers are filling up. That product has just depressed as much as 70% from last year's value to this year's value.

We'd also like to thank the Canadian consumer for their continued support and efforts, and thank as well the manufacturers and processors in this country who have made the switch to Canadian product. We'll see just where that goes as time unfolds.

In terms of our current inventory, I'll bring you back to some of our desperation. I don't want to repeat what Garnett has alluded to, because it is fairly similar, although maybe at a smaller scale.

We produce approximately 2,500 to 3,500 animals a week. On May 19 we had an inventory value on our slaughter floor, that was destined for export to the Pacific Rim, of approximately $2.5 million Canadian. Of course, as we all know, as of May 20 we woke up to find out that the inventory could now be worth pennies, and it continues to be that way.

We've also had to implement the SRM bans in the mature animals, those over 30 months, that eliminate the spinal column from further processing.

In total to date, our estimated losses are about $126 per head, the amount available to us in the industry prior to May 20.

In week one of our process, we did have cows bought, like everybody else, at market value, but the market showed distress as of that Thursday, May 25, and continued to start to depress itself to where there was no bottom. We had a lack of movement of livestock due to uncertainty of compensation packages. That continued right through to weeks three and four, and then into week five. Then the rumours started to get out.

The package was finally released and understood, in Ontario, I believe, July 10. So we had the federal government announce June 19; by the time all the logistics and the auditability and the legality were done, it was July 10.

Our business is a seasonal business. It's barbeque season, and this affects the ground beef program and the consumption of ground beef. We usually end up with a fairly strong demand in the fall because of the supply of raw material in this country.

We also had to struggle with imported meats coming into this country. In January, February, and March we preceded the Americans in allowing Uruguayan product into this country. So when we approached the street to promote the use of Canadian products, we were forced to compete with those buys, which, let me tell you, brought the price down to about 90¢ a pound for lean ground beef. It's a complete shame, but that's what did occur.

We'd like to thank the people in DFAIT for their efforts in suspending subs. In terms of inventory in the country, I'm not sure if we really know where that is to date.

Á (1120)

I'll bring you along. We were able to clean up our fixed-cost losses by approximately week five. We had a lot of live veal product in the province of Quebec that was becoming stressed, so in conjunction with another packing operation, we began to slaughter that veal. So that took care of some of our fixed-cost losses. For the first three to four weeks, we were losing about $440,000 a week, but of course that cleaned itself up as we started to put product through our plants, so we were able to assist in the veal operation.

As of week nine, we were able to put our plants back to about 95% efficiency. Because now the programs are understood, cows are known to be part of the program, and they began to move the livestock. So for the last three weeks, we have seen an increase in our slaughter numbers as well as our fab numbers, and we'll continue to look at that as we do unfold.

There is a lot of speculation in the industry. For the last five to eight years, we've been unable to speculate in this industry because of the fluctuation in the American dollar and so on. It is a penny business; it always has been. If you're on the right side of the penny you're doing well, and if you're on the wrong side it's just another month.

I'm sure there will be lots of questions, Mr. Chair. I could go on, but I think Mr. Altwasser did allude to most of the issues that we do have.

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

Now we'll move on to Mr. Nilsson, please.

Mr. Brian Nilsson (Co-Chief Executive Officer, Nilsson Brothers): Thank you, Mr. Chairman and committee members. I thank you for the opportunity to speak to you about our company, our customers, and how the BSE crisis is affecting us.

Nilsson Brothers and our meat company, XL Foods, form a truly integrated cattle and beef production company. We're probably the only one in Canada that is this integrated. We're involved with every aspect of the supply chain. We start with a large land base of farms and ranches that we use to produce both calves and yearlings for our finishing operation.

Our primary business is livestock auctions. We run 15 facilities throughout western Canada, and these facilities basically are from Manitoba, Saskatchewan, Alberta, and British Columbia. We deal with over 40,000 producer clients every day. We're actually the largest auction company in North America, although I don't know if that's something to be proud of today in Canada.

Currently we are marketing 10% to 15% of normal volumes in our facilities. We've closed three marketing facilities completely. We will review that as we get into the fall. We've laid off approximately 60% of our staff at the markets, with an additional 30% on work share.

Our managers and sales staff daily deal with the anguish of the producers as they struggle to cope with the BSE marketplace. The calls you're getting we get first, and we get more of them. I cannot explain to you the agony I feel for these producers, because I am one. I was one. I'm a fourth-generation cattle person. I come up through this deal, and it's ripping the heart out of everybody in it.

Probably the largest problem is lack of liquidity in the marketplace. The present situation is such that if the markets were to return to normal volumes, I do not believe all classes of cattle would have buyers. I don't even know if price would be an issue in certain classes. I'm optimistic, as we all are, that this will change, but I think the underlying thing we have to conclude here is that never has a country with such a large volume of livestock and such a small human population had to deal with a BSE crisis. So I don't think there's a mirror or a standard or anything that can be followed to explain the right way to address this concern. You're just dealing with such a large oversupply.

Again, we hope the partial opening will have some positive effect and maybe bring some normalcy to the livestock marketing part of our business. The ability for this to happen is critical for the financial community to be able to return to normal lending practices. I see it and I hear it from our producers. There is tremendous stress out there. The financial community is in limbo, let's say, about where they're at, so I don't know how this is going to happen.

The next segment of our business is similar to Lakeside and Levinoff. We currently operate two slaughter plants, one in Moose Jaw, Saskatchewan, and one in Calgary, Alberta, and we operate four cutting and fabricating facilities in Calgary and Edmonton. We're no different from anybody else. Right after May 20, we had substantial losses in the offal and product that was trapped in other parts of the world that we were not able to get any value for. This was followed by a continued decline in the value of certain parts of the carcass, to where last week we were not just rendering the offal, but we got to the point where we were actually rendering an additional 5% of the meat. It wasn't worth it to take it off the bones.

I guess you do those things so you can push more cattle through to try to clean the backlog, to have more of the cuts that we can sell. I know it just gets to be an irony and a craziness that we're in when you ask why this cut is worth this amount and this one is worth nothing. I can't explain it. I just know that the one focus is how you get as many through the door as you can.

Á (1125)

From a production standpoint, we have seen it increase from 50% of capacity immediately after May 20 to where, as of last week, we're running at 80%. This has helped to bring some of our fixed costs back down, but it's definitely not in the 90% to 100% where you normally operate, so you have all these extra fixed costs.

Garnett spoke to the problems we're having as far as our competitive ability in the U.S. is concerned. I don't think he's underestimating at all how offside we are.

Our business actually does a lot of branded product, both for the retail marketplace and the food service marketplace. Both of these call for holding product anywhere from 14 to 60 days. This has just created more losses for me, because you've got aging programs for them, but they want the price to come down all the time. Week after week, my inventory is worth less and less.

I'm anxious to see if the partial opening will stem the tide and allow maybe some normalcy to return to the meat market. I don't know. I'm optimistic. If we're able to move more product, but only at a continually declining value, this is not an environment that either the cattle or meat packing industry can survive in. Hopefully we can clean up the backlog of finished steers and heifers without this continuing to happen. The partial opening, we would like to think, will bring some stability and maybe bring the market back in line.

I'm seriously concerned about the cow slaughter. Over the last three months, for the most part, we have been the only plant slaughtering cows. The industry can't handle what's going to come at them. That's the long and short of it.

We've been lucky. We haven't had any cows to deal with, but they're coming and there will be lots of them. I think we have to proceed over the next month or two, even with this partial opening, to make plans for what we are going to do with these cows and what kinds of programs we can put in place to try to facilitate the removal of these cows and address some of the oversupply problems we are going to face.

We have to attempt to get to a supply-demand balance. All the things that are wrong are just that. We have an incredible oversupply and we can't expect our domestic marketplace to do that. I think everybody in this room will agree that the Canadian consumer has been tremendous in response to us. We could not ask for a better response than what they've given us. But the reality of the situation is that you can't eat it all.

I think the partial opening of the border is a start, but it's a permit system. I think some people have spoken to that. I mean, how the permit system works could mute a bunch of the benefits. How do you get in? How much can you get in? This is not a free flow, so I don't know if this is necessarily going to do everything we want.

I seriously think there will have to be decisions made that will address basically two things: first, how is the primary producer being looked after in this process; but also, regarding the cows, do we have a depopulation problem and do we need to seriously consider that? That will help us reach a balance. Until we do that, I think we also risk our pork and chicken industry in the slide in the meat business.

With that, I thank you and I look forward to your questions.

Á (1130)

The Chair: Thank you, Mr. Nilsson.

We'll move to Mr. Holmes, from Carman Meats.

Mr. Jim Holmes (President, Carmen Meats Inc.): Good morning, ladies and gentlemen. Thank you for the opportunity to discuss the current situation for the small abattoirs in Manitoba, provincial abattoirs.

These are desperate times for most industries working directly with the beef industry. It has been a busy summer for the provincially inspected abattoirs as we have done our best to maximize our capacity to help the situation. Unfortunately, we are not large enough to fill the gap between slaughter and supply needs. There has been some talk of expanding our slaughter facility, but possibly too late for this approach. The beef, lamb, bison, and other livestock industries need our borders open to survive.

Our provincial plants provide niche market services that are essential to keep rural Canada alive. The local economy will take a huge hit if the provincial plants are not around. In the province of Manitoba alone, our 26 red meat slaughter plants employ approximately 250 people. Of this, the spinoff industries such as spice companies, paper companies, freight carriers, companies that sell the cleaning products, as well as our local businesses that we do business with every day in our communities would take a hit. If there is no employment in the community, people move away, so there's no money to spend to keep the other businesses alive.

The federal plants do not have the time to service our niche markets. The provincial plants are needed to keep this diversification viable, and without this option the farmers will have to look at uninspected facilities, which are not feasible or safe, in our estimation.

The rendering and offal pickup issue must be addressed. Currently Rothsay has an offal pickup for us at a cost to the plants that at this time is being passed on to the producer. This service to our abattoirs could be suspended at any time. In addition to the 250 to 300 tonnes of ruminant material going to the city of Winnipeg Brady Landfill site per week, this may become a sensitive environmental issue, therefore jeopardizing the continued use of this facility as a disposal site for us. If there is no place to dispose of this material or no rendering of it, it will not be picked up. Remember, with the opening of the border, this situation will still exist in Manitoba.

The options of composting and incineration must be addressed. These could cause huge environmental impacts. Two or three of our provincial plants in Manitoba have started to experiment with the composting of offal; however, this has proved to be a fairly costly experiment, which the abattoirs at this time have been absorbing.

We feel the government must continue to supply inspection services to the provincial plants and to provide assistance and guidance for levels of inspection to permit interprovincial trade from what are now provincial plants.

We feel we can continue to work with the federal plants and supply these niche markets, knowing that the federal plants are the big contributors to the livestock industry. Our livestock producers must have the option to slaughter their own animals at inspected facilities, be it provincial.... The opportunity for them to sell to their friends, neighbours, and others a safe, healthy product through provincially inspected abattoirs is an important part of farm diversification. A national one-tier system would possibly not give them this option since provincial plants as they are now may not exist. This would leave the producers the undesirable option of resorting to uninspected facilities. The talk of a one-tier system would force our provincial plants into extinction. This is not because we cannot meet sanitary requirements or maintain high food quality. The implementation of the system in question is going to require major construction changes that will not have an impact on food safety or quality.

Although the BSE issue was handled well on the scientific level, the foreign customers we invited as partners in our investigations, which included the United States, could also have included the Japanese representation, knowing the importance of food safety to this important trading partner. So someone has to admit a mistake was made, get to the table, negotiate, talk. Call it brown-nosing if you like, but we have to get the beef industry moving in Canada.

Á (1135)

Thank you, again. I would like to congratulate you for the work that has been done to get a small chunk of our border open. I thank you again for this opportunity and hope I can answer any of your questions.

The Chair: Thank you, Mr. Holmes.

Now we'll move to Mr. Bielak, from St. Helen's Packers in Toronto.

Mr. Robert Bielak: Good morning, Mr. Chairman. First, I'd like to thank you for having me here. Initially I had other plans, but I thought this was much more important, so I'm here today.

I'm going to tell you a little bit about our company and my history. Many of the points have already been made by Garnett, Brian, and Jim.

St. Helen's Meat Packers is an independent, family-run meat processing and harvest facility of beef and veal. I'm the third generation in the agriculture sector.

My grandfather immigrated to Canada in 1955 and traded livestock in Ontario. After purchasing a farm in Belleville and living there for a short time, my father and grandfather moved to Grimsby in the Niagara Peninsula and farmed there in the late 1950s and early 1960s.

In 1961, my father and grandfather opened a retail store in downtown Toronto. From 1961 to 1967, my father custom killed his needs in Toronto, at the Toronto Abattoirs, which is now Quality Meat Packers. In 1967, my father decided to build his own slaughterhouse. Facing some financial challenges in the late 1960s to early 1970s due to the overcapacity in the slaughterhouse sector, my father had a lot of stress and, because he was a new entry into the beef packing industry, fell ill in the mid-1970s.

I was the only son of five children, and when I was 15, in 1977, my father was forced to sell his portion of that business. At the time, we still had the two farms and the small retail shop. My father passed away in 1980. I had just finished high school and was somewhat forced into the retail meat business.

I initially custom slaughtered veal calves from about 1981 to 1987, trying to wholesale some of the meat and selling some of it from our retail store. In 1987, with my immediate family, I purchased the facility in which we were tenants and started harvesting or slaughtering beef for the first time on my own. After we incurred substantial debt to purchase and continue upgrading the facility, we became one of approximately six federally inspected slaughter beef plants in Ontario.

With the industry continuing to shift to western Canada, the Ontario industry changed dramatically and quickly between 1987 and 1995. Rationalization in the industry left approximately one major packer and a few smaller packers in 1995. Those are federal packers. With customer requirements changing--as an example, the industry going to boxed beef versus hanging beef--we were forced to expand our fabricating facility, incurring more expenses and recurring debt.

Between 1987 and today, 2003, we as a company have continuously invested in a relationship with local producers and continue reinvestment in our facility. Over the last eight years we have rigorously explored and pursued the export markets. Our markets were predominantly in the U.S., Korea, and Japan. These were the main exporting countries we pursued. We're a smaller packer that tries to stay competitive by pursuing small niche markets such as the kosher process or halal. In 2001, we again invested in a smaller designated kosher processing facility exclusively for export to the U.S. In total, our business consisted of 65% domestic market and 35% specific specialized cuts and niche markets for export.

Prior to May 20, we employed about 200 people. On May 20, our business changed significantly and dramatically--hopefully not for the long term, but I have my doubts. All our exports markets were shut pretty well immediately; all our products in transit were halted; all our inventory of products in transit storage, in frozen and fresh states, were immediately devalued significantly, in many instances to zero value; all our cattle purchased ahead, usually two to three weeks, were devalued significantly. Our business was damaged. All our plans would have to change. All our people employed at our designated kosher plant were laid off. Specific rooms in our main plant laid people off as well.

Á (1140)

All our overheads and costs of operation continued to escalate, with the sales and volumes dropping. We continued to buy cattle as the situation unveiled. We made all efforts to slaughter as many cattle as we could within the facility and labour situation that we had. As well as trying to increase our slaughter, we custom slaughtered a percentage of our veal for Delft Blue--I don't know if you know them or not--because they have no slaughter facility in Ontario.

Our objective and desire is to have the borders fully open and to make an attempt to have financial normalcy back in place for all our cow-calf feeder-producers and slaughter processors involved.

If anyone has any questions, I'm more than happy to answer them.

The Chair: Thank you, Mr. Bielak. We'll get to you in a few moments.

Now we have Mr. Eby, from the Canadian Cattlemen's Association.

Mr. Stan Eby (Vice-president, Canadian Cattlemen's Association): Thanks, Mr. Chairman. On behalf of the Canadian Cattlemen's Association, I appreciate the opportunity to be back before you today to give you an update from our perspective. I'll attempt to be very brief on things.

The one positive prior to last Friday has been the tremendous support that Canadians have shown for our industry, and that was alluded to here earlier this morning. Due to the excellent work of both government and industry, consumer confidence has remained high, and we will be the first country to see a per capita consumption increase following BSE. I don't think we want to overlook the fact that all industry and government sectors have worked hard to maintain that image.

The partial opening of the border with the United States to boneless beef that will take place during August is providing our industry with a greatly needed morale boost and needed markets to allow the plants to ramp up to full capacity. We must reach these levels if our industry is to see its way back on the path of recovery.

As a little background, the first weeks following the announcement on May 20 saw processing levels drop by over 50%. They fell from 75,000 head per week pre-May 20 to 35,000 head per week. Recently these levels have recovered to around 60,000 per week. At the same time, prices fell from $1.05 a pound live weight to approximately 35¢ per pound presently. This represents a $945 decline in the selling price of fed cattle. That's based on a 1,350-pound live weight.

Cows and bulls have also been backing up in addition to these numbers. Some of our research indicates that about 210,000 cows and bulls would have come to market during this period. Somebody can likely comment on those numbers. If we maintain our current slaughter levels, we'll clear the fed cattle backlog sometime late in September, mainly because very few cattle have been put on feed since May 20. While it will temporarily improve selling positions of cattle feeders, those feeder cattle are still in our system and need to come to market. If the U.S. border remains closed to live cattle, we'll need to process 85,000 head per week in order to handle our current level of production.

We remain confident that the live cattle trade with the U.S., particularly cattle under 30 months of age, will open as a result of the expedited process announced on Friday. This could leave us with several classes of cattle that will need additional capacity. In the past, we have exported 90% of our mature bulls and 40% to 50% of our culled cows. Many believe this occurred as a result of more lenient manufacturing beef import procedures and rules in Canada than exist in the U.S. The plants and jobs move south as well. We are working on a capacity strategy to address the requirements to support all parts of the sectors in our industry. Hopefully the announcement last Friday will quickly lead to improved pricing of fed cattle.

We remain optimistic that Mexico will follow quickly with the reopening of their market to Canadian beef. In 2002, beef exports to our NAFTA partners was 450,000 metric tonnes, which would be equivalent to 1.7 million head of cattle. While this should generate more optimism, unfortunately many fed cattle sellers have become very discouraged about competitive bidding since May 20.

Overall, producers are growing angrier each day as a result of perceived or real inequities that currently exist in our industry and the lack of market function. General frustration with the unknown, such as market price, product movement, credit availability, and support programs, is causing concern. The losses that feedlot operators are experiencing is taking funds out of the industry and right out of the market, and it's causing severe cashflow problems and inability to pay bills. The same feeling exists in all producer sectors. The future availability and affordability of credit is a major concern. If we work together and significant market recovery starts to take place, we can save much of our industry.

I'd like to stress that we've had good working relationships with the people at the table, with government. We look forward to continued strong working relationships with everyone involved. While there are no easy answers to this problem, it is clear that all parts of the value chain must commit themselves to this recovery process. We are moving quickly on a carcass value model that can relate fed cattle values to wholesale beef prices. Our principal objective is to ensure that accurate information is available and to direct our marketing efforts to activities that can generate the greatest return.

Á (1145)

Thank you.

The Chair: Thank you, Mr. Eby.

That concludes the presentations. We want to begin the question period. Mr. Mark, are you on first?

Mr. Rick Borotsik: I'm up first, and then Mr. Mark.

The Chair: Okay, you have five minutes.

Mr. Rick Borotsik: I thought it was seven.

The Chair: Five minutes.

Mr. Rick Borotsik: I have two very quick questions, and then Mr. Mark will have a question.

There's an inventory incentive program of $30 million. Each and every one of you indicated that as of May 20 your inventory has reduced in value--in some cases to zero, I was told. Did anyone here take advantage of the inventory incentive program through the government?

Mr. Garnett Altwasser: The program in Alberta has not been announced. We're momentarily waiting for that.

Á (1150)

Mr. Rick Borotsik: So has any money flowed at all to the processors? Has anybody received a dime from the inventory incentive program?

Witnesses: No.

Mr. Robert Bielak: All we've received is paperwork looking for the documents on how many we're slaughtering--

Mr. Rick Borotsik: Okay, so there has been no inflow. There is no money flowing to the processors right now about the inventory incentive program, but there is a program there that you may get some money from. Okay.

As for feeder cattle, Garnett, you say you have an integrated system, as you do, Brian. I appreciate that. I understand business fairly well. When you have the feeders in place...did you buy those feeders into the system? Did you take advantage of the slaughter program at that time? Did you buy at market prices and apply for government top-up to those feeders you had?

Mr. Garnett Altwasser: If I understand it--

Mr. Rick Borotsik: You had 75,000 feeders.

Mr. Garnett Altwasser: We had 75,000 cattle on feed on May 20.

Mr. Rick Borotsik: Right. When you took them into the plant after May 20, did you take them in at market value and apply to the government for the top-up?

Mr. Garnett Altwasser: We move our cattle over to the plant. If we can fax average for the week--

Mr. Rick Borotsik: Okay, have you done the paperwork now for the government?

Mr. Garnett Altwasser: We have applied for the BSE--

Mr. Rick Borotsik: Okay. You were buying at markets at the time. Whether the market was at 50¢ or 35¢, whatever it was, that's what you did. How many feeders do you have now? From the 75,000, you said you're down to 35,000?

Mr. Garnett Altwasser: Around 35,000.

Mr. Rick Borotsik: Would that be normal? You would normally keep them at the 75,000, wouldn't you?

Mr. Garnett Altwasser: We would stay at 75,000 cattle.

Mr. Rick Borotsik: Okay, so you've taken 40,000 out of the system.

Mr. Garnett Altwasser: Due to the uncertainty of the market, the uncertainty of the border, we haven't replaced--

Mr. Rick Borotsik: Did you see that you had a personal advantage in doing that? There are other feedlot operators who don't have the plant to back them up. They don't have the same ability to reduce their numbers.

Mr. Garnett Altwasser: No, we have not turned any slaughter cattle away from our plant.

Mr. Rick Borotsik: Okay, I have a last question, if I may, and you can think about this because I'm going to come back again. Culled cattle--think about that, and I'll come back to you.

Inky, go, and then I'll come back to culled cows, because we have some real issues there.

Mr. Inky Mark (Dauphin—Swan River): I would suggest that you don't give up on industry. As you know, agriculture is the third largest sector in this country, and we have a $30 billion beef industry. It impacts everybody across this country. I was surprised to hear Mayor Chiarelli last night saying that BSE has a $400 million impact on the city of Ottawa. That should send a loud message to the people in this city.

It's not only that, but it has trickled down to everybody, certainly in rural Canada, and it will devastate the rural communities despite the announcements. I know that over the next few months there is a disaster in the making if cash doesn't start flowing. One of the problems is that the primary producers don't have cash. How many of us can survive without cash for three months? Most of us live by our paycheques.

The department people have said, well, they're going to have to determine which groups of farmers need help. My question to the Canadian Cattlemen's Association is, first, do you support a cash advancement program for the primary producers, and what process would you follow to convince the federal departments that it's needed at this time?

Mr. Stan Eby: The Canadian Cattlemen's Association has requested that the present deficiency program be extended for fed cattle. We've been working closely with Agriculture Canada as of last week on a program that would address cow-calf and backgrounders. There appears to be a very good avenue via the agricultural policy framework and the business risk management. With a few changes there, the interim cash withdrawals...and they claim they can do that within 30 days of an application, but there's also a major problem because not many provinces have signed on to that. But there is a vehicle there that is very useful, we feel.

The Chair: Mr. Proctor.

Mr. Dick Proctor: Thank you very much.

The Chair: If you have a question, Mr. Borotsik, you may ask it now. You have about half a minute.

Mr. Rick Borotsik: I'll just go back to my initial question of culled cows. Everybody mentioned it. We have a really serious problem just sitting out there that nobody seems to be considering. I'd like to have your opinions--any one of you. What's the answer to the culled cows? Is it depopulation? Is it going to come to that, in your opinion?

Mr. Brian Nilsson: I think I spoke to it, but I think it is.

Mr. Rick Borotsik: Okay. Should there be a compensation package available to animal herds that have to be depopulated?

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Mr. Brian Nilsson: Well, yes....

Mr. Rick Borotsik: Be open about this, please.

Mr. Brian Nilsson: Yes, I--

The Chair: You've asked that question; one question, but two parts. You've answered the question. Thank you.

We'll move on now to Mr. Proctor. Five minutes.

Mr. Dick Proctor: Thanks very much.

Gentlemen, thank you for being here today.

In the previous round you heard it said by the CFIA official that there will be a lot more testing of animals for BSE. How does that work? Who pays for the testing?

Mr. Brian Nilsson: You'd have to ask CFIA, but as I understand it, it's the government that pays for all the testing.

Mr. Dick Proctor: Okay. So for the animal that tested positive back whenever the test was done--May 20 or May 19--that would have been paid for by the government, would it, Brian?

Mr. Brian Nilsson: Yes, and in that case I think it was the provincial government doing that test.

Mr. Dick Proctor: Right. Are animals tested at the Moose Jaw plant, for example? Do you have the capacity to test there?

Mr. Brian Nilsson: I believe they take some of the cattle from both of our plants, actually, and do some testing on the culled cows. So I think it's not the primary place where they test. The bulk of the testing is done at the renderer, at the dead-stock cow places.

Mr. Dick Proctor: I know it didn't happen at your plant, but for the animal that tested positive, did that meat and material end up going for feed? Does anybody know?

Mr. Garnett Altwasser: To my knowledge, it was rendered. I'm not familiar...but it did not go into the food chain; it was rendered, and the meat and bone meal was distributed from that animal.

Mr. Dick Proctor: What would be the reality if Canada were to ban all animal-to-animal feed? What would that mean for your industry, for example? I know Mr. Holmes spoke about renderers and landfill and composting and all that, but what would be the impact?

Mr. Brian Read: I think we can make a joint response to you and I'll make the first response.

From a science base, we do not support a feed ban. There is no science for that decision. That would be emotional, and I think we'd impede the border opening.

Mr. Garnett Altwasser: The other problem, of course, is that it's a highly nutritional calcium, phosphorus, and protein source for livestock feed for other species. We don't feed it ruminant to ruminant, and the disposal problem would be absolutely horrendous. We have no idea of the mountain of this stuff that's coming at us. Right now we're putting it into a landfill, but that is only a short-term problem when you think in terms of not only the cost of the product--that has real value to it--but also the potential environmental issue that may arise from having that much organic matter buried in one spot.

Mr. Dick Proctor: What do you say in response to people who suggest that if you allow animal feed to, say, chickens and hogs, inevitably there will be mistakes at the feed mill or by the farmer and some of that will end up being fed to cattle.

Mr. Brian Read: I do believe, through the investigation, probably some holes were identified, and I believe that would be--

Mr. Dick Proctor: There is some...? I didn't hear it clearly.

Mr. Brian Read: I believe, through the investigation, possibly some holes were identified in the feed ban that's been in place since 1997. As minor as they are, I do believe tighter controls on the process should fall under the jurisdiction of our CFIA, whatever they may be, whether it's flushing of the chutes and those issues we've read about and seen and talked about in the last 12 weeks.

Mr. Dick Proctor: Mr. Eby, you mentioned that cattle had gone from about $1.05 a pound live weight down as low as 35¢, and everybody here has agreed that the Canadian consumer has stepped up to the plate literally and figuratively, I guess. Are you surprised that the price the consumer has had to pay for that product has not dropped more sharply than it has? There is the 90¢ a pound for lean ground beef, but that seems to be the exception. Most consumers would say, hey, I may be paying a tiny bit less than I was a year ago for the steak or the roast I'm buying, but not very much.

Mr. Stan Eby: Yes, we're concerned about that. But also, as has been pointed out here this morning, we're not aware of all the situations that the packers are in, and additional costs to the system. I don't understand the packing industry or the retail industry really well and I think part of the exercise today is to get a better insight into that.

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Mr. Dick Proctor: Can I get an opinion from one of the packers who are here, perhaps Mr. Nilsson?

The Vice-Chair (Mr. Howard Hilstrom): Thank you. That will be your last question and answer, then.

You can answer the question, by all means.

Mr. Brian Nilsson: Thank you.

I would say the reason the consumer is not seeing the drop in the steaks and roasts is that is one part of the animal that has held relative value. The rest of it has collapsed so much. A lot of this is product that we don't consume a lot. I mean, 50 trimmings, which is a tremendously fat product, all went to the States. It was all a product, and that product has gone from having a big value to zero, for the most part, and that in itself is almost $200 a head that has disappeared.

If you take all these pieces, that's what the problem is. Yes, the T-bone steak has dropped, but not as much. It's all the things we don't eat, it's all the product that was shipped offshore, the offal. A tremendous amount of value has gone out of the animal that had nothing to do with our domestic consumption patterns

The Vice-Chair (Mr. Howard Hilstrom): Rose-Marie Ur, please.

Mrs. Rose-Marie Ur (Lambton—Kent—Middlesex, Lib.): I am really pleased that finally we get to meet some of you gentlemen. This is a day that has been waited for by this committee and certainly, I can tell you, many of my farmers in my riding of Lambton--Kent--Middlesex in southwestern Ontario. As one of you individuals has stated, all parts of the value chain need to work together, and the one link was missing until now, so I'm really pleased that many of you have taken the opportunity to come here.

Farmers have expressed deep frustration and anxiety, as Mr. Nilsson has said. Trust me, it's happening at our political constituency offices as well, and it should be. This is the third time we're back in Ottawa discussing the subject matter, so we are all seriously looking at this.

Many of our farmers are concerned with the packing industry, but they are scared to say too much for fear that there aren't many individuals out there and there are repercussions down the road. We've heard one story after another. I guess because I'm an elected member and I was elected to serve the people who sent me here, I will ask you some of the questions that have been directed, through me, from them.

For individual abattoirs, what was your slaughtering price prior to May 20? Would it change after May 20? What is the cost now?

Mr. Brian Nilsson: You're saying our cost of operation?

Mrs. Rose-Marie Ur: No, for people to have animals slaughtered, it was x cents per pound. Do you do that on a small scale, or are you too large for that?

Mr. Brian Nilsson: I think Jim will speak to that.

Mr. Jim Holmes: We're a custom operation. The only thing we have added on to our cost has been our environmental cost for Rothsay to come and pick up our offal. Other than that, I don't believe anybody has upped the cost of their kills.

Mrs. Rose-Marie Ur: What does it cost to kill, then?

Mr. Jim Holmes: It works out to 7¢ a pound on our hanging weight, so a 600-pound beef would be $42.

Mrs. Rose-Marie Ur: Okay. I was told it almost doubled in some areas, so that is one question that was brought before me.

Also, with Lakeside or Tyson right now, Mr. Altwasser, how many cattle are owned by your company at this time?

Mr. Garnett Altwasser: On a normal basis, we would produce 200,000 cattle in a feedlot and we would slaughter a million cattle a year, so that's about 20% of our production. The other 80% is bought on the open market.

Mrs. Rose-Marie Ur: Maybe this is a wrong question to ask of you, but since you are American owned, do you have any hope that because your company is with Tyson at the present time, they will listen a little bit more diligently to the concerns we have here in Canada regarding the industry?

Mr. Garnett Altwasser: The question, again, is that they would listen to...?

Mrs. Rose-Marie Ur: Well, because they do have a strong affiliation, would it make it easier for you to have a bigger impact on the industry through your company?

Mr. Garnett Altwasser: Well, the impact we need to have, of course, is to continue to process cattle, and as I said initially, I believe our plant was hurt the hardest because of the amount of export business we do. Through price, we've regained some of that kill that we had forfeited in the export market. Other than that, our responsibility is to continue to operate and to manage as best we know how under the circumstances, in the absence of an export market.

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Mrs. Rose-Marie Ur: I have heard lately that they're starting to experience difficulties in the United States as well. Do you think that will assist us in opening up the borders a little bit more quickly?

Mr. Garnett Altwasser: Well, there's a number of factors there, and number one is that Tyson-IBP is the largest slaughterer in North America. They have two plants in the Pacific northwest, one in Pasco, Washington, and one in Boise, Idaho. Those plants are absolutely starved for Canadian cattle. Historically, 45% of their live cattle supply has come out of western Canada, and those plants are really short of cattle.

There are two competitors in that area as well--Washington Beef and E.A. Miller, Inc. at Hyrum, Utah--that are tight for cattle. In fact, that region developed and evolved using Canadian cattle as a supplement to their own cattle supplies. They are now bringing cattle up from Colorado and from as far east as Nebraska, and the two corporate plants are clearly in the red because of the cost of live cattle. So there's that tremendous imbalance there.

From a corporate perspective, the company has really been active in terms of trying to get the border open, working through the American Meat Institute. My boss is second executive in charge of the American Meat Institute. It's very much in their interest to have this border open.

The Chair: Thank you very much. Your five minutes is gone and a little more.

Mr. Hilstrom.

Mr. Howard Hilstrom: We've heard a lot about some of the details, but I think we have to talk about some fundamental questions.

Mr. Altwasser, is there any doubt whatsoever about the fact that IBP is in any danger of closing under the new reality, or is it going to be able to adjust to the new reality as we move along this path? How does that work?

Mr. Garnett Altwasser: Well, capital flows, and where capital doesn't get a return.... Of course, capital flows to where it can get a return. It's absolutely critical that we be able to create a positive margin in that plant. It will solely be determined on whether or not the plant is profitable. I'm not talking week by week but year by year.

At this point in time, I've heard the rumour as well, but I've heard it from outside. I have no idea--

Mr. Howard Hilstrom: I haven't heard any rumours--

Mr. Garnett Altwasser: I've heard a rumour a time or two that maybe the plant will close. I haven't heard--

Mr. Howard Hilstrom: No, no, I haven't heard anything like that. My questioning has to do with the idea that if the border is going to open, we're going to get things moving back to at least a point where we can export enough meat to keep in business. We want to see these packing plants keep in business, and that was the line of questioning there.

There are two other fundamental questions here. Mr. Stan Eby, we'll ask you. You say you have a good working relationship with the government and that you expect the borders to soon open up to live cattle. I asked the government officials when that would be. Can you tell me when that will be for live cattle? Is it September?

Mr. Stan Eby: I cannot answer that question.

Mr. Howard Hilstrom: Okay. So in view of that, not knowing when that border is going to open, what's the Canadian Cattlemen's Association position? We heard Mr. Gilles Lavoie say that in fact, if a program is needed for the cow-calf producer, we'll look at that in October-November. What is the Canadian Cattlemen's position on support for the cow-calf producer? You know exactly what the situation is--no cashflow, big bills, mortgage payments, kids trying to go to university. What's the Canadian Cattlemen's position on a compensation package for the cow-calf producer?

Mr. Stan Eby: We worked with Ag Canada last Thursday on that very thing, Howard, and they worked on the basis of information pulled together by Ag Canada staff on some historic cow-calf operations in Alberta, Manitoba, and Ontario, various sizes and various adjustments in income, and would that program respond. And yes, it will respond.

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Mr. Howard Hilstrom: Which program is that?

Mr. Stan Eby: The APF program.

Mr. Howard Hilstrom: Do you really believe that agricultural policy framework program is going to replace...? Okay, you know that a ranch that runs 300 cows has operating expenses over the year, counting mortgage and other expenses, of about $100,000 to $120,000. Are you going to sit there and tell me that agricultural policy framework is going to give that rancher enough cashflow to break even?

Mr. Stan Eby: With the scenarios we ran the other day.... There are changes we would like to see in the program to address negative margins on things, and with an interim cash withdrawal on that, yes, it will.

Mr. Howard Hilstrom: Okay. Well, that's really good news, because we've been trying to get the reference margin coming out from the government for individual farms and ranches to see how much money you're going to be able to get out of this program, and if past programs are any indication, there will not be nearly enough to cover the costs of production or even come close. But you say there will be.

Mr. Stan Eby: We're working with more individual cases of some producers who will, in confidence, give us their information on Wednesday, both background and cow-calf, to verify what I just said.

Mr. Howard Hilstrom: Okay. The cow-calf man will be in a loss for at least another year. Even if the border opened up to live cattle, there's going to be a loss position--a big loss position--because I don't believe the prices for live cattle, for feeder calves, are going to return to anything that covers the costs. So why wouldn't you be arguing for this compensation program to be implemented immediately?

Mr. Stan Eby: We are.

Mr. Howard Hilstrom: Oh, you are, okay.

Mr. Stan Eby: We are, immediately. Also, as I say, we're suggesting that extraordinary negative margins caused by the BSE events be covered for a period of three years. So that addresses your concern about next year, and we feel there's a framework there to do that.

Mr. Howard Hilstrom: Mr. Nilsson, can Canada out-compete New Zealand and the other countries on export beef? If you're getting it cheaply enough from the cow-calf producer, can you out-compete those exporters into Canada by selling lower than they do?

Mr. Brian Nilsson: In our present environment, there is no competitor in the world that we have to worry about.

The Chair: With that question, we move to Mr. Borotsik.

Mr. Rick Borotsik: Thank you.

I'm going to get back to the other question, but I just want to touch on this one. Mr. Eby, with the APF, from the Cattlemen's Association's perspective, can you tell me when cash would flow to the producers under the APF program, regardless of whether it has been entered into by other provinces or not? When would cash flow?

Mr. Stan Eby: They tell us that they could have cash flowing within 30 days of when they get an application.

Mr. Rick Borotsik: So you're looking for a cash advance, then, under the APF program. So you're going to do your financials and say, here's what it was previously, here's what we anticipate it is today, or is it simply going to be a straight cash advance?

Mr. Stan Eby: For anyone who has been involved with NISA in the past, the numbers will be there. If not, they'll have to provide numbers based on that.

Mr. Rick Borotsik: The NISA program effectively is finished as of March 31 this year. We're talking about a new program. We're talking about a risk management program here.

Mr. Stan Eby: That's what I'm talking about.

Mr. Rick Borotsik: And you're saying that cash will flow within 30 days.

Mr. Stan Eby: That is the information we got last Thursday.

Mr. Rick Borotsik: Mr. Eby, do you believe in Santa Claus and the tooth fairy? I've been in this particular business for too long. I know the programs from the government, and I should tell you that we're still looking for AIDA in some cases, and we're still looking for CFIP, and that was two years ago. You're saying cash could flow in 30 days? I wish you the best of luck.

Mr. Stan Eby: That was the information they gave us from fairly good sources last Thursday. We have to grasp at anything that's positive, right?

Mr. Rick Borotsik: Any little straw. I agree, Stan, and I wish you the best of luck. I really do.

Mr. Stan Eby: We're quite aware of how deep the concern is in the countryside, too.

Mr. Rick Borotsik: I know you do, Stan. Believe me, I know you do.

Let's get back to the issue of culled cows. I asked the department at one point in time to think a little bit ahead with respect to perhaps a need for depopulation. It's not something people want to talk about, obviously. We have--and Howard would agree--a substantial glut of culled cows out there that has absolutely no market right now. Can somebody please tell me what the solution is? Brian?

Mr. Brian Nilsson: I'll speak to it. It's close to my heart.

Mr. Rick Borotsik: It's close to my heart.

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Mr. Brian Nilsson: I say there has to be some type of controlled depopulation. Something has to happen to the meat, other than just dumping it into the marketplace because--

Mr. Rick Borotsik: What? Incineration?

By the way, we had a feedlot operator here shortly after May 20 who suggested that perhaps incineration should be the process. Are you in agreement with that?

Mr. Brian Nilsson: As a packer I'm not supposed to be, but as a cattleman I'm saying it might be the option we have to look at. The one thing we need to keep in mind is that every other country that has gone through a BSE crisis by implementing the 30-month rule actually did that. They did it for a totally different reason, but what they did is remove meat from their marketplace. If you ask, is that what we have to do--and we're not doing it from a disease standpoint, we're doing it from an economic standpoint--I'm not sure that's the road we have to go down.

Mr. Rick Borotsik: Again, perhaps from Jim and Garnett, just for the record, because we're going to bring the CFIA people back here, I'd like to talk about rendering. We have a problem with culled cows, and we recognize that, and we'd better deal with the issue. If in fact the rendering rules are changed, as has been suggested, so that no longer can animal meat and bone meal, animal protein, be allowed in feed in Canada.... Garnett and Jim, you said we have a problem now. If that happens, perhaps we can't even deal with it. What happens if those rules are put into place? What happens to the offal, and what happens to the rendering?

Jim.

Mr. Jim Holmes: In Manitoba, Rothsay has become a certified pork plant, so our beef products will never be going into that plant again. Right now, if we got back to rendering, they would probably go to Saskatoon. If that isn't the case--

Mr. Rick Borotsik: What happens? You're a processor; you take cattle and you have waste. What do you do with the waste?

Mr. Jim Holmes: Well, if Brady Landfill in Winnipeg does not take that, we don't have many small rural garbage dumps that want that stuff in there. It's going to become a large problem for us. It's probably going to shut some of us down.

Mr. Rick Borotsik: Garnett, Jim is a small operator, and you're a large one. What do you do with your waste?

Mr. Garnett Altwasser: We just need to back up for just a second. The specified risk material is the debate, and now with cattle over 30 months, specified risk material has come out of the food chain. That's implemented and that's where we are. The question now is whether those products, the head, the spinal cord, the vertebral column, will go into the normal rendering stream or whether they will need to be separated.

Last week in Calgary, industry, together with CFIA, reviewed this and it is recommending, similar to the United States, that all specified risk material will stay with the normal meat and bone meal. If that's the case, then we believe there will be a market at some point in time redeveloped, because it's a high-quality product that really poses no risk, other than cosmetics, in the other species. If that doesn't work and you have to take this specified risk material out, then that product after rendering needs to be incinerated.

So there is a way. If you have enough diesel fuel and enough money, you can do almost anything. There is a way, but it has costs.

Mr. Rick Borotsik: Gentlemen, when the slaughter program stops on August 17, what happens to the marketplace?

Mr. Garnett Altwasser: I think it's really serious. We don't know whether that will push a lot of cattle to market, whether that will hold cattle off the market in anticipation. There really needs to be a transition.

The Chair: Brian.

Mr. Brian Nilsson: I'm in agreement that one of the things that have to be looked at seriously is a transition program that is probably longer than two weeks long or two months long, or something. Again, you have this problem because you've lost the faith of the industry, and the financial industry. We have to really get a feeling for how much meat is moving. Are we selling our soul for a few boxes of meat?

The Chair: Thank you, Mr. Nilsson.

As a follow-up to Mr. Borotsik's question in terms of the depopulation, where should that edict come from? Should it come from the industry or should it comes from government? Where should it come from? If and when it does come, who takes ownership of that issue?

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Mr. Brian Nilsson: I find it strange that it's not supposed to come from me, but I'm the one who believes in it. I'm going to say it is something that the cattle industry has to get their heads around. You know, if you start it and you make it a voluntary program, it's simple then, because then it becomes a personal decision for each producer. We're not forcing anybody to do anything. So at that point you could probably start some kind of program and not have to worry about where it comes from.

The Chair: I guess the reason for the question, who's taking ownership of it, is that if government were to give that edict, obviously the primary producer, the cattle feeder, would expect the government would then pay for that animal. So it's one of those questions. Who does take it?

Mr. Eby, do you have a comment on that?

Mr. Stan Eby: There are some feelings throughout the industry that if we had a depopulation of older cows, the pre-1997 animals, it would help us get a much better health status, too. To do that, I think we need more than a voluntary plan, because there are a number of pet cows that would not come to market without some encouragement.

The Chair: Thank you, Mr. Eby.

We'll move to Mr. Speller, for five minutes.

Mr. Bob Speller (Haldimand—Norfolk—Brant, Lib.): Thank you very much, Mr. Chair.

Gentlemen, thank you for coming today. Mr. Eby, I want to congratulate you and the Canadian Cattlemen's Association for all the hard work you've been doing on this. I know it has been a difficult time for you guys.

I do have a question of everybody, I guess. I'm trying to get a better sense of what's going on in the industry and where we're going from now on. Was I led to believe that somebody had said that in fact generally we're only selling about 30% of the carcass? If so, what steps next need to be taken in order to help you gentlemen be able to get rid of the rest of the carcass?

Secondly--I might as well ask all my questions first and then you gentlemen can respond--what is the government not doing now that it should be doing, in your minds? I know, Mr. Read, you congratulated the government for being transparent and open and involving everybody in this process, but what are the next steps? I've heard we might need some transition, we might need some depopulation. I wonder if you gentlemen could respond to where are the next steps. What should the government be doing that it may not be doing now?

Mr. Brian Nilsson: I think it was probably my comments that led you to believe that. We're selling more than 30%. It's probably that 30% has retained the value, and then the rest of it has decreased so dramatically in value that there are parts of it--20%--that have actually gone to zero. We're selling everything, as I think you've all seen.

Our company gives over $500,000 worth of meat to the food bank. Before I go to rendering, I'll give it away to the food bank. It's a new customer. These people probably weren't eating it before. Sometime in another life I'm hoping I can use the tax credit someplace. Today I don't really need one, but who knows?

I think the major thing was that the value has shifted so much on 70%. It's not that we're not disposing of the whole animal; we're trying to get as much value as we can.

Mr. Bob Speller: The second part?

Mr. Brian Read: I'll just start it. We're talking about government next steps. I find that being positive, by all means--I'm an optimist--I think the question is really simple, but in all fairness, I've never been down this road before in the agricultural sector. So I believe we have to move forward. Our next step should be to pressure that door open to live cattle, and I say that from a packing standpoint. I believe it's imperative that it follow along with the boxed meats.

I believe as we speak today--and I think the meetings are occurring--we're probably going to leave here with some questions rather than answers. We now have CFIA and their staff meeting with USDA to see what the rules and regulations are. When you read through it, it can be very cloudy. Gee, are they just going to cherry-pick the products that they require out of this country, and, Canada, you eat your way through the rest? We have to understand that first before we can really look at the next step.

Is that a fair answer? I'm not trying to be negative at all; it's just the way I'm looking at it as we go through the process of re-entry.

Also, I think there has to be a lot of work done in Mexico. We heard four or five weeks ago at the ministers' meeting in Winnipeg that Mexico was about to jump, and all of sudden it stopped. I apologize to the chair for missing the first committee meeting because I was attending that one, but there was a lot of enthusiasm right there and then. It didn't take much to wake the industry up. I think a lot of effort has to be done in many other countries to see how wide we can open this door. Understand, we're talking about one animal, gentlemen, in a population of twelve.

I don't know if I've answered your question, but I'm just trying to review where I think we are.

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The Chair: Does anyone else want to respond to the question from Mr. Speller? Mr. Altwasser.

Mr. Garnett Altwasser: I have just one comment as it relates to the cows. The depopulation issue is a really difficult thing emotionally, morally, economically, and to my mind, it's absolutely a last resort. You ask a question about what government may do, and I don't have the answers, but I'd like to ask that we really pursue food aid to the best of our ability on some of these cows. As we get partial border opening and maybe we can negotiate different relationships with other countries, maybe some of these cow cuts could find their way through food aid to where at least they're eaten.

The Chair: Any comment to that? Mr. Bielak.

Robert Bielak: Yes, I would agree with Garnett on that, because I think our existing customer base, if they see that happening, will be asking some other questions. They'll be asking why we are destroying cattle. It's a big question.

Mr. Bob Speller: Do we need to do a different market in Canada?

The Chair: We've exhausted our time with this line of questioning, but let's move on to Mr. Proctor.

Mr. Dick Proctor: Thanks very much again, Mr. Chair.

Mr. Altwasser, I have a question for you. You indicated that normally your plant slaughters a million animals per year. That would be about one-third of all the animals that are slaughtered in Canada. Is that correct? the other plant, I guess, is the Cargill plant in Edmonton. How many do they slaughter?

Mr. Garnett Altwasser: The plants are similar in size.

Mr. Dick Proctor: So we have two American-owned plants that are slaughtering two-thirds of the animals that are killed every year in Canada. But when people have said, well, you know, we could do things a little bit differently in Canada, we could make our food the safest in the world, to back up what the agriculture minister says all the time, it seems to me that the industry has always responded that we can't be out of step with the Americans. Because that American border is so important to us, we can't consider no bovine growth hormones, which would allow products to go to Europe, because we'd be out of step with the Americans. If we banned animal-to-animal feed, we'd be out of step with the Americans. Shouldn't we be concerned that our industry is so controlled by the Americans now that this in fact is part of the problem we're in?

Mr. Garnett Altwasser: I guess you can come at that in a number of different ways. The processing industry or the slaughter business is only a service industry, and the only reason it exists and it exists large in Alberta is that Alberta grows cattle cost-effectively and it markets the products of the land, the roughage and the grain. So that's the only reason it exists.

As far as access of those products to the American market goes, which is half of the product out of our plant, 45% would go into the U.S. market. The access into those other markets is not controlled by Canada but by the Americans, and so whether Canadian ranchers or feedlot operators can sell their cattle live or whether they can sell them as dressed meat, we're only there as a service to be able to get that done.

On the other question as to the ownership of those plants, we sold our company to the Americans in 1994. You have no idea how many times I've thanked the good Lord since May 19 that they owned the bugger.

Mr. Dick Proctor: Mr. Nilsson, I'd be interested in your response. I was hoping you were going to get in on this.

Mr. Brian Nilsson: The one thing we have to keep in mind in that scenario you brought forward is that I'd be the first one to say, if Europe stood up and said, you know, we'll take the meat off a million cattle, that we should cut hormones and get out of sync with the United States. We have a quota system there that is 20,000 tonnes, the equivalent of 50,000 or 60,000 cattle. The European market is effectively closed; they've shut us right out, BSE or not, so we can't really say, well, let's change our standards, because we have to realize that the American system is the one we're trying to feed.

I'm open to suggestions for somewhere else, but I know that unless something happened with Jean and Jacques that I don't know about, we're still not going anywhere in Europe right now. So we have to work towards the markets we have, and those are the United States and Mexico.

Â (1230)

Mr. Dick Proctor: Stan Church, who probably will be known to you, is not known to me, but Church Ranches is saying that we could have one more major processing plant in Canada. Now, I realize that when we're looking at BSE and all that, it may be difficult to stand back and look at it as if things were ever back to normal, but what is the response for new folks? Do you think Canada could have one more major plant in this country for slaughtering animals, under normal conditions?

Mr. Brian Read: We actually forecasted a light supply of livestock this year. I think the CanFax numbers said that we were down. Our inventory of live cattle was down by 2%. That would have made it difficult. I believe the major plants were rocketing back their production in January and February. I'll just give you some details, Dick, and then you'll have to draw your own conclusions.

Our plant was in the east. We were fairly heavy in January, February, and March. In April we started to see a little tightening of supply. Based on the dairy quotas, there are different supply programs out there that do affect the flow. So this year it wouldn't have been viable. I don't think anybody could have survived as a third plant. I could be wrong. I think we've actually seen some plants tighten up their production and lay staff off in anticipation of light supply.

Mr. Dick Proctor: Is that basically what you felt, you other fellows?

Mr. Brian Nilsson: I think we have to keep in mind that it depends on where we end up at the end of a year or two years or three years. If we are back to where we're more domestic and less export, we've got overcapacity. If we can come through this, theoretically could we have one more plant? It's possible. Before anybody builds one, please come see me. I have one.

The Chair: Mr. Ritz, I think, wanted to share his time with Mr. Hilstrom.

Mr. Gerry Ritz (Battlefords—Lloydminster): Thank you, Mr. Chairman. I have just one short question.

Stan, you were saying that the Canadian Cattlemen's Association is convinced that the APF will handle the next phase that's required in compensation, that it will be there and can do that. Now, you also said there were three or four little amendments you wanted to see put into the APF to make that viable, if I understood you correctly. Okay. There's $1.1 billion allocated annually for all farm programs coast to coast, for all farming sectors. How much more cash is it going to take to cover the three or four little amendments that you guys want to tweak?

Mr. Stan Eby: That's an excellent question, but also bear in mind that the APF can draw on the next year's funding there. So we did feel that the--

Mr. Gerry Ritz: Well, that's just forward mortgaging. That's not the answer at the end of the day. How much more money do you think it's going to take?

Mr. Stan Eby: I cannot give you an answer on that. If this market moves up, it will take less money.

Mr. Gerry Ritz: Then why would the provinces and everybody else sign on if they're buying a pig in a poke? I mean, they want to know that the cash is there and has been accounted for.

Mr. Stan Eby: Bear in mind that I'm talking from the beef industry perspective on the APF.

Mr. Gerry Ritz: Well, you're basically taking a leap of faith, too, that the amount of cash you're talking about will be there. We just saw close to $500 million dissolve in phase one here. We're now moving into phases two and three, and we have no idea how long it's going to take. So I think everybody would feel more comfortable if they knew what dollars were on the table.

Mr. Stan Eby: I agree with you. We're taking this to our semi-annual convention on Thursday--

Mr. Gerry Ritz: At Moose Jaw, yes.

Mr. Stan Eby: --of this week to work on this further. This is the information. We had a report put through last Thursday and we are taking it to our convention.

Mr. Gerry Ritz: This is a case of saying, show me the money and then I'd be happy to sign on.

Thank you. That's it.

The Chair: Mr. Hilstrom.

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

There were some questions asked regarding who should be taking leadership on decision-making in this crisis. On May 20 we entered into a health of animals crisis and an economic crisis, and now we've got a war on our hands in fighting the economic crisis. Brian, you've touched on this. The government is the only one that can deal with all the sectors of the beef industry. No one of you has the authority or the responsibility to handle that. It's quite clear to me, and I was surprised at the government members' asking who should lead on this. It's quite clear.

Has there ever been a master plan discussed with anybody who's presenting here right now as to how things are going to transpire between now and April 1, 2004? There is none. I'll ask the government members when they come back here.

But right now, I've attended many producer meetings in Saskatchewan and Manitoba primarily, and those producers have no idea whatsoever about what is going on, other than that we're trying to get the borders open and some day down the road there may be some compensation coming. I guess those are statements....

These culled cows, 20% of a herd of 300, that's 60 cows. And that's a small or medium-sized cattle ranch nowadays. Do your plants have the capacity, with the killing you're already doing on the fat cattle, to kill those? Does Canada have enough capacity to kill all those culled cows right now?

Garnett, you could probably answer as well as anybody.

Â (1235)

Mr. Garnett Altwasser: I can take a stab at that. Within Alberta, the Alberta Beef Producers, I'm sure with the CCA, are doing a balance on that to see what the numbers really are. We can say we have 200,000 culled cows, but under these conditions I won't cull as many out of my herd if the market is 10¢ a pound. I think the definition of a culled cow in the beef sector, at least, has some reason to change so we don't put as much pressure on. The economics of keeping a cow longer and not breeding a heifer are going to change.

So we need to take a good supply-demand balance to see what it looks like when we replace all the imported product. At the end of the day, then we'll have an answer. I can't stand here and say what that balance is, because we're trying to determine it ourselves right now.

Mr. Howard Hilstrom: Well, I think as the marketing starts here.... In my own ranch right now, I can sell all the hay I can produce, so when I'm feeding it to these cows, that is a waste of money. This is a decision to make, and we ranchers are trying to figure it out. Do we hold those cows, expecting that the borders are going to open up--not for the cows necessarily, but for the calves coming from them--or do we dump those cows at whatever price in order to cut our costs and cut our losses as best we can to try to save our land? That's how basic this is. We're trying to save our ranch land and not go bankrupt.

Yes, Brian, comment on that.

Mr. Brian Nilsson: That's what I think the problem is. They might talk about the fact that people won't sell, but it's the economics that will drive this thing. It's just going to be a collapse. You have to provide liquidity to the marketplace in some form, and if that form is some disposal program on the cows, it might provide liquidity so that the producers can at least feel they want to keep part of the herd. Otherwise, you get to the stage where you should shoot them; it costs you less.

The Chair: Your time has expired, Howard, and we'll now move on.

Who wants to speak on the government side? Mr. McCormick.

Â (1240)

Mr. Larry McCormick: Thanks, Mr. Chair.

I have a very quick one to you, Stan, to clarify what I've heard, because I do respect the Canadian Cattlemen's Association and your group that we've met from all across the country. You're saying that most of these producers would like to encourage the provinces to sign on to the APF because it will at least be a help. Is that correct? Thank you very much.

Okay, Mr. Chair, a few years ago we heard the expression, “Where's the beef?” And of course today we hear the expression, and I've heard it in my.... We've got the best beef in the world. That's why consumers are consuming it, and certainly it's you people, the professionals, who give us that excellent food.

The big question, of course, is where's the money, and where has the money gone? Yes, there's one solution for all of us, and that's to have the border opened, to return to where we were as much as possible. But I've heard from a lot of consumers and I've heard from a lot of producers, and the word.... People talk in rural Canada--your neighbours, my neighbours. Prime carcasses, prime cattle, live cattle, really good, selling for--let's use an example--34¢. I have it documented. Some went for a lot less than 34¢. They sold for 34¢ two weeks ago tomorrow.

Well, the price did not go down in the supermarket. That animal would have sold for a lot of money previously. So where did the money go? Yes, you people had great losses, but just because some people are multinational companies, whether you're Cargill or whoever, do you believe you should be able to try to recover most of your losses in a very short time?

All our producers want is to survive. They know they're going to take a loss. They know this is a real crisis, but they want to survive. It's a greater challenge for the smaller operators to survive than it is for your major companies.

So where did the money go? Some of you have said that it went to the retailer, some went to the wholesaler. How much of that spread went to your industry? How much did you pass on to the other people? And why is it that none of it went to the consumer and none of it went to the producer?

Mr. Brian Read: I guess it's a joint response, so I'll start.

I think, Larry, in my statement I alluded to where some of it went. With the drop credits that we're now paying $60 a metric tonne to pick up, it's now a cost. We were being paid for it. If you take my total spinal column removal for the SRMs, it's about $126 a head difference from where we were on May 19. That's strictly cost to the industry that's no longer available. It's a kill credit.

I can only talk for the cow side, Larry. The boneless beef, the lean meat, that is being depressed. The sale price is off by 50¢, the same as the buy. It's fairly related. If you put the numbers together, Larry, there's not.... Understand, in the cow industry, Larry, this is the beginning of week 13. Week 9 was the first time that our plant actually had its legs under it, for whatever reasons. The borders could open tomorrow, so as a cow-calf producer--it was misquoted in the newspaper--you hang on in hope that the border does open tomorrow. Now, as I said, we are in week 13 and the reality has come. So as I said, it was nine weeks of no plant running. We ran calves and some steers just to keep our people in place. It takes about five to eight years to train a knife man, and you try not to lose them, so we carried the expense. So that's really where we're at.

Now, we have been dealing with depressed prices since week one, when the prices started to drop off. I can't speak to the retail side. I understand a little bit of it, about their inventories. They cut at 21 days. But the industry was flat for the first five or six weeks, to the degree where some of the importers--and the ad hoc committee for imports is here--were saying the meat was not available because we were waiting for the process to begin. And they were right, we weren't processing.

Mr. Larry McCormick: Mr. Chair, to Mr. Read, clarify this for me, because there are two and three sides to all stories. You mentioned that for the good cuts, I believe, the price was off 50% also. Was that the 50%--

Mr. Brian Read: I wouldn't talk about the prime--

Mr. Larry McCormick: Okay, sorry, I wasn't trying to put--

Mr. Brian Read: That's okay, Larry. I'll leave that one. Can I move that over to the steer guys? Sorry, Larry.

Mr. Garnett Altwasser: Perhaps I might comment on it. With all due respect, we do price checks across Canada, and CCA, through BIC, does price checks across Canada, and in fairness to the retailers, prices have come off. I can't give you an actual measurement, but prices have come off substantially on certain cuts of meat, and that's documented work from CanFax. So I think we need to give them their due regard in terms of passing some of the pricing through, because without that, we couldn't sit here and say that consumption has increased. We would never in this world eat 60,000 cattle if the consumer weren't getting a better deal at the store, because she wasn't eating that before. So something has changed, and it's not because the price went up. The price did go down to some degree.

The other thing that's happened that would witness that prices have gone down is that we've displaced the imported products that have come into this country. That didn't happen because buyers are good guys; they happened to do that because it was cheaper. And of course, the inventory did need to work its way through the system.

So there is some evidence here that would say that consumers have been getting beef at a lesser price.

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Mr. Larry McCormick: Thank you very much.

The Chair: Next is Mr. Mark. He may want to share with his colleague.

Mr. Inky Mark: Thank you, Mr. Chairman.

I have a question to Stan again over the cash advance proposals of CCA.

Knowing the problems we've had in the past in agriculture.... I've been here six years and every year there's a crisis in agriculture. Everybody takes their turn in the sector itself. But in your case, if we know the past programs haven't worked well and everybody is trying to phase them out, if cash advance is important for the survival of the producers in the industry, why wouldn't you come up with a new program at this point in time?

Mr. Stan Eby: We're looking at everything there is. As I mentioned, what we looked at last week has promise. Bear in mind that we want a program that has the least market intervention we can have, so we can operate fairly, and also we have a trade issue to keep in mind. So it's not an easy thing for a cash advance to solve all problems.

We're not really pleased with the way the deficiency payment played out. The design initially was to get cattle to market. It has done that. For various reasons, it has not kept the price up that we would have liked. How can we design a program that's going to be equitable and get the money to the right people and do the job?

Those are some of the concerns, but as I say, minimum market intervention with the program is important, and also we have to keep an eye on the trade risk situation. That's certainly not a priority right now. Let's stay in business and we'll worry about trade risks later. But what we see of the APF business risk management for the cow-calf and the backgrounder, with some adjustments that we've talked about, has promise.

Mr. Inky Mark: The problem, as you know, in Manitoba is that we haven't even sat down and talked to the government about APF. I think we need to look beyond the cows; it's about people's lives. I think that's the concern of members of Parliament. So if it's people's lives that are at stake, if we value the industry, then why don't we do the right thing and make sure people survive so they can continue in the industry?

Mr. Stan Eby: That's certainly what we're looking at. I guess we also look for suggestions from people like your group as to what is the best route to do exactly that.

Mr. Inky Mark: At this time, if cash isn't available, I would say within the next month or two.... Manitoba's industry produces $500-million-plus in revenue for the province, and as my colleague indicated, 90% are live and usually end up being exported. It would decimate a $3 billion industry in Manitoba. That's a disaster that's around the corner. So I would plead with you to look at cash as a way of saving the industry, certainly in Manitoba.

Mr. Stan Eby: Thank you for the suggestion.

The Chair: Mr. Borotsik.

Mr. Rick Borotsik: Manitoba has a unique problem, as I'm sure you're aware, and I guess you really don't care that much because you have your own problems in Alberta and Saskatchewan. But Inky is right, 90% of our live cattle go someplace else. We don't have access to your kill space--well, some limited access to your kill space. I saw the eyes roll there, Garnett.

When this program goes off on August 17, my feedlot operators--small, little guys, 3,500 or 4,000 head of cattle there--are going to be going into a marketplace with no floor at all. What kind of transition period should there be for those guys?

I want to come back to that question because this is the question I'm going to get when I go back. My guys in Manitoba are going to be at the mercy of the market, which at that point in time could be anywhere from 30¢ to 35¢--maybe, maybe not.

Help me, Brian, Garnett. What can my guys do?

Mr. Garnett Altwasser: My only suggestion would be that they be allowed to qualify for the BSE recovery program on all those cattle that they had on feed on May 20.

Mr. Rick Borotsik: Okay. Is that the transition period we're talking about?

Mr. Brian Nilsson: That sure sounds like a good start, because that supposedly means that those cattle that are out there would go from now until next April. People forget that lots of those cattle were 600 pounds then, and so they're not going to show up until next March and April. Why aren't they allowed? So maybe it should be that everything prior to May 20 is in the transition program. I think that would be an excellent solution.

Â (1250)

Mr. Rick Borotsik: I see Gilles Lavoie is still here so I'll ask him. That's exactly the answer I wanted to hear.

Thank you very much, Mr. Chairman.

The Chair: Okay. We'll now move to Mr. Proctor, if he wishes, but if he declines, then we will move to the Alliance and Mr. Casson.

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

I have a series of questions here. I need to know how many cattle all of you or the industry in Canada can comfortably kill in a week. What's that number? What are the kill numbers for Canada in total?

Mr. Brian Read: Our kill prior to May 20, that week ending, was 70,000. If we ran it for seven days, we could probably bump that up tentatively by another 10,000. So I would say 80,000 to 85,000 would probably be pretty close. Yes, in that number, 80,000 to 85,000, going seven days a week.

Mr. Rick Casson: So there is the capacity to do that with the present equipment and plants and feed system?

Mr. Brian Nilsson: Yes.

Mr. Rick Casson: Mr. Nilsson, I appreciate your putting an emotional spin on this, because in this industry we're dealing with live animals. It's an historical industry in this country, and it is an emotional issue to the people involved--the 40,000 producers you deal with and the 90,000 families in this country that are dealing with this. But you made a statement that you are already rendering good meat. Is that true?

Mr. Brian Nilsson: That's true.

Mr. Rick Casson: Are you just not deboning to the degree you were before or are you taking a certain cut? How are you judging how to do that?

Mr. Brian Nilsson: It's an economic decision. It's a part of the carcass that used to actually have a lot of value and now has very little value. All of a sudden you've got to the point where the meat you produce is worth almost nothing, so you say, here, maybe I can run a little faster if I just render this product. So it's the economic decisions you make, and that's what you do. Last week it was just a hard week for me to understand that we would make that decision that says, okay, I can put an extra five loads through this week if I don't do this with this product any more. But the economics said to produce more of the other meat that I can sell.

Mr. Rick Casson: Presently, where is that rendered product going?

Mr. Brian Nilsson: Well, the nice part is that this is a high-fat product, so actually half of it ends up as rendered tallow and there is a market for it. The other half goes into meat and bone meal, for which there is no market. It goes to landfill.

Mr. Rick Casson: Maybe a question, Garnett, for you. How much boxed beef is still coming into Canada from the United States on a weekly basis?

Mr. Garnett Altwasser: I haven't seen the numbers most recently, but very little. Ann Dunford had some numbers last week, and I don't have the recall, but we have most of it shut off.

Mr. Rick Casson: And that was price driven?

Mr. Garnett Altwasser: That was all price driven.

Mr. Rick Casson: Good.

Now, we talked a little bit about confidence, and I want to get to that a little bit because I think that confidence, from the cow-calf producer--I have one sitting beside me--to the grain farmer, of which I am one, to the bankers.... All of the industry related to this has been shaken completely. There has been some talk, possibly a rumour--there has been a rumour a day going around during the last three months--that because of that lack of confidence, some of the producers are thinking about relocating south of the 49th parallel. To me, it would be an absolute disaster to see that happen.

I'm just struggling to find what we need to do to force some decision-making or leadership in this country to restore that confidence. If this can happen to the degree it has happened now because of one cow--and I understand some changes are going to be made to the OIE, or attempted to be made.... I mean, that's not a given. What do we have to do as a country to restore that confidence in this entire broadly spread industry to keep it here, to keep it prosperous?

I'd appreciate any comment from any of you--maybe from Stan, since he's with the CCA.

Mr. Stan Eby: This is a major concern because it's been mentioned here by everyone. Post-May 20, the market collapsed. There was no functioning market. If we think back to the 1980s when we had a high-interest situation on the farms, we could all do something personally about that. In this situation, we cannot. It's a total industry.

Seeing the movement of cattle, when we come from a low of 35,000 head a week processed to 60,000, we're starting to get that market functioning again. How do we get the confidence all the way through the system? That's a major concern. Doing it responsibly, I think, is a key part of that.

Â (1255)

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

We're moving to Ms. Ur, for five minutes.

Mrs. Rose-Marie Ur: Thank you.

I'm getting back to numbers again. On May 19 the price was $1.05, and in the last couple of weeks we've seen it go to 30¢ or 33¢. You're telling me here that you run on a very small margin. Mr. Read indicated that it's costing him more now, so he's downloading it, but the poor farmer has no one to download it to. You're saying you are not making any major profits by buying animals at 30¢ a pound. Other costs have gone up for you and you're still not making money.

We went through this with the hog prices a few years ago--and yes, I'm a politician, but I do shop. One of the individuals said the prices of beef have come down in the stores. Well, I can tell you they haven't come down in southwestern Ontario, and I shop every week. I've not seen the 99¢ hamburger; steaks haven't come down; chuck roasts haven't come down; blade roasts haven't; and those are all things that you say are part of the 70%. Educate the public out there. I know how to cook a blade roast, or chuck roast, or round steak. You can move those things, but the consumers don't know that.

But I can't really understand how you can say you're not making any money at 30¢. Perhaps you can explain that to me.

Mr. Garnett Altwasser: Sure. I didn't say we weren't making money at 30¢.

Mrs. Rose-Marie Ur: And I don't want you not to make money, don't get me wrong, but not at the expense of the farmer.

Mr. Garnett Altwasser: Thank you.

But you can't just take a snapshot, today, this morning, when the plant is running, and say that it makes money or it doesn't lose money. What we've gone through here is such extreme volatility that we are managing on a day-to-day basis. The mode in which a packing plant or a processor like us operates is a margin business. We produce 300 to 400 products over here, we have the raw material, and in between we try to put together all combinations of product mix and volume to wherever we can go with the product.

The situation, if we want to take the last quarter, for example, was that we came out of a winter where we were short of cattle in Alberta, short of cattle because there were fewer cattle on feed and the American plants were much shorter, the ones we spoke of before. They pulled a lot of cattle out, to the point where the prices in Alberta were stronger than the American prices. Now, figure that out. The prices are stronger for a raw material and the meat has to go south, so we lost money through the winter period because of a local situation. Why do you operate? You operate because you lose less money by operating than you do by quitting. So you're in one of those management modes.

When May 20 hit, it got worse, because then everything came to a grinding halt. We had producers who wouldn't sell cattle, we owned a bunch of cattle that the market was falling out of, and people were reneging on prices of meat that they had already contracted for, so there was the volatility and the uncertainty of the market.

We went for weeks with horrendous losses. Then we stabilized in July, when we got the volumes to where, as Brian says, we were rendering certain products, and we've been rendering good offal material for quite a while--heart, tongue, liver, that kind of product--that had a big run. We kind of got our feet under it, and for the last three weeks we've been making money. That's where we are. At the end of the period our results are going to be terrible, but today we're making money.

Mrs. Rose-Marie Ur: That goes for the farmer as well.

Mr. Garnett Altwasser: Maybe so.

Mr. Brian Nilsson: I guess a comparable to that would be that I would be killing some cattle today that I had bought as 700-pound cattle from that producer for $1.20, which he did really well on.

Garnett says it's hard to just take a few-week snapshot. I know right now the farm community is in such stress where we are, but about six months ago it was okay. I don't think we can take any segment of our industry and just say, here, you're doing great, you're doing poorly. We all do poorly at the end. There is no ability for any one of us to rise above it.

· (1300)

Mrs. Rose-Marie Ur: Okay. I'll move on to the next question.

Someone made the statement--I think it was maybe you, Mr. Nilsson--that we need to get to a supply-demand position. You tell me how we should get to that. I have ideas, but I would like to hear it from you.

Mr. Brian Nilsson: I believe the basis is cows, the concept of an over-six-year-old cow in some kind of program. In any kind of economic situation, such as if you were running a manufacturing plant and this happened, you'd have to cut supply. Again, I agree with Garnett in saying that we have to look at the options and how we dispose of the product. But it has to be outside the regular channels. Getting ourselves into supply balance is critical. That's part of making the market function, and that's part of getting us back to where the institutes want to be in this industry. There are only two ways of doing it. Either you have to go with a program that says cattle are going to be this price for the next year and a half.... Then everybody wants to own them because they know they're going to get it. But that could be horrendously costly. I don't know how that would work, and--

The Chair: Your time has expired.

We now move to Mr. Borotsik again.

Mr. Rick Borotsik: I'm fine.

The Chair: Mr. Mark? What about Mr. Proctor? I made a promise to your colleague, but you work it out. If you bow to this guy, we'll take Mr. Solberg first, and perhaps you could share the time.

Mr. Monte Solberg (Medicine Hat): Thank you, Mr. Chairman.

I won't be long. We've gone through this horrible period, and I would think that some lessons have been learned. From an industry perspective, including the cattlemen's, I'm wondering what the industry anticipates would happen if we came across another diseased animal. I'm wondering if we've gotten to the point where we've started to figure out how we would handle that situation. It's obviously not beyond the pale that could happen. Does industry have any insights to offer that might help government deal with that eventuality?

Mr. Brian Read: I'll start the conversation. We actually went through it briefly this morning. From an optimist's standpoint, I believe that Ann Veneman has issued a directive to a team of scientists to develop strategy and policy around such issues within 45 days. I think that's one of the things we did learn. We learned a lot about the disease, but we didn't learn about the protection and control of it. We proved that the system does work. We were able to keep it out of the human food chain. But they did shoot the messenger. We as an industry boarded a plane two weeks ago Thursday, I believe it was, to go down to meet with our AMI counterparts to develop that policy. If there's anything we in this room can do at a political level, because it is political, it is the CFIA.... It is the policy writers who should develop a policy on this side of the world--the five nations of Australia, New Zealand, Mexico, the United States, and Canada--that is acceptable to the OIE, and we award the finder rather than shoot him and tell the rest of the world that's just the way it is. But our initiative should be to keep it out of the food chain.

I don't know if that answers your question.

Mr. Garnett Altwasser: If I might add, Mr. Chairman, the issue of confidence in the industry so that commerce will begin and people will buy cattle has come up here. Monte has touched on one of the things that's really important. The cattlemen are now saying, why would I refill for the risk of a second BSE? That's a really important issue.

· (1305)

The Chair: Does anyone else have a response?

Mr. Monte Solberg: I have a quick follow-up, and then I'll give it to Garry. It looks as if we're going to have to figure out how to deal with culled cows. Do the economics make sense to enhance our capacity to slaughter culled cows and to use those cows, or is the thinking that eventually the border will open up again and the culled cows that we can't handle now will just go back to the States? Is somebody going to step in and try to slaughter those animals?

Mr. Brian Nilsson: I don't know if we can ask whether anybody is going to step in and do some major program on cows because you would be overwhelmed. You can only run your facility. It has to do with what you do with the product afterwards. If it's just to dump it in and create more meat, we already have lots. So we have to have some program whereby we take the cows and freeze the product and put it away. If we look at any country that has been through this, we see that at the end of one or two years they had a huge stockpile of cow meat to support their marketplace. Maybe we have to look at that type of intervention program. We have to do something with the product. That would then be an incentive so that maybe you could open other facilities or run more shifts or do something to try to dispose of the culled cow problem. But it all comes back to what we do with the meat, because just dumping it into our domestic marketplace doesn't really do anything for the rest of our industry.

The Chair: Mr. Breitkreuz.

Mr. Garry Breitkreuz (Yorkton—Melville, Canadian Alliance): Thank you very much, Mr. Chairman.

Thank you all again for the insights you have provided to this committee with your wealth of knowledge and experience.

I come from an area that was severely impacted by the grains crisis. A lot of the agricultural producers in my area that were involved heavily in grains diversified and went into cow-calf operations. There are a number of these, and now they're really being hurt by this. One of the reasons I'm here is to represent them, because this is going to really impact them, and they don't know where to turn anymore.

This is probably one of the final questions. If the border were to open very quickly to live cattle, within the next month or two, how long would it take for the industry to recover? What message can I take back to the producers in my riding? How do you see this working out? One of you clearly indicated that government programs don't seem to have that long-range view in place. How long do you think it will take for prices to recover? Where do we go from here even if the border opens up? What would you conclude at the end of this meeting as to where we go from here?

Mr. Brian Nilsson: I'll start to speak to it. If you had an opening for young slaughter cattle, it would probably open up more capacity to slaughter cows. So if we had a program to put cow meat aside, it would help work through this. It would increase the speed of the change. If we could move young cattle south, I think it would rectify itself quicker than we believe it would. We're going to see some of that this fall. Because of the fact the feedlots are not filling, we're probably going to have a recovery in young cattle and an oversupply of cows and just a weird kind of economic situation, which just provides more uncertainty for everybody. I think the cattle being moved across will facilitate a relatively rapid recovery. We always have to keep in mind that this is a 100-year-old industry. A year is not a long time.

The Chair: That's your last question.

Mr. Eby

Mr. Stan Eby: To speak to that further, I think that if the border were open to all classes of livestock, it would speed a recovery. We also have to think of other species--namely, the dairy, sheep, and goat industries--that have major markets in the U.S. We know that the breeding stock both in beef and dairy has taken a major hit in this. It's more than just the beef sector. To restore confidence in the overall industry is key.

· (1310)

The Chair: Thank you.

The questioning is finished. I have to go to Mr. Borotsik if he wishes to get back in again. I'm sorry about that Garry, but we went three minutes over.

Mr. Rick Borotsik: I know it happened on Friday. I know that there's now access to the American market for muscle cuts and boxed beef. Has anyone applied for a U.S. import permit?

Mr. Brian Nilsson: We had a permit about a month ago under a different set of circumstances for one of my processing plants. We have a cooking plant. That has been expanded now supposedly to include the new definition of meat that we could use. They've said they'll give a response in the next two weeks, and I'm waiting frantically to see their response. I think it's going to say a lot about how this is going to work.

Mr. Rick Borotsik: You just segued into my next question, Brian. Do you see the restrictions that have been placed on us by the Americans with regard to import permits as their control of our supply back into their marketplace so that a substantial amount of beef isn't quickly flowing into the States?

Mr. Brian Nilsson: I'm really hopeful that Cargill and Lakeside, which are owned by the Americans, will get there a lot quicker than I will. Even if I could follow along behind, I'm a happy guy.

Mr. Rick Borotsik: Let's talk about the American plants, then. Garnett, do you see that?

Mr. Garnett Altwasser: We don't really need more information than what was released on Friday. We will be at the head of the list wanting to get product moved across the border.

Mr. Rick Borotsik: Can you give us a ray of sunshine?

Mr. Garnett Altwasser: It'll help. Where the market will establish itself, no one knows. But it will help. There's no question that it's going to take some of the downward pressure off.

Mr. Brian Read: Rick, I'll give you an update. As we were coming up the hill, some people had the opportunity to enjoy the view and others had to work their way through it. Dr. Merv Baker did call. They are in constant communication with the USDA, and apparently there's another meeting on Thursday. They're not sure how long. Then they'll give the industry an update on all the regulations. There are a lot of questions. Even though they did supply a question-and-answer sheet, there are still some questions from the Canadian side. We reviewed a lot of that prior to this. That's where we're at with the process. By Friday morning we should be better educated.

Mr. Rick Borotsik: You'll know what's available to you on those import permits and how much you can get through.

Mr. Brian Read: Possibly.

Mr. Rick Borotsik: I know this isn't your problem. It's the issue of live cattle moving into the States. Perhaps, Mr. Eby, you can help me on this. Is there anything that you and the association or we can do to move along this live cattle process?

Mr. Stan Eby: We've been in constant contact with the cattlemen's association in the U.S. on this. Any lobbying you can do from a political standpoint would be an asset. I think that question should perhaps be directed to some of the federal officials.

Mr. Rick Borotsik: Thank you very much, and I will do that.

The Chair: Inky Mark.

Mr. Inky Mark: The bone cuts are your high-priced cuts in terms of export. Am I correct?

Mr. Brian Nilsson: Muscle cuts.

Mr. Inky Mark: Are you at variance right now with the rules on boneless exports?

Mr. Brian Nilsson: As Brian said, we have to get the interpretation of the regulations.

I'd have to point out to Rose-Marie that if she's not buying a blade steak at a cheaper price, something's wrong. I know that I'm not getting anywhere near the value I used to get for that.

As was said, maybe we have to have a stand on the corner so that the packer could sell and you could buy.

A large amount of lesser quality cuts would be included in muscle cuts. Those are ones that will move back up dramatically and help increase value. As far as our high-end cuts are concerned, no. For some of those things, such as tenderloin, it'll make a big difference. It's probably some of those other ones.

When we talk about the work that needs to be done on opening up the Mexican market, how it opens is critical.

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Mr. Inky Mark: On the dollar side, are you still behind even with the new allowances?

Mr. Brian Nilsson: We don't know, because we don't know what gets in and the value of it.

The Chair: Thank you, Mr. Mark.

Mr. Maloney, do you want to ask a question?

Mr. John Maloney (Erie—Lincoln, Lib.): No.

The Chair: Mr. McCormick.

Mr. Larry McCormick: In the pricing there's this huge gap. Whether it's the wholesalers, the retailers, or the packers, we'll probably never get to the bottom of it. Rose-Marie mentioned the pork prices. When it was finished and the figures came out for Maple Leaf, I think their profits were up by only 75% or something. It's a small amount.

A lot of people have been shoving oil companies and packers down my throat during the last three weeks. This is how they're comparing you. So you may want to do a little bit of work on this, and you may want to work with your wholesalers and retailers. In eastern Ontario the price has not gone down very much on any product. My wife comes home and tells me what she paid for 10 pounds of ground beef. I'm really glad she bought it, but still it's where it should be if everybody got their fair share. As someone mentioned, it's more than just beef. I met with the Ontario lamb producers group last week, and they're also being devastated, because we have excellent lamb. But here we are with Tyson and Cargill, and certainly in the end we all want the industry to move.

With regard to these cows we're going to be faced with, I don't know, sir, how many cows you normally process in a year, but you mentioned the food aid. I've talked a lot about that, and I've talked about the fact that a certain minister of the Crown would be reminded of food aid by her father--sorry, Susan, I'm not supposed to say that--with the green hat, who talked about food aid and met people around the world. You have the contacts around the world to help move some of this food aid. Do you also have the facilities to slaughter cows as well as the fat cattle?

Mr. Garnett Altwasser: Under normal circumstances we slaughter 700 cows a day in addition to the young cattle killed. We're flexible. We can slaughter more cows than that if in fact we could sell or move the product.

Mr. Larry McCormick: Your contacts are around the world through your parent company. This seems like a simple question, but is there a need--I'm sure there is--for this meat around the world? The government had better invest in trying to distribute it, rather than trying to dispose of it in some other way. But I think we do have to act.

Mr. Garnett Altwasser: It's only my opinion but I believe that government needs to determine whether or not that product can find itself a market, rather than putting cash into it. IBP has offices worldwide. They're not in the business of not-for-profit sales. So in terms of being represented in those countries that might receive food aid, we're not even there.

Mr. Larry McCormick: I thank you very much for your answers.

Mr. Brian Read: We're a member of the Canadian Meat Council. I believe there is a letter on food aid on Minister Whelan's desk, and we're just waiting for a response on that.

Mr. Larry McCormick: Excellent. I'm glad to hear that.

Thank you very much, Mr. Chair.

The Chair: Thank you very much.

Mr. Hilstrom has one final question.

Mr. Howard Hilstrom: Mr. Altwasser, with regard to imports from other countries, was it oceanic beef that you said is not coming in anymore or is it U.S. meat? Is it still coming into Canada in any significant quantities or has that more or less stopped?

Mr. Garnett Altwasser: It has pretty well stopped. I saw some numbers last week that Ann Dunford from CanFax had produced. These were up to the end of July. In July a very small amount came in. But maybe other people here would know better than I do. I think it has been virtually cut down.

Mr. Howard Hilstrom: There's one other thing I'd like to clarify. There have been no impediments to the movement of boxed beef amongst the provinces of Canada. It's flowing in the normal way. Eastern buyers are buying from Alberta and Alberta is buying from Ontario and all this kind of stuff. I'd just like to have it made 100% clear that there are no impediments between provinces.

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Mr. Brian Read: I haven't heard any of that in the last six weeks, Howard. There was some of that earlier, but I haven't heard that as an issue. Minister Anne McLellan and Minister Lyle Vanclief came out very strongly and quickly to say that the meat we eat in this country is safe.

Mr. Howard Hilstrom: That's really good. Canadians have to stick together on this whole issue. I'm glad to hear you make those comments.

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

I've taken the liberty to ask the last two questions. I support very much the notion that if we have beef to dispose of for which we don't have a home, we should find a home somewhere in the world. If we were to go that route, do we have the facilities to can beef? Say the government decided on a food aid program of some degree of magnitude. Would we have the capacity to quickly put this meat into cans? That's the way it has to be shipped. It can't be shipped any other way.

Mr. Brian Nilsson: We run some cooking facilities. I'm mildly familiar with this. For the intensity of the program you're looking at, I don't believe we have the ability. But we do have--and I've said this many times--the largest freezer in the world at the Alberta Research Council. We could implement a program. We could take these sides and freeze them. We could take five years to can them, and we could work out of this. We really need to take a serious look at some of the assets we have in Canada to work through this program. I don't know if anybody has seen one. Every research council has a freezer that you can drive a truck through. It looks like a Tonka toy. This thing is made to do weather research. You could freeze hundreds of trailer loads daily. That's the type of program you talk about. The largest cooler in the world is in Smokey Lake, Alberta, and it is full of seedlings. So we could put the frozen beef there. There are ways, if we have some programs, that we could freeze it and put it into play. You can't put it through the commercial freezing channels because they're full of all the meat we're already doing. But the government has access to facilities where we could do this. Then we could work through the canning issue. Where we can send food aid, they don't have refrigeration. We can't send it there. They're just going to have a boatload of flies two weeks after they got it. So we can look at some of these options and freeze this product and store it and then work through the canning.

The Chair: Thank you.

My last question is this, and it's a very pointed question. It's the very reason we've come here today. All of us around this table have been asked this by many of our constituents. Some of those farmers don't have recourse to ask these questions for fear of retribution by the packing houses, more particularly in Ontario. But not by the one that's represented here today, I must say. You are one of the good guys, at least in the eyes of the farm community. There are a number of good guys. We also have a good guy in the corner. Mr. Read is also known as a very good guy. I think all of you people are good guys. But there is one who is notably not here today. People have asked me to ask this question. I'm sorry if I'm embarrassing someone back home, but that's the way it is. These people are believed to have been less than honest with the people who are producing the beef on the farm. There have been all kinds of deals made that sound very questionable.

The question I have is this. Take a 1,200 pound steer, the best marbled steer you can find. How would you cut that in terms of dollars? How much is offal? How much can you return to the farmer for that steer in terms of what you get? How does that steer factor out? I know a number of things, which I'm not going to bring to the table today. But I want to see if this balances out. I'm simply asking the question because this is why we're here.

These people feel that this is what's going to happen down the road. Those freezers and coolers we're talking about are full of beef that's pretty cheap. If this border opens, some pretty high-priced beef will roll out of those coolers. There's going to be a quick recovery for the packing house industry, but the farmer has lost, and there's no way of recovering.

Perhaps you can help us answer those questions. Whether you've answered those questions to the satisfaction of the primary producer will depend on the answers you give today. Start where you like.

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Mr. Brian Nilsson: I think each facility would have a different number. I don't think there's any way to say this is the number that the return would be. As many of you heard, we've been donating meat to the food bank. I don't get a return for that. I'm not going to question my Ontario colleagues. I do point out that anytime you are in a crisis, everybody is going to blame somebody. My experience is in the packing industry, and I'm in that part of the cattle industry a lot, too, and I don't see what everybody is blaming the packers for. The packer is the front line right now in this thing, and he's the first one to say they're stealing the cattle and we're making less. As I said, if somebody wants to be in my business, just get right up here. I'll be the first to want to be in Miami doing something else for a living.

The Chair: Robert.

Mr. Robert Bielak: I'm not here to defend any packer in Ontario. I think part of the issue in Ontario is that there is one major packer, whereas in the biggest cattle producing province in Canada there are two. So I feel that automatically the Ontario producer looks at the biggest packer and feels there is an injustice being done. But comparatively west to east, I don't think there is any special customer in eastern Canada that an eastern packer would give a premium to, versus western beef coming from Alberta to Ontario. Everyone is a competitor, and we all pretty well know what other people are asking for the product. I don't think there's a huge variance in selling prices from packer to packer. But the way it's laid out, there is only one major packer in Ontario of the magnitude they are for whatever reason. So I think it works against them. That's all I can really say about Ontario. We're trying to do whatever we can as a province as far as taking the number of cattle that are coming at us. As I say, I'm not defending a major packer in Ontario. I'm just saying that's part of the situation.

The Chair: Mr. Read, did you want to speak?

Mr. Brian Read: I'm not here to talk about anybody else's business. Believe me, mine has been a heck of a roller coaster to the degree where in week four or five we looked at each other and said, how far should we go here? I can't talk for the steer side of the business. Our business is cows and bulls, so I can only focus on that. I think I've shared where we are, what has happened, and where we're going. I can attest to the point that we have worked with the people in Manitoba. We've tried to draw some out of there. They have some specific breeds. They have some Finnish white cattle. We're trying to deal with those specific animals. They're gorgeous animals. We're not sure how to deal with them in our type of business.

I'm doing a wrap-up, Paul, rather than dealing with it.

Our prices are reflective of the current conditions. We are trying to displace the oceanic beef coming into this country, and I think to date we are. There are opportunities to expand the hip cuts off the cows, believe it or not, into the cooking programs for the deli counters. As a company, we've just gotten our legs under it for the last three weeks. Now we'll focus on utilizing those products to their best value within our country at this point.

The Chair: Mr. Altwasser, do you have any comments?

Mr. Garnett Altwasser: What you really asked was, how do you put a cut-out together? We have computer programs that plug in all these myriad combinations and relate it back to the live cattle. I don't have recall to do that. But the bottom line is that through July and now into August we've found a combination of cut-out, what we can sell here and what we can speculate on to put in storage. We have millions and millions of pounds in storage. We don't know whether that is a wise speculative decision or it's wrong. The cheapest way out might have been to render it. But we're paying storage on it, and if the market does recover, we will get a return on it. As I said before, in the last three weeks we've turned profitable. Prior to that it was a bloodbath, and over the time horizon it's going to be looked upon as a very difficult quarter.

· (1330)

The Chair: Mr. Holmes, you're a small packer. How do you see it?

Mr. Jim Holmes: Our situation is a little bit different. You bring us the beef. We try to get back to you as much as we possibly can. Unfortunately, it can't all be T-bone steaks. We send it back to you wrapped for your freezer. So it's a little different situation.

The Chair: It goes back to the notion that on the day the government announcement of the program was made, prices dropped significantly. It varies depending on whom you talk to. But the industry knows how much it was.That has caused a lot of people consternation over what is happening here. Are we being gouged? As someone said, the profitability in the pork industry in terms of the packers was huge following the disaster of 1998 or whenever it was.

We need you people. As I said to my farm friends, we need the packers. But you packers also need the farmers. I think we need each other equally.

I'm only bringing forward these questions because I think they had to be asked at this meeting.

We will keep a very close eye on what's going on. We'll be monitoring this thing, and we'll have a report. I hope you'll like our recommendations.

Even though it's difficult and we're going to suffer and we'll never be quite the same, we may be a stronger and better industry in the future because of this.

I thank you very much for coming.

You wish to have the last word, Robert.

Mr. Robert Bielak: The only thing I can say is all of us are here, and we realize that without our producers, feeders, and cow-calf guys, we don't have a plant to run.

The Chair: As has been mentioned many times today, we need to thank the consumers the most because they have stuck with us. I thank them very much.

So thank you from the committee for coming today.

We're going to ask the department to come back to the table for a quick summary. Would everybody please stay at the table so we can wrap this up in the next few minutes.

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· (1335)

The Chair: Ladies and gentlemen, I think we've had a productive day. You people have been able to hear another side of the industry's story today.

Given that we have 20 minutes left, to start with I'm going to allow one question from each party to the department. If we see that we need more time, we may continue. But, hopefully, we can conclude it that way.

Mr. Maloney, as the parliamentary secretary, I'll give you the last word.

Who's speaking on behalf of the Alliance party? Mr. Proctor and, I presume, Mr. Mark.

Carry on.

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

Gentlemen, I can see you taking copious notes back there, just scribbling it all down. You're all set for phase two, I can tell.

One thing the packers talked about was the inventory adjustment dollars that were allocated, $50 million in total, including $20 million from the provinces. No cheques seem to have gotten anywhere. Where is the cash?

Mr. Gilles Lavoie: Mr. Chair, the program, as is the case for the slaughter program, is administered by the provinces. It's the provinces that will put out the application forms, including on their website. We believe that it's up and running in most provinces. I know that in some provinces they have already received applications, but I cannot tell you exactly how much in each province. But it is administered at the provincial level, and we have never heard of a province that didn't want--

Mr. Gerry Ritz: So the money has gone to the provinces.

Mr. Gilles Lavoie: Normally, they submit a claim on what they expect to be paid out of the program in the community. They will ask us for an advance for August, for example.

Mr. Gerry Ritz: The program is getting close to winding down. There are only a few more days left during which you can apply for it. According to Mr. Vanclief, on Friday the money will be gone. Do you have a province-by-province breakdown of where the cash went? Would it be possible to get that?

Mr. Gilles Lavoie: Mr. Chairman, as you know, we have not had any provincial allocation to start from. We do have the number of animals that are slaughtered every week. We do have the reference--

Mr. Gerry Ritz: But the provinces are administering it, sir. You must have an idea of what went to which province.

Mr. Gilles Lavoie: As I was explaining, we do have the number of animals slaughtered. We have the market price in Canada and the reference price. Then we can see on a weekly basis what is committed under the program. Even if a province has not yet sent a claim to us, we know that they will, and we set the money aside.

Mr. Gerry Ritz: But you can do a province-by-province breakdown.

Mr. Gilles Lavoie: Yes.

Mr. Gerry Ritz: I'd like to see a copy of that if I could.

That's it.

The Chair: Howard.

Mr. Howard Hilstrom: In your first presentation, gentlemen, you said that you had no reports or indications that there was any kind of price gouging going on in the slaughter facilities. Now you've heard their presentation. Have you changed your mind, or do you believe there's any reason to do a big inquiry into the pricing of meat in Canada as it relates to this program?

Mr. Gilles Lavoie: Personally, I don't see it. But, obviously, it would be up to the minister to decide on this type of question. But from what I heard today--

Mr. Howard Hilstrom: You folks work for the minister, and you talk to him everyday. You monitored this program. You should be able to tell us at this committee if you think there's any problem with the way the program ran as to unconscionable profits coming out of that program and sticking with either the.... Well, the chairman of this committee is alleging that the slaughter plants are the ones profiteering out of this.

My last question is on the agricultural policy framework. The cow-calf man needs money today. The provinces have not signed on to the implementation portion of the APF. If they don't sign on for another six months or a year, are you telling me that the federal government is going to do nothing for that cow-calf man till the provinces sign on? Is that the situation?

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Mr. Gilles Lavoie: No, we are looking at other options. Obviously, we are still confident that the provinces that have not yet signed will do so pretty soon. Some of them said that they are seriously looking into it. We are also looking at options to be able to have some type of interim payment for provinces that have already signed.

Mr. Howard Hilstrom: Based on inventory, send a cow-calf man $300 a calf for every one he has in the yard. Then he'll sell it and give you back your money.

The Chair: The Alliance party has concluded.

Mr. Borotsik.

Mr. Rick Borotsik: Thank you.

You've heard from all of the processors at this point in time. One of the things they said was that, in their opinion, to simply close off the program effective August 17 without some sort of transition would throw the market into a somewhat chaotic situation, although it's an unknown hole we're walking into. I asked you before, Mr. Lavoie, whether you are looking at a further program. I think it was Mr. Carberry or Mr. Marsland who said there are going to be announcements. Does this announcement consider this transition period with regard to the marketability that's going on at the present time?

Mr. Gilles Lavoie: Various options are being considered for all segments of the industry, including feeder cattle and cows. That has been mentioned many times. If there is an announcement pretty soon, whether or not it will include everything, I don't know. It may be a stage approach.

Mr. Rick Borotsik: It's your job to look into the future and say how this is going to affect the industry. If the gate comes down on August 17 and there's nothing there, in your crystal ball what do you see happening to the industry at that time? Is it going to melt down? Is there going to be a transition to a normal market? How can we assist that market going forward?

Mr. Gilles Lavoie: It is a big question, how we could assist. As Mr. Eby mentioned, we had some discussions with the cattlemen last week. We're going to have some later today. We're looking at the best way in the circumstances. The priority always remains the same, to continue to open borders for a large amount of products.

Mr. Rick Borotsik: Absolutely. That's the subject of my next question, the open borders. You also heard Mr. Eby answer a question of mine where I said, what is it we can do? He said that any amount of lobbying is great, whether it be with the industry, the cattlemen's associations, or politicians. Do you agree with that? Should there be an acceleration of lobbying at the political level at this point in time?

Mr. Andrew Marsland: We have been lobbying beyond what was opened up last Friday. We've been pressing for more than that, in particular on the animals, because that's critical, as I mentioned earlier. We'll continue to do that not just in the U.S. but in other markets. We're fairly confident there will be movement in Mexico very soon. We'll see, but we're confident that will happen. As one of the witnesses from the packers mentioned, what's important is not just the movement but what it involves.

Mr. Rick Borotsik: Would political lobbying assist you?

Mr. Andrew Marsland: I think there has been a lot of political lobbying.

Mr. Rick Borotsik: Would an increase in political lobbying assist more?

Mr. Andrew Marsland: It's another one of those questions that's difficult to answer.

Mr. Rick Borotsik: I appreciate that I'm asking it of bureaucrats, and I know that you have certain limitations in answering those questions. I can well understand that.

My last question has to do with culling and depopulation, terrible terms like that. We talked about it on the telephone at one time. You heard what was just said with regard to the culled cows. Is there any long-term thought process going forward from government to try to get a handle on what may well happen in that part of the industry if something doesn't open up very quickly? We don't assume that culled cows over the age of 30 months are going to be acceptable to the American market anytime soon. What are we going to do in this market? Have you given any thought as to how we as federal government representatives should be dealing with that, as opposed to just passing it off to someone else?

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Mr. Gilles Lavoie: Some preliminary work has been done on that, and discussions with the provinces and the industry have taken place. As you indicated, depopulation as such is not a popular option. I believe there are a lot of options that could be seriously considered before this type of thing would happen. The best way to dispose of a cow is through a slaughterhouse and to find there the best possible market value for the product. As many borders will open, we should explore how fast we can get back into these markets. We should also explore the full potential of new markets, which we may not have done before.

Mr. Rick Borotsik: Mr. Nilsson had some great comments with regard to freezer and chilling space, something I didn't even know was available to us. Have you considered that at all? Did you even know it existed?

Mr. Gilles Lavoie: It is a market decision to a large extent. Somebody has to take a market decision in terms of how long you could store this type of product and what would be its condition for subsequent consumption. But this type of long-term solution has not been actively considered. Freezing for five years has not been considered as an option. But we're taking note of all the good suggestions that have been made today, and we'll include that as part of the things to consider.

The Chair: Mr. Mark.

Mr. Inky Mark: I'm going to ask again about money. Do you really believe that the cash advance for primary producers needs to be worked through the APF program? Can you create a new program for short-term purposes?

Mr. Gilles Lavoie: We do believe that the APF and the BRM component as it is could be of significant assistance to producers, in particular the cow-calf producers and the backgrounders. The production margin, compared to what was there before, offers excellent protection for them. As indicated before, the data are being reviewed with the industry, using very concrete examples, to see how it works in various circumstances. To date the preliminary data indicate that it could do a relatively good job to assist producers in the current circumstances.

Mr. Inky Mark: Do you have any idea when this could get started?

Mr. Gilles Lavoie: The work with the industry and the provinces has already started in terms of making sure we have all angles properly analyzed.

The Chair: Mr. Maloney.

Mr. John Maloney: Mr. Lavoie, with regard to the continuation of the financial assistance, it would appear that the agricultural policy framework would be the quickest way to start assistance flowing again. Could you briefly review for me the formula that's required to trigger the use of the agricultural policy framework and indicate which provinces are not on and why? What are the obstacles? Can they quickly be removed with reasonable negotiation? If they do sign, how quickly can money flow? You've danced around this question, but I'd like to pin you down a little bit. What sectors of the industry can benefit? I think you indicated that perhaps all the sectors can. If so, how can this happen?

Mr. Gilles Lavoie: British Columbia, Alberta, Yukon, New Brunswick, and Nova Scotia have already signed. Alberta, which is important in this context because they do market more than 55% of the cattle in Canada, is one of the signatory provinces for the new implementation agreement. In addition a disaster component has been included in this new BRM so that a producer could have access immediately to an interim payment at 70% of the production margin. It is important that it be available to all producers, obviously. They have, however, to take the first step of applying for the program. As indicated before, an interim payment could be issued quickly for all producers. A large number of cattle producers are participating in the program. We already have the information. We will send them a letter with the information we have on their account. If they can confirm that is correct, then we can apply the formula and issue an interim payment.

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Mr. John Maloney: Ontario hasn't signed. What will it take to get Ontario on board so that Ontario producers can benefit?

Mr. Gilles Lavoie: That is one area where a little bit of lobbying by your colleagues from Ontario to try to convince Madam Johns to sign the agreement would surely be a great help and welcome. As you know, the Ontario Cattlemen's Association issued a press release a couple of weeks ago, I believe it was, urging the provincial cabinet to seriously consider signing the implementation agreement.

Mr. John Maloney: Thank you, Mr. Chair.

The Chair: Mr. Proctor.

Mr. Dick Proctor: Thank you very much.

Mr. Carberry, I'm sorry, but I just want to get this information from you again. We're going to test more cattle. We're going to ramp up. That is what you told us in the first panel. What were the numbers you threw out?

Mr. Robert Carberry: Right now we're working on several different options. I think the important number here is that we would have a sampling program that would target that one in a million. Depending on the subpopulations within the Canadian herd, those numbers would vary quite largely. The largest number we'd be looking at now is in that 65,000 to 70,000 range. That's the top number. It could be less than that.

Also, Mr. Chair, if you would permit me, Mr. Proctor asked a question this morning with regard to rendering facilities. I do have that answer for you now. We do have a licence to operate for each of the rendering facilities. This is because of their linkage to the feed industry. It's feed ingredients that come out of there. We do one in-depth inspection per year. If there are changes within the facility, we do another one and of course anything related to compliance. But in general terms the compliance in those facilities is extremely high.

Mr. Dick Proctor: Thank you.

On the testing of cattle over 30 months, would you have any idea what percentage of cattle that enter the slaughter house are 30 months of age?

Mr. Robert Carberry: I'm sorry, I don't have that information with me today.

Mr. Dick Proctor: Mr. Lavoie, we spent a lot of time talking about the APF and provinces signing on, but the BSE recovery program itself is a federal-provincial program. How many provinces have signed on to that program?

Mr. Gilles Lavoie: To the best of my knowledge all provinces have agreed to participate without exception.

Mr. Dick Proctor: Including New Brunswick.

Mr. Gilles Lavoie: Yes.

Mr. Dick Proctor: Mr. Marsland, in the earlier panel Brian Read mentioned the rumour was that Mexico was going to begin accepting Canadian beef, but then it seemed to go to ground. Can you shed any light as to what happened there?

Mr. Andrew Marsland: My understanding was that Mexico had some concern about its exports of live cattle to the U.S. It exports about 1.2 million head of live cattle north of the border. There was some concern about how that might play out if they opened up the border. Discussions took place. As I mentioned earlier, we're confident that Mexico will move very quickly.

Mr. Dick Proctor: What is your sense about the other 32 countries that have banned our beef?

Mr. Andrew Marsland: We've intervened with all of our markets. We had another technical mission into Japan and Korea the week before last. I think the circumstances are different in each market. The context is different. We understand the context in Japan. It's a very sensitive issue. We pressed them on two points. One was their position on the reopening of the Canada-U.S. border. They sent us very positive signals that they understood that was going to happen, and they were going to come to an arrangement with the U.S. on that. On the second issue of bilateral Canada-Japan trade, it was difficult to get a clear answer as to the conditions that would have to be in place for that to recommence. We will continue to work with Japan and Korea and other markets to try to make that happen. Certainly, the movement by the U.S. last Friday is going to make that a little easier in some of these markets.

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Mr. Dick Proctor: This is my final question. I know this BSE recovery program isn't destined to assist everybody in the industry. I just want to zero in on the transportation. I know it has been raised before, but this is a significant issue. As long as live cattle can't be exported, it's going to remain a serious issue. At this point in time they are not eligible for any assistance. Is that correct?

Mr. Gilles Lavoie: That is correct.

Mr. Dick Proctor: And no change is contemplated that you know of.

Mr. Gilles Lavoie: They are part of the various groups, as I mentioned, that have asked for consideration.

Mr. Dick Proctor: Thank you.

The Chair: Thank you, Mr. Proctor.

Now we'll go to the parliamentary secretary for the last word. Mr. Duplain.

[Translation]

Mr. Claude Duplain (Portneuf, Lib.): Thank you, Mr. Chair.

I thank you all for being here today. I feel like saying that you must have had a rather crazy summer up to now.

There was a lot of talk about beef and my questions will relate to the other sectors affected by this crisis. What kind of assistance have you been able to give to other sectors, particularly to the dairy products sector, and how do you go about it. I think dairy producers throughout Canada are terribly affected by this crisis. We heard of losses of at least $300 million a year. There is also the problem of culled cows, which constitutes part of their income. There is also the heifers that they normally sell in the United States and that they cannot sell anymore.

I want to know if you really know about this problem and if the government is considering something for the other sectors. I want particularly to know if there are now discussions going on about ways to help the dairy sector.

Mr. Gilles Lavoie: A good part of culled cows, veal calves and grain-fed calves come from dairy herds and these animals are already eligible under the present program.

On the other hand, as was mentioned several times this morning, the borders will probably remain closed for a prolonged period to cattle of more than 30 months of age. As culled cows are, by definition, animals which are more than 30 months old, the marketing of these animals will continue to be difficult. This is an issue that the ministers will have to examine for the future. On the other hand, in the case of veal calves and grain-fed calves, the situation should improve quickly since they belong to the products which should be allowed to enter in the United States as soon as the import licences are issued.

As you mentioned, the sector of purebred animals export remains problematic and the dairy sector is a big exporter of purebred cattle. Up to now, we have no indication of the reopening of this sector. I think that it is part of the considerations. Ms. Veneman said that she would accelerate the process of the adoption of new rules concerning live animals. They belong to that group. I think that we cannot foresee a date at the present time.

Do my colleagues have more information on this?

Mr. Claude Duplain: I am told that in the sole dairy sector, they talk of revenue of almost $1.5 million a day for heifers and culled cows. This is a lot of money. Is nothing being considered now in the assistance programs?

Mr. Gilles Lavoie: Well, producers are only eligible for the cows they send for slaughter. For the compensation, the formula is the same as for steers. It is related to the American price. We pay part of the difference between the domestic market price and the U.S. price.

Dairy producers are a little more worried because of a news release issued last Thursday, I think. What will happen in the Fall, when a large portion of old cows will normally have to be slaughtered? Will there be enough space in the slaughterhouses? Will there be a sufficient market? Even if we have space in the slaughterhouses, we will still have to find out what we can do with the meat. Will there be a market for the meat? Who is going to buy and eat this meat? For them, this is a question to which it is still difficult to find an answer. We are going to work with them and the other industry participants to find the best solution.

Mr. Claude Duplain: Yes, because there is a risk all this increases production costs in the long run.

Mr. Gilles Lavoie: Yes, it is a scenario which was mentioned by the chairman of the dairy producers.

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Mr. Claude Duplain: I would like to ask one last brief question. What percentage of the whole problem is being solved by a partial opening of the border?

Mr. Gilles Lavoie: Probably between 40 and 50 percent.

Mr. Claude Duplain: Good. Thank you.

[English]

The Chair: Thank you very much, panellists, for coming, and thank you to the three departments for coming today and giving us responses to questions, as you have so often done before.

Mr. Borotsik.

Mr. Rick Borotsik: Mr. Chair, first of all, I'd like to thank you very much for bringing us here today and recognizing the urgency and seriousness of this issue. I think that has been articulated today by all members of the industry as well as the bureaucrats.

I wonder if you would indulge me and accept a motion I would like to put forward. It's one that should be taken seriously. As was mentioned by the CCA as well as the members of the department, lobbying is going to be very vital in what happens here. We recognize that it has to deal with live cattle, dairy issues, and cows and bulls.

I move that the Prime Minister be encouraged to lead an all-party delegation to the United States to meet with the appropriate officials with the desire to facilitate the opening of the U.S. border to pre-May 20 levels.

It's a motion I take very seriously. I believe this is now politician to politician. I believe it's Prime Minister to President. I believe that in order for us to get this industry back on its feet, it's going to take that kind of intervention. So I would like to put that motion on the table, with your indulgence, Mr. Chair.

The Chair: Do you have a seconder?

Mr. Rick Borotsik: Yes, I have a seconder.

The Chair: First of all, is there unanimous consent to accept the motion, because we haven't had 48 hours' notice?

Some hon. members: Agreed.

Mrs. Rose-Marie Ur: I'd like to propose an amendment. I think, Rick, it's a great idea, but I think we should add Japan.

Mr. Rick Borotsik: I would certainly be prepared to do that. I think we have to pull out all the stops.

The Chair: Just one moment. The official mover has accepted the amendment. I also have a seconder for the amendment. Is there any discussion?

Mr. Rick Borotsik: The motion would now read “to the United States and Japan to meet with the appropriate”.

The Chair: Can we make that one motion rather than deal with an amendment?

Mr. Rick Borotsik: Sure. It's a friendly amendment to add Japan.

The Chair: Is there any further discussion?

Mr. McCormick.

Mr. Larry McCormick: I think there's a key word there in Rick's motion. I've certainly said to many Canadians in the last three weeks that I wish the Prime Minister was down there. But the Prime Minister has talked to the elected officials. I know that Minister Vanclief has talked to Ann Veneman many times.

We're having a national caucus meeting next week, Mr. Chair. I think it's a great idea. I'm not sure I'm ready to forward this now and to approve it.

Last year we wanted to go to Washington. I think it was almost as important. Of course, then you get into the politics around the table. We couldn't go. I don't want to mention who. I'll leave the discussion to others.

The Chair: Let's not get into politics here. We've kept away from it.

We want to put the question.

Mr. Borotsik.

Mr. Rick Borotsik: If I could just speak to that, it's simply a matter of encouragment. If this committee decides to pass this motion, it's a perfect opportunity to have them take it to their caucus and say this is what the committee thinks. We'll take it to our caucus, and they can deal with it there. But it is simply to encourage.

I would ask that the question be called.

The Chair: The question has been called.

(Motion agreed to)

We have unanimous support.

Thank you very much. Enjoy the rest of your summer.