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37th PARLIAMENT, 2nd SESSION

Standing Committee on Agriculture and Agri-Food

EVIDENCE

CONTENTS

Monday, June 30, 2003

1005

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

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

1010

The Chair

Mr. Gilles Lavoie (Senior Director General, Policy and Planning Team, Food Safety and Quality, Department of Agriculture and Agri-Food)

1015

1020

The Chair

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

1025

The Chair

Mr. Gerry Ritz (Battlefords—Lloydminster, Canadian Alliance)

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

The Chair

Mr. Gerry Ritz

The Chair

Mr. Howard Hilstrom

1030

Mr. Claudio Valle

Mr. Howard Hilstrom

Mr. Claudio Valle

Mr. Howard Hilstrom

Mr. Claudio Valle

Mr. Howard Hilstrom

Mr. Claudio Valle

Mr. Howard Hilstrom

Mr. Claudio Valle

Mr. Howard Hilstrom

Mr. Claudio Valle

Mr. Howard Hilstrom

Mr. Claudio Valle

Mr. Howard Hilstrom

1035

Mr. Claudio Valle

Mr. Howard Hilstrom

The Chair

Mr. Gilles Lavoie

The Chair

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

Mr. Robert Carberry

1040

Mr. Louis Plamondon

Mr. Robert Carberry

Mr. Louis Plamondon

Mr. Robert Carberry

Mr. Louis Plamondon

The Chair

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

1045

Mr. Robert Carberry

Mrs. Rose-Marie Ur

Mr. Claudio Valle

Mr. Robert Carberry

Mrs. Rose-Marie Ur

Mr. Robert Carberry

Mrs. Rose-Marie Ur

Mr. Andrew Moroz (Director, Trade Controls Policy, Department of Foreign Affairs and International Trade)

Mrs. Rose-Marie Ur

1050

Mr. Andrew Moroz

The Chair

Mr. Rick Borotsik (Brandon—Souris, PC)

Mr. Robert Carberry

Mr. Rick Borotsik

Mr. Robert Carberry

Mr. Rick Borotsik

Mr. Robert Carberry

Mr. Rick Borotsik

Mr. Claudio Valle

1055

Mr. Rick Borotsik

Mr. Claudio Valle

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

The Chair

Mr. Rick Borotsik

The Chair

Mr. Dick Proctor (Palliser, NDP)

Mr. Claudio Valle

1100

Mr. Dick Proctor

Mr. Claudio Valle

Mr. Dick Proctor

Mr. Claudio Valle

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. Gilles Lavoie

1105

Mr. Dick Proctor

Mr. Robert Carberry

Mr. Dick Proctor

Mr. Robert Carberry

The Chair

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

The Chair

Mr. Garry Breitkreuz

The Chair

Mr. Claudio Valle

The Chair

1110

Mr. Rick Borotsik

The Chair

Mr. Rick Borotsik

The Chair

Mr. Rick Borotsik

The Chair

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

1115

Mr. Brad Wildeman (Chair, Foreign Trade Committee, Canadian Cattlemen's Association)

1120

1125

The Chair

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

Mr. Brad Wildeman

Mr. Larry McCormick

Mr. Brad Wildeman

Mr. Stan Eby

Mr. Larry McCormick

1130

Mr. Andrew Moroz

The Chair

Mr. Gerry Ritz

The Chair

Mr. Rick Casson (Lethbridge, Canadian Alliance)

Mr. Brad Wildeman

1135

Mr. Stan Eby

Mr. Rick Casson

Mr. Stan Eby

The Chair

Mr. Rick Borotsik

Mr. Brad Wildeman

Mr. Rick Borotsik

1140

Mr. Brad Wildeman

Mr. Rick Borotsik

Mr. Brad Wildeman

Mr. Rick Borotsik

Mr. Brad Wildeman

Mr. Rick Borotsik

Mr. Stan Eby

Mr. Rick Borotsik

The Chair

Mr. Rick Borotsik

Mr. Brad Wildeman

Mr. Rick Borotsik

The Chair

Mr. Brad Wildeman

The Chair

Mr. John Maloney (Erie—Lincoln, Lib.)

Mr. Brad Wildeman

Mr. John Maloney

Mr. Brad Wildeman

1145

Mr. Stan Eby

Mr. John Maloney

Mr. Stan Eby

Mr. John Maloney

Mr. Stan Eby

Mr. Brad Wildeman

Mr. John Maloney

The Chair

Mr. Dick Proctor

Mr. Stan Eby

Mr. Dick Proctor

Mr. Stan Eby

Mr. Brad Wildeman

Mr. Stan Eby

Mr. Dick Proctor

Mr. Stan Eby

Mr. Dick Proctor

Mr. Brad Wildeman

1150

Mr. Dick Proctor

Mr. Brad Wildeman

Mr. Dick Proctor

Mr. Stan Eby

The Chair

Mr. Howard Hilstrom

Mr. Brad Wildeman

Mr. Howard Hilstrom

Mr. Brad Wildeman

Mr. Howard Hilstrom

Mr. Stan Eby

Mr. Howard Hilstrom

1155

Mr. Stan Eby

Mr. Howard Hilstrom

Mr. Stan Eby

Mr. Howard Hilstrom

Mr. Brad Wildeman

The Chair

Mrs. Rose-Marie Ur

Mr. Brad Wildeman

Mrs. Rose-Marie Ur

Mr. Stan Eby

Mrs. Rose-Marie Ur

Mr. Brad Wildeman

Mrs. Rose-Marie Ur

1200

Mr. Stan Eby

Mrs. Rose-Marie Ur

Mr. Brad Wildeman

Mrs. Rose-Marie Ur

Mr. Stan Eby

Mrs. Rose-Marie Ur

Mr. Brad Wildeman

The Chair

Mr. Rick Borotsik

Mr. Brad Wildeman

Mr. Howard Hilstrom

Mr. Rick Borotsik

Mr. Stan Eby

1205

The Chair

Mr. Dick Proctor

Mr. Brad Wildeman

The Chair

Mr. Larry McCormick

Mr. Stan Eby

Mr. Larry McCormick

Mr. Stan Eby

Mr. Larry McCormick

Mr. Stan Eby

Mr. Larry McCormick

Mr. Stan Eby

Mr. Larry McCormick

Mr. Stan Eby

The Chair

Mr. Gilles Lavoie

The Chair

Mr. Gilles Lavoie

The Chair

1210

Mr. Gilles Lavoie

The Chair

Mr. Stan Eby

The Chair

Mr. Gilles Lavoie

The Chair

Mr. Gilles Lavoie

The Chair

Mr. Howard Hilstrom

1215

Mr. Gilles Lavoie

Mr. Howard Hilstrom

The Chair

1220

Mr. Rick Paskal (Alberta Cattle Feeder, Butte Grain Merchants)

1225

1230

The Chair

Mr. Cor Van Raay (Alberta Cattle Feeder, Butte Grain Merchants)

1235

1240

The Chair

Mr. Calvin Vaags (Manitoba Feed Lot Operator, As Individual)

The Chair

Mr. Calvin Vaags

1245

1250

The Chair

Mr. Calvin Vaags

The Chair

Mr. Rick Casson

Mr. Rick Paskal

1255

Mr. Rick Casson

Mr. Calvin Vaags

Mr. Rick Casson

Mr. Calvin Vaags

Mr. Rick Paskal

Mr. Rick Casson

Mr. Cor Van Raay

Mr. Rick Casson

Mr. Cor Van Raay

The Chair

Mr. Rick Borotsik

Mr. Calvin Vaags

Mr. Rick Borotsik

Mr. Calvin Vaags

Mr. Rick Borotsik

Mr. Calvin Vaags

Mr. Rick Borotsik

Mr. Calvin Vaags

Mr. Rick Borotsik

1300

Mr. Rick Paskal

Mr. Rick Borotsik

Mr. Rick Paskal

Mr. Rick Borotsik

Mr. Calvin Vaags

Mr. Rick Borotsik

The Chair

Mr. Claude Duplain (Portneuf, Lib.)

Mr. Calvin Vaags

Mr. Claude Duplain

Mr. Calvin Vaags

Mr. Claude Duplain

Mr. Calvin Vaags

Mr. Claude Duplain

The Chair

Mr. Calvin Vaags

The Chair

Mr. Howard Hilstrom

The Chair

Mr. Dick Proctor

The Chair

Mr. Dick Proctor

Mr. Rick Paskal

1305

Mr. Dick Proctor

Mr. Rick Paskal

Mr. Dick Proctor

Mr. Rick Paskal

Mr. Dick Proctor

Mr. Cor Van Raay

Mr. Dick Proctor

The Chair

Mr. Howard Hilstrom

Mr. Cor Van Raay

Mr. Howard Hilstrom

Mr. Cor Van Raay

Mr. Howard Hilstrom

Mr. Cor Van Raay

Mr. Howard Hilstrom

Mr. Cor Van Raay

Mr. Howard Hilstrom

Mr. Cor Van Raay

Mr. Howard Hilstrom

Mr. Cor Van Raay

Mr. Howard Hilstrom

Mr. Cor Van Raay

1310

Mr. Howard Hilstrom

Mr. Cor Van Raay

Mr. Howard Hilstrom

Mr. Cor Van Raay

Mr. Howard Hilstrom

Mr. Cor Van Raay

Mr. Howard Hilstrom

Mr. Cor Van Raay

Mr. Howard Hilstrom

Mr. Cor Van Raay

Mr. Howard Hilstrom

Mr. Cor Van Raay

Mr. Howard Hilstrom

Mr. Cor Van Raay

Mr. Howard Hilstrom

The Chair

Mr. Larry McCormick

The Chair

Mrs. Rose-Marie Ur

1315

Mr. Cor Van Raay

Mrs. Rose-Marie Ur

Mr. Cor Van Raay

Mr. Rick Paskal

Mrs. Rose-Marie Ur

Mr. Rick Paskal

Mrs. Rose-Marie Ur

Mr. Rick Paskal

Mrs. Rose-Marie Ur

Mr. Rick Paskal

The Chair

Mr. Dick Proctor

Mr. Rick Paskal

Mr. Dick Proctor

Mr. Calvin Vaags

1320

The Chair

Mr. Garry Breitkreuz

Mr. Calvin Vaags

1325

The Chair

Mr. Rick Laliberte (Churchill River, Lib.)

Mr. Rick Paskal

Mr. Rick Laliberte

Mr. Rick Paskal

The Chair

Mr. John Maloney

Mr. Calvin Vaags

1330

The Chair

Mr. John Maloney

Mr. Calvin Vaags

Mr. Rick Paskal

The Chair

Mr. John Maloney

The Chair

Mr. Robert Carberry

1335

The Chair

Mr. Robert Carberry

The Chair

Mr. Gilles Lavoie

The Chair

Mr. Andrew Moroz

The Chair

Mr. Gerry Ritz

Mr. Gilles Lavoie

Mr. Gerry Ritz

Mr. Gilles Lavoie

Mr. Gerry Ritz

Mr. Robert Carberry

1340

Mr. Gerry Ritz

Mr. Robert Carberry

Mr. Gerry Ritz

Mr. Robert Carberry

Mr. Gerry Ritz

The Chair

Mr. Claudio Valle

The Chair

Mr. Rick Borotsik

Mr. Gilles Lavoie

Mr. Rick Borotsik

Mr. Gilles Lavoie

The Chair

Mrs. Rose-Marie Ur

Mr. Gilles Lavoie

1345

Mrs. Rose-Marie Ur

Mr. Gilles Lavoie

Mrs. Rose-Marie Ur

Mr. Gilles Lavoie

Mrs. Rose-Marie Ur

Mr. Andrew Marsland (Director General, International Markets Bureau, Department of Agriculture and Agri-Food)

The Chair

Mr. Dick Proctor

Mr. Claudio Valle

Mr. Dick Proctor

The Chair

1350

Mr. Rick Laliberte

Mr. Robert Carberry

Mr. Rick Laliberte

Mr. Robert Carberry

Mr. Rick Laliberte

Mr. Robert Carberry

The Chair

Mr. Howard Hilstrom

Mr. Robert Carberry

Mr. Claudio Valle

1355

Mr. Howard Hilstrom

Mr. Gilles Lavoie

Mr. Howard Hilstrom

Mr. Gilles Lavoie

Mr. Howard Hilstrom

The Chair

Mr. Howard Hilstrom

The Chair

CANADA

Standing Committee on Agriculture and Agri-Food

NUMBER 039

2nd SESSION

37th PARLIAMENT

EVIDENCE

Monday, June 30, 2003

[Recorded by Electronic Apparatus]

À (1005)

[English]

The Chair (Mr. Paul Steckle (Huron—Bruce, Lib.)): Ladies and gentlemen, can we bring the meeting to order.

When we left here a number of weeks ago, we had planned that if there was a need or a reason for us to do so, we would convene a meeting to bring the industry and the various representatives of Parliament up to speed on where this issue is at in terms of the border opening; the questions of science and how they've been dealt with; and what responses we've had to that. So we want to thank you for taking time out of what is normally a time of summer vacation and family time to come and spend time with us today.

We plan to divide this meeting into three sessions. We hope those people who are here this morning from both CFIA and Agriculture and Agri-Food Canada will remain with us throughout the duration of the three-hour meeting. While we're going to run a structured meeting, we also from time to time may want to draw on the expertise of those who have given presentations or will make presentations so that we don't lose the continuity. Then at the end of this session we will be able agree that it was a worthwhile time and that certainly we learned and gleaned information here this morning.

We want to begin this morning by hearing from the Department of Agriculture and Agri-Food: Mr. Andrew Marsland, director general, international markets bureau; and Mr. Gilles Lavoie, senior director general, policy and planning team, food safety and quality.

Then we have, from the Canadian Food Inspection Agency, Robert Carberry, acting vice-president of programs, who has been with us a number of times and who has been very forthright in responding to questions.

We also have with us, of course, the Department of Foreign Affairs and International Trade: Claudio Valle, director, technical barriers and regulations; and Andrew Moroz, director, trade controls policy.

We thank you for appearing this morning.

I believe I have Mr. Carberry wanting to go first, followed by Mr. Lavoie.

When you make your presentations perhaps you could try to make them brief, but obviously we've come together seeking information, so we'll allow you to do that.

Mr. Carberry, please.

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

My name is Bob Carberry, and I'm the acting vice-president of programs at the Canadian Food Inspection Agency. I'm pleased to have, yet again, another opportunity to speak to this committee.

I would like to begin by talking about the actions the CFIA has taken to date to deal with the case of BSE we found in a single cow in Alberta.

Beginning Tuesday, May 20, when we received confirmation from the World Reference Laboratory, the CFIA conducted a thorough investigation to find and test any herds of cattle that may have been exposed to the same feeding practices associated with the infected cow over the course of its entire life.

During the course of this investigation, which involved the trace-back with two lines of inquiry--a trace forward and a feed investigation--we quarantined 18 herds of cattle in Alberta, Saskatchewan, and British Columbia.

An additional 36 herds were investigated because they had received individual animals or groups of animals from the herds in the lines of inquiry over the past eight years.

Over 2,700 animals were destroyed, and more than 2,000 samples were taken and submitted to our laboratories for testing for BSE. All of the quarantines have now been lifted, and all of the test results have come back negative. It is clear that what we have encountered is not an epidemic of BSE.

However, it is also clear that some changes to our policies and practices will be required to address a previously undetected very low prevalence. Based on the international experience, Canada is proposing to require the removal of specified risk materials, better known as SRMs. This approach is strongly endorsed by the findings of the expert international review team as an immediate priority.

Over the upcoming months, we'll be reviewing and revising other policies on BSE prevention, surveillance, and livestock feeding restrictions, with a view to strengthening controls as appropriate to maintain the highest possible level of protection. As part of this effort, in cooperation with other federal government departments we will seek involvement of the provinces and the United States to reflect the fact that the beef and cattle industry in North America is highly integrated.

Some of the further changes we are already considering include a higher level of surveillance in federally registered slaughterhouses; higher levels of targeted testing for BSE in cattle; and strengthening our ban on using ruminant protein and feed for ruminants.

At the beginning of June, the CFIA invited an international team of experts to review our BSE investigation and assess our overall BSE protection measures. The members included Dr. Ulrich Kihm from Switzerland; Dr. Will Hueston from the United States; Dr. Stuart MacDiarmid from New Zealand; and Dr. Dagmar Heim from Switzerland.

The international team came to Canada on June 7 to conduct the review. Before they left, the team members gave us a brief oral report on their findings.

Last week we received the written report from the international team. We have had it translated, and I brought copies here today in English and French for your information; they should have been distributed.

In the report, the team concludes that our response to the single case of BSE was comprehensive and complete, and they commend the speed and thoroughness of our investigation. They also proposed several enhancements to our BSE safeguards, which generally support the actions we were already considering.

The main recommendation is to ban the use of specific risk materials, SRMs, which are the parts of a cow associated with high levels of the prion protein that is the agent thought to cause BSE in infected cattle.

We have indicated that we agree in principle with the team's recommendations. We expect to be announcing shortly new policy measures to respond to the recommendation on SRMs. The SRM policy will be introduced as a precautionary measure to further enhance existing food safety and public health efforts.

The CFIA has shared the findings of the expert team with our international trading partners. We are confident that the panel's findings will assist in facilitating international recognition of the results of our investigation and, we hope, reconsideration of interim restrictions on Canadian beef products.

Throughout our investigation, the CFIA has worked hard to ensure that all available information about our investigation has been made available and shared with the public and with foreign governments on a regular basis. This has been done through the CFIA website; Canadian missions abroad; two presentations we made to the Office international des épizooties, or OIE; a CFIA briefing for all interested foreign missions in Ottawa; and daily technical briefings for North American and international media.

À (1010)

These activities have been taken with a number of countries, but the United States of course has been our top priority. There has been a high level of engagement with our U.S. counterparts in the U.S. Department of Agriculture and in the Food and Drug Administration from the beginning.

In the second week of our investigation, senior U.S. regulatory officials visited Ottawa to receive personal briefings from Brian Evans, me, and my colleagues on the progress of the investigation. Subsequently, two BSE experts from the USDA came here to participate in our investigation.

On June 10, CFIA representatives travelled to Washington to meet USDA officials to hold a scientific briefing. We notified them that our investigation was concluded, and their epidemiologist reviewed the actions we took and our conclusions. We also presented an outline of what we heard from the international team.

In recent weeks, we have also had delegations from other trading partners, including Japan and Mexico, who visited Canada to review our investigation and our findings.

At the beginning of June, Dr. Evans wrote to his counterparts in a number of countries, bringing them up to date on the investigation and urging them to not include certain products in their import restrictions, based on the risk-based recommendations of the OIE.

Mr. Chairman, this has been a brief summary of the actions to date we have taken at the CFIA regarding BSE. I welcome any questions the committee may have after my colleagues have finished with their presentations.

Thank you.

The Chair: Thank you, Mr. Carberry.

Mr. Lavoie.

Mr. Gilles Lavoie (Senior Director General, Policy and Planning Team, Food Safety and Quality, Department of Agriculture and Agri-Food): Thank you very much, Mr. Chairman, ladies and gentlemen.

The discovery of BSE in one cow is obviously a unprecedented event for Canada. Overnight, the borders to all our export markets were closed, leaving no destination for 60% of our Canadian beef production. As we know, in 2002, Canadian export of cattle, beef, and byproducts were valued at $4.4 billion Canadian. In fact, the borders were closed to all ruminants and products from ruminants.

The groups most immediately affected were the feedlot operators and veal producers. They had animals ready to be sold for slaughter in Canada or to be exported to the U.S. In a normal week, we export around 20,000 live cattle and send between 60,000 to 70,000 for slaughter. The closure of export markets led to a buildup of 50,000 live cattle for slaughter on feedlots and farms every week.

On June 18, federal, provincial, and territorial ministers announced a national program to provide temporary assistance to help the industry continue to operate while borders are closed. It is a $460-million program. This program has been developed with the full cooperation of the provinces and the industry.

The program was never intended to compensate all partners in the beef and other ruminants value chain who experienced income losses as a result of BSE, but it is designed to target key partners that will have the greatest impact in getting the domestic market operating.

The temporary relief program has two major components. First, a deficiency payment to producers provides an incentive to move cattle through the system. The objective is to increase domestic slaughter from 30,000 head a week to 50,000 to 60,000 head, thereby reducing the further accumulation of slaughtered cattle and cows in inventory.

Second, inventory and pricing incentive payments to packers should encourage them in their efforts to clear the slowest-selling items in inventory and to offer higher prices for cattle they purchase.

À (1015)

[Translation]

The key program principles are that the program be national in scope, equally available to all provinces and eligible producers, that it be temporary and not replace the long-term safety net program, that it be cost-shared 60:40 between federal and provincial governments, and that it encourage market transparency, active packer bidding and the sale of fed and non-fed slaughter cattle at the best price by the producers.

All producers raising and selling cattle or other affected ruminants in Canada are eligible for the deficiency payment component of the program. Fed steers and heifers and non-fed cows and bulls, veal calves sold directly for slaughter in Canada and delivered for slaughter in a licensed establishment within 14 days of sale are covered by the program, as well as other ruminants affected by trade restrictions since May 20th.

The time period is limited. While the border remains closed, payments are available for livestock owned prior to May 20th, 2003 and subsequently sold for slaughter in Canada. For fed cattle as well as grain and milk-fed veal calves, it will terminate once these animals are sold to slaughter. For other animals, the program will end on August 31, 2003. Nonetheless, the program will terminate at the close of business on the day that the US border is opened to muscle cuts or shipments of live animals. Regardless of circumstances, the program will finish if government costs reach the maximum $460 million. The provinces will administer the program.

[English]

Let me describe how the payment calculations will be made. A weekly reference price will be established by converting U.S. market prices to Canadian dollar equivalents. A western region and eastern region weekly average market price will be calculated, and when the current regional average weekly market price falls below the reference price, payment will be made on the magnitude of this decline.

The percentage of the contribution provided by governments will be reduced as the magnitude of the price decline increases. This is intended to encourage producers to hold out for the best possible price and encourage packers to bid competitively for available animals. Note that the total amount of government payments does not decline; rather, it increases at a slower rate as the market price reference price gap becomes greater.

Payments under this program are considered as farm income for support payment calculations under the business management program, and tax slips will be issued.

To give you an example, using a steer of 1,350 pounds, and assuming a reference price of $1 a pound, if the market price for a week is 60¢ per pound, the market will pay $810 per head and the government will pay $445 per head, equivalent to 83% of the decline, and the producer will receive a total of $1,255 per head. The cattle feeder's share of the decline will then be $94.50.

If the market price is 50¢ per pound, the market will pay $675, the government will pay $513, which represents 76% of the decline, and producers will receive a total of $1,188 per head, and the share of the cattle feeder's of the decline will be $162.

The objective of the second component, the inventory and pricing incentive program, is to encourage increased cattle slaughter by assisting packers in their efforts to clear the slowest-selling beef items in inventory and at the same time encouraging them to offer higher prices for the cattle they purchase. Contributions offered to owners of slaughter facilities will be based on the byproduct value of animal slaughters. Byproduct values will be derived from U.S. prices paid for similar products.

For each animal slaughtered, the contribution will be calculated by multiplying this byproduct value converted to equivalent Canadian dollars by the reissue of the slaughtered cattle market price paid that week relative to the reference price for that week. In effect, the more packers bid for slaughtered cattle relative to the reference price, the greater the contribution they receive for the byproduct.

This should encourage the market to reach the best possible price for the week for all concerned. As market conditions vary over the weeks of the program, the federal government reserves the right to adjust this percentage from time to time.

All federally and provincially licensed slaughter facilities are eligible for this program. To be eligible for coverage, animals must have been slaughtered from June 19, 2003, the day of the announcement, to August 31, or the day that the U.S. border opens.

The rapid development of this program has been facilitated by the existence of the beef industry round table. This round table had already started this operation. It was established as an action under the actual policy framework, and the round table has been the principal mechanism for discussions, coordination, and collaboration between representatives of the Canadian beef industry and federal, provincial, territorial, and departmental agricultural officials.

At the last meetings, on June 23 and 24, there was clear recognition on the part of the industry and government that intensive efforts would be required to regain markets. In a process led by the Canada Beef Export Federation, representatives from federal and provincial governments will join with industry to develop country-specific openings and re-entry strategies for key markets. The department has approved over $2.2 million in matching funding for the Canada Beef Export Federation this year under the Canadian Agriculture and Food International Program. These funds will be very useful to execute the market re-entry component of the strategy. These will require a coordinated government-industry approach to deal with the new challenges in international markets.

À (1020)

There is no doubt the science contribution from the CFIA investigation is a key part of the BSE recovery program to solve this situation, but the central element is the opening of our export market and the recapturing of our export customers. In fact, only when all parts of the puzzle have been brought together will we have a complete solution.

Thank you.

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

Is there something you want to add, Mr. Marsland, before we move on to the next group? No? Okay.

From the Department of Foreign Affairs and International Trade, Mr. Valle.

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

I have a brief presentation simply to note our diplomatic efforts throughout this month and a half in terms of seeking to reopen borders and keeping our trading partners informed.

We started by informing all government authorities of this situation on May 20. On May 21, Dr. Brian Evans of the Canadian Food Inspection Agency, as chief veterinary officer, informed the OIE meeting in Paris of the development, and by May 21 all our trading partners were informed.

We have kept all our missions assessed and informed of the investigations, providing them with our latest information. I can virtually attest that in all our major markets there were representations being made on a daily basis to host authorities.

On May 29, having noted that many countries had taken measures beyond OIE guidelines in terms of the products that were being banned, we sent instructions to 14 missions to deliver letters from Dr. Evans requesting to remove these products that should be exempt under OIE criteria. On June 13, we had a major debriefing of all foreign missions here in Ottawa, and a number of our ambassadors or main trading partners were also briefed separately.

Over the last ten days we have stepped up the representations, particularly since the active phase of the investigation has been concluded and the international reports were being made known.

Last week, Ambassador Marchi, at the WTO in Geneva, delivered a statement to the WTO sanitary and phytosanitary committee, outlining the way Canada managed the investigation, re-emphasizing the need to lift border restrictions on products that are not subject to OIE criteria and also products for which there is a minimum risk.

In the past two days we have sent instructions that included the reports of the international panel report as well as this final CFIA report. In addition, as Mr. Carberry indicated, we have begun receiving a number of foreign veterinary teams coming to Canada, and we ourselves have been proactive. This weekend Dr. Evans and his team went to Japan. They arrived there today, and will be holding meetings in Japan for the next two days before moving on to Korea. CFIA, as well, has been in daily contact with U.S. authorities.

In addition, my minister, following discussion with the industry and the Department of Agriculture and Agri-Food, reviewed in early June the beef and veal TRQ allocations and made a number of changes to deal with the situation.

So this is a brief snapshot of what we have done. A lot more activity has taken place, but if there is more information needed, we can bring that out during the questions.

Thank you, Mr. Chairman.

À (1025)

The Chair: Thank you very much, gentlemen.

We will begin the questioning, and we're going to stay with seven minutes; this will allow all parties to have at least one question in this round. We hope you'll remain within those time limits so we can get everyone in.

Mr. Hilstrom, I believe you're first.

I should recognize Mr. Ritz here this morning. He now, apparently, is chief government critic for agriculture, for the Alliance Party.

Is that correct?

Mr. Gerry Ritz (Battlefords—Lloydminster, Canadian Alliance): Yes, thank you.

Mr. Howard Hilstrom (Selkirk—Interlake, Canadian Alliance): Thank you, Mr. Chair. We certainly hope to be government, and that he'll be our minister, but....

The Chair: I apologize; he's the opposition critic, just so we have it for the record.

An hon. member: A Freudian slip.

The Chair: We don't want Mr. Ritz to think he's already there. There's still some distance between here and there.

Mr. Gerry Ritz: There are a few things I'd do differently.

The Chair: Okay, Mr. Hilstrom, away you go.

Mr. Howard Hilstrom: There are media people who pick up on Freudian slips like that. It'll be reported, no doubt.

At any rate, this is a crisis, a major crisis, and that fact can't be lost. There is no functioning market. I'll allow anyone to comment in regard to the fact if any government people think there's a functioning market, there isn't. And I'll get to the program in just a minute; we can possibly cover it under that.

First of all, Mr. Valle, when are the NAFTA borders, U.S. and Mexico, going to open up to beef exports from Canada? If not tomorrow morning, what is holding up those borders from opening?

À (1030)

Mr. Claudio Valle: I can't speculate with any precise timing on when the borders will be open. We referred to indications informally that it might happen in the near future, but we're not willing to give any precise date.

Discussions at the scientific level are continuing. As you are aware, Japan is a particular key in light of U.S. concerns about their exports to Japan. That's why we sent the mission yesterday to Japan. The Japanese mission was in Canada last week. We're there to provide the reassurances the Japanese need so that they do not impose measures on the U.S. based on the U.S. understanding that we're operating a continental market.

The Japanese initial thoughts were to impose restrictions that sought to somehow segregate Canadian beef from U.S. beef. That is very difficult to manage. That's why we are in Japan, to explain to the Japanese and to provide comfort to them.

Mr. Howard Hilstrom: So Japan is a key to opening up the NAFTA borders. That's what you've just told us.

Mr. Claudio Valle: It's an important element.

Mr. Howard Hilstrom: Well, it sounds like it's the only element. We won't argue about things, but who is leading the delegation to Japan, then?

Mr. Claudio Valle: It's our chief veterinary officer, Dr. Brian Evans.

Mr. Howard Hilstrom: Doesn't that seem just a little bit too low-level a delegation to Japan, to have the head veterinarian in charge of this? Where's the foreign affairs minister? Why wouldn't the foreign affairs minister lead a delegation when we're talking about billions and billions of dollars, about a crisis here in Canada? Why was a decision made to have such a low-level person go to Japan in view of this crisis having gone on since May 20?

Mr. Claudio Valle: The Minister of Foreign Affairs was in fact in Japan last week. He briefed the Japanese authorities and expressed our concerns. The delegation is at the chief veterinary officer level because we need to explain this issue on a science basis. The Japanese are somewhat traumatized by BSE. They had the problem in 2001-02, and they want to manage this issue on a scientific basis.

Mr. Howard Hilstrom: What specifically did Japan tell Minister Graham was required to get the Japanese border open? What specific requirements do the Japanese have for us to open that border?

Mr. Claudio Valle: The Japanese authorities last week told Mr. Graham that they need to review the findings of the investigation in Canada and the findings of the international team. Those findings were only provided and made available to them late last week. So the Japanese had no capacity to discuss the issue on a technical basis until those reports were made available.

Mr. Howard Hilstrom: Do you agree that August 31 is an economic crisis deadline for this country as a whole--not just beef producers, but as a whole--to have significant economic impact way beyond what's already happened? What date is your department using as a crisis date?

Mr. Claudio Valle: We don't have a crisis date. We believe every day provides significant costs and burden to the industry. Our aim is to reach solutions that will provide relief to the industry as quickly as possible.

Mr. Howard Hilstrom: Did Japan give a hard and fast date as to when they would finish reviewing the findings? Of course, implementing the changes is up to us, but did they give the date when they would finish reviewing that?

Mr. Claudio Valle: Not as yet. Those discussions are ongoing. We should have more indications of their concerns and their outlook sometime in the middle of this week.

Mr. Howard Hilstrom: What I'm touching on here is the fact that there is no end in sight to this crisis, because nobody in government, in their negotiations with the other country, has any hard facts, hard criteria,or any timelines. So where is the...?

The feedlot part of the beef industry has a program. Those facts are going to go out the door. There is no marketplace because there are no feeders going to go into those feedlots, because the feedlots will not buy feeder cattle this fall.

Where do you see the cow-calf operator having any hope or any belief that there's light at the end of the tunnel, from what you know today, the way this whole thing is unfolding? Is there any light at the end of the tunnel anytime for the cow-calf man?

À (1035)

Mr. Claudio Valle: I don't want to be pessimistic, but after meetings with Japan and Korea this week, I believe we should have a better idea of how things are going to unfold over the summer. But I don't want to put any thought on any specific dates.

Mr. Howard Hilstrom: Mr. Lavoie, how many cattle have been slaughtered under the FAP program so far? And when is that 900,000 head going to be cleaned out of there? How many have been slaughtered to date?

That's my last question, I guess, Mr. Chairman.

The Chair: Can someone respond to that?

Mr. Gilles Lavoie: Yes, sir.

Between May 20 and today, we have on average killed around 30,000 feed cattle. The estimation for the week of June 20 was around 39,000, and this week it's around 42,000.

So it's been around 180,000 since May 20.

The Chair: We'll now move to Mr. Plamondon for seven minutes.

[Translation]

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

You seem to have implemented a lobbying program with Japan and the United States to show there was just one case and that the borders could therefore be safely opened. However, the reports you made on the study of your own process over the past few years, especially since 1997, show there are perhaps shortcomings or, at least, improvements to be made. In the report I have here, there is specific reference to high-risk materials, sophisticated techniques for meat recovery, control and banning specific risk materials, ARMs, VSMs, as well as better surveillance.

What steps have you already taken to change your way of proceeding so that there are even fewer cases, even if there is just one? We can sense that the borders will be opened soon, but in the meantime, specific measures must be taken here.

Mr. Robert Carberry: We started thinking of new policies and various programs right from the second or third day. In fact, our status changed as soon as we discovered there was just one infected cow. There are three major aspects. First of all, there are the specific risk materials, to protect the public from risks that might exist and to eliminate the risk of transmission to other animals. The second aspect is animal feed, which is the main method of transmitting the disease from one animal to another. We studied the possibility of adopting a policy in this regard as well. Thirdly, there is a surveillance system to show our foreign partners what we are doing and the real rate of illness in Canada. There have already been consultations between the departments and the industry. Last week, there was a round table organized by the Department of Agriculture and Agri-food of Canada to discuss these three policies.

À (1040)

Mr. Louis Plamondon: Have you examined, as the Union des producteurs agricoles du Québec was suggesting, the regionalization of health practices? Canada being an east-to-west axis country with a long border, if there were regionalization of health practices, when an unfortunate event like that one happened somewhere, that would not prevent the other regions from going on with their economic lives and pursuing their export business because they would not have to deal with closed borders, especially as some regions of Canada are more advanced than others in the area of health practices. So have you examined regionalization of health practices?

Second, you collect information on the animal at birth and at death. Have you thought about a traceability feature for the animal? That way, from the animal's birth, all the information on its travelling would be collected. For example, you'd know if it had been brought to an agricultural fair, if it visited another farm and so on. That's already being done in Quebec. At the present time, that information is not all in a centralized database. Have you looked at establishing a centralized system in order to better prevent those unfortunate cases?

Mr. Robert Carberry: As for regionalization, we did examine that, but BSE is not a disease that can be brought under control with that kind of system because it is not transmitted from one animal to another. Normally, a regionalization system can control the diseases transmitted from one animal to another. As this disease is transmitted through animal feed that is transported east, west, north and south and as the incubation period for this disease can last three years or longer, it is difficult to ensure that the disease has remained in a single region as opposed to another. To our knowledge, no country has managed to regionalize its herds. It's very difficult. To date, that was not a real possibility in our relations with our foreign partners.

Your second question concerned traceability. For some years now there's been a better system in Canada. In view of the nature of the problem, we will re-examine this system and bring about improvements to make it as rigorous as possible. So there is already a traceability system in Canada.

Mr. Louis Plamondon: But there is no central database in the present system.

Mr. Robert Carberry: That's one of the things we'll be examining.

Mr. Louis Plamondon: Thank you.

[English]

The Chair: Thank you, Mr. Plamondon.

Mrs. Ur.

Mrs. Rose-Marie Ur (Lambton—Kent—Middlesex, Lib.): Thank you very much for appearing before the agriculture committee. We've been away from Ottawa since mid-June, but this has never left our plate, I can tell you. I've had several contacts with my producers in my riding, and some questions I will be putting forth are directly from them, because they can't be here.

First, we had this international panel here in Canada. I don't know how they were chosen, or how they came. My question is, did Japan express these same concerns that they are today...[Technical difficulty--Editor]...for a CFIA system here, or lack of perhaps a protocol within the CFIA, which I don't think we have? Would we have been better off including them at the beginning if these people were chosen to come here?

That's my first question to you.

À (1045)

Mr. Robert Carberry: We chose the international team of experts based on their knowledge and their history of dealing with this disease. The majority of people, in fact all of the people, who were on the team have a status beyond just their own country, and they did not come just to represent their own country. They were authors of chapters for the OIE on BSE. They had done risk assessments in other countries. They had experience in doing this kind of work.

We chose a team not because of their country affiliation but because of their expertise and their international reputations. So this team was brought together because of that.

Mrs. Rose-Marie Ur: That said, and I appreciate that, this country went through BSE in 2000-01. They would have the latest hands-on experience. Would it not have been of some benefit for them to be here?

As you said, it's based on knowledge and history. Well, that history is pretty recent, and perhaps they would be on top of the issue.

Mr. Claudio Valle: That's one of the downsides in terms of Japan; they in fact fired completely their animal health specialists. In fact, the last element of this purge happened last week, so they've changed their team completely. The people who were handling their BSE investigations in 2001-02 have in fact been removed from the system, so Japan has a new group of animal health specialists that has just come on stream and some new chief people are being installed, in fact over the past week.

Mr. Robert Carberry: I'll just add that the people we invited are the ones who have their fingers on the pulse at the international level that the Japanese officials will go to in order to effect changes within the OIE codes. In fact, Canada and Japan have partnered. We've been a partner with Japan, trying to see some amendments made to some of those codes.

Mrs. Rose-Marie Ur: I agree that everything has to be science-based, first and foremost. I can't stress that enough. I think Canada has proven that very well, and I commend the CFIA on that.

I really wonder, though, if this is not really based on science any more, in my humble opinion; I'm not a veterinarian. I just wonder where this is going.

There are 34 other countries, I guess, that have banned Canadian imports as well. Are they looking at what Japan is doing? Because they're going beyond the OIE, and some of the things they are doing are not science-based.

Where are we going to end up with this then?

Mr. Robert Carberry: We're still very much in the throes of a scientific discussion with these other countries. We've just recently completed our investigation. We have Brian Evanses going to countries to present our scientific findings, but at this point there's still a very high element of scientific discussion that needs to occur with these countries.

We're using the scientific arguments now to encourage them to put in science-based measures. That's why we're leading with the science foot at this point in time. That's not to say that we're not dealing with the trade and other aspects as well. We have several levers pulled on this--trade, diplomatic, and scientific standpoints.

Mrs. Rose-Marie Ur: Just to switch a bit in my questioning, talking about trade, Canada imports twice as much offshore beef per capita as does the United States. When the annual quota is filled in the United States, then large duties are levied so that no more beef is imported. And in Canada, being the good Canadian people we are, we issue supplementary permits.

Why can't we address that situation, then, regarding tariff rate quotas?

Mr. Andrew Moroz (Director, Trade Controls Policy, Department of Foreign Affairs and International Trade): Thank you, Mr. Chairman. My name is Andrew Moroz. I'm director of the trade policy controls division, which is responsible for the tariff rate quota.

Under our tariff rate quota--if I could take one minute and step back--

Mrs. Rose-Marie Ur: Please just answer the questions. We don't need a lot of history here. I just want it done.

À (1050)

Mr. Andrew Moroz: All right.

On June 4, we actually did announce policy changes based on our consultations with the industry. These were based on consensus recommendations. The policy announcements basically made two important changes to our current supplementary policy.

First, before somebody could request a supplementary import authorization, they would have to check with at least five Canadian suppliers to see if they could provide the product. Where there were not five suppliers of that product, then they had to check with everybody. So if there were only three, they had to check with all three.

Secondly, if a Canadian supplier was able to make an offer at a price that was comparable to the import price into the United States from other countries, then we would normally say “no” to that supplementary import permit.

Those were the policy changes that were announced on June 4. They were implemented, effective for all requests that had come in from May 21 onwards. So we required those companies that applied for import permits between May 21 and June 4 to go back and check with domestic suppliers, which they did.

Now, to basically give you some numbers and then to finish, since May 21 we've had requests for supplementary import permits of about 15,800 tonnes. That's as of about noon Friday. We have authorized supplementary imports for about 11,400 tonnes. The main reason we have authorized these is that between the period of June 4 and last week, there were not a lot of domestic offerings being made.

We have turned down about 3,000 tonnes, either because there was a domestic offering or the import price was too low, because we also have a policy that says if the import price is below the equivalent in the U.S., we will turn it down. We are now reviewing about 1,200 tonnes worth of requests.

The Chair: Thank you. I think we have to stop it there. I'm sure someone else will pick up on that.

Mr. Borotsik.

Mr. Rick Borotsik (Brandon—Souris, PC): Thank you, Mr. Chairman.

Thank you, gentlemen, for being here on a sunny day in Ottawa.

Mr. Carberry, again, I know that CFIA has done an admirable job. We touched on why the Japanese weren't part of the delegation. Can you tell me when the CFIA final report went to the USDA?

Mr. Robert Carberry: It went on Sunday. We had people working on it over the weekend. Now, the U.S. certainly has been aware of everything that was coming up in the report. They were part of the discussions we had. They knew what was going in it, but the final, formal copy went to them on Sunday.

Mr. Rick Borotsik: Okay, so Sunday past.

Mr. Robert Carberry: Yesterday.

Mr. Rick Borotsik: Yesterday. But we know you've been in constant contact with the USDA. We know there has been this ongoing communication. Was that the earliest possible time we could get the final report?

Second, what now are the expectations? How long does the USDA sit on this report? Is it going to be a month, is it going to be two months? Are you putting some kind of internal and external pressures on them currently to make sure they react to this report and not just simply sit on it, for some obvious reasons?

Mr. Robert Carberry: In fact, we started discussions with the U.S. last week in Sacramento. I was down there and we pressed with them. I had the opportunity to meet with Undersecretary Hawks, as well as the head of the FDA, Lester Crawford, as well as the head of their agriculture and plant health inspection service, Bobby Acord.

They didn't need the report to know what the report was going to say. We'd already shared that information with them.

But, yes, we're pressing hard with them at that level.

Mr. Rick Borotsik: I've heard constantly from you, Mr. Carberry, as well as your department--and again, I do appreciate all of the effort you've put into this, make no mistake about it--that the USDA and the American administration want the borders open as equally badly as we do. Now that they have the report, now that they know the process we've gone through, and we recognize there are no other cases out there, it was a one-off incident.... I know you can't speculate on timelines, but are you putting pressure on them now on a daily basis to say, “We need this open sooner than later”? This is a crisis. Let's make no bones about it. And we're going to hear from the Canadian Cattlemen's Association.

Based on that, I've heard--and you can corroborate or not--that there is an easier opportunity to remove the temporary closure of the borders within a timeline, that timeline being two months. Is that in fact the truth, and if so, what happens if it goes beyond the two-month closure?

Mr. Claudio Valle: In terms of bilateral discussions on several different levels, we've used the occasion of Premier Klein's visit last week to raise the matter, and that's a matter of public record. We had briefed Mr. Klein on what to say. As well, we have had discussions with the White House, with the departments of commerce and agriculture. At all levels the issue is being pressed. They understand the pressures, they understand the effects on our industry, and they are in the process of reviewing.

I can't tell you whether a decision will be made tomorrow or the day after, but they are aware of the importance that is being attached--

À (1055)

Mr. Rick Borotsik: If the closure goes beyond July 27, is it more difficult then to take the closure of the borders off at that point?

Mr. Claudio Valle: I don't want to speculate on that type of thing. I think we're looking at it on a day-to-day basis inasmuch as we believe the pressure is so intense that--

Mr. Rick Borotsik: Good. We're going to keep the pressure on, too. Thank you, Mr. Valle.

Mr. Lavoie, on the program itself, that the program's fine, you had said, and I quote, “encourage packers to pay higher prices”.

Well, I can tell you, that's not happening. I've heard of live cattle sales going certainly below the 50¢, in fact going less than that at the present time.

What the program does now is it certainly puts the onus on the producer and the government, not on the packers. Have you considered reviewing the plan and looking at a floor price of some sort? I know the Cattlemen's Association will talk to that, but have you looked at reviewing the plan? Because the plan is not working.

Mr. Gilles Lavoie: Thank you, Mr. Chairman.

We believe the plan is working. The 50¢ range of prices is not a surprise.

Mr. Rick Borotsik: It is for producers.

Mr. Gilles Lavoie: The price dropped in the weeks following May 23, down to the 70¢ range, and it dropped another 20¢ after the announcement of the program. The objective, as I mentioned, is to try to market in Canada between 50,000 to 60,000 head a week, and we need--

Mr. Rick Borotsik: Have you considered setting a floor price?

Mr. Gilles Lavoie: It is an option, but the floor price at the moment is already established by the market.

Mr. Rick Borotsik: But the market could go down to 10¢. If the market goes down to 10¢, believe me, there's a windfall here, but it's not for the producers and the governments; it's for the packers and the processors.

Mr. Gilles Lavoie: Yes, but floor price is established by supply and demand on the part of producers--

Mr. Rick Borotsik: Mr. Lavoie, we have a lot of supply. This doesn't come as a shock, okay; and the demand is still only 39,000 to 55,000 cattle. The processors and the packers seem to be paying a lot less than what really should be paid. Have you considered a floor price? I mean, that's one way of at least setting out that there are no windfall profits there for the packers and processors.

Mr. Gilles Lavoie: It has been part of the consideration, but for the moment it is the declining scale of--

Mr. Rick Borotsik: In Manitoba right now, Manitoba producers cannot take advantage of this program. The majority of the cattle they sell go directly into the U.S. market. There is very little domestic market for those. Right now a producer in Manitoba gets nothing out of this program.

Have you at least considered perhaps a feed maintenance program of some type, some way that a Manitoba producer can at least get some support? Because right now there's nothing there--and there won't be. When you open the borders on August 31 or sooner, when they go in there, there will be discounts, there's no question. Those producers get nothing of anything in the program. Have you considered that at all?

Mr. Gilles Lavoie: The possibility of having an interest-free loan was part of the considerations in the weeks previous to the announcement of the program. At that time it was considered by the industry that the most important and urgent thing was emergency payment, and that's what was offered.

The Chair: That's end of your questioning, Mr. Borotsik.

Mr. Rick Borotsik: That's it?

The Chair: Yes.

Mr. Rick Borotsik: I have so many more.

The Chair: Yes, I know.

Mr. Proctor, for seven minutes.

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

To Mr. Valle, when did Japan first ask to come to Canada in order to themselves look into the BSE program?

Mr. Claudio Valle: We heard about Japanese interest in visiting Canada in the early part of June. We informed them at the time that our specialists were all tied up in terms of dealing with the investigations. We told them that we would invite them as soon as we had the initial investigation completed. When that happened, we in fact let them know, and they came and visited Canada last week. They had part of the visit here in Ottawa and then they went to Alberta and came back to Ottawa for a wrap-up session.

Á (1100)

Mr. Dick Proctor: So they wanted to come at the same time the international inspection team was here, more or less?

Mr. Claudio Valle: They indicated an interest in coming and discussing. We told them the investigation was not completed at the time, but they would be invited as soon as the investigation was completed.

Mr. Dick Proctor: But didn't they want to come to see what we were doing on the investigation, to see how we were handling the investigation, to observe?

Mr. Claudio Valle: They expressed an interest, but we told them we did not have the resources to manage another team while the investigation was being pursued.

Mr. Robert Carberry: Actually, we made an intervention with them and reminded them of the circumstances they had when they were dealing with BSE. They quickly realized that what they really wanted to see was the results of the investigation. We told them at that point in time that we would invite them as soon as the investigation was coming to a close. And in fact that's what happened.

They understood that it was untimely to come at the outset of the investigation. In fact, when they first made their offer to come, it was prior to the international team being put together.

Mr. Dick Proctor: Given what's happened subsequently, do you think in retrospect that was the best decision we could have made?

Mr. Robert Carberry: I think it was the best decision. They needed to see the results of the investigation, and they got that last week. We had our epidemiologist and our experts walk them through, in a detailed way, exactly what the results were. Then they were able to go out to the site and see what types of facilities we have and those kind of things.

When they want to do these types of trips it's to see what the results are and what our findings are. They were comfortable, from my understanding, in terms of both the investigation we did and what they saw on the ground in Alberta.

Mr. Dick Proctor: But in the meantime they've indicated to the U.S. that the United States has to guarantee there's no Canadian content in beef that's being exported to Japan, and now South Korea has joined in. So it's kind of convenient for the Americans to hide behind that Japanese embargo.

Mr. Robert Carberry: To my understanding, the Japanese have in fact delayed the implementation of the country of origin verifications, and to my understanding, as of this morning, Korea has not copied those measures--unless something's happened that I'm not aware of.

Mr. Dick Proctor: So given everything we've done in terms of welcoming the Japanese here since the international investigation, the purpose of Dr. Evans' trip to Japan is what?

Mr. Robert Carberry: When the Japanese were here, it was not at the CVO level but at the level of the technical officials underneath. So the information was shared. We expect them to be briefing back up their lines as we speak, so Brian Evans' visit is an immediate higher-level visit, if you like, to meet with his CVO counterpart as well as some of the other parties in Japan, including their department of health, as available.

Mr. Dick Proctor: Okay.

With regard to the feed maintenance program Mr. Borotsik spoke about, as I understand it, you are getting pressure from the cattlemen to have a feed maintenance program. There are a number of perhaps smaller producers who have no relationship with packing houses in Canada and who export their product all to the United States. There's no way for them to get in the queue once things return to some degree of normalcy.

Would it not be cost-effective to introduce a feed maintenance program? Would it not be cheaper to do that rather than to do the sliding scale reference points that you've done heretofore?

Mr. Gilles Lavoie: The government reiterated last week, I believe, a request for government to consider feeding incentive on one side, and on the other...you mentioned a $60 amount to help people create an incentive to keep the animals on their farm, because there are some obviously that cannot go to the market at the moment.

This request obviously is going to be considered by federal and provincial ministers. It's being analyzed and considered at the moment by the officers, but at the moment the program does not, as I mentioned in previous testimony, include it. It's a request that was reformulated last week and is being considered.

Á (1105)

Mr. Dick Proctor: To the Food Inspection Agency, Dr. Kihm indicated that because of the low percentage of tests we do on BSE in Canada, in his opinion there has to be more cases of BSE in this country.

What is the Food Inspection Agency's response to that?

Mr. Robert Carberry: The level of testing we were doing over the last number of years was in excess of the number of tests recommended by the OIE for a country that was provisionally free of BSE, which was our status. Now that we will have a status somewhat different from that, we will be gearing up our tests. We will be looking at statistical representativity to demonstrate that there is only a very low prevalence of disease. So that's in the works as well.

Mr. Dick Proctor: But you would not disagree with his suspicion that there are more cases of BSE out there, they just haven't been discovered.

Mr. Robert Carberry: I wouldn't speculate one way or the other on this. This could in fact have been a single case, but certainly the results show that if there was any level of prevalence it would have shown up during our investigation. That was their finding.

The Chair: Thank you very much. That concludes that line of questioning.

We have one question from Mr. Breitkreuz.

I'll allow you one question, very succinct, and then we must move on to the next group.

Mr. Garry Breitkreuz (Yorkton—Melville, Canadian Alliance): Thank you, Mr. Chair.

I have just a few comments, and I want to read a little bit of a quotation.

The Chair: We're moving beyond our time here.

Mr. Garry Breitkreuz: Okay.

I want to point out that the entire cattle industry is not the only sector of the meat production industry being affected. The entire protein industry is experiencing severe negative repercussions.

I'd like to just read a quotation from the general manager of Harvest Meats, who wrote a letter to me. He says:

This one mad cow has started a reaction that has far-encompassing consequences on the entire protein industry in Canada, not just the beef segment. I'm concerned that there seems to be a widely held opinion that only beef producers and packers are affected by the crisis when in fact everyone in the protein sector is being affected by varying degrees.

Now, the letter goes on, but I won't quote it all because of time constraints. He says that prices have been depressed across virtually the entire meat sector. The closure of the Canada-U.S. border has affected retailers, packers, wholesalers, rendering disposals, trucking companies, and auction marts. It's difficult to compensate properly, and compensation is really inadequate in this. The factors affecting border closing seem to go beyond the science.

My question is, isn't it extremely important for the negotiators who are trying to open the border to go to the highest levels possible? Even the Prime Minister could possibly get involved. The factors affecting the closure seem to go beyond the science, and the compensation will not be adequate because of all the different sectors of the meat industry that are being affected.

Is this not a fairly good picture of what is happening out there, and that demonstrates clearly the urgent need to address this?

The Chair: Just a short response. It was supposed to be a short question.

Mr. Claudio Valle: As indicated earlier, I think it's the top issue of government right now, reopening the border. All the resources are geared to that, including the need to make representations at the highest level if need be. We're looking for a formal response to the science first. If that is not forthcoming quickly, then we will ratchet up the representations to another level. But the formal response to the science has not been received as yet. So until we get that, it's counterproductive to blow the issue into other matters. We need to keep it science-focused to deliver the optimum results.

The Chair: Thank you very much.

For the next round, I'm going to ask these people to stay. As I said at the outset, we may be calling them to the table.

So I want to thank you for coming and I want you to remain in the room.

I want it clear before you leave the table, though, that there was a statement by Mr. Hilstrom...and I'm sure it wasn't intended that way. This is an issue that has caused a lot of frustration. There was a comment with respect to Mr. Evans not being a high-profile person. I believe Mr. Evans has done tremendous work, and we all applaud him for that. We want him to know that he does represent Canada at the very highest level in terms of the science.

So we want him to know that, and I'm sure Mr. Hilstrom would want that as well.

Á (1110)

Mr. Rick Borotsik: On a point of order, Mr. Chairman, I know you're keeping the witnesses here. Is there an opportunity to bring them back at the end of the session?

The Chair: If there's a reason to bring them back, we will bring them into the discussion.

Mr. Rick Borotsik: Or as an alternative, if they could stay another 20 minutes now, perhaps we could get some more of our questions in.

The Chair: No, I don't think it's fair for the other witnesses. They should be able to come to the table at their designated time.

Mr. Rick Borotsik: Fair ball. And you're right, perhaps the other witnesses will have some information and maybe we can then put some better questions to the first panel.

The Chair: Exactly.

Again, witnesses, thank you for coming. We'd ask you to stay, and we thank you for doing that.

We'll break while the next group of witnesses comes to the table.

Á (1111)

Á (1113)

The Chair: I'll bring this meeting back to order.

We have now before us the Canadian Cattlemen's Association: Brad Wildeman, chair, foreign trade committee; Stan Eby, vice-president of the association; and Jim Caldwell, director of government affairs.

These people have become regulars at our committee meetings, but shortly, hopefully, we can put this to rest and we can go on to doing other things for the betterment of all.

Mr. Eby, are you first?

Mr. Stan Eby (Vice-President, Canadian Cattlemen's Association): Yes, thank you, Mr. Chairman. We're getting to know each other on a first-name basis, and hopefully we can carry on a friendship under better circumstances in the future.

Mr. Chairman, members of the committee, my name is Stan Eby. I and my family operate a beef farm near Walkerton in Ontario. Our operation is somewhat typical of the beef operations in Ontario.

With me today is Brad Wildeman, a large feedlot operator from Saskatchewan, and Jim Caldwell from our CCA office here in town. We'll not be making a long presentation but we have a few opening comments.

We may have heard a great deal about large feedlots in western Canada and the hurt they are suffering, and it is substantial, but the hurt is also being felt by smaller feedlot operators in eastern Canada. When the price of market...is $600, whether it be in eastern or western Canada, the same hurt is felt across the country.

On another note, the veal and the sheep industry, along with the dairy heifer backgrounding operations, are also feeling the negative effect of this border closing.

I do want to compliment the work that's being done by the Canadian Food Inspection Agency. I understand their final report will be released soon. I also want to thank Agriculture and Agri-Food Canada for their assistance and their dialogue through this whole event.

I also want to compliment you, Mr. Chairman, Mr. Vice-Chairman, and your colleagues for your actions. I'm sure you and other committee members would have a lot of other things to do rather than being here in Ottawa today. But without this committee holding hearings and making recommendations, I believe the assistance to producers would not have been forthcoming. So we thank you for your involvement and your work.

It goes without saying that the beef industry in Canada is facing the biggest disaster it has ever faced in its history. To put it very bluntly, we do not have a market for our product. That was brought out by previous speakers here.

Manitoba, which does not have a major slaughter facility, has not sold any animals since May 20. Other provinces are in the same position. Some producers have been forced to sell animals, and received prices in the forties. If things don't change, we could see prices fall even lower than that. Some people are predicting that it will go much lower. We'll discuss this a bit later.

This is why we believe changes will have to be made to the deficiency payment scheme. We're still trying to work our way through the 900,000 cattle that were on feed as of May 20. When the normal kill is near 70,000 head a week and we've been doing only half that number, you can easily see how the backup is affecting the industry.

There has been some improvement in slaughter numbers the last few weeks, but we're still a long ways from where we could and should be.

While we have a very serious problem with cattle that are ready to go to market, we are quickly facing another problem: We have cattle ready to go on feed, the backgrounding group. They're getting bigger every day. The feedlot operator will not pay much for replacement cattle if he cannot receive a fair price for his fat cattle, so the problem goes on down the line. The backgrounder and cow-calf sector will be next. That's been alluded to already today.

Ironic as it may seem, we could have a shortage of cattle ready for market if the border opens, which is another reason we believe there should be changes to the current program. It isn't going to do much good to get through this glut of cattle only to find out that the packers have to lay off workers because there's no cattle ready for market later in the fall. I'll ask Brad to discuss this a bit further.

The total industry, all production sectors--packing, processing, retail, food service, and rendering--including government representatives from Agriculture Canada, Health Canada, Department of Foreign Affairs and International Trade, have met on several occasions to have joint effort to try to make the best of this situation. This ranges from trying to bring some order into the marketplace to promotion of our product.

The Canadian Cattlemen's Association welcomes the findings of the international committee released last week. The report confirms the position of the CCA that the beef industry is a North American integrated industry and that decisions made need to reflect this reality.

The cattle industry welcomes any measures to ensure the highest level of animal health and food safety, and will work with government to implement and enhance any measures deemed necessary. The international report should assist the U.S. and other countries to recognize that all necessary steps have been taken and the science shows that Canadian beef is safe and should once again be available in the global marketplace.

Á (1115)

It goes without saying that we not only want the borders open to our products but we also believe they should be open. As I indicated earlier, we believe we'll have to make some changes in the deficiency program, and we've talked to government officials, even earlier today, about those changes.

I'd ask Brad to make a few comments on what we believe the changes should involve.

Mr. Brad Wildeman (Chair, Foreign Trade Committee, Canadian Cattlemen's Association): Thank you.

I think I'll give you just a minute of background.

When this initially occurred, the industry got together very quickly to initiate discussions with various levels of government to develop what we thought would be a sound and reasonable plan. We developed five principles, and I think it's important that we review those in light of where we're going: first, that it would be easily understood by industry; second, that it would be bankable to the lending institutions; third, that it would encourage orderly marketing approach and encourage feeders to sell at the highest price; fourth, that it would provide equity, not additional debt; and five, that it would provide cashflow, as quickly as possible, to help manage these diminished cashflows.

Over the next two weeks, we met intensively with federal officials and developed a program that we thought would be sustainable. Unfortunately, prior to the implementation, several key actions were either ignored or modified from the original proposal, rendering many of the positive outcomes ineffective. The two most significant were changing the end date of the program from 30 days after the reopening of international markets to live cattle sales to immediately upon reopening of markets to muscle-cuts; and a significant change to the format and conditions of the diminishing market adjustment formulas.

These changes resulted in several damaging outcomes as predicted by the industry in advance of the announcement, particularly excess selling of slaughter cattle, the collapse of finished-cattle markets, and increased anxiety of cattlemen about the future.

Through the last couple of weeks, the CCA has met in several different locations, several times, and I think these goals keep coming up over and over again. These are the goals we seek to achieve if we're going to get normality and some functionality back in our marketplace.

First, we need to increase slaughter levels to the May 20 levels or above. Second, we need to allow some form of orderly marketing for these market-ready cattle. Third, we need to keep cattle prices at a level that is reasonable to give each sector adequate operating margins and to ensure that margins are fairly distributed through all sectors. Fourth, Canadians and Canadian consumers benefit from these programs that move meat products out of the system, and fifth, that we do everything possible, as quickly as possible, to regain our entire international markets, including meeting individually each trade traditional importing country, if necessary, led by our minister.

A period, we believe, for allowing due process to occur is quickly passing. Since the initial announcement, we've gone back and tried to review this program to make it more acceptable. We believe it needs now, again, to focus on some of the same things, but I'll read these four in a little different light.

The goals are to restore a sense that the situation is being brought under control and managed. There's a lot of anxiety out there; I think a lot of people feel that this thing is spinning out of control and nobody is stopping it.

Second, the program discourages or virtually eliminates sales below some level.

Third, the deficiency percentages should be adjusted to serve the purpose it was originally intended to meet, and that's the survival of the cattle industry, in particularly the feeding sector.

Fourth, a new program should be added to encourage producers to hold cattle at maintenance levels, stretching supplies to accommodate this 50,000 to 55,000 head per week slaughter level that we're at now, and then try to extend these cattle out so that we don't end up with the hole that Stan talked about, where we'll sell these cattle at very low prices and then we'll find out that there's no cattle left to slaughter and we're going to have a shutdown of our packing industry. We think it's time to start managing this issue. One announcement doesn't get us there.

Finally, to be more specific about the recommendations, one of the things we're saying is that the deficiency...a percentage compensation should be significantly lowered or removed for sales under 50¢ a pound or $50 a hundred weight; this would effectively eliminate sales below $50, thereby setting a floor price.

Second, the deficiency payment should be adjusted to 90% for sales above $50 and below the reference price, as agreed to previously.

Third, a new program, which we call the “feed program”, should be established whereby cattle feeders would receive compensation for putting cattle on maintenance rations, therefore stretching it out. In western Canada we're thinking $60 per head, per month. In eastern Canada, where their feed costs are slightly higher, it would be probably more like $75.

Á (1120)

And this would be provided for the cattle who were on inventory as of May 20. This would allow cattle feeders to remain viable until the cattle were sold on a timely basis. It would also provide room for smaller cattlemen to get a selling opportunity, which they haven't had, as we heard today. It would also help alleviate a number of over-heavy and over-finished cattle.

And fourth, the federal and provincial governments should restate their commitment to the cattle industry as it concerns the ending of this program. They should reinstate the ending date in the following terms: that the program will continue until the border reopens for Canadian beef and live cattle and the provincial and federal governments have had an opportunity to meet and determine the adequate recovery response process. This would comfort the industry that the program would not end until after the ministers had met and additional support was given, if necessary.

We believe the new component of the feed thing will save taxpayers money, not cost them money. We've done a significant amount of analysis on this, and we believe this is the only way we can start to manage the issue of trying to get cattle slaughtered in an orderly fashion and trying to give smaller producers who don't have traditional slaughter markets in Canada an opportunity to get in the queue.

With that, I'll end my comments.

Thank you, Mr. Chairman.

Á (1125)

The Chair: We'll now go to questioning, beginning with the government side.

Mr. McCormick, please, for five minutes.

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

Great to see you here, but sorry we have you back under these circumstances.

Brad, you just mentioned your suggestions, your needs, your recommendations that we all need to listen to. We're all trying to work together for the same cause, but some of what you've just mentioned....

You know, you've brought along changes that need to be made following the program that's been put out there. I also hope you include the fact of whether or not Ontario is in yet.

Have you made these recommendations and these requests to Agriculture and Agri-Food Canada recently, since this has come out? And have you been received?

I'll just give you an opportunity to come in on that, please.

Mr. Brad Wildeman: We've had two conference calls and in-person meets. There was a round table on the beef industry held in Ottawa last Monday and Tuesday, so we had an opportunity that night to talk to officials from the federal government as well as all the major packing companies who were represented there. Again, we had another conference call on Thursday to talk about this.

Yes, it has been presented. It's been fully endorsed by the Canadian Meat Council. We continue to send data to them as we get it. We're very open to have a further discussion and work on the details. We've had a chance to be presented...and every major provincial livestock organization as well. So it's been pretty widely distributed.

Mr. Larry McCormick: Thank you.

Regarding the money that's available--and the federal government has said up to so much money--I'm really concerned here about the depth of this program and the length of the program. This is a small amount of money we're proposing. I'd like to hear your comment on that.

As well, we seem to be losing ground regarding the country of original labelling. Now, under the present challenges, have you any comments as to how this could be a help or not?

Mr. Chair, as the last question from me, I want the trade officials here to come up and answer a quick question on TRQs. My past experience has not always been good with the bureaucrats here, who have allowed meat into this country and no minister knew anything about it, and then we turned around and turned it back because they didn't seem to study the situations.

Thank you, Mr. Chair.

Mr. Brad Wildeman: I'll start and I'll let Stan finish.

As far as the amount, I think when we originally discussed this with the federal government we all agreed that this was a relatively short-term thing with the expectation that the border would open in some timely matter. I think next week will obviously be critical for that. If we pass that date and we still don't have any imminent border opening, I think we need to start talking about what we would consider phase two.

But what we're trying to do really, in redesigning this program, is to try to make that money be as effective as we can. And when I look at the cost of this program, compared to what we're saying, the entire feed program in total would equal about 14 days of deficiency payment, would accomplish the same thing.

So I think we're trying to make this money last. We know it won't last. We know what we have in doubt in terms of what we're going to do with the backgrounding industry. We haven't dealt with the cow-calf industry. I think those things need to be looked at in the future if this border doesn't open prior to September.

Stan, I'll let you talk about country of origin.

Mr. Stan Eby: Country of origin has not been a priority issue with us. We know it's there. We know it's going to affect us potentially, but we're looking at managing our issue presently. As you can see, as time drags on, the whole issue becomes much larger, because we're looking at other sectors. We're talking about a phase two program. We don't know what that may look like yet, but we're certainly ready to address that and realize that it's there.

Mr. Larry McCormick: Thank you, Stan.

Mr. Chair, I have a short question on the TRQs, if I may--with my too-loud voice, sometimes.

We hear that we've let out a certain amount of TRQs now. That's fine, but on this 11,000 tonnes of TRQs, how long do their contracts go for? Now that the feed industry is starting to move some product, how long does this go on for?

I go back to chicken. At one time, there were TRQs of chicken coming into this country. Not one minister knew about it. Some company got through to the bureaucrats and told them about their great need. They didn't check enough with the industry. I think this has to be so tight, and we have to be willing to work with our producers, who can match any product from any country, as far as I'm concerned.

Á (1130)

Mr. Andrew Moroz: Thank you, Mr. Chairman.

The 11,000 refers to those supplementary imports we have authorized since May 21. Virtually all of it is for delivery dates in June, July, and early August, because the people who needed the meat were ordering it. That is not to say that further requests will not show up. Indeed, we are starting to get some requests for September.

Overall, our tariff rate quota is 76,409 tonnes a year. Over and above that, we normally allow supplementary import permits. Last year we authorized in total about 65,000 in supplementary imports. This year we're at about 52,000 tonnes right now.

Our tariff rate quota policy has actually reflected the fact in the past that our policy was more designed to safeguard our access to the U.S. market as opposed to protect the Canadian market. The beef industry, which can speak for itself, was prepared to compete head on.

Under normal conditions, we ran a supplementary policy that was designed to be able to say to the Americans that we are not trans-shipping through Canada, nor are we diverting Canadian beef to the United States.

The Chair: Thank you very much.

Before the next witnesses come to the table, we would ask those who've been invited as guests to avail themselves of the food that's been brought in for them and for members.

Mr. Gerry Ritz: Mr. Chair, they're beef sandwiches, right?

The Chair: I don't know. I can only presume.

We must move now to the next questioner, Mr. Casson, for five minutes.

Mr. Rick Casson (Lethbridge, Canadian Alliance): Thank you, Mr. Chairman, and thank you, gentlemen, for being here.

I just want preface my question with some comments.

The County of Lethbridge, which I represent, is in my riding. They have declared an economic disaster within the county. They fully realize the extent and the ripple effect that's happening within the economy in southern Alberta, and indeed through the entire beef industry. I have letters here from trucking firms, from real estate agents, from retailers, from municipalities--everybody. This is going to affect everybody.

The program, gentlemen, that was put in place--I'm assuming that you must have agreed to it, because the government keeps saying that industry was onside--is not addressing the five issues you've pointed out. You're indicating some change--“cashflow'', “equity”, “orderly marketing”, “bankable”, “understandable”--but none of those are there as far as the producers who have been contacting me are concerned.

On the issue of 45¢-per-pound beef right now, if it gets down to 20¢ or whatever, and they start getting these deducts added on for overweight cattle.... One producer said to me, when the price of fat gets to 20¢, and the deduct is 25¢, do I owe the packer a nickel a pound to take it off my hands? These are the situations, and this is the feeling that's starting to seep into this industry.

I think all of the officials here, and everybody here, has to realize that as these cattle mature, putting them on hold is only a very temporary issue. They will get fat and they will need to go to slaughter. I want to know what you're suggesting to government that we're going to do with hundreds of thousands of fat cattle who don't have a home.

Mr. Brad Wildeman: I agree with you fully that the program is out of control. We said that, and we're saying that today, but we're trying to take what we believe is a reasonable approach.

In fact, I am a feedlot operator, just so you understand, and we already are at calf-cattle on maintenance. It's not a great thing. It's a costly thing, but it's the only thing. The fact is, we have twice as many cattle as we can slaughter. There are only two ways we can get out of this thing. One isn't very palatable, and that's to slaughter cattle and destroy them, because there isn't enough packing capacity to do it. Second, we need to put them on hold. Some of us who have feed have the capability to do that. Is it a good answer? No, but it's the most manageable answer right now.

Again, although we consulted significantly with the government on developing this, the program wasn't ours. I have a letter here that we sent to the minister prior to the announcement being made, saying if you do this, this thing is going out of control. And it is out of control. But what is the most reasonable thing we can do, in the time it takes to get this thing done as quickly as we can, and not have to ask for more budget allocation? I guess this is as close as we get today.

I think your other comments are particularly true. First, this is absolutely a disaster. It is the greatest disaster the agriculture has ever faced, and I don't think there's any question about that. I don't think we've ever been in a place where we have no market with this kind of export dependency. Second, I think we're learning that although we thought we were made up of several independent businesses, we're finding out we're a pretty interdependent industry, and one sector certainly has a lot of impact on the other.

Will this thing go to 20¢? Unless we intervene, I think we have to face that reality. And then your comments may be right.

Á (1135)

Mr. Stan Eby: I believe the last time we were before the committee we urged an immediate announcement to give some producer confidence. That took some time. Everything is taking time. What we helped design originally we thought would solve the problem, but as time goes on, this problem becomes much larger, much more difficult to control.

Going back two weeks ago to today, even, we cannot convince producers to move cattle to fill our own pipeline because of the pricing situation. That's one of our problems. We keep working on that and we obviously aren't working fast enough. It's a timing situation.

Mr. Rick Casson: I believe the way it's structured right now is that it's absolutely every producer for himself. There is no orderly market. When this clears, if you have the packers who are...and I don't understand why the price of beef hasn't gone down dramatically in this country. Somebody should look at that.

So you're going to have the packers who are there, and you're going to have the bankers who might get a few bucks, but there isn't going to be a feedlot operator left in Canada. We already have this gap in bringing in the replacements that are backed up onto the grass, and time is ticking.

The only answer to this situation is opening up that border to the United States of America. If we don't have every official who's being paid by DFAIT or Agriculture Canada down there, kicking doors down in Washington, then I don't think this country is doing its job or this government is doing its job.

We could get into the Mr. Evans...or whoever else, but if the Prime Minister and ministers responsible for this are not going face to face with their counterparts around the world right now, then I don't feel we're doing the right thing.

Mr. Stan Eby: I certainly agree with you on that, and the final report from CFIA is key to this.

The Chair: Okay.

We'll move to our next questioner--Mr. Borotsik, in the absence of Mr. Plamondon.

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

I couldn't agree more with my colleague from Lethbridge. It doesn't seem the program has sort of fit those parameters that you've identified, but I also agree that we've gone beyond that now.

You talk about phase two. In phase two you see these issues that you've put before us today--the maintenance program as well as, I assume, the floor price for the packers. Can you expand on that a little bit? Have you received any encouragement--I won't say “support”--from the bureaucrats in the government to this point?

Mr. Brad Wildeman: One of the recommendations we have as well is that one of the first things we need to do is decide--and I think there was general agreement--that if this went on for some time we'd need to go to phase two. First of all, I think we need to decide what that deadline is, because I think we're getting there pretty quickly.

So we may need to decide, what is that deadline, and when does phase two begin--

Mr. Rick Borotsik: Okay, let's not go away from there. You've heard the comments today. We've talked about what is the timeline with USDA, what is the timeline with the Japanese, and we haven't had any. In fairness, it's hard to speculate on something like that.

What do you believe that deadline should be? If this goes any longer, we have a lot of producers in our area, Brad, who aren't going to be able to pay their bankers. What's that timeline?

Á (1140)

Mr. Brad Wildeman: I think the industry is trying to be as responsible as it can, first. So I think this week is key. We've said that we would have to deliver the two reports. I understand they're both going to be here this week. We've fulfilled our commitment, to the U.S. particularly, and then we deserve an answer. And if we don't get that, or if the answer is, “It's not right away”, I think that is the deadline for phase two. We do have other sectors. We knew that when we started this, but we thought this was the one that needed to be addressed first. Without this sector, we simply don't have a market for feeder cattle, we don't have a market for calves.

Mr. Rick Borotsik: Brad, I just want to touch on one other thing, and it's an issue that we have particularly. When you sell only into the U.S. market, when it opens--and let's assume it opens within two weeks, let's be very optimistic--is there going to be discounts, in your opinion? You work in that market all the time. Do you believe there'll be discounts? And if there are, should there be some sort of a backstop, some sort of a program also put into place for that discounted price that the U.S. packers are going to be paying for our cattle?

Mr. Brad Wildeman: I think that's yet to be determined--

Mr. Rick Borotsik: Let's be a little proactive.

Mr. Brad Wildeman: --but if the border were opened very quickly, we believe we could mitigate a great deal of this in that their industry is extremely current and they are looking for beef. We've had some talks with some of their buyers. If this stretches on for more than probably two or three weeks, that hole in their currentness goes away, and then we're going to have some issues. I think a lot of that's going to depend on how they determine SRMs and what their criteria will be for getting cow meat over there, because we have a big backlog full of caul cows and slaughter bulls that normally go there. We need to understand those. Once we do that, we need to come up with a program.

Again, I go back to my initial comments that I think we need to start managing this issue as it comes. Unfortunately, we just don't have a mechanism established today to manage that on a timely basis. I think anything else is just idle speculation. We're having enough problems with the program we have. I guess we're saying, let's fix the one we have and then let's talk about the new one so we don't make the same mistake.

Mr. Rick Borotsik: Yes, but it has to be a living, breathing program. It has to be flexible enough that we can handle these things on a timely basis. And we're not talking months, we're talking days or weeks whereby the governments and the department should be able to react to this on a daily basis so that we can react to the problems facing us.

Stan.

Mr. Stan Eby: We've suggested a provincial and federal government and industry management committee to address those things.

Mr. Rick Borotsik: Okay.

As a last question, if I can--I don't know how much time I have--

The Chair: Just one short question.

Mr. Rick Borotsik: --you talked to the industry within the other provinces. Are the provincial governments you talked to, particularly in...? And nothing against Ontario; I appreciate the fact that Ontario has a very major play in this as well. Are all of the provincial governments onside on this, with the expansion of programs? Because one of the excuses we're going to get is, “Hey, listen, it's a 60-40 split. The provinces aren't onside.”

Do you believe the provinces are onside?

Mr. Brad Wildeman: I'll say it this way: I think there's a growing number of provinces onside. A lot of this didn't go out to the provinces, to the governments, until mid-last week, but I've talked to three provinces that...and I know they're onside. We need to discuss this thing further, and we're prepared to do that, but--

Mr. Rick Borotsik: Last question: interest-free loans?

The Chair: Your time has gone, sorry, Mr. Borotsik.

Mr. Brad Wildeman: Rick, this is a national program, and, yes, Ontario's onside--

The Chair: Mr. Maloney, please, five minutes.

Mr. John Maloney (Erie—Lincoln, Lib.): The compensation program is not intended to compensate all sectors within the beef value chain. Are you content with those that are being compensated? Are there others that you feel should be compensated?

Mr. Brad Wildeman: No, we're not happy with the present program, so I think that tells you we're not happy with the ones that are presently being compensated.

Do we need to have compensation for other sectors? We think the time is coming. We thought that if the border would open very quickly there would be some backlog with that, that we could survive this. The industry understands that we're in a new reality, but if this border doesn't open after our reports are handed in and we give some short opportunity for the U.S. to respond, we very quickly need to start looking at other sectors. Again, there's widespread panic starting to grow out there because they're being left out. If this thing can open very quickly, I think a lot of that can sort of be mitigated.

Mr. John Maloney: Which sectors? And why?

Mr. Brad Wildeman: We think there are two significant sectors on the cattle side that haven't been addressed, and that's those people who have background cattle out on grass, for instance, the feeder cattle they have on grass; they have until early September. There is a small portion of them who keep cattle in feedlots, who don't slaughter them, and who need some help more immediately. Then we need to deal with the cow-calf sector, coming up probably again in September as they try to figure out what value their is herd now. Is there going to be market opportunity?

Quite frankly, if we don't solve this problem with this feeding sector, there are no customers for them unless the border reopens.

Á (1145)

Mr. Stan Eby: I guess the other sector is the veal sector and other ruminants that are caught up in this. I mentioned that earlier. We're certainly aware of this and all the accessory industries, supporting industries. Marketing, market operators, transportation--they're all being negatively affected presently, and we're aware of that. How do we address that, possibly into phase two?

Mr. John Maloney: On a different tack, do you have any comments or thoughts on prohibition of meat byproducts in feed?

Mr. Stan Eby: That's being discussed.

Mr. John Maloney: What's your opinion?

Mr. Stan Eby: That, yes, they will be prohibited. There's a number of them prohibited now, and we expect that list will grow. We're willing to accept that.

Mr. Brad Wildeman: Excuse me, but are you talking about the SRMs, the specified risk materials?

Mr. John Maloney: No.

Thank you, Mr. Chair.

The Chair: Mr. Proctor, five minutes.

Mr. Dick Proctor: Thank you very much.

I wonder what reaction you're finding when you talk to your counterparts in the United States about the crisis we're in. What are they saying back to Canadian Cattlemen?

Mr. Stan Eby: They've been very responsive and very positive from day one, and even more positive after the international preliminary report was issued. They see this as a North American beef industry, and there have been initial discussions about how we harmonize even more portions of our industry--regulations and that type of thing. So, yes, the National Cattlemen's Beef Association has been very positive.

Mr. Dick Proctor: Some people...and I think maybe even Dr. Evans has suggested that we need to look at livestock feed programs, slaughterhouse rules, and testing procedures. Now, given all of the talk--that we're aware of, anyway--that this is a highly integrated market, if we were to begin to undertake some of those commitments as suggested, would that not put us at odds with the American counterparts?

Mr. Stan Eby: That discussion is being held with our American counterparts now, on how we harmonize these things so that we do not affect the overall market. Hopefully we can pull that all together in a North American context and not be out front or behind.

Mr. Brad Wildeman: I think it's important for this committee to understand that we need to have harmonization, because we're going to continue to have trade. I mean, there are millions of cattle traded and millions of pounds of beef traded, but we have a set of rules on this side of the border that exports cattle down to the U.S. and then they have a different set of rules down there. Yet we're going to need to continue to accept imported beef from there. It doesn't seem to make a lot of sense to have two sets of rules. All that will do is increase costs up here. It'll make us less competitive. We know there's likely to be more testing required, and I think the industry is prepared to do that, but certainly when it comes to health standards we need to have a unified North American approach as well.

Mr. Stan Eby: In addition to that, Dick, there's Health Canada and some of their proposals at the present time. I haven't got details, but that's got to be harmonized also.

Mr. Dick Proctor: Can you just expand on that?

Mr. Stan Eby: There are some food safety situations. As I say, I'm not familiar with all the details on things, but we're quite aware that Health Canada from the food safety area has to be part of this consultation.

Mr. Dick Proctor: But it is a bit of an anomaly. We don't necessarily need to dwell on it, but as Prusiner has said, Canada is in a situation now where it has to prove that it has the safest beef on the planet. At the same time, we're saying, yes, but we're also into an integrated market here with the United States, and we can't be offside with them. So it is an anomaly, as I see it.

Let me just ask a question. There was some concern about some of the cuts that don't sell well domestically and that fill up locker space, freezer space, and so on. Do you see any of that moving, or what's happening on that front?

Mr. Brad Wildeman: I think the packing industry that's represented by Canadian Meat Council believes at these price levels, in the 50¢ range, they can move that product, whether they move the real low-value stuff into additional rendering or whether they take some of those other low-value cuts and grind them into ground beef...so that would actually increase the value of ground beef. They believe they can manage their problems at these price levels. We have to trust them on that.

Á (1150)

Mr. Dick Proctor: Brad, there's general acknowledgement that beef prices at the supermarket have remained fairly high. Are you of the opinion that's going to start to fall now?

Mr. Brad Wildeman: Yes, and we've been told that. We've met with the retailers. Our beef information centre, which does a lot of work with that, has said it takes about three to four weeks for the beef to clear the channel.

The other thing is, at 30,000 head a week we were importing a lot of high-cost, high-value meat out of the U.S., so we're not going to see the relief in the high-value cuts. We'll continue to import them, and we'll continue to do that for some time until we get our kill fully wrapped up. But we should start to see significant price relief in some of the other cuts, particularly the grind and maybe some of the marinating steaks and some of the low-value cuts. We see that today.

Mr. Dick Proctor: The XL Foods plant in Moose Jaw has announced it's going to go to three days a week. It's reopening, I think, on Wednesday or Thursday this week. Are there other plants across the country doing something similar, or is that a one-off?

Mr. Stan Eby: I think the Moose Jaw plant has been shut down. The other plants have been operating at a percentage of the capacity, and hopefully increasing that capacity.

Mr. Dick Proctor: Thanks.

The Chair: Thank you.

Moving to Mr. Hilstrom.

Mr. Howard Hilstrom: Thank you.

Have the packers not given a commitment that they will sell at a price lower than what the Americans will on steaks and roasts inside Canada here, with all the subsidies that are going on? Why won't they say that? Did they tell you why?

Mr. Brad Wildeman: I hate to speak for the packing industry, but I think what they're really looking at is what's the value of that whole carcass. One of the things that I think's been most gratifying to the producers, quite frankly, and it's the only thing that's given us a lot of hope, is that domestic demand continues to stay solid.

We may be the first country in history to have an animal health situation where consumption went up. That clearly is an opportunity, and I think that's good. But the problem is that the total carcass value...and while we can get good value for the steaks, the T-bones, the sirloins, it's the other ones that we can get very little or nothing for.

So when you add all those components together...and they believe they need to continue that. Demand is there. I think for consumers, if they're looking for the right cuts, they're going to get some bargains, but I don't think they're going to see it in the highest-value cuts.

Mr. Howard Hilstrom: I understand all that, but it just seems incredible that with the amount of fat cattle we have, that are ready for slaughter, as that floods onto the market I can't believe our domestic packers, where they can't sell it outside the country, cannot offer a steak at a lower price than what the Americans can. Can you explain that?

Mr. Brad Wildeman: The problem is, of course, such a big component of that animal isn't steaks and roasts.

Mr. Howard Hilstrom: I understand that, but do you not understand that there's a big government subsidy going in to make this meat saleable at a lower price? That's where I guess you say the program isn't working.

Brad, I have another bone to pick with you on one of your statements there, on this whole business of the cow-calf man, that they somehow are just fine until the fall. That is...I'm going to choose my words carefully here. That is not a true statement. Do you not understand...?

Stan, maybe you should be answering this. There are lots of cow-calf men that calve cows out in the fall. They were going to sell those bloody calves there just after May 20, in May or early June. They were going to the feedlot or the background or whatever. Those guys never got a paycheque this year, and I hear Canadian Cattlemen saying, in fact, don't worry about that; all we have to do is take care of the feedlot business and, yes, someday down the road, later in the fall, we'll worry about the cow-calf men.

Do you believe that is the right message you want to send out to the cow-calf producers in this country?

Mr. Stan Eby: That was not the message we intended to get out, because this thing, we had hoped, was going to be over within a short period of time. I get a lot of pressure in my own area from backgrounders. We're a big backgrounding area in this province, and the pressure is getting great because of that very concern. As I say, all we can promise is that phase two will address that.

Mr. Howard Hilstrom: All right, let's talk about that, Stan, for a minute. How far along are the discussions on phase two? Do we have a loan replacement program in place? Do we have loan guarantees? Who's actually working on this from the government side? Who has the Canadian Cattlemen been talking to in Agriculture Minister Vanclief's office specifically setting up this program for the cow-calf person, and what are the proposals that have been advanced so far?

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Mr. Stan Eby: There have been no firm proposals advanced at this stage and very initial discussions with Agriculture Canada on it, Howard. I realize the urgency as this thing moves along, so it's not been forgotten.

Mr. Howard Hilstrom: It was May 20 when this thing crashed. Everybody knew what was going to be happening. It's June 30 today and we don't have a working, functioning program to take care of the fat cattle. When is the cow-calf man going to get something? In 2005-06? This government is not treating this as a crisis and the Canadian Cattlemen have been going along with it up to this point.

Mr. Stan Eby: Howard, I would disagree with you that everybody knew what was going to happen. We did not know what was going to happen and we're still not sure. But we're trying to address the problems as we see them in terms of priorities.

Mr. Howard Hilstrom: Okay. There are two things that we do know are going to happen--the border is not going to open up very soon, and the proposal put forward by Canada is for muscle-cuts. When you talk about muscle-cuts--and Brad, you hit it right on the head--that whole animal has to sell for our industry to be competitive. On a muscle-cut thing only, I guarantee that the cow-calf man isn't competitive. The backgrounder, well, he can pay less for the cattle, so once they get rid of current stocks they're okay. The feedlots are going to be okay, because once they get rid of current fats, they're not going to buy any cattle then that they can't sell down the road.

Do you not understand that the foundation of the cattle industry in this country is the cow-calf producer? And why isn't there planning done for that?

Mr. Brad Wildeman: Absolutely no question about that. We understand. I'll go back to my initial comment, that initially we needed to save the packing industry, we needed to get it kick-started, because without that we'd get nowhere. We needed to get immediate relief so we could get these cattle moving, because we weren't killing anything and we were creating a larger problem.

We fully understand. We were ready to talk about phase two yesterday. The problem is, we have a program that's broken that needs to be fixed, and to come up with another broken program doesn't get us there. I think we need to get this one fixed and then we need to move immediately on to the next issue.

The Chair: Mrs. Ur.

Mrs. Rose-Marie Ur: I had a constituent come forth who totally supported Lyle's initial approach as to funding. He too agrees that we should have an interest-free loan system set up until the border is reopened; not ASAP, when the border reopens. At that time the sliding payment would be used so that their loans could be paid. He said it would prevent dumping of cattle and it would pressure the free market approach and decrease the amount of taxpayer dollars that would have to be contributed. He also said with interest-free loans, the border would be opened and would discourage producers from dumping their cattle.

What is your viewpoint on that?

Mr. Brad Wildeman: We always said there was a spot for the interest-free loan program, but quite frankly, the interest-free loan program by itself would not have encouraged any sales, so we would have continued to back up cattle without a deficiency payment that encouraged people to sell. We would have just continued to log up a lot of debt. This industry can't take the debt, so a combination of the deficiency payment that encouraged producers to sell and survive and then to top that off with some interest-free loan program--the combination works. Each one of these things by themselves, we don't believe, is enough.

Mrs. Rose-Marie Ur: Right.

Another negative in Ontario, from where I represent my constituents, is that the dealers and sales barns will be left out with a sliding payment program because they aren't able to produce a killing certificate. Has that been brought forward?

Mr. Stan Eby: Yes, that's being addressed in Ontario with the Ontario government, and the dealers and the auction market association and so on.

Mrs. Rose-Marie Ur: There's also another concern about the 14 days; if a buyer buys and doesn't kill, the animal could be resold, and they could be compensated twice over. This gentlemen thought maybe a tattoo system or whatever, once that animal had been compensated for, would be some kind of identification so that there wouldn't be more than one payment made on that particular animal.

Have you looked at that?

Mr. Brad Wildeman: No animal would be eligible for any payments unless it was accompanied by a slaughter certificate or some other...so double-dipping today is not on.

Mrs. Rose-Marie Ur: Right.

Another statement was made by one of the individuals at the table about the packers. We lived through the hog downturn a few years ago, and this is almost a revisit of that situation. Although I am a politician I still do buy groceries every now and then, and obviously I eat my fair share. At that time I didn't notice any great decline in prices at the grocery store, but the packers seem to be quite happy to carry on the way they are presently with the beef industry.

I have a real problem, because they are the real winners here, not our producers, who are being shafted once more. To put those kinds of dollars into the packing business with no back-flow to our primary producer is wrong.

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Mr. Stan Eby: I certainly agree with you on that, and I would suggest that you interview some packers at this committee level and make them bring their financials.

Mrs. Rose-Marie Ur: I would love to see them here, Mr. Eby.

Mr. Brad Wildeman: A supplementary comment is that it's not just the packers. There are more people in the supply chain than just the packers; there are retailers as well, and distributors. So I think you may need or want to talk to the further beef chain, because it's a combination of those three.

Mrs. Rose-Marie Ur: But the retailers also get the price from their wholesalers, and if the price doesn't drop.... I was at that end, doing fresh marketing, so I know how that system works as well.

I think we need to address this concern, because they seem to be getting the dollars, and our primary producers are getting shafted.

Mr. Stan Eby: As I guess a point of interest, we were all together last Monday in this town with five major packers from the country, and retailers. It was somewhat unique to have them all in the same room.

So there is consultation, but I would urge that they should be at this forum also.

Mrs. Rose-Marie Ur: I think it should be in the international media that the consumption of beef has gone up. It would show other countries that we Canadians believe in our primary producers and our CFIA system. We should do a better job as to the consumption of Canadian beef.

Mr. Brad Wildeman: There is a marketing strategy being undertaken now. You will see it in major national papers this week, thanking Canadians for their great support of the industry.

The Chair: Thank very much, Mrs. Ur.

Mr. Borotsik, do you have any questions?

One question--and Mr. Proctor, one question; Mr. McCormick, one question.

Mr. Rick Borotsik: I know Mrs. Ur talked about it, and we heard from the government, once again, suggesting interest free. I would like to have your comments, on the record, when you talk about this can't be debt, this has to be equity going back in. It was one of your pillars that you talked about.

Would you please, on the record, say what it is your producers are telling you about an interest-free program, that may well be proposed by this department?

Mr. Brad Wildeman: For the record, we believe the industry cannot take on significantly more debt. For the record, we think there is a spot for some interest-free money to particular sectors that may be able to benefit by it. There's not sort of one shotgun approach that's going to deal with this; it's a combination of a number of programs that have flexibility for each producer to do that.

Mr. Howard Hilstrom: I have a point of order, Mr. Chair, on terminology.

In your question there, are you talking about a debt replacement program where farmers wouldn't lose their farm on an existing mortgage, or are you talking about taking on new debt as interest-free, or are you talking interest-free to replace loans so that the farmers don't lose their land?

Mr. Rick Borotsik: No, as I understand it from the department, they would make available interest-free...which is debt, Howard, which would then be used to either retire existing debt or to use maintenance programs on their operations. Regardless of what it's used for, it's still additional debt, as I could see, simple and plain.

By the way, in saying that, this comment was made at least two and a half or three weeks ago: Why has the government not been listening when you've been out there saying, this isn't the kind of program that's needed; this isn't interest-free, it's equity and it's actual cash that has to be injected? Why has the government still insisted, as late as today, that “interest-free” is still in their vocabulary. Why is that? Or am I putting you on the spot?

Mr. Stan Eby: On terminology, again, Howard, I think this was loan guarantees; nothing was mentioned about interest-free, but it was loan guarantees on things.

As Brad had mentioned, we need a number of programs within that tool box, and that addresses some of Howard's concerns. What addresses the feedlot concern doesn't necessarily address the cow-calf concern. So we need a number of programs in that tool box to cover the whole gamut.

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The Chair: Mr. Proctor.

Mr. Dick Proctor: Thank you.

You're indicating that this program is not working for the five main reasons that you outlined. I guess it's a program that's been in place for only a couple of weeks. What was the reaction of the Cattlemen's Association when the program was unveiled? I didn't see anything, but I do know that the Canadian Federation of Agriculture came out with fairly glowing comments about the program. Did you folks feel that this was inadequate right from the get-go?

Mr. Brad Wildeman: We have a letter that we sent to the minister prior to the announcement telling him that if changes weren't made, the result would be what we've seen. But our intention is to try to work with the people we need to work with to get this done. This issue is just too great, we think, to be playing politics with it. We have people out there who have a high degree of anxiety, and we have to keep our eye on the ball. We don't want to offend anybody; we don't want to play politics with this; we just want to get the job done.

The Chair: Mr. McCormick, for one question.

Mr. Larry McCormick: Thank you very much, Mr. Chair, and thank you, witnesses, for being here.

First of all, just a couple of comments. We have many interested guests in the room today, and it's good to see the attention being paid to this, but I personally feel I'd just like to point out a representative of what I think is a very famous cattlemen's family. It's good to see one of our neighbours here, the Honourable Dan Hays.

Thanks, Dan, for being here. I know you're always there for the industry.

Mr. Chair, I do invite all facets of this beef industry to be part of the solution. It was great to see you all around this table last week--the banks, Farm Credit, the packers, the retailers. I go back to the real disaster with the grains in the west. I don't think every facet of the industry was enough part of the solution. I don't think they tried enough.

As Rose-Marie said with regard to pork, those packers and processors showed the greatest profits ever following that disaster. So let's not kid ourselves. But we need these people. We probably should have them here, Mr. Chair.

My question is one that probably the cattlemen can answer, and one that I should know. Is this BSE recovery program available today in Ontario? What provinces are in and what provinces are out?

Perhaps you can speak to that.

Mr. Stan Eby: I understand the federal-provincial agreements are being signed. The program has been announced. It's available in Ontario. No cash has been given out to date.

Mr. Larry McCormick: I just want to know, for my own neighbours' sake--they're quite busy people--if until that APF is signed--

Mr. Stan Eby: No, I'm talking about the disaster assistance.

Mr. Larry McCormick: Okay, thank you.

So the APF does not have to be signed to get this money flowing.

Mr. Stan Eby: Exactly.

Mr. Larry McCormick: But this money is not signed yet here in Ontario.

Mr. Stan Eby: That's right.

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

Mr. Stan Eby: I guess as just a comment, Mr. Chairman, I'd like to thank the committee for not playing politics with our crisis. I really feel that all sectors are working together to try to find a solution for this new dilemma that our industry is in. And it is new to us. Everybody is working through it, I think, very diligently and very honestly.

The Chair: I think we need some clarification. Someone mentioned that Ontario has not signed on. My understanding is that Ontario has signed on to the beef agreement, because it's on their web page. Let's have clarity on that.

Mr. Lavoie.

Mr. Gilles Lavoie: Mr. Chairman, this program is not linked with the signing of APF.

The Chair: No, we understand that.

Mr. Gilles Lavoie: All provinces, as far as we know, have confirmed they will participate in the program. The application form for Alberta was put on the web 10 days ago. The Ontario one is also possible--

The Chair: It's on the web.

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Mr. Gilles Lavoie: This morning we were told it would be out before the weekend. Nova Scotia was also planning to have it today, if not the day before.

It's moving forward, and I don't think...[Inaudible—Editor]...stop the advance of money even if agreement is not technically signed.

The Chair: Yes, I have copies of the web forum, so it's there.

Before we go to the next group, I would leave this with this group as well. Hopefully the other people are listening.

I think one of the disconcerting things about this whole thing is that we've guaranteed $50 million into the packing industry for the removal of low-cut meats in the country that aren't normally consumed here. Given that they have discounted the beef the way they have since our program came out...and I think it was a deliberate attempt by them to buy cheaper beef. There was no reason for this discounting, and if there is a reason, they should be declaring that reason. I know of one packing plant in Ontario that has already said they're making more money than they've made for a long time. Another one is saying they're not making money. Obviously, there is a difference between what they were paying before and what they're paying now. The consumer is still paying the big bucks in the store.

And we're not suggesting they shouldn't, because I think that reflects on other meat products as well, but I think we ought to get on the backs of these people. None of that $50 million should be released until we find there's a justification for doing what they're doing.

I think we have to get tough with these people and start speaking, and I want to hear it from the beef industry and from those who are following, the producers later today.

Perhaps you have a comment before you leave.

Mr. Stan Eby: Mr. Chairman, I'd suggest that you have someone from Agriculture Canada explain the packer portion of this program so we're all familiar with it. I believe some of those people are in the room today.

The Chair: Before anyone leaves, we're going to hear from them and hear the comments on that, so let's do it right now. Let's have someone come to the table right now.

As chairman, I don't want to be taking over this meeting, but I think it's awfully important that we hear some answers to that issue today.

Could someone from Agriculture Canada come to the table and tell us how they can justify the discounting of beef the way they have in this country?

Mr. Gilles Lavoie: Sorry, Mr. Chairman, could you repeat that?

The Chair: Yes. There's a lot of concern out there that the packing plants, particularly as we look at one of the packing plants in the west, which is owned by Americans, buying beef at tremendously discounted prices, given what they were paying prior to the government announcement of a program and what they're paying now....

There should be some justification for that 20¢, 25¢, 30¢ discounting--why they're doing that, how they can justify that. And what are we doing in response to that in terms of our $50 million in helping them out of their situation?

Mr. Gilles Lavoie: The program has been developed in such a way as to create an incentive to restore, as much as we can, a normal functioning of the market, to have as many cattle as possible move out of feedlots into slaughterhouses. Obviously, the operators of these slaughterhouses could not kill more than what the Canadian buyers would be prepared to buy. Then there is a limit, and from discussions with meat packers and the industry, the 50,000 to 55,000 a week is their estimation of what they can move on a weekly basis.

Some of this product, as was explained by the previous witness, is priced ahead of time. They will try to conclude today some agreements to deliver in five or six weeks down the road. Then we cannot see the movement in terms of prices necessarily overnight, but as was indicated, it's showing some additional movement. The killing last week was slated to be 42,000, which is not enough, but it is surely better than the average of 30,000 the previous week.

This means that the program has responded and achieved its objective on this figure. While the prices remain low with the deficiency payment, the farmers are not receiving 50¢ a pound but 90¢ a pound or 88¢ a pound, if you go with the graph of the deficiency payment.

For these reasons, we believe the program is working. Whether or not there are people who make more profit than before, I don't know. We don't have any good data to say that.

The Chair: But the contention is, if they need the beef and they have a market for that beef, they should pay for it. If they don't need it, then they shouldn't buy it at any price. But they're willing to buy it at a discounted price.

That's where, I think, the questioning comes in: Why buy it if they don't need it and they don't have a place for it? But if they have a place for it and a market for it, then they should pay for it.

Mr. Howard Hilstrom: Along the same lines, you've just touched on what is wrong with this whole situation: The false premise from the Minister of Agriculture, that Michael Keenan gave out in the newspapers the other day, and that you just said, Mr. Lavoie, that you're attempting to restore a normal functioning of the market. The Canadian beef market is only normal when it is fully engaged in the world export and import of beef.

So trying to suggest that with all your planning--and from your minister and others who have made statements--you somehow can restore a normal function of market is a false premise.

Why was the crisis planning not based on the idea that we are in a crisis where the normal markets are not working...and in fact the word “orderly” marketing, but the “planned” marketing of beef? Why was that not the basis on which this was done, as opposed to trying to believe that in fact the packers and the feedlot people and everybody would participate in some marketing?

Why was that not the premise, Mr. Lavoie?

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Mr. Gilles Lavoie: In our discussions with the producers in the industry, including the packers, we have not come up with any good solution for an overnight orderly marketing system for the Canadian beef sector. It is believed--and I believe it has been explained this morning--that payment to help producers keep the animals on feedlots a bit longer to reduce the pressure on the immediate slaughter could help in terms of orderly marketing. But again, on the orderly marketing scheme, there is no solution for that--

Mr. Howard Hilstrom: It's not the whole industry. The orderly marketing is for the fat cattle. And that's what you were trying to fix up, the fat cattle.

The Chair: Mr. Hilstrom, we have to conclude this line of questioning, I'm sorry. We have to conclude for the next group to come on.

Thank you very much for appearing. I would ask you to stay in the room. We may have to call on you again.

This is obviously an issue that has raised the temperature a great deal in this country. It's a serious issue, and we take it very seriously.

Thank you very much, gentlemen.

Now we'd ask the new group to come to the table--Mr. Paskal, Mr. Van Raay, and Mr. Vaags.

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The Chair: I'll bring the meeting back to order.

You will find translation. We may not be into any more French. Our French guest has left....

Oh, I'm sorry, we have our own member here, Mr. Duplain. He's getting so good at English we hardly think of him as French any more.

We want to welcome to the table, as we continue our discussions and questions and comments on the beef industry in Canada, from the Butte Grain Merchants, Mr. Rick Paskal, Alberta cattle feeder, and Mr. Cor Van Raay, Alberta cattle feeder; and as an individual, Calvin Vaags, Manitoba feedlot operator.

So we bring together now some of the primary producers.

We'll ask you gentlemen to put your comments forward, beginning with Mr. Paskal.

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Mr. Rick Paskal (Alberta Cattle Feeder, Butte Grain Merchants): We appreciate the opportunity to be here, Mr. Chairman, and other MPs, and we will welcome your questions.

We have five topics, Mr. Van Raay and I, that we would like to discuss. Number one is a trade issue; two is relief for the livestock trucking industry; three, NISA; four, the support program that we have currently; and five, where is this industry headed?

I'll make a quick comment on the state of the livestock feeding industry. Over the past two to three years, we've had unheard-of equity losses in our sector. And that's part of a healthy marketplace, just the market; we pay too much for our feeder cattle.

We've had drought in western Canada for two years. We've had to import feed to stay in business. We've had an unbelievable evaluation of the Canadian dollar that has really slammed our industry. And now we have BSE.

I first want to touch on the trade issue here. For the past ten years, American and Canadian livestock industry representatives have tried to establish free trade in regard to feeder cattle movement in between the two countries. Now, feeder and fat cattle from Canada can move south to the United States year round. Fat cattle from the United States can move north from the U.S. year round, and feeder cattle can only move seasonally. Because of this inequity, we have American livestock groups--and one of them I'm sure you've heard of by now, R-CALF--that have lobbied hard to have this controversial trade issue addressed.

They have launched anti-dumping and countervail investigations towards Canadian livestock producers. They have lobbied U.S. senators and congressmen to design into the latest Farm Bill the country of origin labelling laws. They are lobbying congressmen and senators, as we sit here today, to keep this border closed in regard to BSE.

We must change this law today, and we must facilitate this process of importing feeder cattle into Canada on a year-round basis. It's been ten years we've been working on this. The CFIA has dragged their feet on this matter. The NCBA, which is the National Cattlemen's Beef Association, just released a document last Monday suggesting that this will go a long way to alleviating some of these border tension issues that we have in front of us here now.

Next, we must harmonize or standardize our TRQs. Why is Canada at double the level per capita compared with the United States? Why does Canada give additional quota up when the United States basically sells theirs?

The last two weeks, the Canadian government got tougher with importers. Importers found loopholes in the system already. Harmonization would go a long way to addressing trade concerns between NAFTA countries.

My second topic is relief for the trucking industry. We've handed out a paper, a three- or four-page document, that the trucking industry has worked hard on. Human Resources Minister Jane Stewart, Senator Fairbairn in our country, and Clint Dunford from Alberta have worked really hard on getting relief for packing plant workers. That is an important part of our infrastructure, and we must commend the government. Thank you: We need to keep those people in place.

The trucking industry, to us, is as important as the packing industry. We estimate there are 800 to 1,000 cattle trucks in Canada that haul exclusively cattle. They are going broke. There have been trucks turned into the freightliner dealership in Lethbridge.

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A trucking business out of Moose Jaw and Lloydminster, Roberge Transport, had 143 trucks prior to May 20. They are down to 66 right now. That's what they think they have. Their dispatcher and owner, Mr. Heatherington, says, “I don't think, if you ordered 50 trucks, I could give them to you.”

So the trucking industry has come up with a plan to give them minimum compensation just to stay in business, just to pay fixed costs--to pay their payments, interest, insurance, licences--and pay themselves a $1,600-per-month minimum wage just to keep the wolf away from the door.

They've developed a formula, they have the criteria, and they have an application for them already before you there. So if you people would consider that, we would really appreciate it from the livestock industry. We need these people as part of our infrastructure.

I'll go on to NISA. It has been suggested under the new agricultural policy framework that NISA is a safety net to address income deficiencies in agriculture. I'd like to comment on a few glaring problems of that program. NISA is designed for naturally occurring business losses, droughts or depressed markets. NISA is not designed for disaster situations, such as BSE. For NISA to be effective, more input is required to make it a workable program.

For instance, if you have that document with you, there's a worksheet from CanFax of the Alberta feedlot model, for 1998 to 2002--and I'm just explaining the effectiveness of the NISA program as it sits right now. Using Olympic averaging, it would suggest that feedlot operators would receive 70% of 66¢ per head. So they're going to get 46¢ per head compensation through NISA.

My family's company last year, on audited statements, lost in excess of $160 per head. So it needs to be looked at.

To be effective, the program must also eliminate payout caps. To be efficient and competitive in the cattle feeding business, this business tends itself to largeness. Now, 10,000-plus head operations are quite normal. The program must address all sizes of operations, because if it doesn't, the loser, in the end, is the cow-calf man here.

In terms of the current support program, I'd like to thank industry and I'd like to thank government for coming to the table and addressing this. It is a good program as long as the price doesn't go down. Industry and government sat together here and said, well, the price might get to 75¢ or 80¢, and this program is going to compensate us very well. And it does. Herein lies the problem: last week I sold my cattle for 45¢. My break-evens on those cattle are $1 a pound. The government support of 39¢, and with me getting 45¢ out of the market, before we start talking about any discounts--and I'll sure entertain questions on discounts--that's going to leave me a net of 84¢. I lose $208 per animal, or $200 a head. I'm done.

My debt-to-equity ratio is out of balance. I don't even have to talk to the bank about margins; they're not going to loan me the money. I'm going to have to sell, and I'm going to have to sell some land. And who am I supposed to sell this land to? All my neighbours are in the same boat as me.

We need more help from government. I respect government balancing the budget, I respect government being prudent on spending dollars. That's where I come from. But we have a disaster here. We need you to come to the table again and look at this situation.

Government must consider producers who can't move livestock, which are getting too big and too fat. It's not their fault; the plants can't kill them, they're behind.

Lastly, where is the industry headed from here? We must address our trade situation with the United States. Borders must be opened for these feeder cattle. If we're going to have free trade, we have to have free trade. The NCBA, as I stated before, has suggested this will help. This must be done as soon as possible.

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If government could get this done, and if the government could top up this support program, I believe our industry could survive. We're ready to go to work here. Pay $1 a hundredweight to every producer here. The cattle will line up; the packing plants are going to run at capacity; commerce will start.

At some point in time, this border is going to open. We've got to get the cattle ready for when this happens. As mentioned by the previous speakers, we're going to have a big hole here and these plants are going to have unemployment problems again. We've got to get this industry moving.

In Canada, we have probably the biggest concentration of efficient feedlot facilities to be found anywhere in North America. We can compete; we will work hard with packers; we must work with wholesalers and retailers to move this mountain of beef.

Canada Safeways in the west are doing just that this week. From conversations with the president of their company from Oakland, California, these guys are going to move beef. They're going to start selling it, according to the ads in western Canada, for $1 a pound.

We need help from eastern Canada. If the taxpayers of this country are going to fund this program, then we've got to give it back to the taxpayer in this circumstance, in this environment, right now, in the way of cheaper beef. It's got to help. We need your help. We'll work with you; we'll bring truckloads of beef wherever we've got to bring them, I don't care. We've got to move this beef.

Finally, I would strongly suggest, to industry and government, not to draw a line in the sand. We need to slaughter cattle; we have to have slaughter plants make reasonable profits to encourage them to run full. We have to have wholesalers and retailers work in conjunction with industry to sell meat at reasonable profits.

Be careful about pointing the finger at a particular segment of the supply chain before suggesting that we can put a floor on the price of fat cattle. The consumer who underrates this program by way of taxes must be the beneficiary of any government support programs to the beef industry.

I'll let these other people say something now, but I'll gladly comment later on the $50 million to the packers.

Thank you very much.

The Chair: Mr. Van Raay, do you have some comments?

Mr. Cor Van Raay (Alberta Cattle Feeder, Butte Grain Merchants): I call this “plan B”, as “plan A” was to ship my Canadian fat cattle to the United States, as we had planned.

What we have here, right now, since the closure, since the total interruption of the normal flow of cattle, is an oversupply of 42,000 head per week. Period.

Now, what are we going to do with these cattle? What are we going to do with them?

We can't eat them. We can't sell them. Possibly we can give them away, some to food banks. What are we going to do with them? If we even give them away to foreign poor countries, they probably would perceive it as unsafe beef. So what are we going to do with 42,000 head of excess slaughter cattle in Canada every week?

They're piling up right now. We're into the fifth or sixth week of this. We have about 250,000 head of cattle backed up there right now.

I have some suggestions for this committee, and hopefully the government. Before I give them to you, let me say that this is a really simple thing of numbers. This is not a social issue. There's no left or right in this. We have a common problem here. We have 42,000 head of excess slaughter cattle that have to be taken care of.

I just want to clarify something about the slaughter cattle. These cattle were put on feed about three or four months ago for only one purpose. They were put on a high-grain diet, to be fat in anywhere from 150 to 200 days. After that, they have to go to slaughter.

It's not that these cattle are somewhere on a nice green pasture running in northern Alberta or someplace, and can stay there for awhile. No, those animals, after 150 days or 200 days, are what I call “ripe”. They're ripe. Nobody wants them any more, just like a box of apples. If you have a box of ripe apples, you eat half of them, and the other half, if you don't eat them, rots.

These things don't rot, but their value is zero. They get too big, they get too ugly, they get too fat, and nobody wants them any more.

I just wanted to explain that. That is the kind of cattle we're having trouble with. Right now, the cow-calf operators are not in as big trouble, I'd say, or the backgrounder, because they're still sitting there waiting for the border to come back, and hopefully they can sell their cattle to them.

But these fat cattle, 42,000 of them, are just like ripe apples in a box. They have to go someplace really quickly. That's what they were put in the feedlot for, for that purpose.

What are we going to do with them? I suggest that the government get together with the packing industry--real simple--and kill all of these cattle. You'll say, well, we can't sell the meat of all of these cattle. That's true. We can only assume so much. But it's real simple: Sell the saleable cuts of beef. Period. The rest I call “compost”. Let's compost them. There is no other way to go with them.

The best thing, probably, would be if you just killed enough cattle to satisfy the Canadian demand. These cattle could be what they call “depopulated,” but that probably wouldn't be a very popular thing to do.

So I say, put these cattle through the normal processes of a slaughter plant, and take the saleable meats out--and it could vary as time went on--sell it, and bury the rest. Compost it. That will work excellently. Two months from now, you won't know the difference. That's the only way to go.

These cattle get too big, they get too fat, and nobody wants them any more. They don't even want them in the States, because most of the plants they go to are 925-weight carcasses; after that they discount them so much you might as well not send them down there.

That way, you get a full kill going here in these packing plants, and that, I think, should be the aim of the government. Put the truckers back to work and put the people who work in the packing plants back to work, and get what I call a “normal” flow of cattle going. Clean them up, be out of the way, and we get the normal flow going.

Â (1235)

There was mention here of orderly marketing. Let me tell you, there's no such a thing as orderly marketing. When you have twice as many cattle as the market can absorb, there's no such thing as orderly marketing. We sold cattle at the beginning of this for $1.05, and now we're at 45¢, and I predict it'll go to 20¢ or less.

I thank the government for putting on the program the way it is. It needs to be reviewed, and I think we need probably a little bigger payouts than we have, but if it wasn't for the government program, I have to say I would be totally finished. If the border stayed closed and no government program, I can't stand, with the number of cattle we have around, to take a loss of $700 to $800 a head; it just totally would finish me.

Right now we have no cattle markets, and there are no auction markets. If we went to a full kill, we could possibly get this feeder market going, and consequently we'd have fat cattle for sale four months from now. The way they're doing it now, if the big cattle are not accepted and they have to go someplace, we won't have any fat cattle at a point. We haven't placed any cattle in a feedlot for the last six weeks, so there possibly could be a point--and I think it was alluded to here--where there was no cattle to be killed. We're not placing any cattle because the backgrounder is not selling them and we don't know where to buy them.

We need margins. I alluded to that; we need margins for the bank. My margins are gone. Basically, for every dollar I have there the bank will give me $2, and if I haven't got the $1 they won't give me the $2. Consequently, $3 is taken out of the cattle business. We operate in millions of dollars, and we won't have any money to buy these cattle back into the feedlot.

The scenario here could be that two months from now, when they open the border, what happened to our margins in the feedlots? Totally disappeared. We won't be able to borrow any money and consequently buy any cattle.

But what happened to the U.S. feedlot margins in the meantime? Their feedlot margins are considerable. So who do you think will have the power to buy the feeder cattle in western Canada, or in eastern Canada for that matter? The U.S. feedlots.

I'm not blaming the U.S. feedlots, but that's what the situation is. So what happens when all the feeder cattle go to the U.S.? And it'll happen. There's no volume market left, because for every steer I put in my feedlot, the steer eats a tonne and a half of barley, which represents an acre or more of barley. So there won't be any barley trucks rolling in my yard, I'll guarantee you that, and right now there are lots of them rolling in. So the barley market is going to....

My big thing here today is this: Keep us a little bit in the money so that we're around. We're not going to blow it. We're not going to buy real estate in the United States or anything like that. We're in the feeder market. We feed cattle. We have the infrastructure. We have people there who have been working for us for the last 10 to 15 years. And we have trucks, we have feedlots, we have machinery. I have a family that's totally involved.

So keep us in the money. Contrary to what Howard says about the cow-calf family, if we get our money back in our feedlots, we're there. We are competitive. We want to do this. We'll get the money to the cow-calf operators. But if we haven't any margins left, that'll be the end of them.

I think that's all, Mr. Chairman.

Â (1240)

The Chair: All right.

Do you have anything, Mr. Vaags, to add to what's been said?

Mr. Calvin Vaags (Manitoba Feed Lot Operator, As Individual): Probably a few points.

The Chair: Can you keep it brief, so we can go to questions?

Mr. Calvin Vaags: I'll try to be as brief as I can.

I'd like to thank you, first of all, for allowing me to come to this committee meeting. I think it's good that we see producers from Alberta. They're much larger producers. Those in Manitoba, like me, are much smaller, but I think it's important that this committee sees that perspective as well.

I'd like to just briefly go over my current status and what I am. I run a grain farm of about 3,000 acres as well as a feedlot of only, say, 1,000 to 1,400 heads, or somewhere in there. My current status right now is that I have 800 market-ready cattle. Some of those cattle were supposed to go out actually on May 26, so I've been in a holding pattern on those cattle since that time. I've slowed them down as much as I can, but I'm getting to the point now where I'm going to start to get out-of-condition cattle, fats and heavies, and I'm going to experience real discounts because of that.

The other big problem I have is not just the damage that I'm going to inflict on myself by selling these cattle at these lower prices; I'm running out of cash to feed them and to finance the rest of my operation.

I'm going really fast here, trying to be brief.

I was supposed to receive a good chunk of equity out of those fat cattle in early spring to pay for my inputs going into the other side of the farm. You have to understand how everything is totally integrated and it all just comes falling apart.

So right now I have very few options to choose from, even with this BSE recovery program that's before us. This is probably particular to Manitoba, but it really doesn't help us, because in Manitoba we have very limited access to market these cattle. Over the last 20 years, 90% of my cattle have gone into Dakota City, Nebraska. There is a small domestic packing industry here, but they kill such a small amount that if I tried to get my cattle in there, I'd be looking at over six to ten weeks down the road somewhere.

So it's really not an option for me as well as for other Manitoba producers. We just can't kill the cattle that are in Manitoba without going either to the east or to the west. Of course, in those areas there's an oversupply of cattle there, so you're going to be put way back in the queue.

So I can't access any cash right now without selling my cattle, and I virtually cannot sell my cattle, so I can't access cash. I'm out of options. It's really tough. We're at the breaking point here.

I'd just like to point out—again, I'm trying to be brief—a few of the problems with the program. In terms of the sliding scale in the program, I had some conversations with people about the initial program. They were saying, okay, they'll pay 90% of the market differential, what you actually get compared to the reference price. I thought to myself, well, that's not too bad; I can take a bit of a hit there. But with this sliding scale now....

For example, say I did get cattle into Ontario at 45¢ last week. By the time I take my freight costs off and my shrink, I'm going to net, at my gate, about 37¢. If you take the program the way it says right now, with the sale of the cattle and with the program, I'm only going to net probably 77¢ or 78¢. The loss I'll take on those cattle at that level will break me. There is no way I can sustain a loss of $300 to $400 a head.

Then to top it all off, if you really read the program, the program ends the day the border opens. So because of a waiting list to get into a plant in Ontario.... Say I have to sell my cattle today on the phone; a sale is a sale, but it's for four or three weeks out. In the meantime, the border opens, the program is gone, and I'm committed to a sale of cattle. I could end up being out $900 to $1,000 a head.

Do you see what I'm getting at with the points that are in the program like that?

The other thing is the discounts on the cattle. I'm not quite clear on this, but my first understanding was that I would have to stand any discounts, that the program wouldn't compensate for discounts. If that's the case, then I'm really in trouble, because I'm now in a position where I just can't move the cattle quickly enough. I can't find anybody that'll take them. I have no option to sell them. The cattle are getting bigger. And I'm forced into a discount position. There again, it's a real problem with the program, if that's the case.

The other thing, and it doesn't affect me as much, is the issue of cows and bulls. If the border opens, it's more than likely going to open to younger cattle first. So these guys that have cows and bulls....

Â (1245)

We have a member in our feeder association at home who's over 60 years old. This man has been feeding 200 bulls through the winter. And when I'm talking bulls, I'm not talking young virgin bulls; these are big 2,500- to 3,000-pound bulls. It's common practice for him. He normally sells them in early spring, when the weather is still fairly cool. He's facing a position right now where he has these bulls that are starting to tear apart his yard. The guy is over 60 years old. He's got no help. He's got no money. He's got no options. There's not a plant in Canada that will take those cattle right now. He can't send them anywhere. What do I tell this guy?

I mean, there are some really hard questions here that are coming up really fast and that we need some answers to.

Rick made a point about the existing government programs that are in place. If there are some people who are thinking that NISA and CFIP are going to see this industry through, there's absolutely no way.

On my farm, we had some really bad years, 2000 and 2001, and we qualified. According to my accountant--and we've been over this many times--we qualified for some substantial money from those programs. We are still waiting for a resolution on our application for the 2000 year claim, and it's now June of 2003. I haven't seen a dime out of that program yet. And if I would see some money out of that program, this cattle crisis wouldn't be as hard to bear, although it could finish me anyway.

That's just to give you an idea; if you think those existing programs are going to pull us through, there's no way.

I'll make another quick point on this border issue. If this border happens to stay closed for a long time, this problem is going to get way bigger than I think a lot of people realize. We have way more beef in the country than we can consume, so if the thinking is, okay, we have to get rid of all this beef somehow and eat our way through, it's not going to happen. And even if it does, look at the effect it's going to have on other industries. If we start selling hamburger at 25¢ a pound, is anybody going to buy pork chops? Poultry, the grain industry, and the entire economy in Canada will really feel this thing.

This has the potential to really be big. It's not just for me, not just for Manitoba, and not just for western Canada. This has the potential to really hurt the entire country if we don't handle it right.

Again, I'm going to be brief, but I have just a couple of possible points that maybe would help us through this thing. I know we've heard the government people talk, and we've talked, all about cashflow, interest-free loans, credit guarantees, whatever you want to call them. I think that would be useful for me as a producer. And again, it's not just the credit guarantee I need; we need a comprehensive approach to this issue. But if you give me cash right now and guarantee that I can do my job at my end to manage those cattle as best I can, I'm glad to do that. But I also want that coupled with a commitment that when I do get rid of those cattle, I'm not going to suffer too badly a financial loss.

Let's face it, this is not my fault. I've done my job. I did everything right this year. I bought the cattle right. I had excellent production. I even hit the right window in the market. If the border would have been open, those cattle would have made me good money this year. And on top of that, I got a great crop this year.

So everything that I'm supposed to do, I did well, but my country didn't guarantee me access to my market. Now it's time for my country to come to me and say, okay, we're going to make sure you get through this thing.

I'm talking too long here.

Â (1250)

The Chair: Perhaps you could wrap it up, yes.

Mr. Calvin Vaags: One more point, very quickly.

Our border is closed right now, and we beef farmers are prepared to compete anywhere around the world if our border is open. But right now it's closed, so it has to be logical that if we cannot ship our product out of country, let's stop everything that's coming into this country. Just stop it.

There was a point made that 11,000 tonnes of new import permits are coming in, I think. I did some quick calculations on that. I'm not sure I'm completely correct, but I think that equates to about 50,000 head of cattle. Again, maybe somebody else had better do that math, but it's a substantial amount.

The other fellow said we've killed only 132,000 head since May 20. Well, come on, let's get these plants killing our own cattle and stop this product coming in.

With that, I'll stop and take questions.

The Chair: Mr. Casson, for five minutes.

Mr. Rick Casson: Thank you, Mr. Chairman, and thank you, gentlemen, for the producer side of the issue.

Mr. Paskal, you said you wanted to comment on the $50 million that went to the packers. I'd like you to do that.

I also have a question that hasn't really come up yet. Can the U.S. separate from their own, for market, the 600,000 head of cattle that went out of Canada into U.S. feedlots last year?

Mr. Rick Paskal: I'll comment on the $50 million to packers, and maybe Cor would want to comment on the other one, Mr. Casson.

From what we've been led to believe, there's been a $50 million aid program to the packing industry; $20 million for assistance in rendering some meats. Last week, for instance, exporters of beef from packing plants had containers sitting on the dock in Japan that had to be booked to come back home by boat. That meat is going to go in the garbage. The packing plants, when they started going....

You have to understand, these packing plants were killing cattle and continued to kill cattle the way they traditionally do for probably a period of two to three weeks. They weren't grinding things, they were just keeping the chucks. They got everything full. So they loaded reefers, or refrigerated trucks, with product and then cranked the temperature down in these reefers. Reefers are not meant to freeze. So they'd freeze the outside, but the inside of their product--now it's 30 or 40 days--is mush. So they're throwing that stuff away.

The packers do have a problem there, so I think the government should continue giving them their $20 million to get rid of the variety meats--tongue, heart, kidney, liver. Those markets have evaporated. They're not there any more. Let's render those things. So they need some assistance there.

The packing industry does not need assistance to buy trim, to buy hamburger. There's a marketplace out there for that. They need some assistance, but be careful on what you cut off from them, because those guys have some serious issues of their own.

Â (1255)

Mr. Rick Casson: And can the U.S. keep Canadian and U.S. cattle separate?

Mr. Calvin Vaags: I'd like to comment on that.

The U.S. right now has no tracking system in place, and they cannot keep...unless there's a specific paper trail. But it would be very difficult for the U.S. to keep Canadian cattle segregated.

Mr. Rick Casson: Were all our cattle that went down there last year ear-tagged, though? Were they part of that program? I don't know if they take those ear tags out when they get there.

Mr. Calvin Vaags: They're all tagged, but that system isn't in place down there.

Mr. Rick Paskal: Mr. Casson, the Americans extended this date to September 1 for the Japanese for one reason and one reason only, and that was to make sure that all the Canadian cattle in the United States, the Canadian feeder cattle that went down there, are dead. As of September 1, they don't have to worry about Canadian cattle.

Mr. Rick Casson: Another thing, too, that we talked about in terms of getting the industry going is this gap that's started to form between the fat cattle and the cattle coming into the feedlots, and the ability for our producers....

You've all stated that you want to stay in this business and that you're ready to do business, you're ready to get back to normal. I think that's encouraging after what you've been through in the last three years; it's just been incredible.

At any rate, the Americans have had a couple of good turns. They have some money in their pockets. Our guys don't. What needs to be done to keep the banks onside here? If you're starting to lose your equity, if you're starting to lose your ability to borrow, and you're starting to lose that confidence in the banking industry, what part of this program...? Is it strictly to bring the price up to a level that keeps your equity, or is there something else that needs to be done so that the banks are there when you go to buy cattle this fall?

Mr. Cor Van Raay: Myself, I think it's strictly a matter of margins, Rick. If they don't see the margins, if you haven't got any money left in your business, they won't give you any more money.

Mr. Rick Casson: So the whole thing is that the program has to be propped up to some degree--

Mr. Cor Van Raay: Yes, the program has to be propped up so that we have some money and we can borrow money back.

The Chair: Mr. Borotsik.

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

Calvin, in the last part of your comments you suggested that allowing additional TRQs and additional beef into the country should be considered. I asked that question of the feedlot operators that were here previously, on whether we should. And we could probably justify it. We have cattle, obviously, that have been integrated, and you could justify closing the American market into Canada. Every one of the feedlot operators I asked that question to said, you don't open borders by closing borders.

Would you agree with that statement?

Mr. Calvin Vaags: I would agree that under normal business circumstances you have an open border. I've been shipping cattle into the States for the past 20 years. But right now I think you have a crisis in this country, and steps are warranted. I believe that.

Mr. Rick Borotsik: You had also indicated, and it's fact, that in Manitoba particularly we're much more dependent on the American market than other areas are because we don't have the kill capacity. In saying that, if in fact we did close the borders to American beef coming in and at some point in time that border didn't reopen, we have 60% capacity that we can't accommodate within our domestic system. What happens then to that 60% capacity months down the road?

Mr. Calvin Vaags: Do you mean...?

Mr. Rick Borotsik: We produce 60% more beef than we can consume domestically. That's a given. If we close the border right now to the Americans bringing beef cattle into--

Mr. Calvin Vaags: So you're talking consumption, but not necessarily killing capacity.

Mr. Rick Borotsik: I'm talking consumption. In Manitoba particularly, you have no killing plant capacity?

Mr. Calvin Vaags: That was another point I actually wanted to make. I think a lot of this thing is that we have to get this excess beef out of here. There's a bunch of countries in the world that this product is not closed to. There are a couple of options here. As Cor said, either we burn it and dispose of it or we find a way to use it as food. If we're going to use it as food, we probably can't eat it all, and it has to go out of the country somewhere.

So if the border doesn't open, it's going to come down to those simple options: give it away, sell it to whoever will buy it, or burn it.

Mr. Rick Borotsik: That's pretty succinct. I thank you for the candid comments.

Mr. Paskal, I've heard from the truckers substantially over the past numbers of weeks, but it's the first time officially there's been a trucking proposal put before us. So I'd ask you two questions.

One, why are you delivering this program on behalf of the truckers? Do you have some sort of connection with the trucking industry? Second, as you're aware, there's a provincial-federal component here, 60-40. Has there been any consideration or discussion with the provinces as to whether they're even supportive of a trucking program? It's the first time we've seen it.

· (1300)

Mr. Rick Paskal: Yes, we have a trucking interest ourselves. Two, we wanted to take advantage of this venue, because they are an integral part of the livestock industry. It's as important, as we said, as the federal government giving relief to packing plant workers.

I can't answer any more questions on that other than there are people working on the deal.

Mr. Rick Borotsik: You'd also said there's a major trucking outfit in Saskatchewan that has lost a lot of their owner-operators. Obviously they've gone someplace else.

Just for my own information, are a lot of the truckers now hauling other freight as opposed to cattle? Are they getting into other types of business?

Mr. Rick Paskal: There are only so many places in the marketplace for them to go and take over other jobs, but we have to bear in mind....

I feel very comfortable that this border is going to open at some point in time, although the date is something we can kick around in this room from here to eternity. That said, if we get a program from the government where we can start commerce, where we can start buying feeder cattle and putting things back to work, I need those trucks. Our product is not to be consumed in Canada; we need those trucks to move these cattle out the country.

So that really worries us, that those trucks will not be around one or two months down the road. That's our concern here.

Mr. Rick Borotsik: To Mr. Vaags, have you any access to any killing capacity in Canada now? Can you market any of your cattle within the domestic market? You said 10%; is that in fact happening?

Mr. Calvin Vaags: I have access to killing plants, but probably not in a timely fashion. It changes every week, but last week when I called, I was told the earliest I could get any cattle killed anywhere in Canada would have been about a month out. Today it could be different.

Mr. Rick Borotsik: The last question--

The Chair: No, that was your last question.

Mr. Rick Borotsik: Oh, okay.

The Chair: My memory is short.

Mr. Duplain.

[Translation]

Mr. Claude Duplain (Portneuf, Lib.): I'll ask a single question because Mr. Borotsik has just asked my other two.

My question is for Mr. Calvin Vaags. You said before that you made a request under NISA for the year 2000 and you haven't had an answer yet. Can you explain that? Maybe I misunderstood.

[English]

Mr. Calvin Vaags: No, you understood correctly. It's not that I didn't get a response. I did get a response, but apparently my file is considered very complicated, and it's been dragging on and dragging on. We've been working on it that long.

[Translation]

Mr. Claude Duplain: Are many farmers in the same situation?

[English]

Mr. Calvin Vaags: I know of other farmers who are in that position. I can't speculate on numbers, but I know there are definitely other farmers who have had the same thing happen.

[Translation]

Mr. Claude Duplain: Your request was for the year 2000.

[English]

Mr. Calvin Vaags: Yes, I have a claim in for 2000 and also for 2001.

[Translation]

Mr. Claude Duplain: Thank you.

[English]

The Chair: Would you be so kind, at the end of this meeting, to speak to Mr. Duplain, who's the parliamentary secretary? I think we need to look at that. If it's a unique case, that 2000 claim should be addressed. Can you bring us up to speed on what's going on there? Would you do that, please?

Mr. Calvin Vaags: Certainly.

The Chair: Okay.

Mr. Hilstrom.

Mr. Howard Hilstrom: One of the problems--

The Chair: Oh, I'm sorry. Mr. Proctor is next. I apologize.

Mr. Dick Proctor: Your memory is short, Mr. Chair.

The Chair: It is indeed.

Mr. Dick Proctor: Mr. Paskal, I want to go back to your comments about NISA and the glaring problems, because I saw a lot of heads nodding in agreement here when you said the NISA program was never designed for the type of thing we're into right now.

What should we have done as a country to deal with this, in your opinion?

Mr. Rick Paskal: In hindsight, it's very difficult for us to point the fingers at anybody in government. We didn't expect BSE, or the economics of BSE under this scenario, what's happened here.

Our cattle industry over the last couple of years has started to plan for foot-and-mouth disease, if there were ever an outbreak in our country. Some work has been done there. I think that's something that has to be part of a plan that we must bring to the table.

As an industry, we know this is going to happen again. It's not if it's going to happen, it's when it's going to happen. So I suggest that we work with government, that industry work with government, and that we get a plan devised on how to address this next time.

I think the banks, at some point in time, are going to address this through the margins that we are going to be required to have before we can fill up these feedlots, and that in turn affects our whole economy. It affects the price of cattle, the price of grain--everything.

So it's a huge, complex issue, and we as an industry want to work with you. We need to work with you right now on this. But we have to get through this. We need this border open, first of all.

· (1305)

Mr. Dick Proctor: Dr. Kihm's point was that there probably are more cases of BSE out there. Are you basically saying, yes, there probably are?

Mr. Rick Paskal: Well, it's hard for me to comment on science. We found the needle in the haystack here, so I feel very comfortable saying that our food supply is very safe in this country.

Mr. Dick Proctor: Yes, and I think it's important to point out that this animal never did get into the food chain.

Mr. Rick Paskal: Exactly.

Mr. Dick Proctor: We can't lose sight of that.

Let me address a question to Mr. Van Raay.

Your solution was to take these 250,000 cattle that are backed up and slaughter them now, sell the cuts we can, and compost the rest. Have you figured out what that would cost?

Mr. Cor Van Raay: Basically what would happen is that the cost of the composting to the packers, or the cost of getting rid of that excess meat, would be reflected in the price. Consequently, they would pay us less. I think it's reflected in their prices already, right now.

Consequently, on the $50 million or whatever millions you gave to the packers, if you had given it to the feedlot operators, they could have taken it off the price of the animals, and that way they could have recovered their costs of doing that.

Mr. Dick Proctor: Okay.

Thanks.

The Chair: Mr. Hilstrom.

Mr. Howard Hilstrom: The media doesn't necessarily understand, from my experience, how this cattle industry actually works. Now, when this program gets rid of all your fat cattle, your feeders....

Cor, I assume you're not buying feeders any more and putting them into the feedlot.

Mr. Cor Van Raay: Actually, I've been selling cattle all along, although not as many as I would like, and I got to the point last week where I thought I should buy some, but there were none to be bought.

Mr. Howard Hilstrom: So there are none to be bought.

Mr. Cor Van Raay: It's because the backgrounder or cow-calf or feeder operator was not prepared to take the lower price.

Mr. Howard Hilstrom: You were thinking that you would be able to sell those animals down the road someplace, were you, so you're willing to buy my feeder calves?

Mr. Cor Van Raay: I'll risk that. I'll take my chances on some of those animals down the road.

Mr. Howard Hilstrom: Yes, at 30¢ or 40¢ a pound or whatever, you probably would. But I think the real working of the market is that if the feedlot doesn't have any reasonable expectation of selling those, you are not going to start to draw in cattle from the cow-calf man unless you expect those to be able to be sold. And a government program isn't going to run for two years.

Mr. Cor Van Raay: No, I guess it's real simple. If you just figure you'll break even, and if you break even with 80¢ or with 90¢, if that's where you're comfortable, that's where you would buy them. And that's where I would buy them.

Mr. Howard Hilstrom: Okay. So you have 150,000 head, as a guess here, in your feedlot right now. I don't know if you want to say your numbers or not, but I'll guess you have 100,000 head in the feedlot. Once those are all cleared out, do you intend to refill those this fall?

Mr. Cor Van Raay: The numbers in the feedlot?

Mr. Howard Hilstrom: Yes, refill your feedlots like you normally would.

Mr. Cor Van Raay: Yes.

Mr. Howard Hilstrom: You do?

Mr. Cor Van Raay: Provided the bank lends me the money, yes.

· (1310)

Mr. Howard Hilstrom: What about the rest of the feedlots? Are they going to do the same thing? Because right now, I can't take my feeder calves into the auction markets, where they usually go.

I'm giving you an offer right today. I have 300 calves on my ranch. If you'll contract those from me at, say, a buck a pound, I'll give you all 300 of them. Will you do that?

An hon. member: Not in the House.

Mr. Howard Hilstrom: Well, no, we want the media and everybody else to understand this.

You're giving the impression right now, Cor, that in fact this government program...that it's going to work out, standing behind the government people who say this government money is going to get the market functioning normally again, and in fact everything is going to be great.

Do you really want us to believe things are going to be great if this government program keeps buying your fat cattle?

Mr. Cor Van Raay: That's what I want you to believe, yes. And guess what options I have, Howard. I have 60 people working there. I have land that's all seeded to silage. What am I going to do with that? Of course, I could sell the barley, but who am I going to sell the barley to if there are no feedlots left?

You have to take my word for it--and I'm sure Rick will say the same--that we're ready to fill these feedlots up again.

Mr. Howard Hilstrom: How long...? Okay, answer this question--

Mr. Cor Van Raay: But if you don't want to believe me, that's fine, too.

Mr. Howard Hilstrom: No, that's fine. You're an optimist. You're a typical feedlot man. I've seen this before; you guys will spend money you don't even have. We know that.

I want your opinion on this. How long do you think the taxpayer of this country is willing to keep buying fat cattle from you and putting them into a compost? Answer that question for me.

Mr. Cor Van Raay: I suppose that's just like asking me what should have happened on day one of the border closure. I don't know. But things are evolving, and sometime down the road, we all know this border is going to open.

Mr. Howard Hilstrom: We do?

Mr. Cor Van Raay: Oh, yes.

Mr. Howard Hilstrom: Where do you get that information from?

Mr. Cor Van Raay: Well, I assume the border is going to open.

Mr. Howard Hilstrom: Okay, an assumption.

Mr. Cor Van Raay: If you're saying the border is going to stay closed, that's fine, but it's a two-way street for the Americans, too, right?

Mr. Larry McCormick: [Inaudible—Editor]

Mr. Howard Hilstrom: Larry, just a minute.

I'm not trying to be difficult with you, Cor--

Mr. Cor Van Raay: You can be difficult all you want.

Mr. Howard Hilstrom: --I'm just telling you straight up, the impression the Canadian public has is that everything is fine. Now that there's a government program in place, the normal markets are going to start to work and everything's going to be fine.

And I know that is not true. I just really question your presentation here that is trying to give that same impression from the feedlot industry.

I don't have any more questions, Mr. Chairman.

The Chair: Mr. Hilstrom, your time has finished.

I don't whether you want to respond to that. I think you have responded.

Let's move to Mr. McCormick for a short question, and then I'm going to take a few questions over here.

Mr. Maloney may want in as well.

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

I just want to mention that the Minister of Agriculture is a neighbour of mine, in one of the nine ridings that surround mine. I know that Lyle Vanclief has talked repeatedly and continually with the United States, and he's met with Ann Veneman, the minister down there. I know he's talked with the top officials in Japan. He met with Koreans last week, and some of the rest of us did too. I just want to give him credit for that.

But do you know what? To my colleagues on the other side of this floor, I support the government in giving the interest-free loans to the grain producers of all provinces. I want to ask the government, and I will encourage our government--that's us--to give interest-free loans to the beef industry, to the Canadian cattlemen. I believe it will help some of the people I talked to on the weekend. Some of you have said that.

It doesn't cost us a lot of money. It does not cost the taxpayers much money to give out these interest-free loans. Those are the types of things we have to do.

As well, Mr. Chair, I think we need to encourage Agriculture Canada and DFAIT to work with other countries that have not listed our Canadian beef. There are many countries that would like to buy beef from us around this world, and I think we should also work with those countries as well as the countries with the borders we're trying to open up.

I would look for any comment on how much these interest-free loans would help, because we do it with the grain producers.

Thank you, Mr. Chair.

The Chair: Mrs. Ur.

Mrs. Rose-Marie Ur: I don't know whether you want to hear this information, but I know Calvin alluded to the fact that he had an operation of about 1,000 to 1,400 head of cattle and a grains operation. I'll just pose the question, and if you wish to answer it, do so, but if you don't, that's fine too.

With the size of your operation, how would this program assist you in dollars if you applied for it? So it's the size of your operation and the dollar value of the program in your present operation, if you know.

· (1315)

Mr. Cor Van Raay: So how much money the three of us...?

Mrs. Rose-Marie Ur: How many cattle do you have in your feedlot?

Mr. Cor Van Raay: We have a capacity for over 100,000 head. We're usually about 90% full.

Mr. Rick Paskal: And we're at about 40,000.

Mrs. Rose-Marie Ur: Do you think this program would be sufficient to keep you afloat, then?

Mr. Rick Paskal: No. As I said in my opening comments, I'm out of business. With this program, the way it is right now, I am out of business. I do not have margin money, and I am going to have to come up with a way to get some money. And I'm going to have to sell something.

Mrs. Rose-Marie Ur: I think it was you, Mr. Paskal, who stated that the U.S. requested extension of the deadline for Japan until the end of August or September, I believe.

Mr. Rick Paskal: For the first of September, yes.

Mrs. Rose-Marie Ur: It's interesting you made that statement, because I have a press release here from the U.S. press on lifting the ban on Canadian imports. It came from one of my constituents. It says:

The USDA has requested an extension of Japan's July 1 date for putting procedures in place to ensure that Canadian cattle are not reaching Japan via the U.S.

It goes on to say:

Of course from a purely economical standpoint the elimination of trade with Canada has helped in two ways. The first is the obvious reduction of supplies in the short term. The second is an increase in export demand as the U.S. begins to fill the orders that Canada previously filled....

It then says:

The trick is balancing the science, the marketplace...and economics to determine what that point is.

So science seems to be a fraction, and here we always understood that everything had to be science-based. Then you throw in these extras, and we know where we're going now.

Mr. Rick Paskal: I think those comments are really incredible, but the fact of the matter is, the Canadian beef industry needs the Americans a lot more than the Americans need us.

As I stated in my first comment about this issue of feeder cattle, that they are unable to bring their feeder cattle into Canada, I would, if I may, suggest a scenario to the dairy industry. Let's say the dairy people in British Columbia, Alberta, Ontario, or Quebec had to sit and watch on a daily basis as spring heifers and heifers came in from the United States into Canada, and they as Canadian dairy operators could not send their dairy cattle down there. It would create a huge amount of animosity.

That's the same scenario we have down there with this border. These guys have got this lobby going big time.

We have to get over the politics a little bit. I'm just suggesting this one issue we have to address in freeing up this border, to let these cattle trade. I realize the CFIA will tell you that there are some health concerns there, but these health concerns are a drop in the bucket compared to the situation we're in right now.

So please help us on this issue, if you would.

The Chair: I'm going to cut if off there and go to Mr. Proctor.

Mr. Dick Proctor: Let me ask just one question.

A lot of people said at the outset, well, maybe Canada wouldn't have done the same thing. I think Canada would have done exactly the same thing if the shoe had been on the other foot on May 20.

However, once the science was in, once we had done the testing, I think we would have reopened the border--the point that Rose-Marie raised a few minutes ago.

To all of you, do you share that view? What is your opinion on that?

Mr. Rick Paskal: Well, there's been this talk of harmonization. That is something we have to do within 60 days here. We have to get our cattle industry and government working with our free trade partners under NAFTA that addresses this. Let us know the rules of the game here.

As I say, it's not if it's going to happen, it's when it's going to happen again, so let's get down some rules, some good rules. If we meet the criteria that the CFIA has worked really hard on, so that we know tomorrow, okay, we've done this, enough of this other crap, let's open the border, then....

Mr. Dick Proctor: Any comments, Calvin?

Mr. Calvin Vaags: You asked if Canada would have opened the border. I think we would have, and I think the Americans also would like to. I think the big groups down in the States, the national cattle producers and some of the feedlots further south, Tyson Foods, want to have the border opened as well.

But as Rick said, we are very dependent on that market. In anything we do, we have to make sure we don't only keep our market here intact; we have to keep the American market intact. So the USDA has to be careful with this issue, there's no doubt about it.

I guess the real thing I'm worried about now is that if it moves beyond science and gets all wrapped up in politics and trade issues.... For instance, I think what Japan is doing now is more trade and politics than science. That very much concerns me, and I think that's where the Government of Canada really has to start playing hardball. If it moves to trade and politics, then the government had better start playing hardball, whatever that may be.

· (1320)

The Chair: Thank you, Mr. Proctor.

I'm going to move along to Mr. Breitkreuz, very quickly.

Mr. Garry Breitkreuz: Thank you, Mr. Chair.

I'm impressed by the calmness with which you can sit there and address this issue with the impact it's had on you. I would have probably a very difficult time so rationally explaining the situation. So I appreciate you coming before the committee. I have many farmers coming into my office and phoning me and explaining to me how this is impacting them, and they're very passionate in their pleas for us to do whatever we can to open up that border.

All of you emphasized that we need that market in the U.S. We need to maintain a very good relationship with our American neighbours, and that relationship just isn't in the cattle trade. I mean, that goes right across the border. You pointed out very clearly that the politics of this thing can be used by the Americans; the senators there will use this to keep the borders shut because there's some short-term gain there for some people. Even in Canada there's some short-term gain by some people.

It's beginning to really impact in my riding. I have an exporter there who exports sausages and processed meats. He has no beef in them at all. He cannot sell them because the border is closed to that.

So your description that this is going to start impacting the entire industry is absolutely right on. That's why, if you sit there calmly, maybe you should be starting to tell people right across the country that you guys are the canaries in the mine here. You're just indicating, in one brief little snapshot here today, how devastating this is going to be across the border.

So maintaining a good relationship with our neighbours is absolutely essential. That's why earlier today I called on the Prime Minister to get involved here, because I think this has to go to the highest levels. I don't know if you'd agree with that.

Because this is going to hurt the entire country eventually...and even if the border opens up immediately there's going to be a huge impact to this. Will the problems be resolved as soon as the border opens, or will there be some long-term consequences to this that we should start working on as an agriculture committee?

You have our ear today. You're bending our ear, and we shouldn't be just dealing with the immediate crisis. We should start to look ahead a little bit, as we should have been for a long time already. The short-term benefits are there to some, and especially in the U.S., but will there be some infrastructure that may be destroyed as a result of this? What are we going to have to do to rebuild the industry after the dust settles here? Where would you go? What advice do you have to us as a committee?

Mr. Calvin Vaags: I think this industry is probably already somewhat altered, even if the border opens tomorrow, just because of the financial injury that some people have already sustained, and the fear. For a lot of these lots in western Canada, it takes investment dollars to fill them up. If you're an investor today and you have money tied up in cattle, will you come back in September and buy those cattle? I know the private guys, we'll all do it. I mean, we're cattlemen, and we're going to stay cattlemen. But not all the money that buys the cattle comes from us private players who are directly involved; some of it comes from investment. Will that investment community come back in and buy these cattle?

What can we do to make sure we retain this infrastructure and keep this industry going? I think it's what we're trying to do here: mitigate the financial damage as much as possible. If we're all left whistling in the wind, as it were, or if we have to bear the brunt of this problem on our own and a lot of us go broke because of it, or most of us go broke, well, yes, then it's a big problem. If we come together and have a comprehensive....

I don't know what the answers are yet, but we've talked a lot today. If we somehow can address the issue and get this industry through, that will go a long way to keeping it intact.

· (1325)

The Chair: That's it, Mr. Breitkreuz.

Mr. Laliberte, and then Mr. Maloney.

Mr. Rick Laliberte (Churchill River, Lib.): Thank you, Mr. Chair.

To open the borders, I think the term that's being used in all this correspondence that's sent to us is that Canada has to demonstrate “BSE-free status”. Are we doing that? Are we communicating a BSE-free status?

On top of that, the international report refers to an infrastructure, and that the veterinary infrastructure has to be looked at. Diagnostic laboratories should be set up in regions, as I interpret it. Is that something we should be doing now?

As I watched Great Britain go through this, there were media reports all the time about what was happening with their mad cow situation over there. Are we pumping enough information to the world about protecting our BSE-free status? Are we doing enough on that side, or are we just assuming that this report comes out, that everybody interprets it the same way?

Are we communicating and messaging that we are BSE-free?

Mr. Rick Paskal: I would say, with regard to this investigation, that the way CFIA handled it, they made sure they followed the lines. Their ultimate goal was to convey to the consumer that the beef in Canada is safe to eat. I feel very comfortable with the process they undertook. If there was a question in regard to any blood line or any feed line, they answered it scientifically.

So, yes, I feel very comfortable that they've done that. Now, that doesn't mean that countries around the world have to respect our system. The Japanese and the Koreans are disgruntled with it.

In hindsight, I think with regard to beef or any other commodity, in future we should make sure that we include all pertinent partners in an investigation. That's all water under the bridge now, but that has to be part of this process from now on.

Did we fail there? Yes, we did. But I think in all attempts on behalf of CFIA, they did what they thought was right. It's just too bad the Japanese and the Koreans weren't included from the beginning.

Mr. Rick Laliberte: I guess as a closing question, this committee and our government...we're looking at the summer. Time is of the essence. What can we do? Aside from the programs and the services, is there anything this committee can do over the summer that would address these issues?

You have multi-issues in the different industries--trucking, packing, etc. Should this committee also be touring some of these feedlot operations and some of these packing operations, some of these trucking operations, dispatch offices? Should we be hearing some of this first-hand? We heard second-hand of an individual who's too old to handle the bulls. Maybe that's what this committee could be doing--going out and hearing some of these stories first-hand. We heard it through a messenger, so to speak. We're far removed from the western provinces.

Mr. Rick Paskal: We really need to communicate with the retailer right now. There's one thing we have to do above and beyond anything else, as far as we're concerned. Before we go to a plan where we're going to start composting, we have to make meat available to the consumer in Canada, first and foremost.

One way we're going to do that is get the price down. The consumer has to take advantage of this.

After that is done, then I would say we have to go to plan B over here. We need government to help us with these retailers to help us move meat.

The Chair: Mr. Maloney.

Mr. John Maloney: Does Mr. Vaags want to respond?

Mr. Calvin Vaags: You asked a question on what this committee can do. A lot of times, when we farmers are faced with a crisis and we're looking at government programs, one of the biggest problems is that the wheels of government turn very slowly when our situation marches right along. For instance, right now these cattle are getting bigger. We're faced with decisions that we have to make every day.

What can this committee do? Make the wheels of government turn faster. Keep the pressure on these programs. Listen to us now and act quickly. I can't stress that enough. This is a train that's moving down the track, and it's not going to stop. It's going to keep going. We have to match our support programs with it.

Thank you.

· (1330)

The Chair: I'm going to cut off the debate and the questioning with this group here....

Oh, Mr. Maloney, we're finally coming back to you. I must apologize.

Mr. John Maloney: It's just a quick question, Mr. Chair.

I think we've done the science, and perhaps it's an issue of communicating it now to the Orient. Perhaps we can do some more work there. But we appear to have to move beyond the science. We've heard, “Do whatever you can to open the border.”

If it has come down to political issues, as I think we are suspecting it has right now, on a topic like country of origin labelling, do you think that would be an issue we may have to give some leeway on as an incentive to get those borders open, or do you want to go that far? If that's what it takes to do it, or if that's one of the issues it takes to do it, what would your advice be to us?

Mr. Calvin Vaags: There's no question that the cattle industry in Canada doesn't want country of origin. The hog industry...nobody wants country of origin labelling. But I don't think we have much say on whether that's coming in down there.

I even think within their own country they're not sure. Last week the senate appropriations committee down there actually stonewalled it. They blocked funding for it. So I don't know how that's going to turn out down there.

From our point of view, I don't think we're going to have much choice in the matter. They're going to decide whether they want COOL, and we're just going to have to deal with it.

Mr. Rick Paskal: The country of origin labelling part of the American Farm Bill was brought to the House by Democratic Senator Tim Johnson. Mr. Johnson did not lay in bed at night thinking this thing up himself. It was brought to him by industry. It was brought to him from the northern tier senators, from Montana, the Dakotas, Wyoming.

So would it help? Absolutely. I believe that's a huge issue. The NCBA released a statement last Monday, June 23, with regard to this issue, that it would go a long way toward helping in this problem.

So to your question, yes, it would help us immensely.

The Chair: Any more questions, Mr. Maloney?

Mr. John Maloney: That's it, sir.

The Chair: Okay.

At this point, I want to thank you, gentlemen, as the primary producers, for appearing this afternoon. It's been very helpful. As you know from the line of questioning, there's a lot of frustration, and I can appreciate that. A number of us at the table here are farmers, actually, on both sides, so we quite understand, at least to some degree, what you're going through. Thank you for appearing.

I'm going to call the government officials back to the table. We want to address again some of the questions we raised this morning and this afternoon with you, and your responses to those questions.

As we get ready to ask a few questions, you gentlemen heard the line of questioning this morning and into the afternoon. You may want to make an opening comment.

Mr. Carberry, do you want to comment before we ask a few questions? Obviously there have been some unanswered questions surrounding some of the comments made this morning. Where do we go, in fact, if we wanted to implement plan B?

I'll go to Mr. Hilstrom first, unless you have first comments.

Mr. Robert Carberry: Perhaps I could respond, Mr. Chair--

· (1335)

The Chair: Sure.

Mr. Robert Carberry: --to one thing I heard just before I stepped out of the room for two minutes to renegotiate my mortgage by phone because I missed my appointment.

A voice: Did you get a good interest rate?

Mr. Robert Carberry: It's 4.7% for five years. I hope that's good.

There was a comment about the inclusion of all countries in the investigation relative to BSE within Canada, and about it being water under the bridge now but in hindsight would that have been a better idea.

In fact, the way these investigations occur is that a country does the investigation independently and then it gets out to its trading partners with the results of that investigation. It's our belief that it would not have been appropriate to have others do an investigation with us.

We did have assistance from some countries, such as the United States, and we did get the international panel to come in and do an initial look at it, with the most highly credible people we could find, so that when we took this to other countries it would have the weight of not only our own expertise, and people of the qualifications of the Dr. Brian Evanses of the world, but also others such as these international experts.

That's the process we're in right now, of sharing those results with others, so I do think we acted in the appropriate way, and in a very timely way.

Thank you.

The Chair: Mr. Lavoie.

Mr. Gilles Lavoie: I would like to clarify one point made in terms of this program being the only answer. Obviously, this program is added to the existing safety net program. The minister has also indicated that while the program will terminate upon the opening of the U.S. border, they have also committed themselves, federal and provincial ministers, to meeting as soon as the border is going to open to review the situation and to review the various conditions and see if there is something else that has to be done to facilitate the continued movement of cattle.

They have not said this is it, that nothing else will ever happen, but this is it for now, and we'll further sit down. As it was in the first paragraph of their press release of June 18, as soon as the border will open, they will sit down together, review the conditions, and see what else needs to be done.

The Chair: Mr. Moroz.

Mr. Andrew Moroz: Thank you, Mr. Chairman.

I just want to make two points of clarification with regard to our TRQ policy. One, our tariff rate quota applies only to non-NAFTA meat. It does not apply to meat from the United States, Mexico, or Chile. They're exempt from our tariff rate quota. There were a number of statements about imports from the United States, and I wanted to clarify that.

Secondly, Mr. Chairman, in terms of the policy changes we announced on June 4, those were based on consultations with all of the industry players. At the time, it was felt that was the best way to go. We are staying in close contact with the industry. We're probably meeting in the next little while to make sure it's the right way to go.

It was based on trying to balance everyone's needs in terms of giving an opportunity to our domestic beef producers to sell beef in Canada while our export markets are closed, and at the same time recognizing that we do have further processors and other customers who use beef imported from outside North America.

Thank you, Mr. Chairman.

The Chair: Mr. Ritz.

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

I have just a couple of quick points, gentlemen. We've all been hearing that the program ends the day the borders open again. Could you define “open?” Are we talking May 19 open, or are we restricted to muscle-cuts and a phase-in? What does open mean?

Mr. Gilles Lavoie: It means open to meat cuts or live cattle.

Mr. Gerry Ritz: So back to May 19.

Mr. Gilles Lavoie: No, no, no, we said if the border opens for meat cuts or live cattle, the program will end. The ministers will meet--

Mr. Gerry Ritz: Okay. So it's still limited access to American markets, but our program ends. There's no phasing out of the program as we phase back in. I just wanted that clarification.

I was on a conference call last Monday, as some of you gentlemen were as well. At that point we were told that the report would be in the Americans' hands by the next day or the day after that. Now we're hearing today that it didn't go until yesterday, almost a week later.

When we were on the conference call Monday, the reason given at that time for the delay was that the French translation was taking longer. At that point, someone mentioned it had been three days already and it was expected to take longer to get the French translation done.

Are you folks aware that we're losing somewhere between $11 million and $15 million a day? I'm not sure who in the American State Department or in the Japanese government would need a French translation.

I wonder why we would be delayed over that.

Mr. Robert Carberry: Perhaps I could clarify.

There are actually two reports. The first one is the report of experts that we were talking about last week. That report did follow immediately afterwards. The report we referred to yesterday, that's being released for the first time to our trading partners, is the investigative report. Some trading partners saw both reports for the first time.

· (1340)

Mr. Gerry Ritz: That's the outside investigators?

Mr. Robert Carberry: No, the outside report of experts, which was an oversight of our investigation, a commentary on our investigation, did go last week to the U.S. The investigative report, the internal one, went out yesterday for the first time, the formal version of it. As well, both copies, both the international report and the internal investigative report, went to a number of countries for the first time yesterday. But for the U.S., we did in fact follow up with the international report last week.

Mr. Gerry Ritz: So the external oversight report went out before our own internal report that they based theirs on.

Mr. Robert Carberry: That's correct.

Mr. Gerry Ritz: So the cart went before the horse.

Thank you.

The Chair: Mr. Valle.

Mr. Claudio Valle: In fact, with respect to Korea and Japan, we gave them a heads-up copy a couple of days earlier than it was made available to the rest. As soon as we had it, we sent it to Korea and Japan.

The Chair: Mr. Borotsik.

Mr. Rick Borotsik: I just have one very quick question.

Mr. Lavoie, you heard the comments from the previous panel. We recognize that there are deficiencies within the program. Are you prepared to go back and review the program? And I appreciate that you said it doesn't necessarily mean it quits on August 31; you're going to look at what happens at that point. But are you prepared to go back now and try to review the program, and try to implement more than what we simply have here now to make it a better program for producers who fall between the cracks? There are a lot of people out there who fall between the cracks. Are there ways of being able to assist those people?

We heard about the guy with the bulls, we heard about the Manitoba lack of access to kill space within Canada. Can you fix that? Can you look at it?

Mr. Gilles Lavoie: As you know, the federal-provincial ministers are going to meet next week in your province, in Winnipeg. It's not a secret that BSE will be on the agenda.

Mr. Rick Borotsik: Will you have recommendations to help fix the program?

Mr. Gilles Lavoie: We will report on how the program has operated so far, what have been the views, recommendations, suggestions made by the regular stakeholders, CCA and others. As we also indicated, we realize, we know, that many Canadians are significantly affected by this situation.

The decision to go in a first stage with the feed cattle--and it's not only feed cattle but all ruminants, those ready for slaughter--was due to the fact that we were accumulating a significant backlog of animals ready for the market, and the slaughterhouses were also accumulating pieces that they could not sell. In order to get the movement for the beef market to reopen and work a little bit, we felt we had to clear that, to make sure there would be some slaughtered cattle that would find their way downtown, and there would be some packers that would be able to get rid of the accumulated material and sell it on the domestic market.

In so doing, the movement of cattle would give a little bit of work to the truckers and so on. It was more or less a way to address the immediate, most urgent issue. It was not a message that these were the only affected people.

The Chair: Mrs. Ur.

Mrs. Rose-Marie Ur: Earlier presenters had indicated that there may be countries willing to take our extra beef. How much effort has been put in by government to look into whether there are countries that would accept our extra beef?

Secondly—I'll give both questions for whoever can answer--I'm from Ontario, and the concern there is that no packing house in Canada can kill Holstein steers. This concern needs to be addressed. They also indicated that the way the sliding payment is set up, these producers would be left out completely.

So those two issues I'd like answered, if possible.

Mr. Gilles Lavoie: The sliding payment was an adjustment made to the initial proposal from the Canadian cattlemen and the western premiers in order to encourage the packers to have the best possible bid and also to create an incentive for farmers to refuse bids that were too low. Because when we go, say, below 50¢, imagine how the rate of the contribution is significantly decreased. Then it does play the role, more or less, of a full price. It's a significant message to the cattlemen to try to obtain a better price.

In terms of the first element of your question, yes, we have a list of countries where there is no immediate ban. Obviously the Canada Beef Export Federation is also fully aware of that. As I mentioned in my opening remarks, out of the beef round table meeting of June 23 and 24, various committees were created. One of them is to look at developing a strategy to get our markets up, but also to look at any other markets for any products that we have to sell.

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Mrs. Rose-Marie Ur: Could you provide a list of those countries to the committee?

As well, I don't think you really answered my first question. There's no packing house in Canada that can kill Holstein cattle, steers, is there?

Mr. Gilles Lavoie: There are some, but it's not a very significant volume.

Mrs. Rose-Marie Ur: Are you looking at that problem?

Mr. Gilles Lavoie: We can give you the exact number of how many slaughterhouses could accept the animals. But it's limited.

Mrs. Rose-Marie Ur: I think our industry needs to know that.

Any other answers on the number of countries? Mr. Lavoie is the expert on that, is he?

Mr. Andrew Marsland (Director General, International Markets Bureau, Department of Agriculture and Agri-Food): I think we can certainly provide you with the list and the data on who buys what in terms of beef. However, given the number of countries that have taken action, there really isn't huge demand out there, in the remaining countries that haven't put in place import restrictions, to take up a lot of the excess supply. But we can certainly provide a list of which countries those are.

As Mr. Lavoie said, we will work with the beef industry to identify what opportunities there are in those countries that haven't taken action.

The Chair: Mr. Proctor.

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

I have just a comment and then a very brief question.

My comment goes back to Mr. Carberry's response about water under the bridge around Japan. I think we'll continue to agree to disagree on this. I'm looking back at the response that was given by this panel earlier on the question of Japan--that Japan is particularly key; that we need to reassure Japan so they don't impose measures on the U.S.; that Japan was traumatized by BSE in 2001 and 2002.

We're just going to have to agree to disagree, because I think this wasn't handled correctly and it's coming back to bite us big time. If you had to make that decision over again, I think you'd come to a different conclusion.

As for my question, we all know that the border with the United States is the one that needs to be opened as quickly as possible, but specifically, are there other countries? If we could get some other countries, perhaps Mexico, which has a WTO challenge with the Untied States and some others, to relax their import restrictions, it would put some pressure on other countries, particularly the United States.

I know--I'm sure I know--you're engaged on all fronts with the other countries, so is there a comment about that, please?

Mr. Claudio Valle: Well, we are indeed engaged with all the countries, and we're taking it as a priority in terms of those that are important in terms of our export markets. The fact remains, though, most of these countries will be followers rather than leaders, and the U.S. decision will be the one that will unlock a lot of the others.

Japan is key in terms of U.S. export interests and given the integrated nature of our market, but the domino effect will only come when the U.S. opens. Then, with that decision, you can show the rest of the world that the biggest market in the world is accepting Canadian products, and by consequence, that market power will allow us to go into other markets and argue that if it's good enough for the U.S., it should be good enough for them.

So I don't see a domino effect coming by getting Guatemala to open on us. That won't convince the U.S.

Mr. Dick Proctor: Merci.

The Chair: Thank you, Mr. Valle.

Mr. Laliberte.

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Mr. Rick Laliberte: I'd like to go back to this report of the experts, which was circulated here. When would our committee be accessing the investigative report? When would we have access to a copy of that?

Mr. Robert Carberry: Very shortly. This investigative report was just finalized over the weekend, and we sent it out, obviously, to our trading partners very quickly. Right now we're looking at releasing it very shortly. Today our communications people are looking at it, so we should have it within a couple of days at the latest.

Mr. Rick Laliberte: To this committee?

Mr. Robert Carberry: To the public as well, yes.

Mr. Rick Laliberte: As well, at the back of the report on experts, it talks about infrastructure. I didn't get an answer on this from my previous question with the other group, but it recommends infrastructure enhancements as being necessary to sustain BSE response as well as to maintain other national animal health priorities.

We have a huge country here. Could we get a report or an analysis of where the laboratories are, and who does what provincially?

It also talks about a central authority. CFIA is certainly one of them, but is there any way of rationalizing more of a national scope, or international communication, where somebody speaks for Canada instead of Ralph Klein in one end of the country and somebody else from another end of a country making press releases and so on? Is there something we can do to make that communications strategy?

Mr. Robert Carberry: For the last number of years we've had the transmissible spongiform encephalopathy network that was formed between provincial and federal governments, and I believe there are some university laboratories involved as well. What that group seeks to do is bring together Canada's collective resources for this type of situation. Health Canada is involved as well.

Right now we have a network that is much bigger than the CFIA. We have been gearing up that network for any testing eventuality that may come at us, with a much bigger capacity, right now on target, than what we're anticipating we might have to deal with. So we are taking care of that contingency right now.

That is basically centralized from a conceptual standpoint and policy standpoint through this Health Canada and federal-provincial team. So we do have fairly good coordination.

In the international report, they refer a couple of times to the importance of having national delivery. What that means is that there will likely be a role beyond the federal jurisdiction, that we will be expecting some level of delivery of some of these activities--whether they be feed programs or surveillance or whatever it happens to be--by provincial governments as well. We are talking to provinces about that.

Just to give you an example, the animal that was found and was kept out of the food chain in this circumstance was part of a testing regime that was coordinated between federal and provincial authorities with appropriate sampling levels taken, in this case by the provincial government in Alberta. So that was also coordinated by a central source, if you like.

The Chair: Thank you, Mr. Laliberte.

Very short, Mr. Hilstrom, because I want to shut it off at 2 o'clock.

Mr. Howard Hilstrom: Mr. Chairman, I'd suggest, on behalf of all the committee members, that you don't try to shut this off too quickly and restrict us before a reasonable time. I know we don't want to go on all day, but let's not get into a little battle on that. I'd like to have at least three or four minutes.

The Chair: Well, let's move.

Mr. Howard Hilstrom: Okay. Here's my first question.

At a previous committee meeting over in the West Block, I asked the CFIA specifically about the terminal feedlot program and the fact that it should be opened up to year-round access for American cattle. I was given a little bit of an ambiguous answer that within a few weeks there'd be some kind of an announcement on it, or whatever.

Now, you can comment on whether or not you're still working on having year-round access to American feeder cattle, but would it not be a pretty doggone good gesture to the Americans right now, seeing as how you've been working on this for the last five years, to implement that tomorrow morning?

Can you comment on that terminal feedlot program?

Mr. Robert Carberry: I'm sorry, I don't have specific knowledge of that particular program. My understanding is that it is an animal health-based program, so it would be better to have somebody from the animal health unit here to respond to that.

With respect to its potential negotiating impact on the U.S., I'll turn to my trade colleagues.

Mr. Claudio Valle: Anything that helps build confidence with the U.S. should be examined. I don't think that was something the U.S. authorities raised with us during the last couple of weeks, when we engaged on the science, but one of the issues we've been mulling around is that we should look at all other impediments that are in the way in terms of beef trade.

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Mr. Howard Hilstrom: We just heard a previous witness say that was an important aspect of the relationship with the Americans.

But there is no point exploring that any further. Obviously, on instructions from your ministers, you're not going to implement a year-round terminal feedlot program. Otherwise, it would have been done.

My last question is on the bison industry. The North American Bison Cooperative slaughter plant is in North Dakota. They have no other plant to ship bison to for slaughter. How do they participate in this program of getting rid of their slaughter fat animals?

As well, this fellow with the bulls that you earlier heard from Calvin Vaags on, how does he participate in this program before he goes bankrupt?

Can you answer those two questions, on the bulls and the bison?

Mr. Gilles Lavoie: Yes.

To be eligible for the program, as it is at the moment, the animals have to slaughtered in Canada. It's one of the conditions under the current program--

Mr. Howard Hilstrom: So where would the bison go from Manitoba, then? Where would they go to be slaughtered?

Mr. Gilles Lavoie: I believe there is another plant somewhere in western Canada, is there not?

Mr. Howard Hilstrom: Yes, there is another plant in western Canada, and they also slaughter bison down in Montreal. But you guys are the one who devised this program, and it's for all these slaughter animals. I mean, you have the answers, I don't.

Go ahead.

The Chair: Are there any responses back on that? If not, I'm going to bring the debate to a close.

I want to thank each one of you. I realize this is an issue that has probably brought out the best and the worst in us.

It's hard to summarize a meeting like this other than to say that I think all of us would agree that the border opening is first and primarily the issue. That has to happen, and we need to only hope that we remain with science, not politics, as the reasoning behind closing and opening borders. If we do that, then I think we'll have these borders open rather quickly, to be optimistic, I guess.

I think we also heard today the need for us to be flexible as we go into the days and weeks ahead--hopefully only days--in terms of being able to adjust the programs so that we help not only the final feeder but also those people who are in the short keep and in the stocker business. Of course, we talked about the trucking business, another industry.

So I think we need to be open to a lot of possibilities here, because we have a lot of ancillary industries that are affected by this as well. All of us would agree that we want to make sure that all the players are there when this thing comes back to some degree of normality.

To those who are not at the table right now, thank you for travelling to Ottawa today to make your voice heard on this issue. It's a very fundamental issue, and we take it very seriously. That's why we've convened this meeting, trusting that we can bring some conclusion to this in the next number of days and that we can go back to doing what we do in the summertime, and that is to deal with our constituency issues and not only cattle issues.

Thank you very much.

Mr. Howard Hilstrom: On a point of order, Mr. Chair, those are very good winding-up comments, but I would like to know if the committee is prepared to meet again around two weeks from now. We've heard that about a week from now it will be a very crucial point in the negotiations in terms of the border opening. Could we discuss quickly when we should have our next committee meeting, in two weeks, or three weeks at the latest?

The Chair: I'm wondering if we could perhaps look at a conference call prior to having another call for a meeting. We could see if we could work out some of the differences there. Let's do it that way. If we find during that conference call that we have to bring the committee back together again, then we should be prepared to do that. And it will be at the call of the chair.

The meeting stands adjourned.